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Turkish Lira Falls as Sanctions Start

by Sarah Feldman

The Turkish lira dropped to record lows Friday, a dramatic fall that is part of a year-long 66 percent decline in the currencies market value.

There are several contributing factors to this plunge. The lira has not done well this year compared to the dollar with inflation rates topping 15 percent. The markets have become skittish by the Turkish government’s persistent unwillingness to raise interest rates to combat inflation. Erdogan has further antagonized the market by encouraging Turks to swap dollars for gold.

In addition to domestic mishandling of the brewing financial problem, Donald Trump has imposed new sanctions and tariffs in response to the detention of an American pastor. United States tariffs are already in place for aluminum and metal and are expected to increase in part because of the detained American.

The European Central Bank is concerned about the EU’s exposure to this problem. The EU holds $150 billion in loans with Spanish, French, and Italian banks the most exposed to the downturn the Turkish economy could take.

Economists assert that a recession and debt crisis are in Turkey’s near future if they do not act to bring inflation down and stabilize its currency market.


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