19:37 GMT +310 December 2019
Listen Live
    An oversized copy of a 200 Turkish lira banknote

    Turkey Faces Threat of Economic Crisis While Germany Weighs Options - Economist

    © REUTERS / Lefteris Pitarakis
    Get short URL

    BRUSSELS (Sputnik) - Turkey has recently seen its national currency plunge amid US sanctions and may be facing a more significant economic crisis in the future, while Germany is considering whether it might be prudent to offer help.

    The Turkish economy was rattled by US sanctions. Earlier in August, US President Donald Trump said he had authorized an increase of levies on aluminum and steel exports from Turkey, up to 20 and 50 percent respectively.

    In response, Ankara raised levies on several types of US imports, including tobacco and alcohol. In addition, Turkey already lodged a dispute complaint with the World Trade Organization (WTO) over the US tariffs.

    Germany to the Rescue

    Earlier this month, Andrea Nahles, the leader of the Social Democratic Party (SPD), a partner in the ruling coalition, said that Germany might need to help Turkey despite any tensions with Turkish President Recep Tayyip Erdogan.

    However, the government spokesman swiftly remarked that the issue of financial aid was not under discussion at the moment.

    Europe cannot do much to help Turkey as it does not have its own equivalent of the International Monetary Fund (IMF), Etienne de Callatay, the former chief economist of private bank Degroof in Brussels, and now a partner at Orcadia financial services firm in Luxembourg, told Sputnik.

    "Turkey should try to convince the IMF to give them guarantees to stabilize the currency. It is the only serious advice that Merkel can give," Callatay said.

    READ MORE: Turkish Finance Minister Downplays Economic Risks Amid Ongoing US Spat

    Incidentally, the German foreign minister said last week that Europe needed its own IMF equivalent as well as a payment system independent from the United States.

    "The other practical thing that Germany can do is to create a temporary mechanism to give a special insurance to German companies trading with Turkey or producing in Turkey. There are many Turkish component manufacturers working for German firms; that would be a little help," Callatay said.

    No Threat to Euro

    Germany may not have enough incentives to want to help Turkey as a potential crisis in Turkey would not be a significant threat to the euro, the economist believes.

    "There would be repercussions of course, but the Turkish economy is not large enough to really threaten a destabilization of the EU," Callatay argued.

    On the other hand, a serious crisis in Turkey would influence the German and European economy and trade and might result in "new geopolitical turmoil, with implications in Syria, Lebanon or Iraq," the chief economist of ING bank in Amsterdam, Carsten Brzeski, told Sputnik.

    According to the expert, Germany is mostly worried about the Middle East.

    Callatay agrees that the Europeans might be concerned over Turkey's ability to welcome migrants under the 2016 deal, which aimed to ease the strain on the European Union. However, the economist argued that Erdogan would have more to lose in this situation.

    "He [Erdogan] cannot afford to lose the billions of euro that the EU is giving Turkey to deal with the victims of the Syrian conflict," the economist said.

    No Strings

    Brzeski pointed out that financial aid from Europe would likely come with preconditions, but Ankara could hardly agree to that.

    "Any financial aid, however, would clearly not come for free. And it is doubtful that Erdogan would accept any [political] strings attached," ING chief economist said.

    Explaining the need for any such measures to the voters in Germany could also be a challenge, Brzeski added.

    "Any financial aid could not easily be sold to the German electorate, given that there are still several German[-Turkish] citizens imprisoned in Turkey," the economist said.

    In fact, it was the detention of a US pastor that led to a US-Turkish standoff. Andrew Brunson has been jailed in Turkey since 2016 on suspicion of links to a terrorist organization. Washington has repeatedly demanded his release. Before the tariffs on steel and aluminum were announced, the US Treasury had introduced sanctions against two Turkish ministers over Brunson's arrest.

    Despite all potential complications, Brzeski believes that the German government is looking into aid options.

    The two countries' finance ministers discussed the sanctions in mid-August and agreed to meet in Berlin in September. Erdogan will also pay a visit to Germany, scheduled for September 29-29.

    The views and opinions expressed by the speaker do not necessarily reflect those of Sputnik.

    The views and opinions expressed in the article do not necessarily reflect those of Sputnik.


    Turkey Slams US Sanctions, Says Dollar Losing Status as Global Trade Tool
    Turkey Must Lift Interest Rates to Resolve Lira Crisis - Fmr. US Diplomat
    Turkey Interested in Eliminating Militants in Syria's Idlib - Foreign Minister
    Turkish lira, Social Democratic Party of Germany (SPD), European Monetary Fund, World Trade Organization (WTO), International Monetary Fund, Andea Nahles, Recep Tayyip Erdogan, Germany, Turkey, Ankara
    Community standardsDiscussion
    Comment via FacebookComment via Sputnik