Easily the most heatedly-discussed subject these days among the Turkish press and its political circles is whether Turkish President Recep Tayyip Erdogan will cut a deal with U.S. President Donald Trump to save his country’s currency from its accelerating plunge.
Asked by Newsmax on Friday whether Trump was considering such a deal with Erdogan, Press Secretary Kayleigh McEnany replied: “I don’t have any information on that front either, as to his future actions with regard to Turkish currency.”
On Tuesday, the lira did begin to rally slightly amid rumors of a rescue by both the United Kingdom and Japan.
But barring any substantive news, talk of a Trump-Erdogan deal continues.
To call the Turkish lira on the verge of collapse would be no exaggeration. Earlier this month, the lira declined to 7.25 against the dollar — its most weakened condition since the Turkish currency crisis of August 2018.
Because of the financial crisis — which has been accentuated by the coronavirus crisis and decline in tourism —“Turkey’s central bank has used tens of billions of dollars of its foreign exchange reserves over the past two months to defend the lira in the foreign exchange markets, reducing its stock of hard cash, net of liabilities, to around zero,” according to Ahval News.
What Turkey desperately needs to keep its currency afloat is a “swap line,” a temporary agreement between its central bank and that of another country that would agree to keep a supply of its currency available to trade to the Turkish central bank at the going exchange rate.
Sources close to the Trump administration say consideration of any deal in which the U.S. Federal Reserve arranges a swap line with Turkey would be dependent upon removing the greatest source of disagreement between Washington and Ankara: the Turkish acceptance of Russian S-400 missiles.
Even before the currency crisis came up, U.S. Ambassador to Turkey David Satterfield made it clear Erdogan’s embrace of the S-400s “exposes Turkey to a very significant possibility of congressional sanctions” from the U.S.
Less than a year ago, it was unthinkable that Erdogan would ever back out of his agreement with Russian President Vladimir Putin. But as the currency crisis mounts, Erdogan's options are growing increasingly limited if he wants to arrange the critical swap line.
Last week, the European Central Bank rejected Turkish requests for a swap line. Erdogan himself has ruled out applying to the International Monetary Fund for assistance.
John Gizzi is chief political columnist and White House correspondent for Newsmax. For more of his reports, Go Here Now.
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