Turkish Economic Crisis Deepens As Currency Hits All-Time Low

Turkish delegation returns home after meeting in US

Turkish delegation returns home after meeting in US

"As we have seen during the Greek debt crisis, financial markets are sufficiently interwoven that concerns over debt serviceability in one region can spread quite quickly within European banks".

Turkey's currency fell Friday after its economy was rattled by the United States' move to slap the country with more tariffs.

The lira hit a record low of 6.24 per dollar on Friday, before recovering to 5.92 - still down a whopping 7 per cent on the day.

Trump said he had authorized higher tariffs on imports from Turkey, imposing a 20 percent duty on aluminum and 50 percent one on steel.

'If they have their dollar, we have the people, we have Allah, ' he said.

Politically, Turkey's finance minister continues to try to say the right things, including that the country will embrace a tightened fiscal policy in the coming months to achieve the strategic goal of "economic balance".

On Friday, the euro sagged to a 13-month low against the dollar, down 0.7 per cent to $1.1450, after the Financial Times reported that the European Central Bank was anxious about possible losses at eurozone banks operating in Turkey.

Turkey said it would respond to the new US tariff action "without delay" and warned the move would further harm relations between the two countries.

The US dealt Turkey and the lira a further blow in a tweet on Friday, in which Mr Trump said he had approved the doubling of tariffs on Turkish steel and aluminium.

Jackson said the weakness of the lira would boost competitiveness for Turkey's exports, but the tariffs on steel and aluminum would offset that.

Brunson's charges include spying for the PKK, listed as a terrorist group by both the US and Turkey, and the Fetullah Terrorist Organization (FETO), the group behind the defeated coup attempt in Turkey of July 2016. High level meetings in Washington between USA and Turkish officials ended this week without an apparent resolution.

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The president's characteristic defiance in the face of a shaky economy has further unnerved investors. He said this would be Turkey's response "to those who wage economic war against us".

He returned to his familiar refrain of urging Turks to use their reserves of dollars, euros and gold to buy up lire. "This is a national, domestic battle", he said.

"Some countries have engaged in behaviour that protects coup plotters and knows no laws or justice", he said.

He added: "Relations with countries who behave like this have reached a point beyond salvaging".

Turkish authorities arrested Brunson in December 2016, claiming that he was a spy and was linked to a failed plot to overthrow the government. Gulen denies the allegation. In the latter's case, investors fear that Europe's banks could sustain large losses if Turkey is forced to default on its debts.

Mr Trump intensified his spat with Turkey by imposing the higher tariffs, putting unprecedented economic pressure on a North Atlantic Treaty Organisation ally and deepening turmoil in Turkish financial markets. The currency has fallen more than 40 per cent this year, fanning worries about a full-blown economic crisis.

Presenting the government's new economic model, Albayrak said the next steps of rebalancing would entail lowering the current account deficit and improving trust.

"First of all, confidence needs to be regained".

President Trump's discarding of the Iran nuclear deal is a point of contention, as well, as almost half of Turkey's oil imports come from Iran, meaning new sanctions against Iran come back and hurt the Turkish economy as well.

Turkey's sovereign dollar-denominated bonds tumbled, with many issues trading at record lows.

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