The plummeting lira threatens the security of Turks and the stability of the region
Turkey's economic crisis is of Erdogan's making
Less than two months after an election win that brought with it unfettered new powers, Turkish President Recep Tayyip Erdogan is facing his first major crisis – one entirely of his own making.
In response to crippling steel and aluminium tariffs, following US sanctions on two Turkish ministers, the lira’s value plummeted 20 per cent, marking the currency’s worst day for two decades. Mr Erdogan’s response was a belligerent “shame on you” as he vowed to defy US “threats”.
Deteriorating relations with the US are just the tip of the iceberg. It is the foremost responsibility of any nation’s leader to ensure his or her people are not left struggling as a result of avoidable economic decline.
But it is Mr Erdogan’s bunker mentality that has brought Turkey to the brink. He retreated to the trenches after a failed coup in 2016 and while he has failed at a core tenet of leadership – namely managing the economy – his only response has been defiance and threats of a “war of independence” with the US.
He is in denial about the current economic crisis, branding the lira’s collapse a “currency plot” instead of admitting his own failures. At a party meeting in Rize yesterday, he said he would be switching allegiance instead to China, Russia and Ukraine.
The longer this crisis drags on, the more damaging it will become for the people of Turkey and the region’s stability.
The lira’s collapse gives it the unenviable accolade of being this year’s worst performing global currency, sparking fears of a banking crisis. Mr Trump’s sanctions could affect $1.7 billion of Turkish exports. Given the exposure of European and Asian banks to Turkish debt, the consequences will be felt across international markets.
The Turkish Central Bank should demonstrate its independence and raise interest rates – which Mr Erdogan has branded a “tool of exploitation”. Approaching the IMF for a bailout package is also an option. But rather than acting responsibly, Mr Erdogan – who appointed his son-in-law as finance minister – has blamed foreign powers for the plight befalling his country.
In an extraordinary gesture, he urged Turks to sell their family gold to shore up the lira – the kind of last-gasp appeal commonly reserved for nations at war. Having acquired unprecedented powers, responsibility for Turkey’s economic woes fall squarely on his shoulders.
Enmity between Ankara and Washington poses a great threat. As Nato’s second largest army, Turkey polices the bloc’s eastern flank. It has absorbed millions of Syrian refugees and is a power broker in the Syrian conflict after involving itself in Afrin and Idlib.
Ultimately, Mr Erdogan’s courting of Iran and Russia, who have stood by Ankara in this dispute, mark Turkey’s transformation from a sympathetic Nato partner and EU hopeful to an unpredictable adversary. That sets a worrying precedent for the rest of the region.