German Ministry of Finance: The Turkish Currency Crisis is a New Risk for the Economy

The Turkish currency crisis represents a new risk for the German economy, alongside trade tensions in relations with the United States and the potential exit of Britain from the European Union without an agreement on trade arrangements, the Ministry of Finance announced on Monday.

Due to deteriorating diplomatic relations with the U.S. and investor fears regarding President Tayyip Erdogan’s influence on monetary policy, the Turkish lira has weakened by nearly 40 percent against the dollar since the beginning of the year.

>>>The Turkish lira weakened by five percent

In the meantime, the lira has slightly recovered and is currently down against the dollar by just under 30 percent compared to the beginning of the year. In morning trading, it weakened again against the dollar by 1.5 percent, hindered by investor fears that Washington will impose new economic sanctions on Ankara if they do not extradite detained evangelical pastor Andrew Brunson.

Germany ranks second among the leading investors in Turkey, immediately after the European Union as a whole.

“Risks remain pronounced, particularly related to the uncertain course of Brexit and future U.S. trade policy,” the German Ministry of Finance emphasized in its latest monthly report. “A new external economic risk is posed by economic developments in Turkey,” it adds.

>>>Višnja Starešina: If only the Sultan goes, the neo-Ottoman project will not disappear

Despite the risks, the German economy continues to record strong growth, supported by government and personal consumption, low interest rates, a strong labor market, and rising real wages, the report highlights.

The ministry expects that companies will also increase investments given the good state of the global economy despite the threat of a trade war.