Aug 14 2018

Erdoğan “wants chaos” as lira stabilises – Economist

Turkish President Recep Tayyip Erdoğan “has refused to take his foot off the accelerator” as his country careers towards a full-blown economic meltdown, the Economist magazine said in an article published on Tuesday.

The day saw the Turkish president refuse to back down in a diplomatic feud with the United States that has turned into a situation described by Erdoğan himself as “economic war,” with U.S. sanctions and tariff hikes as well as combative rhetoric on both sides sending the lira into a nosedive last week.

While the currency has regrouped since falling to a record low of over seven to the dollar early on Monday morning, Erdoğan’s speech calling for a boycott on U.S. electronic goods demonstrates a dangerous unwillingness to back down in the feud with Trump, said the Economist.

While the lira’s “modest” rebound was helped along by reassuring statements from the finance ministry and central bank, including a guarantee the country would not impose capital controls, the plunge can only be fully reversed by a change in tack from Erdoğan, the Economist said.

“That would require an end to the escalating row with the United States, a substantial economic programme, and a massive interest-rate hike,” said the Economist.

However, it added, these measures do not appear to be on the table, with Erdoğan continuing his tirades against the United States yet again refusing to raise interest rates, which he considers to be a “tool of exploitation.”

“Entrusting the finance ministry to his son-in-law, picking fights with his allies in Europe and keeping an American preacher under arrest to extract concessions from Washington have not endeared him to investors, either, added the Economist.

“With the fall in the lira, the $220bn in foreign debt weighing down Turkey’s corporate sector is ever harder to service. It may soon end up sinking scores of companies,” it said.