Fears of new global financial crash as Turkey’s sliding lira rocks currency markets worldwide
President Recep Tayyip Erdogan has now said his country will boycott electronic products from the US in retaliation for the tariffs imposed by Trump he blames for the currency slump
THE meltdown of the Turkish lira has sent ripples through the world's currency markets sparking fears of another global financial crash.
The currency's continuing slump has heavily hit US and European stocks as investors fear for the security of their investments.
They are particularly concerned the 45 per cent drop in the value of the lira this year will prove ruinous for those companies who have borrowed heavily in foreign currencies.
It's also feared the failure of Recep Tayyip Erdogan’s government to immediately tackle the worsening financial crisis will have a domino effect on other vulnerable countries.
Argentina’s central bank raised its key interest rate by five points to 45 per cent following a fall in the peso and the South African rand has also been hit hard.
Erdogan lashed out at “economic terrorists on social media” as he accused Donald Trump of stabbing Turkey in the back for doubling tariffs on the imports of Turkish steel and aluminium.
He told supporters the lira's free-fall was the result of a plot as he urged residents to exchange dollars and gold for lira - calling on the nation to stand united against America.
Erdogan has now said Turkey would boycott electronic products from the United States in retaliation for the new tariffs.
He said: "We will boycott America's electronic products. If they have the iPhone, there is also Samsung on the other side. We also have our own Venus Vestel. We will adopt these measures."
It was unclear how Erdogan intended to enforce the boycott, which he announced at and event to mark the 16th anniversary of the ruling Justice and Development Party's (AKP) foundation.
Why have Turkey and the US come to blows?
The dispute between the two countries revolves around Erdogan's refusal to release American pastor Andrew Brunson.
Brunson has been held for nearly two years in Turkey over his alleged links to the outlawed Kurdistan Workers' Party and the Gulenist movement, who are blamed for a failed coup in 2016.
Erdogan is angry the US has not taken more action against the Gulenist movement and what he said was a failure "to unequivocally condemn" the 2016 coup attempt.
The US has refused to extradite the Gulenist movement's founder Fethullah Gulen, who lives in Pennsylvania.
However, US officials have given no indication that Trump is prepared to give any ground in the ongoing dispute, with Trump seemingly content to keep up the economic pressure.
The United States is also considering a fine against Turkey's state-owned Halkbank for allegedly helping Iran evade US sanctions.
White House economic adviser Kevin Hassett said today the Trump administration was carefully monitoring the financial situation in Turkey "very closely" amid claims the dispute has come personal.
"This is no longer a dispute between the bureaucracies of the two countries. This is a fight between the two presidents now," said Soner Cagaptay, of the Turkish Research Program at the Washington Institute.
Why is Trump being blamed for the slump?
The Turkish lira's worst day was Friday, when US President Donald Trump approved the doubling of tariffs on Turkish steel and aluminium
After the shock move, Erdogan accused the US President of waging “economic war against the entire world".
“The aim of the operation is to make Turkey surrender in all areas, from finance to politics,” the Turkish president told supporters.
“We are once again facing a political, underhand plot. With God’s permission we will overcome this."
Turkey's stock market has also fallen 17 per cent, while government borrowing costs have risen to 18 per cent a year. Inflation has already hit 15 per cent.
What is Turkey now doing about the lira?
The Turkish Central Bank has announced on its country's banks would be given all the liquidity - help to keep money moving - they needed.
However, it did not increase interest rates, which would help contain inflation while at the same time strengthening the lira.
In the meantime, Erdogan has dismissed currency's fall as nothing more than "a storm in a tea cup" and he has urged Turks to sell dollars and buy lira to boost their currency.
A Turkish presidential spokesman also insisted today that the country’s economy is strong and said nobody should pay attention to “speculation”.
What does this all mean to Brit tourists?
Well to put it bluntly, Turkey's problems are good news for those planning to head to the country for their holidays.
While the cost of package holidays will not fall overnight, the favourable rates give Brits an extra £236 worth of lira for every £500 they exchange.
The pound is 89 per cent up on the lira compared to August last year and a staggering 37 per cent up compared to just last month.
Five years ago, a pound was worth just three lira - today it is worth nearly nine. Compared to two years ago, the pound is up 128 per cent.
Ian Strafford Taylor, CEO of travel currency experts FairFX, said anyone travelling to Turkey in the near future should purchase a prepaid currency card to guarantee the current rate.
Not suprisingly, Turkey has seen an increase of 63 per cent in holiday bookings compared to last year according to Thomas Cook.