News Analysis |
The Turkish currency, the lira, took a hammering on Monday as it plunged almost eight percent igniting fears that the economic crisis that Ankara is dealing with might spill over to other countries as well. At the start of this year, the lira was 3.70 to the dollar. However, in recent weeks, the currency has gone sharply down against the US dollar and the Euro.
Investors are concerned, especially after the escalating ‘trade war’ between the US and China, that problems in the Turkish economy may lead to a larger crisis. To some extent, the issues that the Turkish lira is facing is due to a widening rift between Washington and its main NATO ally, Ankara. Last Friday, Donald Trump authorized higher tariffs on imports from Turkey, including a 20 percent duty on aluminum and 50 percent duty on steel.
The sharp decline in the lira has sSaqib parked a sell-off of assets in Europe i.e. those holding the Turkish lira in significant amounts began selling en masse, amongst fears that the decline may continue.
Tensions have been rising between the two NATO allies over Turkey’s detention of an American evangelical Christian pastor Andrew Brunson for allegedly supporting the group Erdogan holds responsible for the attempted coup in 2016. Mr. Brunson denies the charges. His trial in Turkey is set to proceed. Ankara also imposed retaliatory tariffs on US goods.
Read more: Erdogan’s money troubles
The president of Turkey, Receipt Tayyab Erdogan has called the decline in the Turkish currency a “political, underhand plot” against Turkey. He said that the selling of the lira was an attempt by western financiers to bring Turkey to its knees. With God’s permission we will overcome this,” he added. “The aim of the operation is to make Turkey surrender in all areas, from finance to politics,” Erdogan told ruling party members.
Read more: Turkey’s lira crisis: How bad can it get?
Previously, he even asked Turks to convert hard currency and gold into lira. He further added that Turkey would look towards China for finance. “Some close the doors and some others open new ones,” added Erdogan. The sharp decline in the lira has sparked a sell-off of assets in Europe i.e. those holding the Turkish lira in significant amounts began selling en masse, amongst fears that the decline may continue. The European Central Bank has declined to comment so far.