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Opinion
Mohamed A. El-Erian

Turkey Can’t Take Much More of Its Currency Crisis

The central bank needs to reverse its rate cuts, for starters, if the country is to avoid a full-blown economic tailspin.

The Turkish lira has lost half its value this year.

The Turkish lira has lost half its value this year.

Photographer: Ozan Kose/AFP/Getty Images

A currency crisis is bad enough for Turkey. A full-blown economic crisis would be much worse. The country moved a little closer to one on Friday, but it can still avoid the worst-case scenario if it acts quickly to contain the spreading financial instability and maintain its considerable economic potential. The rest of the emerging world has a stake in this, too.

Friday was a particularly difficult day for the Turkish financial system. Further currency volatility, including a trading range of 10% for the lira, was accompanied by an additional daily depreciation of more than 4%. The stock market lost 8% in a hectic session that triggered two circuit breakers.