Published: Fri, August 10, 2018
Finance | By Loren Pratt

Turkey unveils new economic plan

Turkey unveils new economic plan

President Trump ordered a doubling of US tariffs on steel and aluminum imports from Turkey Friday, escalating a diplomatic spat with a key North Atlantic Treaty Organisation ally.

Trump said via a tweet that the tariff on aluminium imports will be increased to 20 per cent and the tariff on steel imports will be raised to 50 per cent as the Turkish Lira "slides rapidly downward against our very strong Dollar!"

Concerns were amplified Friday by a report in the Financial Times that the supervisory wing of the European Central Bank (ECB) had over the last week begun to look more closely at eurozone lenders' exposure to Turkey. That turned into a rout on Friday, with the lira diving more than 18 percent on the day and more than 40 percent this year to a new record low after Trump took steps to punish Turkey in a wide-ranging dispute.

Turkish President Recep Tayyip Erdogan called on citizens to convert other currencies and gold into lira.

Treasury and Finance Minister Berat Albayrak - who is Erdogan's son-in-law - tried to ease investor concerns during a conference, saying the government would safeguard the independence of the central bank.

Speaking in the Black Sea privince of Rize late on Thursday, Mr Erdogan told supporters: "There are various campaigns being carried out. This is a national, domestic battle", he said.

"This will be the response to those who have declared an economic war", he said, blaming Turkey's woes on what he described as an "interest rate lobby" seeking to push the country to higher rates.

The Turkish lira plunged by more than 17% against the dollar after the president announced the move, amid a widening dispute between Washington and Ankara over the imprisonment of the United States pastor Andrew Brunson.

But President Erdogan brushed off any concerns during a speech in the northeastern city of Bayburt on Friday, saying: 'The dollar can not block our path.

Erdogan's words did little to reassure investors.

While most sectors were trading in negative territory, banks were the biggest sectoral fallers, down 1.3 per cent.

Investors are turning against emerging markets as the rising prospect of a prolonged trade war compounds a backdrop characterised by a more hawkish Federal Reserve and European Central Bank. As the currency drops, Turkish companies and households with debt in foreign currencies see their debts expand.

Shares in France's BNP Paribas (BNPP.PA), Italy's UniCredit (CRDI.MI) and Spain's BBVA (BBVA.MC) fell by around 3 percent. In a number of countries, most notably Iran and Russian Federation, this has caused the value of their currency to drop significantly. A delegation of Turkish officials held talks with their counterparts in Washington this week but there is no sign of a breakthrough. "I would say we would define progress as Pastor Brunson being brought home", Nauert said. "Today I am instructing my friends that we will freeze the assets of United States secretaries of justice and interior in Turkey", he said last week.

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