2023-06-07 14:23:51
The danger was imminent. Supported massively and artificially before the presidential and legislative elections in May by the Turkish Central Bank, the Turkish lira hit a new historic low once morest the dollar on Wednesday June 7. Ten days following the re-election of President Recep Tayyip Erdogan, it is trading around one dollar for 22.80 Turkish liras, at -5.5%. The Turkish lira also lost a lot of ground once morest the euro (-5.35%). It is trading around 24.38 pounds for one euro, once morest less than 21.5 pounds for one euro before the second round of the presidential election on May 28.
Once buoyed by cheap labor and an efficient banking system, Turkey’s economy faces a problem that Erdogan himself caused by his crusade once morest the ‘foreign lobby’ of rising interest rates. interest. A policy applied in almost all states to try to stem inflation by curbing demand. The Turkish president has also in the past invoked the precepts of Islam, which prohibits usury (the lending of money).
To carry out his ideological-economic battle, Erdogan waltzed the governors of the Turkish central bank. The results were disastrous: the Turkish lira plunged and official annual inflation topped 85% in the fall – or even more than double, according to a group of independent Turkish economists.
The intervention of the Turkish Central Bank, which spent more than 30 billion dollars between January 1 and the presidential election in May, had made it possible to contain the fall of the local currency. But this policy is not tenable in the long term.
Experts put forward two solutions to try to get the Turkish economy back on track: raise interest rates or let the pound fall, as the monetary support measures have canceled out the advantage of low interest rates in an economy. dominated by the manufacturing industry. The first hypothesis was ruled out during the campaign and the second would be very painful. This would further affect the purchasing power of Turks and might force the government to seek billions of dollars for household support measures, in addition to the many electoral promises.
Faced with the impending disaster, President Recep Tayyip Erdogan seems forced to change his tune. He has already taken a step aside on Saturday June 3 by appointing a new economy minister, Mehmet Simsek, a supporter of an orthodox economic policy, which generally consists of raising interest rates and reducing public spending. When he took office, he warned that it would be necessary to return to “rational measures”.
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