U.S. prepared to add sanctions on Turkey if pastor not released

Andrew Cummings
August 18, 2018

His case now lies at the heart of a diplomatic crisis between Turkey and the United States that has prompted a crash of Turkey's lira currency.

Standard & Poor's is scheduled to release a review of Turkey's sovereign credit rating later on Friday.

Brunson, a pastor who is a long time resident in Turkey, is alleged by the government to have links to the outlawed Kurdistan Workers Party and the Gulenist movement, both of which are accused of being involved in 2016's failed coup against Erdogan.

There are signs that the weakness in Turkish currency markets is already spreading.

Turkey has responded by declaring that it will raise tariffs on a number of USA imports, including cars, tobacco and spirits.

Turkish President Tayyip Erdogan announced yesterday that the country would boycott all electronics from the United States amid tension and rising conflict between the two countries and its leaders.

For years Turkish firms have borrowed in dollars to take advantage of lower interest rates.

The latest USA announcement came after Turkish Finance Minister Berat Albayrak tried to soothe the markets during an unprecedented conference call with hundreds of foreign investors, insisting Turkey would emerge "stronger" from the currency crisis and would not need an International Monetary Fund bailout.

The lira rose as he spoke.

The problem with the new strategy is that it aims directly towards Apple which remains unaffected as Turkey relies on Apple and not the other way around, according toMashable. "They said they came to Qatar's support during Doha's row with its Arab neighbors, and now it was Qatar's turn to pay back the favor".

"It is unlikely that a critical mass of corrective steps has been attained in Turkey", El-Erian says.

On Monday, the central bank said it would provide all the liquidity Turkish banks needed, as it seeks to keep money flowing in the financial system. "So you will see what happens".

He also appeared to acknowledge that he was disappointed that Turkey did not release Brunson after the United States helped negotiate the release of a Turkish national being held in Israel. Economists are anxious of a recession.

Turkey is dependent on imports, priced in hard currency, for nearly all of its energy needs.

"The plunge in the lira, which began in May, now looks certain to push the Turkish economy into recession", Andrew Kenningham, chief global economist at Capital Economics, told Reuters.

But now, the sell-off has increased the cost of servicing that debt, particularly for companies whose revenues are exclusively in lira.

Also 67% of the total debt of the government or private sector are external debt and this will strengthen the demand for dollar and foreign exchange, while government debt stands at $95 billion.

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