Turkey is a 'target of economic war', Erdogan says

Erika Holt
August 13, 2018

The state pipeline operator raised the price of natural gas used in electricity production by a staggering 50 percent last week. That sent the lira down even further.

On Thursday, Erdogan said "If they have their dollar, we have the people, we have Allah".

Worries over the worsening relationship with the United States have contributed to the potential economic crisis.

In his Twitter message, the USA president noted specifically how the Turkish lira was sliding "rapidly downward against our very strong Dollar".

Speaking to the press during a visit to the northern province of Ordu, the president said that the White House will no longer have an important ally in the North Atlantic Treaty Organization (NATO) if it insists on implementing measures such as the decision to double tariffs on Turkish steel and aluminum.

As the currency continued to fall, United States President Donald Trump announced on Friday he had doubled steel and aluminum tariffs on his North Atlantic Treaty Organisation ally before admitting that relations between Washington and Ankara were "not very good".

The tariff for steel imported from Turkey will now be 50 percent. He urged Washington to give up the misguided notion that bilateral relations could be "asymmetrical" and realize that Turkey had alternatives "before it is too late". According to figures from the Turkish Government, for the period of 2002 to October 2017, Turkish direct investments in the United States reached $3.7 billion while USA investments in Turkey amounted to $11.1 billion, second only to the Netherlands' 21.6 billion.

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Erdogan promised supporters that Turkey was taking the necessary precautions to protect its economy but added "the most important thing is breaking the hands firing these weapons".

The lira was trading at 5.95 to the dollar, a loss on the day of 7.5 percent.

Investors are also anxious about the state of borrowing within Turkish companies - as loans were made to support a construction boom. A weaker lira means that the taxes will be less impactful.

Erdogan has been putting pressure on the central bank not to raise interest rates in an attempt to help borrowers.

Reverberations spread through global markets, with European stock markets especially hit as investors took fright over banks' exposure to Turkey. "The dollar can not block our path". If there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks.

Paul Greer at Fidelity International said dramatic interventions were now needed as Turkey faced a "downward spiral" of investor confidence.

In what appears to be a diplomatic riposte, Turkey later said Erdoğan had held a phone call with Russian president Vladimir Putin to discuss economic ties, suggesting it might gravitate further away from its North Atlantic Treaty Organisation allies toward cooperation with Russia, whose relations with the west are at their lowest since the cold war.

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