Turkey crisis deepens as lira hits new low

The financial crisis in Turkey deepened Monday as the country’s currency fell to a new record low and western leaders pressed Ankara to make economic and governmental reforms.

The Turkish lira sunk 7 percent Monday after dropping roughly 20 percent Friday amid growing concerns over the country’s economy and souring ties with western allies. One lira traded as low as $7.24 by Monday afternoon, half of its value from a year ago.

Investors have become increasingly worried about Turkish President Recep Tayyip Erdoğan’s stewardship of the country’s economy. Erdoğan’s reluctance to accept higher interest rates amid rampant inflation and mounting foreign debt has spurred fears among analysts that Turkey’s once-vibrant economy could soon crash.

{mosads}German Chancellor Angela Merkel urged Turkey on Monday to ensure the independence of its central bank and allow it to make necessary changes to save its economy.

“Nobody has an interest in an economic destabilization in Turkey. But everything must be done to ensure an independent central bank,” Merkel said during a news conference in Berlin, according to Reuters.

“Germany would like to see an economically prosperous Turkey. This is in our interest,” Merkel said.

Erdoğan has refused to accept interest rate hikes and other measures that could stabilize Turkey’s economy and has instead blamed the crisis on global “economic terrorists.”

On Monday, Erdoğan accused his critics of treason and began a crackdown on individuals and groups that he claims threaten economic security by spreading “fake news” about the country’s fiscal woes, according to Turkish media.

Erdoğan also said that the U.S. stabbed Turkey in the back, three days after he sought to bolster ties with Russian President Vladimir Putin.

Tensions between the U.S. and Turkey, both NATO allies, have reached new heights in the past week. The Trump administration doubled tariffs on Turkish steel and aluminum last week and targeted Erdoğan’s interior and justice ministers with financial sanctions two weeks ago over Ankara’s detainment of an American pastor.

The White House and lawmakers have demanded that Erdoğan release Andrew Brunson, a Christian pastor arrested in Turkey almost two years ago, and allow him to return to the U.S.

Brunson was transferred from prison to house arrest last month, but the Turkish government has declined to release him from custody. A delegation from Washington, D.C., reportedly left Turkey last week without making progress on Brunson’s case, raising the threat of further sanctions from Trump.

National Security Adviser John Bolton met Monday with Turkish ambassador to the U.S. Serdar Kilic in Washington to discuss Brunson’s detainment and “the state of the U.S.-Turkey relationship,” White House press secretary Sarah Huckabee Sanders said in a statement. Sanders said the White House meeting was requested by Kilic.

Traders are also bracing for spillover as Turkey’s woes roil western markets.

Stock prices for European banks with heavy investments in the country sunk on Monday. Emerging market currencies and equities have also fallen in value since Friday, while investments seen as safe havens, such as the U.S. dollar, Treasury bonds, gold and the Japanese yen have strengthened.

Turkey’s troubles also dampened U.S. stock markets, driving losses in all three major indexes by Monday afternoon. The Dow Jones Industrial Average was down roughly 150 points while the S&P 500 had fallen roughly 0.5 percent before making up ground by Monday afternoon. The Nasdaq composite dropped about 0.3 percent while gains for Apple and Amazon helped stave off further losses.

The Turkish central bank sought to tamp down concerns Monday with a pledge to provide as much financing as necessary to salvage the country’s economy.

Updated at 4:53 p.m.