Erdogan vows action against 'economic terrorists' over lira plunge

Turkey blames Trump for attack on lira says it won’t ‘kneel’ and has counter-measures ready

Murad Sezer Illustration Reuters

Turkish President Recep Tayyip Erdogan has denounced the Lira crisis as a "plot against Turkey", warning that his country will forge new alliances and markets in response to a bitter rift with long-time ally the United States, which has caused the Turkish currency to hit record lows.

Experts have blamed the sharp slide in the lira on fears the country is descending into an economic crisis.

The State Department says it respects the election result.

The Brunson case is just one of many bones of contention between Turkey and the United States, ranging from Syria to Ankara's increasingly cosy relationship with Moscow.

The dispute with the US has centered on the continued detention of American pastor Andrew Brunson, who is on trial for espionage and terror-related charges.

"I here declare that we have seen your plot and we are challenging it", said Erdogan. There is no economic reason ...

"The aim of the operation is to make Turkey surrender in all areas from finance to politics".

Turkey also depends heavily on energy imports, making it vulnerable to rises in oil prices, as are the likes of India. "If you come at us with your dollars then we will find other ways to do business".

But Erdogan indicated he was in no mood to offer concessions to the United States, or financial markets.

"EUR/USD will remain under downward pressure", say CBA who expect the USD to remain bid while emerging market stresses linked to Turkey remain.

Turkey moved to put investors at ease this weekend after the country's Finance Minister said an economic action plan would be put into place on Monday.

In the interview with Hurriyet newspaper, Mr Albayrak described the lira's weakness as "an attack", echoing Mr Erdogan - who is his father-in-law.

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Albayrak also announced a plan has been prepared for banks and the real economy, including small to mid-sized businesses which are most affected by the foreign exchange fluctuations.

He dismissed any suggestions that Turkey might intervene in dollar-denominated bank accounts, saying any seizure or conversion of those deposits into lira was out of the question.

Investors in lira are also concerned about Turkey's internal monetary policy.

Last Friday, President Donald Trump said he has authorised the doubling of steel and aluminium tariffs "with respect to Turkey".

Trump also declared that, "Our relations with Turkey are not good at this time!"

They would be in addition to the tariffs of 25 per cent on steel and 10 per cent on aluminum that the US imposed in March for imports from a variety of countries.

"Turkey does not trigger such a devastating series of crises in other emerging markets that the combined impact could dent growth in the developed world in a meaningful way", said Holger Schmieding, an economist with Berenberg Bank.

On Friday, Erdogan called on its citizens to convert their hard currency and gold into lira to prop up the plunging currency with a "domestic and national stance".

Turkey has pledged it will take action to calm markets after the lira plunged to a new record low in Asian trading. Emerging market currencies and equities have also fallen in value since Friday, while investments seen as safe havens, such as the USA dollar, Treasury bonds, gold and the Japanese yen have strengthened.

Turkey has weathered several tough economic crises over the decades.

Erdogan on Sunday confirmed media reports that Washington gave Onal's delegation a deadline of 6:00 pm last Wednesday for the release of Brunson "otherwise the sanctions will begin".

Wider European or USA economic or financial contagion beyond direct Turkish bank holdings is considered relatively limited, however.

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