This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/live/2018/aug/13/turkey-financial-crisis-contagion-fears-hit-markets-as-central-bank-takes-action-business-live
The article has changed 19 times. There is an RSS feed of changes available.
| Version 2 | Version 3 |
|---|---|
| Turkish lira 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) | |
| The EIU’s Agathe Demarais adds that Turkey has a lot of work to do to regain market confidence -- but it’s not clear that such measures will be taken..... | |
| With an overheated and indebted economy, Turkey will require credibly orthodox economic policies, fiscal discipline and central bank independence to reverse the current situation. | |
| A normalisation of relations with the US could also reduce the amount of legwork that the central bank will have to do to control the economic situation, but this is unlikely to happen at the moment. | |
| In view of the domestic political and economic conditions, it is therefore unclear whether the necessary steps will be taken to contain the market fallout. | |
| Agathe Demarais, Turkey analyst at The Economist Intelligence Unit, has predicted that Western banks will suffer losses from the Turkish lira’s slump soon. | |
| She told the AFP newswire that the impact of the currency crisis will ripple through the financial world, as Turkish companies find they can’t service loans taken out in dollars. | |
| “So far the impact of the lira crash has been limited in Europe and the rest of the world. | |
| “However, within a few months western banks that have strong ties with Turkey will feel the impact of the crisis as Turkish corporates will struggle to repay debt in foreign currency. | |
| “The sharp depreciation of the lira has almost doubled the local currency value of external debt repayments since the start of the year.” | |
| Read my comments for @AFP on the Turkish lira plunge and why it will affect western banks in a few months https://t.co/SEelctqZEz | |
| German chancellor Angela Merkel has now waded into the crisis, urging Turkey to ensure the independence of its central bank. | German chancellor Angela Merkel has now waded into the crisis, urging Turkey to ensure the independence of its central bank. |
| Merkel told a news conference in Berlin that: | Merkel told a news conference in Berlin that: |
| “No one has an interest in an economic destabilisation inTurkey. But everything must be done to ensure an independent central bank,. | “No one has an interest in an economic destabilisation inTurkey. But everything must be done to ensure an independent central bank,. |
| Germany would like to see an economically prosperous Turkey. This is in our interest.” | Germany would like to see an economically prosperous Turkey. This is in our interest.” |
| The Turkish central bank has been restricted by Erdoğan’s opposition to higher borrowing costs (he believes they cause inflation, while most economists believe they restrict it). | The Turkish central bank has been restricted by Erdoğan’s opposition to higher borrowing costs (he believes they cause inflation, while most economists believe they restrict it). |
| Turkish interest rates are currently 17.75% -- very high by current standards. Some City experts, though, argue they should be hiked by over 1000 basis points (to around 27%) to prop up the lira. | Turkish interest rates are currently 17.75% -- very high by current standards. Some City experts, though, argue they should be hiked by over 1000 basis points (to around 27%) to prop up the lira. |
| And here’s Associated Press’s take on the Turkish leader’s speech earlier today. | And here’s Associated Press’s take on the Turkish leader’s speech earlier today. |
| Turkish President Recep Tayyip Erdogan says his country is under an economic “siege” that has nothing to do with its economic indicators. | 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. | 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.” | 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.” | 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. | 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. | 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: | 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. | 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. | 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: |