The Turkish Lira Crisis

Erdogan

Turkey TurkeyPresident Recep Tayyip Erdogan unveiled an unconventional proposal to save Turkey’s economy from the catastrophe that his actions have generated on December 20th. It entails the government guaranteeing certain lira deposits against exchange rate fluctuations.

The plan appeared to work in the near run. The lira made a historic comeback the day following Mr. Erdogan’s statement, swiftly erasing a month’s worth of losses. The central bank, not the deposit-insurance scheme, was the driving force behind the surge, spending billions of dollars from its decreasing reserves to buy lira.

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President Erdogan, who had been in grave political difficulty, has gained some time as a result of the currency’s rebound. However, it has simply served to hide, if not exacerbate, Turkey’s economic concerns.

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