Is It Time for Eurozone Banks to Start Worrying About Turkey Again?

The ECB has already warned once about the potential impact a plummeting lira could have on Euro Area banks heavily exposed to Turkey’s economy.

Turkey is in the grip of another big wave of its multiyear currency crisis. The value of the lira against the dollar has plunged by almost 40% so far this year, making it the worst performing emerging market currency. The currency is currently trading at just over 13 units to the dollar, compared to 7.44 in January and 3.78 at the start of 2018. On just one day this month (Nov 23), the currency plunged almost 20% before recovering slightly. The main cause of the collapse was the Central Bank of the Republic of Turkey’s decision to reduce interest rates for the third time since September, despite a slumping lira and surging inflation.

Contagion Risks

At the height of the last big wave of Turkey’s

Keep reading this article on Naked Capitalism (Yves Smith) - Blog.

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