How Turkey Could Still Go All Wrong
Shoring up the lira hasn't solved the underlying problems.
Turkish President Tayyip Erdogan has a lot of problems with you people.
Photographer: Elif Sogut/Getty Images EuropeTurkey has managed to temporarily stop its currency’s bleeding by cracking down on short-sellers and making it easier for Turkish borrowers to avoid an onrushing wall of foreign-currency debt coming due. This afternoon, Qatar also pledged to pitch in with $15 billion in investments.
But nobody believes this crisis is over. President Recep Tayyip Erdogan is still playing hardball in a diplomatic and trade fight with the U.S. that he can’t possibly win, and Turkey’s central bank isn’t raising interest rates fast enough to truly fix what ails the lira. That means it will start bleeding out again. Noah Smith writes that this has all the trappings of currency crises that hit Asia in the 1990s and Latin America in … pick a decade. The truly troubling thing for Turkey is that its economic boom of recent years seems to have been built on piling up debt for iffy real-estate and infrastructure projects. This doesn’t usually end well, Noah observes.