Erdoğan to blame for Turkey’s currency crisis, FT says

Turkish President Recep Tayyip Erdoğan is responsible for a very unusual currency crisis that has swept through financial markets this month, the Financial Times said on Sunday.

The crisis, which has seen the lira slump to all-time lows against the dollar and euro, has not been caused by economic fundamentals, but by Erdoğan’s increasingly erratic decision-making and the influence he wields over the central bank, the newspaper’s editorial board said.

“Unless he suddenly changes course, the only question facing Turkey, a country with great potential, is how much longer the president will stay – and how much damage he can do before he goes,” the FT said.

Turkey’s lira has slumped to a record low of 13.52 per dollar this month, taking losses this year to more than 40 percent, after Erdoğan sacked a central bank chief who had gained the respect of foreign investors for hiking interest rates to tame inflation. Erdoğan replaced him in March with an economics professor with no monetary policy experience. Since September, the bank has cut rates to 15 percent from 19 percent. Inflation has accelerated to almost 20 percent.

Erdoğan places the blame for Turkey’s financial woes on a so-called “interest rate lobby” that is seeking to bring Turkey’s economy to its knees by forcing the central bank to hike borrowing costs. He has ordered an investigation into possible manipulation of the lira’s value by companies and individuals, the state-run Anadolu news reported on Saturday.

“If the president continues to pursue of programme of interest rate cuts then the lira will fall and prices will inexorably rise,” the FT said. “Opposition parties are optimistic that Erdoğan is in his last years in power, and elections scheduled for 2023 will bring the vicious spiral to an end.”

The lira was trading down 1.2 percent at 12.57 per dollar at 11:32 a.m. local time in Istanbul. The central bank next meets on interest rates on Dec. 16.

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