- IMF chief says central bank, others acted ‘very strongly’
- Markets orderly after ‘massively disorderly’ event, she says
IMF Managing Director Christine Lagarde said quick action by Turkey’s central bank and other agencies has helped calm financial markets after an attempt by members of the military to unseat President Recep Tayyip Erdogan.
“Over the weekend, all of us were on alert, monitoring the situation, wondering if they would take the right measures,” Lagarde said in an interview Monday with Bloomberg Television’s Tom Keene. Turkish authorities including the nation’s central bank and financial authorities “have all reacted very strongly, in a concerted way, in order to make sure that there would be liquidity available, that the banks would function.”
In an effort to quell investor concern, Turkish policy makers said Sunday they will provide unlimited liquidity to banks and would support the lira by removing limits on foreign-currency deposits that commercial lenders are allowed to use as collateral.
Market reaction to the attempted coup has been moderate, with the Turkish lira not getting hit as much as expected, Lagarde said. “In the main, there was an orderly functioning of the markets after something that was massively disorderly.”
Lagarde, head of the Washington-based International Monetary Fund since 2011, commented on Turkey after a speech at the Federal Reserve Bank of New York in which she warned that small countries are in danger of being cut off from the global financial system as big banks withdraw from those nations to reduce risk.
Watch Next: IMF's Lagarde on Banking, Turkey Coup Attempt, Brexit
Lagarde said the vote by Britain to leave the European Union has reinforced the need for EU leaders to demonstrate the benefits of the trading bloc. “The decision made by the British people to exit the European Union has accelerated in our view the need to consolidate the European Union to give a strong message to the European people about the benefit that Europe can actually deliver,” she said.
She said Italian officials have a good grasp of the challenges facing the nation’s banks, which have been under scrutiny over non-performing loans. There’s a way to deal with “the high level of non-performing loans” at some banks and comply with European rules, she said.
Asked to comment on the anti-trade views of U.S. presidential candidate Donald Trump -- who will officially get the Republican nomination this week -- Lagarde said it’s an “illusion” to assume the world can do away with international trade and globalization.
“I fear from any candidate anywhere in the world this withdrawal behind borders, this focus on domestic market issues exclusively, this turning their back to globalization and global issues, because problems are of a global nature, because we are in this together,” she said.