Turkey: Misunderstanding between Trump and Erdogan tanked economy


The dispute between the two North Atlantic Treaty Organisation allies - which reached new intensity over the detention of an American pastor in Turkey - has hammered the lira and also raised questions over the future partnership between Washington and Ankara.

Turkey's president, Recep Tayyip Erdoğan, is opposed to raising interest rates to cool down the economy and support the currency, and has used his recent election victory to impose his unorthodox views on the country's central bank.

"And we also have our Venus and Vestel", he said, with regards to Turkey's own domestic brands.

Shares in Vestel zoomed up seven percent on the Istanbul stock exchange after Erdogan's remarks.

However, other countries - such as Mexico and South Africa - also took advantage of low USA interest rates in the years after the financial crisis to borrow heavily in dollars and saw their currencies coming under pressure.

He also made his now famous speech on the night of the July 2016 failed coup calling citizens out into the street through Facetime, an iPhone app.

The Turkish lira has been hit by concerns over President Recep Tayyip Erdogan's economic policies and a trade and diplomatic dispute with the United States, a North Atlantic Treaty Organisation ally.

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The Turkish president is angry that the United States has not taken more action against the Gulenist movement and what he said was a failure "to unequivocally condemn" the 2016 coup attempt. "Necessary instructions on the issue have been issued to our agencies", Yahya Ustun, spokesman for the country's flag-carrier, wrote on Twitter.

On August 4 Erdogan says Ankara will freeze the assets in Turkey of the U.S. ministers of "justice and interior".

"They don't hesitate to use the economy as a weapon", he said. 'What do you want to do?

Separately, Russian Foreign Minister Sergey Lavrov, on an official visit to Ankara, said the increased USA tariffs and sanctions imposed by Washington are "based on the desire to dominate everywhere in everything, to control worldwide affairs and to achieve unilateral advantages on global markets".

Erdogan admitted the Turkish economy had problems - including a widening current account deficit and inflation of nearly 16 percent but added: 'Thanks to God, our economy is functioning like clockwork'.

After free-falling on Monday, Turkey's already troubled lira began showing signs of stabilizing on Tuesday, climbing 5 percent.

The lira has lost about a fifth of its value against the greenback since Friday.

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Turkey's lira currency has been falling steadily for the a year ago because of a clearly stated view by Mr. Erdogan that interest rates are "evil", and because he has been controlling Turkey's central bank consistent with that belief.

Erdoğan has refused to accept interest rate hikes and other measures that could stabilize Turkey's economy and has instead blamed the crisis on global "economic terrorists".

But the statement gave no clear promise of rate increases, which is what most economists say is needed.

Turkey's Treasury and Finance Minister Berat Albayrak will address foreign investors on August 16.

Turkey's lira fell sharply on Friday after U.S. President Donald Trump threatened to double tariffs in retaliation for failing to release pastor Andrew Brunson.

Brunson's lawyer Cem Halavurt confirmed to a French wire service that he appealed for the release of his client once again on Tuesday, saying that: "The court should deliver its ruling in the next three days".

"There is a cost we're going to pay for the period we're in", he said.

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Trump's national security adviser John Bolton met with Turkish officials in Washington on Monday, Turkey's state-run media reported.