Turkey Is Cooking A New Global Economic Crisis

Turkey's currency is crashing, inflation is rocketing, investors are terrified and the country has a giant external debt. 

Many knew that a crisis was around the corner, but President Trump's decision to double the import rates for Turkish steel and aluminum has precipitated the events. Erdogan has already declared an 'economic war' and warned they will boycott US electronic products, using Apple's iPhone as an example. 

When I moved to Turkey two and a half years ago we had Paypal, Wikipedia, Booking.com, Apple... and the Turkish lira was around 3.20 against the euro. As I sit writing these lines, many of those platforms and products are not accessible anymore or could disappear soon, and the lira exchange rate fluctuates between 7.2 and 7.8 euros. A meltdown that went 'unnoticed' by many local media outlets. 

European and Asian markets have already felt the aftershock. At the street-level, things have changed so rapidly that the consequences are still unknown, but the question is: who will survive?

Turkish economist and writer Mustafa Sonmez gives an account of the complicated relationship between Washington and Ankara and explains how the events of the past few months have resulted in this crisis which might end up shaking the whole world. 

The first to fall, according to Sonmez, will be the companies with foreign exchange deficits. Among the more indebted are businesses involved in infrastructure, energy and transport projects, some of which are building Istanbul's new airport – Erdogan's colossal project – or are linked to other AKP infrastructure projects. If that were the case, would Ankara let them down?

A weaker lira means problems for all those companies – and the government – who borrowed dollars from foreign economies. If the value of the lira keeps going down, the more difficult it will be for them to repay their debt.