New Plan to Rescue Turkey's Deteriorating Economy

Turkish currency hit by perfect storm of US sanctions tariffs & debt plunges to historic low

It comes after the Turkish currency fell to a new low of 7.2 lira to the dollar, dragging the MSCI world equity index, which tracks shares in 47 countries, down 0.6 per cent as markets opened.

Amid a row with Washington over an American pastor being detained by Turkish authorities, the USA has sanctioned two Turkish officials, with Erdogan blaming "economic terrorists" for the market sell-off.

Erdoğan has today threatened to boycott American-made electronic goods in response to United States sanctions against Turkey that sent the value of its currency, the lira, into freefall.

The two countries are also at odds over their policy in Syria as the USA backs the Syrian Democratic Forces (SDF), which is dominated by the People's Protection Forces (YPG), the armed wing of PKK terrorist group's Syrian offshoot the Democratic Union Party (PYD).

"We expect the U.S. to be faithful to our traditional friendly relations and North Atlantic Treaty Organisation alliance", Mevlut Cavusoglu said in his opening speech at the 10th Ambassadors' Conference in the capital Ankara. Turkey responded by ordering the freezing of assets related to the United States "justice and interior" secretaries. There is no economic reason. "We are once again facing a political, underhand plot".

Tax rules would be implemented if necessary, he said, but the government had no plans to seize foreign currency deposits or convert deposits to the Turkish lira.

"If you come at us with your dollars we will try to find other ways to manage our affairs".

Erdogan said rumours had been spread that Turkey would establish capital controls following the decline of the lira, which fell 18% on Friday alone.

Writing in "The New York Times", he warned Ankara would "seek new friends" after the United States "upset and annoyed" Ankara with the new sanctions.

The drop is down to a flawless storm of fresh USA sanctions against the country, economic conditions in Turkey, and a strong dollar that is pulling foreign investment out of Turkey and back to the United States.

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"This is the sign of a clear attack, a challenge", Albayrak said.

Erdogan appeared to indicate that the entire alliance between Turkey - which joined North Atlantic Treaty Organisation in 1952 with strong American backing - and the U.S. was at stake.

Turkey's lira rebounded on Monday from record lows after the central bank pledged to provide liquidity and cut reserve requirements for banks, but the currency was still down around 10 per cent on the day.

Investors are anxious that Turkish companies that borrowed heavily to profit from a construction boom may struggle to repay loans in dollars and euros, since the weakened lira means there is now more to pay back.

Angered by the continued detention of an American pastor, Washington imposed sanctions on a number of Turkish ministers and doubled tariffs of steel and aluminium imports. "Our relations with Turkey are not good at this time!" he says on Twitter. "This is called carrying out an operation against Turkey", he told reporters on Sunday, Aug. 12.

On Friday, Erdogan called on its citizens to convert their hard currency and gold into lira to prop up the plunging currency with a "domestic and national stance". The lira has lost more than 45 percent of its value this year.

ANZ bank analysts attributed the euro's wilt in part to "contagion risks" centered on Spanish, Italian and French banks which are exposed to Turkish foreign currency debt.

Other issues, however, like Turkey's interest in buying a Russian-made air defense system, have been fueling the tension between the two nations for years.

Brunson's fate is one of many issues dividing the North Atlantic Treaty Organisation allies, which have clashed over Syria policy and the aftermath of the 2016 coup attempt against Erdogan.

Mr Brunson has been detained for almost two years, accused of links to the outlawed Kurdistan Workers' Party and the Gulenist movement, which Turkey blames for a failed coup in 2016. The EU put new taxes on U.S. motorcycles in response to the Trump administration's tariffs on products imported from Europe. Both Ankara and Washington list the PKK as "terrorist". The two countries already cooperate regarding Syria and have established close energy and trade ties.

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