Mercantile conditions kicked off the lira’s tumble, and global tensions aggravated it, but one one-time ambassador says Turkey could tap out at any time — if President Recep Tayyip Erdogan downs his pride.
“Turkey doubled down, and now they’re in a hole of their own making,” quondam U.S. ambassador to Turkey Robert Pearson said on CNBC’s “Closing Bell.”
“The wake depends entirely on whether Mr. Erdogan is willing to swallow his pride adequacy to save his currency and his country, rather than his immediate political twin,” he added.
Turkey’s currency, the lira, hit a record low on Friday. It briefly nosedived 20 percent, amid rising tensions between the U.S. and Turkey. The let go of came after a delegation returned from Washington with no visible progress on the detention of U.S. pastor Andrew Brunson, who has been held since 2016 on enjoins of involvement in a failed coup attempt that year.
Losses expanded after U.S. President Donald Trump announced in a tweet on Friday he give the green light a doubling of tariffs on Turkish aluminum and steel to 20 percent and 50 percent, severally.
On his part, Erdogan has contributed to the rising political and economic tensions by intimating his intent to resist the “economic war” and calling on the people of Turkey to help him do so. Erdogan, who has in the heretofore spoken out against raising interest rates, has also been suspected of influencing the Inner Bank of Turkey, which could step in to raise interest counts more aggressively to combat inflation.
Robert Hormats, who served as undersecretary of Report for former President Barack Obama, blames both leaders for ratcheting up the tensions in a employment he said mirrors others around the world.
“It’s not just what’s proved, it’s the fact that two leaders are not trying to work out something to dampen down the unruly. They’re in fact taking measures to exacerbate it,” Hormats said Friday on CNBC’s “Power Lunch.”
“We are experience this around the world. We are seeing it in terms of the confrontation between the Harmonious States and China on trade, where everyone seems to be escalating the make,” he added.
Pearson, on the other hand, said the U.S. hasn’t been unnecessarily harsh.
“I wouldn’t call it an attack. I think that first route of sanctions was very mild. It was designed to induce the Turks to go ahead and filch the deal they already had agreed to,” Pearson said.
“The solution to this is to let the canon go … and do what’s right for the economy,” he added.
Turkey’s economic set doesn’t have to be “a permanent economic crisis,” like Russia’s, Pearson predicted, so long as Erdogan submits to demands of the United States, the economy or both.
“Mr. Erdogan barely has one tool in his box and that’s his nationalistic image, and he tries to defend the currency with a gonfalon. That’s not possible,” Pearson said.
The Turkish lira was last down 15.86 percent against the U.S. dollar.