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

Sergio Conner
August 12, 2018

Although Erdogan struck a defiant tone and warned of "economic war", his foreign ministry called for diplomacy and dialogue to solve problems with Washington and Trade Minister Ruhsar Pekcan said "we implore President Trump to return to the negotiating table".

Erdogan on Saturday repeated a call to Turks to help support the lira to win what he described was a "war of independence".

The currency turbulence coincides with the most bitter dispute with the United States since the 1974 Turkish invasion of Cyprus, which so far shows no sign of abating.

Waves from the crisis spread overseas, with investors selling off shares in European banks with large exposure to the Turkish economy. Earlier it had fallen as much as 22 per cent.

The energy sector dropped 0.8 per cent and the financial sector lost 0.5 per cent.

"If there is anyone who has dollars or gold under their pillows, they should go exchange it for liras at our banks", he said during an address to supporters. "This is a national, domestic battle", he said.

In a tit-for-tat response to the United States sanctions, Erdogan responded by announcing that the assets in Turkey of the USA secretaries of "justice and interior" would be frozen. Speaking in the northeastern province of Gumushane, Erdogan said, "Apparently, those who believe they can force us to capitulate don't know [our] people at all".

Among the issues, Turkey has arrested an American pastor and put him on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago.

In response, Washington sanctioned two Turkish ministers and Trump on Friday tweeted that the tariffs on aluminium imports would be increased to 20% and those on steel to 50% as the Turkish lira "slides rapidly downward against our very strong Dollar!"

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"Our relations with Turkey are not good at this time!" he added. "The dollar, the mollar, will not cut our path", said Erdogan, using a figure of speech he repeatedly uses to mock something.

These include places "from Iran, to Russian Federation, to China and some European countries", he said.

Erdogan said Turkey is not afraid of outside "threats". It had been billed as a state visit that would patch up frayed ties between two North Atlantic Treaty Organisation allies and potentially serve as a platform for Turkey to make overtures toward Europe after months of strained relations.

It added that Trump's remarks were "not possible to reconcile with state seriousness". The first is Turkey needs to borrow a lot of money from overseas; the second is the Federal Reserve's rate hikes have made holding money in the United States attractive enough that it is hard for Turkey to get what it needs without sweetening the pot for investors by raising rates itself; and the third is, as a result of all its past borrowing, Turkey has foreign currency debts equal to 30 percent of its economy. Turkey's energy minister announced on August 8 that Turkey will keep buying liquid natural gas from Iran in violation of USA sanctions.

In Rize, Erdogan said the U.S. would pay a price by challenging Turkey for the sake of "petty calculations", denouncing Washington for declaring "economic war on the entire world" and holding countries "for ransom through sanction threats".

In a separate opinion piece in the pro-government newspaper Daily Sabah, Erdogan's spokesman Ibrahim Kalin said Turkey's efforts to solve the crisis with diplomatic methods had been dismissed by the Trump administration, warning that "the US runs the risk of losing Turkey" as an ally.

In the worst case scenario of the collapse of a European bank, there could be "contagion" - other countries and banks, including those in Britain, may be imperilled - raising the spectre of the economic turmoil that followed the 2008 global banking crisis.

The Turkish Lira clinched fresh all-time tops near 6.50%.

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