Erdogan invokes patriotism, Islam as lira remains under pressure

Reuters , Monday 20 Aug 2018

Tayyip Erdogan
Turkey's President Tayyip Erdogan addresses Turkish Ambassadors during a meeting in Ankara, Turkey August 13, 2018 (Photo: Reuters)

President Tayyip Erdogan appealed to Turks' religious and patriotic feelings ahead of a major Muslim holiday on Monday, promising they would not be brought "to their knees" by an economic crisis that has battered the lira currency.

The lira has tumbled some 40 percent this year, hit by worries about Erdogan's influence over monetary policy and a worsening diplomatic rift with the United States. The sell-off has spread to other emerging market currencies and global stocks in recent weeks.

Highlighting the increased tensions, the US embassy in the Turkish capital Ankara came under brief gunfire early on Monday by unknown assailants in an attack condemned by Erdogan's spokesman as "an attempt to create chaos". Nobody was hurt.

In a pre-recorded address to mark the four-day Eid al-Adha festival, which starts on Tuesday, Erdogan, a pious Muslim, sounded a characteristically defiant note as he lashed out at those selling the lira.

"The attack on our economy has absolutely no difference from attacks on our call to prayer and our flag. The goal is the same. The goal is to bring Turkey and the Turkish people to their knees - to take it prisoner," Erdogan said in the televised address.

"Those who think they can make Turkey give in with the exchange rate will soon see that they are mistaken."

Erdogan stopped short of directly naming any countries or institutions, but he has, in the past, blamed a shadowy "interest rate lobby", Western ratings agencies and financiers.

Diplomatic Rift

Much of the recent tension has centred around a US evangelical Christian pastor, Andrew Brunson, who has been detained in Turkey on terrorism charges, which he denies.

Brunson, originally from North Carolina, has lived in Turkey for two decades and has become an unwitting flashpoint for the diplomatic rift.

On Friday, a Turkish court rejected Brunson's appeal for release, drawing a stiff rebuke from President Donald Trump, who said the United States would not take the detention of the pastor "sitting down".

The lira weakened to 6.1950 to the dollar by 1328 GMT on Monday, from a close of 6.0100 on Friday.

On Friday two ratings agencies, Moody's and Standard & Poor's, further cut Turkey's sovereign rating into junk territory.

The downgrades confirmed prevailing concerns that Turkey "is unlikely to avoid a significant slowdown in economic activity" and that the lira's fall "poses a risk to financial stability", said Piotr Matys, an emerging markets strategist at Rabobank.

In addition to the lira, Turkey's sovereign dollar bonds fell and the cost of insuring its debt rose.

The German finance minister said on Monday the Turkish currency crisis posed an additional risk to Germany's economy.

However, German Chancellor Angela Merkel told her Christian Democrats at a meeting that she saw no urgent need to offer financial aid to Turkey to ease the crisis, the party's general secretary said.

Qatar and Turkey's central banks last week signed a $3 billion currency swap agreement, a move designed to provide liquidity and financial stability.

That came days after Qatar's emir approved a $15 billion package of economic projects, investments and deposits for Turkey. 

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