Posts Tagged ‘Andrew Brunson’

Turkey’s battered lira down again on gloomy outlook for government action — Growth forecast for Turkey in 2019 cut to just 1.1 percent

August 27, 2018

The Turkish lira on Monday lost over three percent in value against the dollar as the same concerns that have propelled the embattled currency to record lows failed to dissipate after a summer break.

The lira has lost just under a third in value against the dollar over the last month, as anxiety over the coherence of domestic economic policy coupled with sanctions announced by the United States generated market panic.

© AFP | The lira has lost just under a third in value against the dollar over the last month

The currency was trading at 6.2 to the dollar, a loss of 3.1 percent on the day. It lost similar ground against the euro to trade at 7.2.

Turkish markets reopened on Monday after a week off for public holidays and the coming week will be crucial for the lira as European markets become more active after the summer break.

Analysts said that the same factors that at one point drove the lira above 7 to the dollar for the first time in history remain in place.

The government has yet to convince markets with a comprehensive economic strategy to fight inflation of almost 16 percent and a widening current account deficit.

The central bank is unwilling to raise interest rates in the face of stringent opposition from President Recep Tayyip Erdogan, raising concerns over its independence.

And the crisis with the United States is far from being resolved. Turkey is still holding American pastor Andrew Brunson under house arrest, one of the key factors behind the troubled ties between Ankara and Washington.

Jameel Ahmad, global head of currency strategy and market research at FXTM, predicted the lira would “remain under pressure for some time as the same structural concerns that terrified traders away from Turkish assets still remain unchanged.”

Market sentiment was further clouded by economists at JPMorgan Chase slashing their growth forecast for Turkey in 2019 to just 1.1 percent.

Treasury and Finance Minister Berat Albayrak, who is Erdogan’s son-in-law and his top pointman on the economy, was meanwhile holding talks in Paris with French counterpart Bruno Le Maire, his office said.

AFP

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Turkish lira firms as markets reopen with eye on US row, Erdogan’s grip on monetary policy

August 27, 2018

The Turkish lira gained slightly against the dollar on Monday as markets reopened after last week’s holiday, with investors set to refocus on a bitter dispute between Ankara and Washington over an American pastor being tried in Turkey.

The lira, which has weakened 37 percent against the US currency this year, firmed to 5.9905 from Friday’s close of 6.00. (AFP/File)

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The lira, which has weakened 37 percent against the US currency this year, firmed to 5.9905 from Friday’s close of 6.00 — the same level at which it stood a week ago when Turkish markets closed for the Muslim festival of Eid Al-Adha.

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The slide has been driven by investor concerns over President Tayyip Erdogan’s grip on monetary policy and the standoff with Washington over the fate of pastor Andrew Brunson, being tried in Turkey on terrorism charges that he denies.

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In his first comments on the currency crisis since before the holiday, Erdogan said on Saturday the commitment and determination of Turks was the guarantee needed to combat attacks on Turkey’s economy.

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Erdogan has cast the lira slide as the result of an “economic war” against Turkey, a comment echoed by his spokesman last week when US President Donald Trump ruled out concessions to Ankara in return for Brunson’s release.

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Trump’s national security adviser, John Bolton, subsequently said Ankara had made a “big mistake” by not freeing Brunson and voiced skepticism about Qatar’s offer of $15 billion in investment support for Turkey.

Reuters

http://www.arabnews.com/node/1362451/business-economy

Could Turkey trigger the next global financial crisis?

August 23, 2018

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All eyes are on the Turkish lira. Its decline has been precipitous – it has already lost more than 40%  of its value against the US dollar this year. For Turkey, which has relied on the inflow of foreign credit, this poses terrible risks.

Enormous debt coupled with a vicious attack for political reasons on the Turkish economy by the US government has pushed Turkey toward the precipice. Will Turkey’s descent take Europe with it and then, certainly, other middle-income countries? Is this the harbinger of a new global financial crisis that would be far more dangerous than the one in 2007-08?

Financial instability

The credit crisis of 2007-08 has not really ended. The problems posed by the collapse of the US housing market and the subsequent debt problems in world banking have not been fixed.

Sober recommendations from the Basel Committee on Banking Supervision as well as from the International Organization of Securities Commissions and the International Association of Insurance Supervisors have been substantially set aside. Instead of genuine reform to the financial sector, the United States government held its interest rate near zero and flushed the financial system with US dollars. The solution to a housing bubble in the United States has been to create a massive debt burden in the middle-income countries.

By VIJAY PRASHAD
Commentary

In countries such as Turkey, recently private companies started to take out more dollar-denominated loans from international financial institutions to fund their operations and even speculative investments. A flood of dollars crashed into these countries. Foreign speculators used this money to invest in their local currencies (including in lira-denominated public-sector securities in Turkey).

The Institute of International Finance showed that this wave continued to crest as recently as the past few years. At the end of 2011, the 30 largest emerging markets were indebted to the tune of 163% of their gross domestic product; in the first quarter of this year, that figure increased to 211% of GDP, an increase of $40 trillion in these countries’ debt. The exit from the 2007-08 financial crisis was through debt-financed economic growth, with a massive balloon of various kinds of debt inflated over the past decade.

Image result for Berat Albayrak, sweating, photos, Turkey

Berat Albayrak, Turkey’s finance minister, is Erdogan’s son in law.

Total global debt is estimated to be $247 trillion. That is a figure that should give us pause. Much of this debt, furthermore, went to fund the expansion of the financial sector rather than ti develop the productive and socially beneficial sectors. It is a model of economic growth that demands more debt to finance itself.

There are few other avenues for this unsustainable model. The trigger that might explode this bubble fully comes in the months ahead as countries such as Argentina, Brazil, South Africa and Turkey will confront the maturation of their $1 trillion of dollar-denominated debt. Will they be able to replace these existing loans with fresh loans? Who will be in line to lend money to countries that seem to be at the end of their rope?

Turkey’s flu

Financial crises are not new to Turkey. Major crises struck this country of 80 million in April 1994 and February 2001. In both cases, the country lost a large part of its GDP and its foreign-exchange reserves as interest rates skyrocketed (in 1994, overnight interest rates went from 75% to 700%, while in 2001 they went from 40% to 4,000%).

Recovery came through a variety of means, namely through an IMF-induced “Transition to a Strong Economy” program. The International Monetary Fund program pushed Turkey to “capital-account liberalization,” a fancy way of saying that its banks were encouraged to borrow in dollars from international capital markets and lend in liras to domestic investors.

The entire economy was restructured to rely on lower wages to encourage exports and by the inflow of short-term capital. As this volatile short-term capital rushed into Turkey, the current AKP (Justice and Development Party) government used it to fund extravagant, unproductive projects.

There was no possibility that Turkey could export enough to finance its significant foreign debt. Massive current-account deficits have been vulnerable to the withdrawal of the short-term foreign capital – what is rightly called “hot money.”

In 2011, everything seemed manageable. Turkey was on the threshold of entering the European Union, relations with the United States were on a high, and Anatolian businessmen saw their own manufacturing benefit in markets from Lebanon and Syria to the Persian Gulf to North Africa. Then the war in Syria threw the entire political situation into turmoil. Exports to the Arab world declined, the refugee crisis put pressure on Turkey, and its own political stability ended with the government opening up a new war on the Kurds.

Turkey’s ambitions in Syria ended and the AKP government tried to bring stability by ruthlessly purging any dissenters in the country. Political favors brought incompetent people to take over from those who had been purged. All this brought internal stress into the Turkish economy.

And then came Donald Trump. The tariff policy of the United States – particularly in this case on Turkish steel and aluminum – sent a tremor through the bankers who had lent Turkey money. Higher interest rates in the United States drew money out of places such as Turkey (and other middle-income countries) to rush back to the US, where the dollar is “good as gold.”

All this hit the lira hard. It did not help that the United States and Turkey are in the midst of a political fight over an American pastor who is jailed in Turkey and over a Turkish cleric who lives in the US. Since the attempted coup in Turkey in 2016, tension has existed between the two countries. Now, the US administration has made it clear that even the release of the pastor will not be enough.

“The tariffs that are in place on steel would not be removed with the release of Pastor Brunson,” President Trump’s spokeswoman Sarah Sanders said. “The tariffs are specific to national security.” What that chilling phrase means is not clear.

It is an advantage to Trump that the banks with the largest exposure to the Turkish lira are all European – France’s BNP Paribas, Italy’s UniCredit and Spain’s BBVA. The European Central Bank has already indicated its concern despite the fact that these banks say they are prepared for the worst scenario.

The amounts are not small. Turkish borrowers owe Spanish banks in excess of $82 billion, while French banks are owed $38.4 billion and Italian banks are owed $17 billion. Turkey’s private-sector debt is substantial – within a year it must pay $220 billion to service this debt.

An inability to make these payments as well as a further collapse of the lira could set off a crisis in Europe, which would then have an impact on the global financial markets. Turkey, this time, could be what the US housing market was in 2007.

Options

Turkish Finance Minister Berat Albayrak, who happens to be the son-in-law of President Recep Tayyip Erdoğan, has said that his country has opened discussions with the IMF. He pledged not to put capital controls in place. Capital controls might well be the only option truly to protect Turkey from economic collapse. The AK Party is averse to any radical solution. It will likely conform to IMF policies without going formally to the IMF – to preserve Erdoğan’s façade about being anti-Western. The AKP is now governed by anti-Western rhetoric, but pro-Western policies.

On August 15, the Turkish government approached the World Trade Organization with a formal complaint about the United States’ tariff policy. The complaint says that the US tariffs are against the General Agreement on Trade and Tariffs (1994), the bedrock framework for the WTO, and that even US law (Trade Expansion Act of 1962) violates the 1994 GATT agreement. Five days later, the WTO circulated this complaint among its members. There will now be a serious discussion based on this document.

Meanwhile, across Turkey’s border, Iran has suffered as well from the return of US sanctions. China has provided some short-term succor for Iran. Will it offer such protection to Turkey? When Boeing pulled out of its contract to sell aircraft to Iran, the Russian company Sukhoi offered to do so. Will Russia now make similar concessions to Turkey? Will there be an Asian solution to the Turkish crisis? But can China and Russia, themselves vulnerable to the turbulence of global finance, bail these countries out indefinitely?

Other solutions are necessary, more radical ones.

This article was co-authored with E Ahmet Tonak, who along with Vijay Prashad works at the Tricontinental: Institute for Social ResearchThe article was produced by Globetrottera project of the Independent Media Institute.

http://www.atimes.com/could-turkey-trigger-the-next-global-financial-crisis/

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Bolton: Turkey can end lira crisis ‘instantly’ by freeing pastor

August 22, 2018

Trump’s security adviser says Ankara should ‘do the right thing’ and free a US pastor held in Turkey without condition.

Pastor Brunson, centre, a US citizen, has been imprisoned in Turkey for the last 21 months [Reuters]
Pastor Brunson, centre, a US citizen, has been imprisoned in Turkey for the last 21 months [Reuters]

US President Donald Trump’s national security adviser has said that Turkey could end its lira-battering crisis with Washington “instantly” by freeing a detained American pastor, adding that a Qatari cash infusion would not help Ankara’s economy.

The Turkish currency has been in freefall since Washington ordered tariffs in retaliation for the detention of Pastor Andrew Brunson on charges of complicity in a failed 2016 coup.

Brunson denies wrongdoing, and Ankara has in the past suggested his fate could be linked to that of a US-based Turkish religious leader whom Turkish President Recep Tayyip Erdogan accuses of orchestrating the attempted putsch.

READ MORE

Turkey court rejects US pastor Andrew Brunson release appeal

Brunson, who has lived in Turkey for two decades, has been detained for 21 months, charged with terrorism by the Turkish government. He is now under house arrest.

“Look, the Turkish government made a big mistake in not releasing Pastor Brunson,” John Bolton told the Reuters news agency in an interview during a visit to Israel.

“Every day that goes by that mistake continues, this crisis could be over instantly if they did the right thing as a NATO ally, part of the West, and release pastor Brunson without condition.”

Qatari assistance

Qatar’s emir this month approved a package of economic projects, including a $15bn pledge of support for Turkey, giving a boost to the lira that lost some 37 percent of its value this year.

Bolton was sceptical about the intervention by the Gulf state, which has been feuding with US allies in the Middle East such as Saudi Arabia, United Arab Emirates and Egypt.

“Well, I think what they pledged is utterly insufficient to have an impact on Turkey’s economy. It’s certainly not helpful but we’ll actually see what develops from their pledge,” he said.

The Turkish lira lost value this year in a currency crisis triggered by concern over Erdogan’s influence over monetary policy and exacerbated by the dispute with Washington.

Last week a court in Turkey’s Izmir province rejected an appeal to release Brunson, saying evidence was still being collected and the pastor posed a flight risk, according to Turkish media.

https://www.aljazeera.com/news/2018/08/bolton-turkey-lira-crisis-instantly-freeing-pastor-180822103604024.html

Trump warns no concessions to Turkey for pastor’s release

August 21, 2018

US president says country making ‘terrible mistake’ with conditions to free Andrew Brunson

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The escalating spat with Washington has placed more pressure on the beleaguered Turkish economy, which has seen its currency hit hard in recent weeks © Reuters

Demetri Sevastopulo in Washington

US President Donald Trump has warned Turkey that he will not agree to any concessions as his administration raised the pressure on Ankara in an attempt to secure the release of an American pastor who is under house arrest in the country.

In an interview with Reuters, Mr Trump said he would not agree to any demands that Turkey has made as a condition for the release of Andrew Brunson, a North Carolina preacher whose detention since 2016 has sparked a dramatic deterioration in relations between America and Turkey, an important Nato ally.

“I think it’s very sad what Turkey is doing. I think they’re making a terrible mistake. There will be no concessions,” Mr Trump told Reuters.

Mr Trump has taken an increasingly assertive stance towards Turkey in recent weeks since the collapse of a preliminary deal to release Mr Brunson. The US has accused the country’s president Recep Tayyip Erdogan of reneging on a deal, saying he released Mr Brunson and placed him under house arrest instead of releasing him outright.

Earlier this month, Mr Trump imposed sanctions on two Turkish cabinet ministers in connection with the Brunson case. The US later raised tariffs on imports of steel and aluminium from the country. Last week, Steven Mnuchin, Treasury secretary, warned that the US would impose more sanctions if Mr Brunson was not released “quickly”.

The escalating spat with Washington has placed more pressure on the beleaguered Turkish economy, which has seen its currency the lira hit hard in recent weeks. The lira weakened by 1.1 per cent on Monday to TL6.0814 to the dollar. It continued to weaken in evening trading in New York, reaching TL6.0973.

Asked by Reuters if he worried about the knock-on impact on other economies, Mr Trump said: “I’m not concerned. This is the proper thing to do.”

US officials have argued that the Turkish economic problems are fundamentally unrelated to the dispute over Mr Brunson, which has exploded in recent weeks.

Mr Trump told Reuters he expected Mr Erdogan to live up to his word, particularly since the US president had helped convince Israel to free a Turkish woman who had been detained in the country. “I got that person out for him. I expect him to let this very innocent and wonderful man and great father and great Christian out of Turkey.”

Mr Trump and Mike Pence, his vice-president, have made very public efforts to call for the release of Mr Brunson, partly because of Mr Trump’s support from Evangelical Christians in the US. The president is hoping to rally the Evangelical vote in an effort to counter Democratic energy ahead of the November midterm elections.

Mr Erdogan has shown no sign of caving and has accused the US of waging “economic war” on Turkey. Ankara wants Washington to take action on other areas of dispute, including providing relief for Halkbank, a Turkish bank that is under investigation for allegedly violating US sanctions on Iran.

A senior White House official said the US had made clear that the other disputes, including the Halkbank case, could only be discussed after Mr Brunson’s release.

The official said Halkbank had recently complied with a subpoena request from the Treasury’s Office of Foreign Assets and Control, but that its response was deemed to be insufficient. Washington has told Ankara that Halkbank must comply properly with the US legal process before any discussions about relief could be entertained.

“A real Nato ally wouldn’t have arrested Brunson in the first place,” the senior White House official said.

Additional reporting by Joe Rennison

https://www.ft.com/content/6d790d6e-a4d2-11e8-926a-7342fe5e173f

Merkel sees no urgent need to help Turkey financially

August 20, 2018

German Chancellor Angela Merkel told her Christian Democrats (CDU) at a meeting that she saw no urgent need to offer financial aid for Turkey to ease its currency crisis, the conservative party’s general secretary said on Monday.

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FILE PHOTO: German Chancellor Angela Merkel at the German government guest house Meseberg Palace in Meseberg, Germany, August 15, 2018. REUTERS/Fabrizio Bensch/File Photo

“She made it clear again that she sees no urgency at the moment for special aid for Turkey,” Annegret Kramp-Karrenbauer told reporters after the CDU board meeting attended by Merkel.

Reuters

Reporting by Joseph Nasr; Editing by Michael Nienaber

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SPD’s Andrea Nahles says Germany may give aid to Turkey

Ahead of Turkish President Erdogan’s trip to Germany in September, the SPD’s Andrea Nahles has said German aid is a possibility. It comes as tensions between the US and Turkey rise over the house arrest of a US pastor.

    
Andrea Nahles (Reuters/H. Hanschke)

The head of Germany’s Social Democratic Party (SPD), Andrea Nahles, has said there could be circumstances in which Germany would provide financial assistance to Turkey during its economic crisis.

“A situation might arise where Germany needs to help Turkey, regardless of political tensions with President Recep Tayyip Erdogan,” Nahles said in an interview published in German Funke media group newspapers on Sunday.

Read more: Opinion: Turkey crisis a threat to Europe’s economy?

“Turkey is a NATO partner who we cannot ignore. It is in everyone’s interest that Turkey remains economically stable and that the current turbulence involving its currency can be stemmed,” Nahles said

Since the beginning of the year, the Turkish lira has dropped more than 35 percent against the US dollar.

Nahles said Erdogan’s planned visit to Germany in September was the correct move.

“The federal government must remain in dialogue with Turkey at all levels,” she said.

“It is my clear expectation of the chancellor that, of course, critical issues will also be addressed. In particular, this includes the arrest and detention of German nationals in Turkey,” she continued.

Read more: Turkey’s economic woes reveal complicated Germany ties

Consequences for Europe

Nahles’ party colleague, the former German Foreign Minister Sigmar Gabriel, has also voiced an urgent appeal to both Germany and Europe not to isolate Turkey.

“In our own interest, we must do everything to keep Turkey in the West,” Gabriel told newspapers from the Redaktionsnetzwerk Deutschland (RND).

Gabriel warned that Europe, and not the USA, would pay the price if Turkey were destabilized by sanctions imposed by Washington. He said the consequences could be economic disruption and an increase in the number of migrants and refugees coming from the country.

He also prophesized that “nationalistic forces” in Turkey could “reach for the atom bomb, as in Iran and North Korea, to make themselves unassailable.”

Possible IMF aid

According to a report from German news magazine Der Spiegel, Germany has urged Turkey to accept an International Monetary Fund aid program.

The issue is said to have been discussed during a phone call between Germany’s Federal Finance Minister Olaf Scholz and his Turkish counterpart Berat Albayrak last Thursday, Spiegel reported.

But this could be made difficult due to tensions between Turkey and the US, which have escalated further over American pastor Andrew Brunson, who is under house arrest in Turkey. Brunson faces up to 35 years in jail if convicted of espionage and terror-related charges, but he maintains his innocence.

Read more: Turkish economic shadow looms over Europe and beyond

The US imposed further sanctions on Turkey and placed sanctions on two leading Turkish ministers, accusing them of serious human rights abuses. Turkey has threatened to hit back with measures of its own.

On Saturday, Erdogan said his country will stand strong against an “attempted economic coup” amid the tensions with the US.

Speaking to thousands of supporters in Ankara, Erdogan said the country was being “threatened by the economy, sanctions, foreign currency, interest rates and inflation.”

“We tell them that we see their game and we challenge them,” he said.

tj,law/aw (AFP, dpa)

Turkey: U.S. Rebuffs Effort to Tether Bank Fine to Pastor’s Release

August 20, 2018

Trump administration says U.S. minister must be set free before other issues are addressed

The Trump administration said it won’t link the release of American pastor Andrew Brunson, above, to other issues, such as eliminating U.S. fines a major Turkish bank faces.
The Trump administration said it won’t link the release of American pastor Andrew Brunson, above, to other issues, such as eliminating U.S. fines a major Turkish bank faces. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES
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WASHINGTON—The Trump administration has rejected an effort by Turkey to tie the release of a U.S. pastor with relief for a major Turkish bank facing billions of dollars in U.S. fines, telling Ankara other issues are off the table until the minister is freed, a senior White House official said.

The jailing of Andrew Brunson has triggered the worst crisis between the two countries in decades and helped push the Turkish currency to record lows in recent months. The rejection of a possible trade sets the stage for the U.S. to impose another round of penalties against Ankara as soon as this week.

The administration wants Turkey to release Mr. Brunson and other citizens it holds on disputed terrorism charges, as well as three Turkish nationals who work for the U.S. government.

Turkey, seeking a gesture in exchange, asked the U.S. to drop an investigation intoHalkbank , which is facing potentially crippling fines for allegedly violating U.S. sanctions on Iran.

The White House official said the U.S. made clear to Turkey that areas of dispute between the two nations, including the fines Halkbank faces, won’t be discussed until Mr. Brunson has been released.

“A real NATO ally wouldn’t have arrested Brunson in the first place,” the senior White House official said, referring to Turkey’s membership in the North Atlantic Treaty Organization.

The Trump administration imposed sanctions against two top Turkish officials earlier this month, and Treasury Secretary Steven Mnuchin said the U.S. was prepared to take tougher steps.

On Friday, President Trump called the charges against Mr. Brunson “phony,” adding: “We are not going to take it sitting down.”

The U.S. and Turkey have been in prolonged negotiations over a major fine against Halkbank, but the talks stalled. Halkbank is also facing further investigation in the U.S.

Halkbank recently complied with a subpoena request from the U.S. Treasury’s Office of Foreign Assets and Control, but its response was deemed insufficient, the White House official said. Washington has told Ankara that Halkbank must comply properly with the U.S. legal process before any discussions about relief could be entertained, the official said.

A Treasury spokesman declined to comment.

The Turkish embassy in Washington didn’t respond to a request for comment. Halkbank couldn’t be reached for comment. The Turkish government has said accusations that Halkbank helped Iran evade U.S. sanctions are groundless and based on fabricated documents.

The bank, formally known as Turkiye Halk Bankasi A.S., is one of Turkey’s largest state lenders. It has denied any wrongdoing.

Other points of dispute between the two nations include Turkey’s retaliation against U.S. exports after the Trump administration placed tariffs on imported aluminum and steel. The U.S. Trade Representative’s Office has also started a review of Turkey’s duty-free access to U.S. markets.

Mr. Brunson, a 50-year-old North Carolina native, has been accused by Turkish officials of aiding the group accused of orchestrating a failed July 2016 military coup and another group of Kurdish separatists battling the Turkish military for greater autonomy. He has been held since October 2016.

Mr. Brunson’s fate—he is now held under house arrest—has been a major cause for evangelical Christians and a priority for Mr. Trump and Vice President Mike Pence.

The White House official discussed other national security issues as well, saying there was skepticism at the highest level of the White House about Russia’s ability to help remove Iranian forces from Syria. That ran counter to Mr. Trump’s optimistic tones after his Helsinki summit with President Vladimir Putin of Russia last month that Moscow and the U.S. would be able to work jointly on the issue.

Syria was the longest subject of discussion between Messrs. Putin and Trump when they and their top advisers met, the official said. The Russian president said during private meetings that he didn’t want the Iranians in Syria either, but he wasn’t sure Russia was able to achieve that, the official said.

John Bolton, the White House national security adviser, said Sunday on ABC that Mr. Putin told the president he “didn’t have the same interest as Iran in Syria, and that he’d like to talk about ways to get them [Iran] out.”

“President Putin is very candid in his comments to President Trump, he was to me as well,” Mr. Bolton said.

Mr. Bolton said he plans to discuss the situation in Syria when he meets with Israeli and Russian leaders this week.

Write to Michael C. Bender at Mike.Bender@wsj.com

Appeared in the August 20, 2018, print edition as ‘U.S. Tells Turkey It Won’t Negotiate On Pastor.’

Erdogan’s possible remedies for Turkey crisis –We need a credible program of fiscal consolidation and economic reform

August 19, 2018

The crash in the Turkish lira sparked by US sanctions has left President Recep Tayyip Erdogan facing the biggest economic challenge of his one-and-a-half decades in power.

There are some possible fixes, but Erdogan will have to swallow a very bitter pill. (Presidential Press Service via AP, Pool)

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The lira has recently clawed back some of its losses, but economists say Turkey still urgently needs to address imbalances in its economy and avert a full-blown crisis.

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The fragility of the currency was highlighted again on Friday when Standard and Poor’s and Moody’s both downgraded Turkey’s debt ratings within hours of each other.

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The lira closed a volatile week of trading at just over six to the dollar, off the lows of over seven earlier in the week, but still sharply down from the start of the month, when it had been changing hands at under five to the dollar.

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Economists say Turkey must act to prevent risks spreading to the European and even global economies.

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Erdogan has a number of mechanisms at his disposal. But they could prove bitter pills for the Turkish strongman to swallow.

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Even before the crisis broke, economists were urging Turkey to raise interest rates sharply to prop up the lira and rein in inflation.

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But Erdogan — who sees his overriding priority as boosting growth — adamantly refuses, with economists worried that the nominally independent central bank is firmly under his control.

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With its hands apparently tied when it comes to raising the headline borrowing rate, the central bank has provided banks with more liquidity, while also quietly using a mechanism that allows de-facto rate increases on a day-to-day basis.

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William Jackson, economist at Capital Economics in London, said that while “the sense of acute crisis” had faded, “policymakers only really seem to have done the minimum needed.”

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Financial markets are also skeptical about Erdogan’s ability to resolve the current crisis, especially after he named his son-in-law Berat Albayrak as finance minister last month.

Image result for Berat Albayrak, sweating, photos, Turkey

BeratAlbayrak

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Erdogan’s unorthodox beliefs have not helped, with the president repeatedly baffling markets by suggesting that low interest rates are needed to bring down inflation.

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Moody’s said Turkey lacked a “clear and credible plan” to deal with the challenges while S&P said the response from Ankara so far had been “limited” despite the mounting risks.

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Albayrak on Friday insisted that bringing down inflation was a priority for Turkey. But markets want to see actions rather than words.

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“Turkey’s economic crisis is far from over,” said Mujtaba Rahman, managing director for Europe at Eurasia Group, calling for a “credible program of fiscal consolidation and economic reform.”

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Economists have long warned that Turkey’s high inflation, widening current account deficit and vulnerable banking sector harbored risks.

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Nevertheless, the immediate cause of the current crisis is the detention for almost two years of US pastor Andrew Brunson and the ensuing sanctions from Washington that have sent the lira into a tailspin.

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One immediate way out of the crisis would be to release Brunson from his house arrest. But this is far from certain, with Turkey noisily asserting the independence of its judiciary.

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Another way could be to defuse the tensions with Europe that have mounted since the failed 2016 coup, and focus instead on the joint opposition to Washington’s unilateral trade measures.

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The last week saw the surprise releases of two Greek soldiers held for around six months and the Turkey chair of Amnesty International held for over a year, moves bound to gladden Brussels.
These releases “were not a coincidence,” commented a European diplomat, asking not to be named.

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In such a situation, the logical move for many countries would be to turn to the International Monetary Fund (IMF) for help. But Washington may not be too keen.

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And this also appears to be a red line for Erdogan, too, who has repeatedly boasted that Turkey managed to clear all of its debts to the IMF by 2013.

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Albayrak said Thursday that Turkey was not in contact with the IMF over a bailout and said Ankara was looking to attract new investments instead.

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After hosting his ally the emir of Qatar earlier this week, Erdogan secured a pledge for some $15 billion of investment from the gas-rich emirate.

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But according to Berenberg Bank economist, Holger Schmieding, the Turkish economy, the world’s 17th biggest, is far too important to be kept afloat with relatively small amounts of foreign money.

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Many economists say that in the short term the most likely course for Turkey will be to try and weather the crisis without resorting to rate hikes, major political concessions or radical economic reform.
The central bank’s attempts last week to prop up the lira suggest it is trying micro-manage the crisis rather than find more comprehensive solutions.

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Jackson at Capital Economics said “policymakers will try to muddle through with a more heterodox approach for as long as possible,” forecasting the lira faced further declines in 2019 and beyond.

AFP

http://www.arabnews.com/node/1358736/business-economy

Mike Pence fires warning shot to Turkey as Qatar vows $15bn support

August 16, 2018

US vice-president tells Ankara not to test Washington’s resolve over detained pastor

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Qatar’s Sheikh Tamim bin Hamad Al Thani, left, and Turkish president Recep Tayyip Erdogan in Ankara on Wednesday © Reuters

By Laura Pitel in Istanbul

Mike Pence, the US vice-president, has warned Turkey not to test America’s resolve in an escalating row between the two countries, as Qatar announced $15bn in support for Ankara.

Mr Pence said Andrew Brunson, an evangelical pastor whose detention in Turkey has triggered tit-for-tat sanctions between the two Nato allies, must be released immediately and hinted at further punitive steps if he was not allowed to go free.

“Pastor Andrew Brunson is an innocent man held in Turkey & justice demands that he be released,” Mr Pence, who is himself an evangelical Christian, wrote on Twitter. “Turkey would do well not to test @POTUS Trump’s resolve to see Americans who are wrongfully imprisoned in foreign lands returned home to the United States.”

Despite no sign of a resolution to the diplomatic dispute, the Turkish lira continued to gain strength on Thursday following the announcement of measures aimed at bolstering the currency and cracking down on short selling.

The lira, which fell as low as 7.2 against the dollar on Monday, rose 4.5 per cent on Thursday morning to 5.7.

The currency’s sharp decline in recent months has piled pressure on companies with foreign currency debts and the banking sector.

White House slams Turkey’s tariffs on US imports

On Thursday, Berat Albayrak, Turkey’s finance minister, will hold a conference call with institutional investors in a bid to improve market confidence in his country. The Turkish finance ministry said 3,000 people had signed up to take part in the call with Mr Albayrak, the son-in-law of Turkish president Recep Tayyip Erdogan.

Turkey said Qatar had pledged $15bn in direct investment in the country following a meeting in Ankara on Wednesday between Mr Erdogan and Sheikh Tamim bin Hamad Al Thani, Emir of Qatar. A Turkish official said this would “provide rapid funds to the financial markets and the banks”.

Mr Erdogan said the meeting was “very productive and positive” and vowed that Turkey would “continue to strengthen our relationship with our dear friend and brother country of Qatar”.

Turkey has strengthened its economic, political and military ties with the Gulf state, the world’s richest nation in per capita terms, since Saudi Arabia and three Arab allies imposed a regional blockade on Qatar last year.

Tensions between Turkey and the US have compounded investor concerns about the Turkish economy. Even before the eruption of the row, markets were concerned about the country’s wide current account deficit, soaring inflation and the apparent reluctance of Mr Erdogan, a self-styled “enemy” of high interest rates, to allow the central bank to raise rates.

Industrial output data released on Thursday showed a 3.2 per cent rise in production year on year in June but shrank 2 per cent month on month. The figures support the view of some economists that Turkey faces a slowdown after booming growth of 7.4 per cent last year.

William Jackson, of the consultancy Capital Economics, said interest rate rises from earlier in the year had begun to take “quite a significant toll on the real economy”. He expects a recession in the second half of the year. “It’s likely to get worse in the third quarter of the year,” he said.

Mr Jackson said the signs of a slowdown would strengthen the argument of some government officials that an interest rate increase is unnecessary because Turkey’s economy is undergoing a natural rebalancing.

But he said a rate rise would boost the confidence of investors whose funds are vital to the Turkish economy and support the lira, which, in turn, would alleviate concerns about the impact of currency depreciation on the corporate sector.

Relations between Ankara and Washington have become increasingly strained in recent years over disagreements ranging from US support for Kurdish militants in Syria to Turkey’s decision to buy an S-400 air defence system from Russia.

But the fate of Mr Brunson, who was arrested in Turkey in October 2016 and is on trial on espionage and terrorism charges, has become a flashpoint.

https://www.ft.com/content/9464d4ae-a125-11e8-85da-eeb7a9ce36e4

Can Turkey turn to the Arab world for economic support?

August 14, 2018

The collapse of the lira and the diplomatic row with the United States has sent Recep Tayyip Erdogan scrambling for help from his allies, including in the Arab world. However, experts say he may find support lacking.

    
Turkish President Recep Tayyip Erdogan delivers a speech

The value of Turkey’s currency, the lira, nosedived over the weekend, hitting a record low to the dollar. While it recovered somewhat on Monday, all eyes remain fixed on Recep Tayyip Erdogan. As the latest drama unfolded, the Turkish president invoked the kind of outlandish and provocative rhetoric he has become known for in recent years.

“If they [Americans] have dollars, we too have our people, our God, our Allah,” Erdogan said on Friday.

According to Hazim al-Amin, columnist at the Al-Hayat newspaper, remarks like that are only likely to alienate the Arab leaders Erdogan will need to turn to in his country’s tough times.

Erdogan’s behavior is typical of populist politicians who like to utilize religious sentiments rather than secular politics guided by reason, said al-Amin. “This group includes Donald Trump, Benjamin Netanyahu, Vladimir Putin, Ali Khamenei and Erdogan,” he explained. “They are all concerned with at least partially replacing politics with religion.”

Pastor spat hampers Erdogan

Trump, like Erdogan, has riled European leaders with his harsh rhetoric, particularly when it comes to trade, said al-Amin, but the reaction there has been somewhat restrained in comparison. However, when it comes to the ongoing diplomatic strife between the United States and Turkey, fueled by the controversy surrounding US pastor Andrew Brunson, who is being held on terrorism charges, the US president may have met his match. “Catastrophe is inevitable,” said al-Amin.

Read moreTurkish economic shadow looms over Europe and beyond

According to Yunus Ulusoy from the Foundation Center for Turkish Studies and Integration Research in Essen, the whole affair has put Erdogan in a difficult spot. Theoretically, it is conceivable that the Turkish president will release Brunson, “but that would be a loss of face for Erdogan that would leave him little support from his followers,” said Ulusoy, adding that such a solution is perhaps only probable in the long term.

Erdogan visiting Qatar (picture alliance/dpa/abaca/K. Ozer)Erdogan was quick to come to Qatar’s defense, but will that support go both ways?

Friendly Qatar has struggles of its own

Turkey maintains only limited economic relations with the Arab world and its prospects for trade in the region are also limited as a result, explained Mustafa Ellabad, director of the Al-Sharq Center for Regional and Strategic Studies in Cairo. “The Turkish-Arab partnership is overrated,” he told DW. “Turkey exports mainly basic, unprocessed goods to the Arab world.”

Turkey’s closest ally in the region is Qatar. The two states’ already-strong political ties — Turkey stations troops in Qatar, for example — were further deepened last year when Ankara backed Doha after it was diplomatically isolated by Saudi Arabia and its Gulf allies. Turkey stepped in and provided Qatar with essential goods. However, to what extent Qatar, embroiled in its own diplomatic crisis, can now support Turkey remains to be seen.

Read moreIs the Turkey crisis a threat to Europe’s economy?

Although Ankara continues to maintain relations with other Gulf states, including Saudi Arabia, they are very limited, said Ellabad. “If we compare trade relations between Turkey and Saudi Arabia, they are disproportionate to those which the Saudi kingdom maintains with the EU states,” he said.

Unfortunately for Erdogan, he may have to look elsewhere for help in solving his country’s current economic woes. He will find “no support for Turkey from the Arab states in this crisis,” Ellabad said.

https://www.dw.com/en/can-turkey-turn-to-the-arab-world-for-economic-support/a-45070283