Erdogan warns of ‘economic war’ as Turkish lira carnage spooks global markets

The Turkish lira crash is threatening to turn into a debt and liquidity crisis with no end in sight. Instead of acting, the Turkish leadership has warned of an “economic war,” and hit back at a “currency plot.”

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Turkey is in the throes of a full-blown currency crisis, with little sign that the government has a plan to deal with one of the worst emerging market currency meltdowns in recent history.

The crisis threatens to throw the world’s 18th-largest economy into a downward spiral of bankruptcy and trigger contagion in emerging markets and Europe.

In a keynote speech on Saturday in the Black Sea city of Rize, President Recep Tayyip Erdogan described the currency’s fall as a “currency plot.” He said those who move the currency on financial markets think they can destroy Turkey.

He pushed back against pressure to hike interest rates which he said “should be kept to a minumum because they are a tool of exploitation that makes the poor poorer and the rich richer.”

Currency carnage

The Turkish lira fell as much as 22 percent Friday, before paring losses back to 17 percent, extending a rout in the currency from earlier this week. It stood at 6.47 to the US dollar at 1900 UTC. The lira has lost nearly 40 percent of its value since the start of the year and nearly 30 percent since Erdogan took over the office with new sweeping powers in June.

The currency carnage was pushed along on Friday by US President Donald Trump’s administration, which announced the United States would increase tariffs on Turkish steel and aluminum imports.

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Turkey’s currency plunges to new low

The tariffs themselves are minor and impact around $1 billion (€875 million) in trade, but they weighed on market confidence in the vulnerable Turkish economy.

“Their currency, the Turkish lira, slides rapidly downward against our very strong dollar,” Trump wrote on Twitter. “Our relations with Turkey are not good at this time.”


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