Erdogan Fiddles In Moscow As Istanbul Burns — And The Global Economy Could Feel The Heat

By Desmond Lachman

 
While his country’s economic crisis deepens — not least due to his reckless policies — Turkish President Recep Tayyip Erdogan is cozying up to Russian President Vladimir Putin and meddling in the Russian-Ukraine war. He’s spent the week trying to raise his international stature, restoring diplomatic relations with Israel and participating in high-level talks in Lviv — which went nowhere. This is unlikely to end well for Erdogan at next year’s parliamentary elections.

With Thursday’s surprise 100 basis-point Turkish interest-rate cut, one has to wonder whether Erdogan fits the definition of insanity by doing the same thing over again yet expecting a different result. Erdogan keeps pressuring the Turkish Central Bank to cut interest rates with a view to curbing inflation — even as with each chop the Turkish lira plumbs new lows and inflation soars to new highs.

The latest interest-rate cut comes as Turkey’s inflation is almost 80% and the lira has already lost a further 25% of its value this year. The country’s international reserves are depleted, and investors are increasingly concerned about Turkey’s ability to service its external-debt obligation. This is reflected in a widening in Turkish credit-default swaps to their highest level in the past 20 years and to very high dollar-borrowing rates for Turkey.

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