Turkey unveils new economic plan

Cornelia Mascio
Agosto 11, 2018

He said he had authorized higher tariffs on imports from the United States' NATO ally, imposing duties of 20 percent on aluminum and 50 percent on steel.

He declared: "Our relations with Turkey are not good at this time!"

The President threatened to levy harsh tariffs on Turkey last month, demanding the release of an American pastor now held by Erdogan's government.

The sudden announcement turned a run on the Turkish lira into a rout; it crashed more than 18 percent to a new record low against the dollar.

Investors dumped euro zone bank shares on Friday on concerns about their exposure to Turkey as the lira fell to yet another record low with a defiant government showing few signs it is ready to take decisive steps to stabilise the currency.

Henri Barkey, a professor of International Relations at Lehigh University who follows Turkey closely and has been critical of its President, Recep Tayyip Erdogan, said the new tariffs are "an unnecessary escalation at a time when the decline of Turkish lira was already putting pressure on Turkey".

"This is a domestic and national struggle", Erdoğan said, according to The Associated Press.

Aside from the impact a potential Turkish debt crisis may have on European markets and financial institutions, which could have a rippling effect on other global markets, the falling lira also matters because it helps to further depress an already-weakened euro and further strengthen the US dollar, which has been rising sharply for much of this year.

President Recep Tayyip Erdogan says his government "will not lose the economic war". "Don't worry", Erdogan told a crowd in the northeastern city of Bayburt.

The United States, the world's biggest steel importer, imposed tariffs of 25 percent on steel and 10 percent on aluminum in March for imports from a variety of countries.

A statement from the Kremlin said the two leaders discussed economic and trade ties.

"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. That caused a further drop in the lira.

On Thursday, Mr Erdogan said: "If they have their dollar, we have the people, we have Allah".

The slump is attributed to the tensions with the United States and concerns about President Recep Tayyip Erdogan's control of monetary policy.

In response to the economic problems, Finance and Treasury Minister Berat Albayrak, who is Erdogan's son-in-law, outlined a "new economic model" on Friday.

You can follow the lira price live on Markets Insider.

Coupled with an inflation rate of almost 16 percent, that could cause a lot of damage to the local economy. It fell yet further to 6.2 to the dollar at 1254 GMT, almost 12 percent weaker on the day.

Russia struck back Friday, with Prime Minister Dmitry Medvedev saying that any move to rein in Russian banks or their foreign-currency dealings would be "economic war".

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