President Tayyip Erdogan told Turks on Friday to sell their gold and U.S. dollars to support the country's currency which plunged after U.S. President Donald Trump escalated a feud with North Atlantic Treaty Organisation ally Turkey by doubling tariffs on metals imports. The lira slid to a fresh record low against the USA dollar.
Turkey has had this sort of experience - a disastrous currency collapse shrinking its economy and impoverishing its citizens - several times before, most recently in February 2001.
But analysts say that while there may be losses at some banks, Turkey's economic problems do not pose a big threat to Europe or other big economies like the United States.
Harsher US tariffs were likely to punish Turkey's already faltering steel exports to the United States.
The Turkish lira hit a record low on August 10 after President Donald Trump authorized the doubling of tariffs on imports of Turkey's steel and aluminum.
Recep Tayyip Erdoğan tried to restore confidence in the Turkish lira after it plunged by more than 20% against the dollar on Friday.
He is facing up to 35 years in prison if found guilty of supporting the unsuccessful coup to overthrow President Recep Tayyip Erdogan in 2016.
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Erdogan has been putting pressure on the central bank not to raise interest rates in an attempt to help borrowers.
"The situation of Turkey can not go on for much longer - I think they will have to intervene", Cristian Maggio, head of emerging markets strategy at TD Securities, adding that the intervention needed to be "drastic". Lindsey GrahamLindsey Olin GrahamGOP lawmaker: Every white suburban district in the country will be a swing district this year The Hill's Morning Report - Trump to GOP: I will carry you GOP senator: "Real likelihood" Dems win the House "by 10 or 12 more seats than they need" MORE (R-S.C.) tweeted Friday. Further downside for the lira and weakness in domestic bank bonds could accelerate the withdrawal of wholesale funding in an economy which needs to attract overseas capital.
The trouble is that for all of Albayrak's talk of Central Bank independence, Erdogan is fiercely opposed to any interest rate hikes, which are widely seen as necessary to stem the bleeding.
A statement from the Kremlin said the two leaders discussed economic and trade ties.
On Thursday, Erdogan said "If they have their dollar, we have the people, we have Allah".
The currency has fallen 66 per cent since the start of the year, pushing up the cost of goods for Turkish people and shaking global investors' confidence in the country.
Treasury and Finance Minister Berat Albayrak has vowed to execute Turkey's new economic model together with "all national and worldwide stakeholders", while stressing that a "decisive" approach and the Central Bank's independence would be maintained. "Making a speech like Albayrak's in the midst of a currency free fall without a single concrete measure shows utter lack of comprehension about what's happening and what's required", tweeted Harvard economist Dani Rodrik.