World press on the impact of political crisis in Turkey on the country's economic situation (January 6, 2014)

The Financial Times published an article headlined "Lira tumbles as Turkey’s woes deepen."

"Turkish households bought more than $20bn in foreign currency in the second half of 2013 as political tensions complicated the central bank’s efforts to stabilise the lira," the article reads. The author suggests that it means that "Turks – who have previously tended to buy lira when the currency is weak - are losing confidence in the authorities’ ability to steer the economy through a difficult period for emerging markets. Their switch into foreign currency will add to pressure on the lira, which has fallen more than 7 per cent in the last month and hit a fresh all-time low of 2.1945 against the dollar on Monday. At the same time, the yield on two year government bonds climbed to 10.46 per cent, above the 10-year yield of 10.36 per cent."

The article suggests a way out of the crisis for Turkey: "Most analysts think raising interest rates will be the only sure way to stabilise the currency and bring inflation, running above 7 per cent, down to a 5 per cent target. But this would be politically contentious, with prime minister Recep Tayyip Erdogan repeatedly blaming Turkey’s economic woes on what he refers to as an 'interest rate lobby'."

The article quotes Mehmet Simsek, Turkey's finance minister who told the FT: "We [Turkey] are not going to fight the markets, we are going to let the adjustment run its course and there will be some correction in imbalances and certainly, possibly, a longer period of sub-trend growth.”