Published: Sun, August 12, 2018

Erdogan says USA turned its back on Turkey, upsetting Ankara

Erdogan says USA turned its back on Turkey, upsetting Ankara

President Tayyip Erdogan has told Turks to sell their gold and US dollars to support the country's currency which plunged after US President Donald Trump escalated a feud with North Atlantic Treaty Organisation ally Turkey by doubling tariffs on metals imports.

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".

"You can never bring this nation in line with the language of threats", Mr. Erdogan said at a rally in the Black Sea town of Unye on Friday.

Pastor Andrew Brunson is on trial on espionage and terror-related charges related to a failed 2016 coup attempt, which he and the U.S. government adamantly deny.

Putting a 50 percent tariff on a foreign country's steel exports isn't the most conventional way to secure an imprisoned American's relief.

The Canadian dollar weakened to a more-than two-week low against its US counterpart as geopolitical risk rattled global financial markets, offsetting stronger-than-expected domestic jobs data.

"President Erdogan's strengthened powers under the new presidential system have made it increasingly uncertain whether policymakers will be able to act to stabilise the economy", said William Jackson, chief emerging markets economist at Capital Economics in London.

President Tayyip Erdogan denied on Saturday that Turkey is in a currency crisis, dismissing a plunge in the lira as "fluctuations" which have nothing to do with economic fundamentals.

Turkey is a major emerging market economy with $466 billion in foreign debt (about 78 percent in USA dollars and about 18 percent in euros), or 52.9 percent of gross domestic product.

President Donald Trump broke the news on social media that he authorized the doubling of existing steel and aluminum duties on imports from Turkey.


Many Turkish lenders are already in talks to restructure billions of dollars of loans, a process that may end up forcing them to accept losses.

Mr Erdogan said the U.S. had "repeatedly and consistently failed to understand and respect the Turkish people's concerns".

The Turkish lira has lost about 40 percent of its value this year alone, largely over worries about Erdogan's influence over the economy, his repeated calls for lower interest rates in the face of high inflation and deteriorating ties with the United States. And more than one-third of that debt is coming due within the year.

In an op-ed published in New York Times, Erdogan warned Washington not to risk its relations with Ankara, saying otherwise it would look for "new friends and allies".

I hope we can soon get Pastor Brunson and other Americans released in a win-win fashion for both the U.S. and Turkey."Trump's move to double tariffs on Turkey was even praised by one of the president's most frequent Democratic critics".

Washington "must give up the misguided notion that our relationship can be asymmetrical", he said in the opinion piece.

UBS chief economist for EMEA emerging markets Gyorgy Kovacs said a giant rate hike of 350-400 basis points would be "consistent with real rate levels that in the past helped to stabilise the currency" but warned a deal to normalise ties with the U.S. may also be needed.

In his tweet about the new tariffs, Trump said "Our relations with Turkey are not good at this time!".

"Do not worry!" He said Turkey was not afraid of "threats" and added Turkey had "alternatives" for economic cooperation in many places "from Iran, to Russian Federation, to China and some European countries".

In addition, foreign investors are disquieted by Erdogan's authoritarian government, which seems to be pursuing imprudent and politically charged economic policies which undercut the independence of the central bank - only worsening Turkey's economic predicament.

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