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How Turkey's Crisis Might Fracture NATO | naked capitalism

And, much like the 1997 crisis, the recent collapse of the Turkish lira has exacerbated Turkey's problems. The decline in the domestic currency (precipitated by President Trump's decision to double tariffs on Turkish metal exports last week), along with the U.S. Federal Reserve's ongoing interest rate hikes, have substantially elevated the cost of foreign debt servicing. Economist Brad Setser sets out Turkey's problems starkly, noting that the country has "a one-year external financing need of close to 30 percent of Turkey's pre-depreciation GDP, against 12 percent in total reserves and about 10 percent of GDP in foreign exchange reserves. And the bulk of Turkey's maturing external debt is denominated in a foreign currency--it thus is a claim on reserves that cannot be depreciated away."

How Turkey's Crisis Might Fracture NATO | naked capitalism

President Erdoğan badly needs to keep the Turkish "miracle" afloat, but he's unlikely get the help he needs from the usual suspects, such as the IMF (which would likely force painful deflationary measures on the country as it did during the Asian financial crisis in 1997-98). He could well secure it from Russia, however, which would undoubtedly love to exploit any divisions in Turkey's ties to the West. By the same token, Russia's President Putin would tremendously increase his own domestic stature were he to pull off a pipeline/gas export deal with Turkey that a) brings in much-needed foreign exchange income for Russia and b) is a public slap in the face to the obvious U.S./Big Oil attempt to strangle Russian gas exports to Europe.


Turkey - Wikipedia
GDP (PPP)    2018 estimate $2.320 trillion

International Reserves of the Russian Federation (End of period) | Банк России
31/07/2018     458,032(millions of US dollars)

So if I'm reading that right then Turkey's external funding need for one year net reserves is about the size of Russia's entire foreign holdings?
Don't think that will work out. Kids, don't dollarize your Economy.

by generic on Sun Aug 19th, 2018 at 10:37:07 AM EST
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