Erdogan freaks cause a new record crash of the currency – politics abroad

by time news

Again and again – especially when he is under domestic political pressure – Turkey President Recep Tayyip Erdogan (67) attracts attention through his foreign policy freaks.

But this time the failure was particularly drastic: Because they had demanded the release of the human rights activist and cultural promoter Osman Kavala (64), Erdogan wants to expel the ambassadors from ten countries and declare them to be “undesirable persons” – including the diplomatic representatives of Germany and France and the USA. Kevala has been in prison in Turkey for four years without conviction.

This step has not yet been taken, as the Foreign Office said on Monday. But just his threat shows once again how much the ruler of the Bosporus has removed his country from the west.

And every time the Turkish lira kept falling …

Erdogan cannot afford this Zoff at all. Because he is dealing new, hard blows to his already badly battered economy.

As a reminder: A year ago, Erdogan called for a boycott of French products and demanded that the “mental state” of French President Emmanuel Macron (43) be “checked”. In April 2021, he humiliated EU Commission President Ursula von der Leyen (63) during her state visit to Ankara, not assigning her a seat at eye level. As a result, Italy’s head of government called him a “dictator”.

Every new quarrel with its most important trading partner – the EU – deters business people even further, and weakens the lira even further.

Islamist interest rate policy noticeable in the wallet

The main reason for the weakness of the lira, however, is another: Erdogan is an outspoken opponent of high interest rates. His Islamist (and anti-Semitic) justification for this contradicts all natural laws of the economy.

Erdogan repeatedly complains that interest is “the root of all evil”. In addition, he simply claims – contrary to the consensus of practically all economists – that they are not curbing inflation at all.

In a quarrel about precisely this interest rate issue, Erdogan dismissed the third central bank governor since 2019 in March 2021. The current monetary policy leadership seems to be more likely to comply with the wishes of the autocrat: On Thursday, the central bank cut interest rates from 18 to 16 percent – although inflation is rampant at rates of around 20 percent.

Means: The already dirt cheap lira will continue to be sold! Because real interest rates – nominal interest rate minus inflation – are still clearly in the negative range. Biggest loser of the currency crisis: Turkish savers and wage workers, whose purchasing power is shrinking at a rapid pace.

Consequence: The further decline in the value of the lira in the markets. Since the beginning of the year it has now been 32 percent (against the US dollar) or 25 percent (against the euro)! Since the interest rate cut on Thursday alone, the currency (as of Monday noon) has lost 7 percent of its value at its peak. For the first time a euro costs more than 11 lira – a record!


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