Disgruntled by US, Erdogan implies alliance with 'other friends'

Sergio Conner
August 12, 2018

The Turkish unit of currency, the lira, has been dropping due both to the policies of Turkish President Recep Tayyip Erdogan and that country's souring relationship with the United States.

The Turkish lira TRYTOM=D3 has always been falling on worries about Erdogan's influence over monetary policy and worsening relations with the United States.

"If the U.S.is turning its back on us.choosing a pastor instead, sorry.we continue our path with decisive steps", Erdogan told a crowd of supporters in Black Sea coastal city of Rize. Erdogan has appealed to the people to convert their dollars to liras, saying Turkey is in the midst of an "economic war" with the West.

The US has demanded the release of Andrew Brunson and on Friday doubled tariffs on steel and aluminium imports.

"We know very well that the issue is not the dollar, the euro or gold".

But analysts say that while there may be losses at some banks, Turkey's economic problems do not pose a big threat to Europe or other big economies like the United States.

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

"This innocent man of faith should be released immediately", Trump previously wrote on Twitter when it became clear Turkey would not release the evangelist, who was ordered to be held under house arrest.

The currency has already fallen 36 percent in 2018 and has slid against the dollar on Friday.

Relations between the US and Turkey have deteriorated further this week as US President Donald Trump raised tariffs against Turkish aluminium to 20% and to 50% in terms of steel. I am calling on those in America again.

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Mr Erdogan said the United States had "repeatedly and consistently failed to understand and respect the Turkish people's concerns". "Turkey has been trending towards authoritarianism & becoming more anti-American".

"The US runs the risk of losing Turkey as a whole", he wrote. Following the tweet, Turkey responded by imposing duties on $1.8 billion in US goods including coal and paper.

Erdogan urged Washington to give up the misguided notion that bilateral relations could be "asymmetrical" and realise that Turkey had alternatives "before it is too late".

"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".

The main concern is that European lenders, which have been looking to emerging markets as rich sources of growth, may get squeezed by turmoil breaking out in both Turkey and Russian Federation, as the USA ratchets up sanctions.

The Turkish lira fell 13 percent to 6.51 per dollar.

Turkey's troubles, compounded by a new round of U.S. sanctions, are unlikely to cause any kind of permanent hit to USA markets or its economy, but it does offer two cautionary tales, one for President Donald Trump and the other for Federal Reserve Chairman Jerome Powell.

Turkey, home to the Incirlik air base which is used by US forces in the Middle East, has been a North Atlantic Treaty Organisation member since the 1950s.

Albayrak, who formerly served as energy minister, yesterday announced what he has described as a "new economic model" for Turkey but he focused on macro-economic issues and steered well clear of tackling the currency crisis.

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