New Plan to Rescue Turkey's Deteriorating Economy

A Kuwaiti man holds a one US dollar bill next to a five Turkish lira banknote at a currency exchange

A Kuwaiti man holds a one US dollar bill next to a five Turkish lira banknote at a currency exchange

The lira has tumbled as investors question whether President Recep Tayyip Erdogan's government can cope with problems including the weakening currency and a diplomatic spat with Washington that has resulted in higher USA tariffs.

Relations between the United States and Turkey had plunged to their lowest in decades following unprecedented sanctions declared by the United States on Turkey over US pastor Andrew Brunson, who faces terrorism charges and up to 35 years in prison if found guilty.

For now, the impact appears minimal, but there are indications and worries that instability in Turkey may just be beginning.

German Chancellor Angela Merkel urged Turkey on Monday to ensure the independence of its central bank as other senior officials said that Turkey's economic woes were causing great concern. "We will be taking the necessary steps with our banks and banking watchdog in a speedy manner", he said. "We have not made concessions on justice so far, and we will never make any". On Tuesday, the Indian rupee hit a record low as a result of the economic issues in Turkey.

President Trump last week imposed sanctions on Turkey over its refusal to release an imprisoned United States preacher.

"You dare to sacrifice 81-million (in) Turkey for a priest who is linked to terror groups?"

Turkey has drafted an economic action plan and has started implementing it "as of tonight" to ease investor concerns, Treasury and Finance Minister Berat Albayrak tweeted Sunday night.

Presidential Communications Director Fahrettin Altun described the rumors as "disinformation campaign" based on a statement by President Recep Tayyip Erdoğan, who had said on August 12 that "You must know that keeping this nation on its feet is not just our duty but also the duty of industrialists and merchants".

Erdogan, who gained sweeping new powers following his re-election in June, said rumors had been spread that authorities might impose capital controls in response to the slump in the currency, which tumbled as much as 18 percent on Friday alone.

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Albayrak dismissed any suggestions that Turkey might intervene in dollar-denominated bank accounts, saying any seizure or conversion of those deposits into Lira was out of the question.

Erdogan rejected speculation that Turkey would seek a rescue package from the International Monetary Found. The U.S. has responded by slapping financial sanctions on two ministers and later doubled steel and aluminum tariffs on Turkey.

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

"Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates. This is called carrying out an operation against Turkey", he said.

Erdogan renewed his call for Turks to sell dollars and buy lira to boost the currency, while telling business owners to not stockpile the American currency.

The Lira has lost more that 45 percent of its value against dollar this year not only because of the latest diplomatic rift, bus also due to the Turkish economy showing signs of vulnerability after years of continued growth.

The president also renewed a call for Turks to convert any U.S. dollars into the Turkish lira to help strengthen the currency. Exposure to Turkey has seen shares in Spain's BBVA lose more than 3 percent Monday, along with shares in Dutch bank ING and Italian UniCredit. Erdogan accuses Washington of protecting coup plotters.

Foreign Minister Mevlut Cavusoglu said Monday that the United States would not achieve aims by exerting pressure and imposing sanctions on Turkey.

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