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Turkey financial crisis: Erdoğan says 'attacks will continue' against the economy - live updates
Turkish lira crisis: Erdoğan says 'attacks will continue' against the economy - live updates
(35 minutes later)
And here’s Associated Press:
Turkish President Recep Tayyip Erdogan says his country is under an economic “siege” that has nothing to do with its economic indicators.
During an address to Turkish ambassadors in the capital, Ankara, Erdogan said Monday that Turkey would overcome the “attack” on its economy.
He insisted that Turkey’s economy remains strong and said the currency would soon settle “at the most reasonable level.”
In an apparent reference to the United States, Erdogan said “the bullies of the global system cannot roughly, shamelessly encroach on our gains that were paid for by blood.”
The Turkish leader’s comments came after authorities launched investigations into hundreds of social media accounts for alleged reports they claimed were helping the currency’s plunge.
Erdogan said there is an “economic terror” being waged on social media, adding that “traitors” would be punished.
Here’s Reuters first take on the Erdoğan speech:
President Tayyip Erdoğan said on Monday he expected attacks on Turkey’s economy to continue but predicted the lira would return to “rational levels” soon, after the Turkish currency hit a record low of more than 7 to the U.S. dollar.
Erdoğan, who has described the lira’s fall as the consequence of a plot rather than economic fundamentals, also said that spreading false news about the economy was treason and recent U.S. actions were a stab in the back against Ankara.
Here’s a clip of president Erdoğan addressing the Ambassadors’ conference a moment ago:
Here’s a clip of president Erdoğan addressing the Ambassadors’ conference a moment ago:
Speaking to #Turkey ambassadors' conference TODAY, #Erdogan slammed the US president @realDonaldTrump AGAIN, saying Trump may be president but can't simply impose tariffs on Turkey, accused the US of backstabbing and shooting its partner in the foot with sanctions. pic.twitter.com/RdhJr0BewX
Speaking to #Turkey ambassadors' conference TODAY, #Erdogan slammed the US president @realDonaldTrump AGAIN, saying Trump may be president but can't simply impose tariffs on Turkey, accused the US of backstabbing and shooting its partner in the foot with sanctions. pic.twitter.com/RdhJr0BewX
The lira is weakening, following Erdoğan’s claim that America is trying to stab Turkey in the back.
The lira is weakening, following Erdoğan’s claim that America is trying to stab Turkey in the back.
It has dropped back to 6.9 lira to the US dollar, close to this morning’s record low of 7.2.
It has dropped back to 6.9 lira to the US dollar, close to this morning’s record low of 7.2.
#BREAKING: Erdogan accuses US of seeking to stab #Turkey 'in the back' - @AFP (The lira keeps falling vs the dollar, and investors know Turkey doesn't have enough foreign reserves to service its debts) pic.twitter.com/EhzCG1DJER
#BREAKING: Erdogan accuses US of seeking to stab #Turkey 'in the back' - @AFP (The lira keeps falling vs the dollar, and investors know Turkey doesn't have enough foreign reserves to service its debts) pic.twitter.com/EhzCG1DJER
President Erdoğan has also declared that spreading false news about false news about Turkey’s economy is “treason”.
President Erdoğan has also declared that spreading false news about false news about Turkey’s economy is “treason”.
That follows this morning’s crackdown on social media accounts blamed for sharing misleading information about the crisis.
That follows this morning’s crackdown on social media accounts blamed for sharing misleading information about the crisis.
Heads-up: Turkish president Recep Tayyip Erdoğan is giving a speech now, 10th annual Ambassadors’ Conference in Ankara.
Heads-up: Turkish president Recep Tayyip Erdoğan is giving a speech now, 10th annual Ambassadors’ Conference in Ankara.
Bloomberg say Erdoğan has told the conference that Turkey must prepare for further attacks on its economy.
Bloomberg say Erdoğan has told the conference that Turkey must prepare for further attacks on its economy.
He has accused America of breaking World Trade Organisation principles (presumably by doubling tariffs on Turkish metal exports last week).
He has accused America of breaking World Trade Organisation principles (presumably by doubling tariffs on Turkish metal exports last week).
Erdoğan adds that America is trying to stab Turkey in the back.
Erdoğan adds that America is trying to stab Turkey in the back.
On the market turmoil, Erdoğan has told his audience that the lira would settle at a rational level soon. There is no ‘economic basis’ for recent exchange rate moves, he adds.
On the market turmoil, Erdoğan has told his audience that the lira would settle at a rational level soon. There is no ‘economic basis’ for recent exchange rate moves, he adds.
There will also be no retreat from free market economic policies, he insists.
There will also be no retreat from free market economic policies, he insists.
Highlights from President's Erdogan:* Turkey under economic siege* No fundamental basis for #lira move* U.S. attempting to stab Turkey in the back* No retreat from free market economy* #Lira will stabilize at reasonable level soon. https://t.co/Xqb2oA9v6D
Highlights from President's Erdogan:* Turkey under economic siege* No fundamental basis for #lira move* U.S. attempting to stab Turkey in the back* No retreat from free market economy* #Lira will stabilize at reasonable level soon. https://t.co/Xqb2oA9v6D
More details to follow soon
More details to follow soon
Some UK stocks are taking a direct hit from the Turkey crisis.
Some UK stocks are taking a direct hit from the Turkey crisis.
Travel firm TUI is leading the FTSE 100 fallers, down 3.3% this morning. In theory, the slump in the lira makes Turkey a more attractive holiday destination. In practice, reports of financial instability are likely to deter tourists.
Travel firm TUI is leading the FTSE 100 fallers, down 3.3% this morning. In theory, the slump in the lira makes Turkey a more attractive holiday destination. In practice, reports of financial instability are likely to deter tourists.
Ashmore, a fund manager focused on emerging markets, is down 5%.
Ashmore, a fund manager focused on emerging markets, is down 5%.
Stockbroker AJ Bell explains:
Stockbroker AJ Bell explains:
“Fund management group Ashmore is widely seen as the London-listed bellwether for emerging markets and its shares are unsurprisingly being sold off in the wake of the crisis in Turkey.
“Fund management group Ashmore is widely seen as the London-listed bellwether for emerging markets and its shares are unsurprisingly being sold off in the wake of the crisis in Turkey.
“The recent collapse in the Turkish lira has served to trouble investors around the world and triggered a ‘risk-off’ mentality. Put simply, investors are less willing to hold assets in higher risk areas such as emerging markets, and are switching instead to assets deemed to be safer havens.
“The recent collapse in the Turkish lira has served to trouble investors around the world and triggered a ‘risk-off’ mentality. Put simply, investors are less willing to hold assets in higher risk areas such as emerging markets, and are switching instead to assets deemed to be safer havens.
Fiona Cinoctta, senior market analyst at City Index, reckons the Turkish government only has a few days to stem the crisis.
Fiona Cinoctta, senior market analyst at City Index, reckons the Turkish government only has a few days to stem the crisis.
She warns that the slump in the lira could prompt some companies to default on their US dollar loans, triggering a domino effect:
She warns that the slump in the lira could prompt some companies to default on their US dollar loans, triggering a domino effect:
The lira had already declined 20% against the dollar on Friday on a mixture of domestic financial problems and increasing friction with the US and the decline continued this morning with the Turkish currency plumbing new lows.
The lira had already declined 20% against the dollar on Friday on a mixture of domestic financial problems and increasing friction with the US and the decline continued this morning with the Turkish currency plumbing new lows.
For the time being Turkey’s financial crisis looks localised but the country’s central bank has perhaps only days to stop the decline of the currency before the lira’s freefall results in loan defaults, starts seriously affecting the country’s financial system and potentially starts spilling over onto European banks.
For the time being Turkey’s financial crisis looks localised but the country’s central bank has perhaps only days to stop the decline of the currency before the lira’s freefall results in loan defaults, starts seriously affecting the country’s financial system and potentially starts spilling over onto European banks.
Into this domestically induced financial slide comes the deteriorating relationship between Turkey and the US. The US is holding it against Turkey that it is refusing to support US sanctions against Iran and that is not releasing an American pastor who is being held on terrorism charges. The US response was fairly clear cut – on Friday when the lira was in freefall the US announced it would raise the tariffs on imports of Turkish steel to 50% and the tariffs take effect Monday morning.
Into this domestically induced financial slide comes the deteriorating relationship between Turkey and the US. The US is holding it against Turkey that it is refusing to support US sanctions against Iran and that is not releasing an American pastor who is being held on terrorism charges. The US response was fairly clear cut – on Friday when the lira was in freefall the US announced it would raise the tariffs on imports of Turkish steel to 50% and the tariffs take effect Monday morning.
The selloff at the Istanbul stock market is gathering pace.
The selloff at the Istanbul stock market is gathering pace.
The BIST 100 index has fallen 4%, with some bank stocks suffering double-digit losses.
The BIST 100 index has fallen 4%, with some bank stocks suffering double-digit losses.
Several of Turkey's largest lenders are experiencing heavy share declines today. Here is a breakdown: https://t.co/oIKWU0Xdwl pic.twitter.com/tBnkqPljNW
Several of Turkey's largest lenders are experiencing heavy share declines today. Here is a breakdown: https://t.co/oIKWU0Xdwl pic.twitter.com/tBnkqPljNW
You can get up to speed on the Turkey crisis with this Q&A:
You can get up to speed on the Turkey crisis with this Q&A:
Plus, here’s economics editor Larry Elliott on why Turkey needs to raise interest rates sharply, or turn to the IMF for help....
Plus, here’s economics editor Larry Elliott on why Turkey needs to raise interest rates sharply, or turn to the IMF for help....
Erdoğan’s answer to the financial crisis – that his followers should do their patriotic duty and exchange rapidly appreciating US dollars for ever-more worthless Turkish lira – is laughable. Indeed, it will merely add to the belief in the world’s financial markets that Turkey is being led by a man who has lost touch with reality.
Erdoğan’s answer to the financial crisis – that his followers should do their patriotic duty and exchange rapidly appreciating US dollars for ever-more worthless Turkish lira – is laughable. Indeed, it will merely add to the belief in the world’s financial markets that Turkey is being led by a man who has lost touch with reality.
It is clear what needs to happen. Turkey has to tackle the three causes of its current predicament: an overheating economy; Erdoğan’s attempts since his re-election in June to prevent the central bank from taking the necessary action to deal with rising prices; and the stand-off with the US.
It is clear what needs to happen. Turkey has to tackle the three causes of its current predicament: an overheating economy; Erdoğan’s attempts since his re-election in June to prevent the central bank from taking the necessary action to deal with rising prices; and the stand-off with the US.
For Erdoğan, that means eating a huge plateful of humble pie. He is going to have to surrender to Trump over [jailed pastor Andrew] Brunson, because he is damaging the economy by continuing with a fight he cannot win. And he will need to accept that tough and unpopular measures are now inevitable to prevent a total collapse in the currency leading to hyper-inflation.
For Erdoğan, that means eating a huge plateful of humble pie. He is going to have to surrender to Trump over [jailed pastor Andrew] Brunson, because he is damaging the economy by continuing with a fight he cannot win. And he will need to accept that tough and unpopular measures are now inevitable to prevent a total collapse in the currency leading to hyper-inflation.
The slump in the Turkish lira in recent weeks is quite extraordinary.
The slump in the Turkish lira in recent weeks is quite extraordinary.
It has lost a third of its value against the US dollar in a week (!) as investors have grown more anxious about the country’s financial health, its diplomatic row with the US, and its central bank’s reluctance (or inability) to raise borrowing costs to stem the crisis.
It has lost a third of its value against the US dollar in a week (!) as investors have grown more anxious about the country’s financial health, its diplomatic row with the US, and its central bank’s reluctance (or inability) to raise borrowing costs to stem the crisis.
This chart shows how the crisis could spread to Europe, if Turkish banks find themselves struggling to repay dollar-denominated debts:
This chart shows how the crisis could spread to Europe, if Turkish banks find themselves struggling to repay dollar-denominated debts:
Turkish authorities have launched a crackdown on news and social media posts which are threatening confidence in the economy, according to local reports.
Turkish financial regulators are threatening legal action against those who make or publish “erroneous and fabricated news and statements”.
Almost 350 social media accounts are under investigation, for undermining the lira’s exchange rate against the US dollar.
The move comes as president Erdoğan’s office warns that there is a co-ordinated attempt to undermine the country’s economy.
Hürriyet Daily News has the details:
The Chief Prosecutor’s Office in Istanbul has opened an investigation into actions threatening “economic security,” while Turkey’s financial watchdog launched a separate probe into what it described as “fake news” aiming to manipulate economy.
“An investigation has been launched according to Turkish Penal Law, Banking Law, Capital Markets Board regulations and related laws into people who displayed actions that threaten economic security through manipulative stories on media and operational social media accounts as part of the economic attacks that target the Republic of Turkey, its social peace, unity and economic security by the powers behind the [2016] coup attempt,” the prosecutor’s office said in a statement on August 13, according to the state-run Anadolu Agency.
In a separate statement, Turkey’s Interior Ministry said that “a judicial investigation has been launched into 346 social media accounts who shared posts to provoke the rise in the dollar exchange rate.”
Meanwhile, Turkey’s Financial Crime Investigation Board (MASAK) also launched a probe into what it described as “fake news” aiming to manipulate economy.
“MASAK started an investigation into people and institutions that spread fake news, such as those claiming that ‘the state will intervene to convert foreign exchange in accounts into Turkish lira’ and ‘it will fix dollar exchange rate’ by ditching floating rate policy, which is a main pillar of the free market,” Treasure and Finance Ministry Press Undersecretary Ali Berber said in a tweet on Aug. 13.
More here: Turkey launches probe into ‘fake news’ over lira rumors
Overnight, the president’s communications chief, Fahrettin Altun, has claimed there is a “disinformation campaign” underway to undermine confidence in Turkey’s financial sector.
He is unhappy about reports that President Erdoğan is threatening to seize foreign currency deposits.
Over the weekend, Erdoğan warned he would take new measures if businesses rushed to withdraw their bank funds. He told an audience in Trabzon that:
“It is industrialists’ duty too to keep this nation on its feet. Otherwise we will set into motion our plan B and C.”
Altun insist on Twitter, though, that this has been misinterpreted (although he doesn’t reveal what Plans B or C might be):
There has been a disinformation campaign underway based on the President's following remarks: "You must know that keeping this nation on its feet is not just our duty but also the duty of industrialists and merchants. Otherwise, I will be compelled to implement Plan B or Plan C”
This disinformation campaign is part of the economic war that has been waged against our country. At no point in his remarks did the President talk about a potential seizure of foreign currency deposits.
The President's remarks reflected his administration's determination to maintain the strength of Turkey's economy and served as a warning against the potential outflow of foreign currencies.
Provided that the President did not reveal the details of plans B and C, it is unacceptable that certain people come up with fictive scenarios in order to unsettle the people and market players.
Turkey is fighting an economic war. Our economy is strong and we will win this fight through the government's cooperation with the people!
Emerging currencies across the globe are suffering from the Turkish crisis.
The South African rand has dropped to a two-year low, while Russia’s rouble is at its lowest against the US dollar since early 2016.
India’s rupee hit a record low, with traders reporting that the country’s central bank had intervened to prevent an even steeper loss.
The Turkish lira is still sharply lower today, down 6% at 6.8 lira to the US dollar (having plunged through 7 lira in early trading).
Bloodbath in emerging market currencies this morning, led by Turkey. Central bank's attempts to reassure on liquidity lasted precisely 20 minutes. Stocks off almost across the board. https://t.co/8VwdM0xmUl pic.twitter.com/hT8yKtcCUl
With the US dollar strengthening, traders fear that developing economies are going to suffer capital outflows - potentially creating fresh currency crises.
Neil Wilson of Markets.com fears further pain for emerging markets [EM in City jargon].
The dollar is the big winner in all this as investors turn away from EM. This may very well make things worse, particularly as long-dollar increasingly becomes something of a one-way trade.
This dollar rally has a lot further to go and this will heap more misery on EM.
European bank shares are leading the selloff, driven by fears that they could be dragged into the Turkish crisis.
Several European financial institution, including Spain’s BBVA, Italy’s UniCredit and France’s BNP Paribas, have significant operations in Turkey.
They have borrowed in US dollars and may struggle to repay those debts unless the lira recovers.
BBVA shares have fallen by 2.2%, Unicredit have lost 2% and BNP Paribas are down 1%.
On Friday, the Financial Times reported that the European Central Bank is concerned about their exposure to the Turkish crisis.
Anxiety about spillover effects from Turkey is also pinning the euro at a one-year low against the US dollar (down half a cent at $1.137 right now).
Yesterday, Turkish finance minister Berat Albayrak pledged that a new economic action plan would be implemented today.
He announced:
“From Monday morning onwards our institutions will take the necessary steps and will share the announcements with the market.”
But that promise, and the Turkish central bank’s new measures, don’t appear to be stemming the crisis.
Konstantinos Anthis, head of research at financial services group ADSS, says Turkish policymakers need to do more:
Erdogan’s speeches over the weekend did little to calm down investors as he remains defiant and this morning news that the Turkish central bank implemented measures to improve liquidity is not addressing the main issue which is the lira’s decline.
Ergodan’s unwillingness to raise interest rates suggests that the situation might not be defused soon extending the risk-off sentiment seen across all markets.
Anxiety over Turkey is hitting share prices across Europe too, following those losses in Asia earlier today.
The main European indices have all fallen into the red in early trading. Germany’s DAX has lost 0.8%, and Britain’s FTSE 100 is down 0.45% or 35 points at 7631.
Jasper Lawler of London Capital Group says contagion fears are engulfing the markets.
The panic that engulfed the markets at the end of last week is showing no signs of going anywhere at the start of the new week. Traders were met with a sea of red as indices dived across the Asian session; investors shunned riskier assets overnight while safer havens such as the Japanese yen and Swiss Franc firmed; jitters surrounding the Turkish currency crisis were showing few signs of moving on.
The Turkish Lira dropped a further 6.3% in trading overnight, breaking through TL7 and hitting an all time low of TL7.2 after comments from Turkish President Recep Tayyip Erdogan over the weekend failed to calm investors.
The lack of any new significant policy and a defiant stance from Erdogan means that traders are bracing themselves for another day of hectic trading on Monday.
Turkey’s stock market is suffering heavy losses this morning.
The BIST 30 index of Turkey’s top countries has slumped by 2.5% in early trading, with virtually every share down.
Financial stocks, utilities and consumer-focused companies are all leading the selloff, as investors fear that the financial crisis is escalating.
Hussein Sayed, chief market strategist at foreign exchange firm FXTM, argues that Turkish policymakers need take much more decisive action, immediately.
With inflation expected to run above 20%, a current account deficit that continues to widen, bond yields trading at record highs and growing political tensions with the U.S., the Turkish administration have limited choices to stop the Lira from bleeding.
Investors need to see serious economic measures and not political ones to prevent things getting completely out of control. This includes an emergency interest rate hike by the central bank, imposing capital controls, fiscal reforms, securing a rescue package by the IMF or other lenders and ending the current diplomatic fight with Donald Trump.
Until such steps are taken, investors will continue to selloff Turkish assets.
Turkey’s central bank has taken action to stem the crisis, after seeing the lira slump to a record low today.
The central bank of Turkey has announced several measures to “support financial stability and sustain the effective functioning of markets”.
This includes providing “all the liquidity the banks need”, and taking a more active role in the foreign exchange markets.
Central Bank of Turkey offers boosted liquidity to banks - slight relief to #TRY pic.twitter.com/RCK9mM2bPR
In a statement (online here), the bank says:
The Central Bank will closely monitor the market depth and price formations, and take all necessary measures to maintain financial stability, if deemed necessary.
It’s an attempt to stabilize the tumbling lira and improve liquidity in the banking system.
The move is having some success - the lira has recovered to around 6.7 against the dollar, from this morning’s record low of 7.2. But, that still means it has suffered a huge depreciation in the last week:
Crucially, the bank has NOT raised interest rates, despite some economists arguing they need to increase by perhaps 10 percentage points.
Robert Bergqvist, chief economist at Swedish bank SEB, thinks more needs to be done:
🇹🇷Turkish central bank tries to take away some pressure on lira but it's time to reverse Erdogan's procyclical economic polices and make Turkey attractive for foreign investments. Will he deliver? Declining stock markets in Asia; US markets indicate -0.5%. pic.twitter.com/SpDqr4reN9
Asian stock markets and emerging currencies have been hit by the Turkish crisis today, and the euro has been dragged down to its lowest level in a year.
My colleague Martin Farrer explains:
The Turkish lira fell almost 9% in early trading on Monday and the euro hit a one-year low as investors feared that the country’s financial crisis could spread to European markets.
Despite defiant words by the Turkish president Recep Tayyip Erdoğan over the weekend pledging as yet unspecified action to reverse the slide, the currency slipped alarmingly against the US dollar on Monday.
Asian stock markets were also down on Monday. The Nikkei in Japan lost 1.7%, Hong Kong was off 1.8%, Shanghai -1.7%, Sydney -0.5% and the Taiwanese bourse fell 3%.
The euro dropped 0.3% to a one-year low against the US dollar on Monday as the falling lira fuelled demand for safe havens, including the greenback, Swiss franc and yen. The Vix volatility index measuring turbulence in financial markets – also known as the fear index – jumped 16% on Monday.
Euro trampled as #Turkey rout spreads. pic.twitter.com/589D83Xxkx
More here:
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Fear is sweeping through the financial markets this morning as Turkey falls deeper into a currency crisis.
The Turkish lira has slumped to new record lows overnight, hitting more than 7 lira to the US dollar. That followed Friday’s precipitous declines, as investors fear that the country could be heading towards full-blown financial chaos.
The crisis has been building for months as Turkey’s inflation rate has surged higher, its current account deficit has risen, and its economy has been hurt by the strengthening US dollar.
Recep Tayyip Erdoğan’s increasing autocratic governing stance - including putting his son-in-law into a key post running the economy - has spooked the markets. So has his dislike of higher interest rates, which would typically be used to prop up a weakening currency like the lira.
Turkish Lira keeps falling, now at 7.1 vs $.Banks and corporates heavily exposed to hard currency debt.President Erdogan continues to deny economic reality.A useful warning for policymakers advertising a make-believe economics#Brexit #EuroExit@FT https://t.co/hqxrbMlLN0 pic.twitter.com/ILPw2tBXe8
Donald Trump’s decision to double Turkey’s steel and aluminium tariffs on Friday has added to the sense of panic.
President Erdoğan did nothing to reassure investors over the weekend.
Instead, in a series of public addresses, he blasted the United States over the dispute over a jailed US pastor, and appeared to hint that Turkey – a Nato member – might look elsewhere for help (Russia, perhaps?)
He declared:
“We will say bye bye to those, who sacrifice their strategic partnership and alliance with a country of 81 million people on the altar of their relations with terror organisations.
“We are working day and night for alternative markets.”
Erdoğan also urged the Turkish people to do their bit, by converting any spare dollar and euros into lira.
He told supporters in the north-eastern Turkish town of Ünye that:
“If there are dollars under your pillow, take these out.
“If there are euros, take these out … immediately give these to the banks and convert to Turkish lira and, by doing this, we fight this war of independence and the future. Because this is the language they understand.”
Unless Turkish policymakers can get a grip, the situation could easily cause serious problems in other markets.
David Madden of CMC Markets explains:
The Turkish lira has taken a battering, and the banks in Turkey who have borrowed in euros might struggle to repay their loans if they haven’t hedged their position. Some eurozone banks have substantial shareholdings in Turkish bank, and should the default rate rise in Turkey, it could have a knock on effect around Europe.
It looks like the eurozone banking system is set for another period of turmoil as the exposure that some Spanish and French banks have to Turkey could hurt confidence in the region. European banks have enough to worry about with their own non-performing loans, and let alone Turkey’s weakened loan books. When it comes to the health of banks, traders usually steer clear of stocks and seek out safe-haven assets such as government bonds or the Japanese yen.
We’ll be tracking all the main events through the day...
