ANKARA, TURKEY — As Turkey grapples with a financial crisis, fears mount that its economic consequences will ripple through global markets.
The Turkish stock market continued to fall Monday, with its currency trading as low as 6.97 to the dollar.
The value of the lira has already dropped 46% since January, reports Reuters.
Turkey had borrowed freely in recent years due to cheap rates in the U.S. and Europe, but debts are becoming unmanageable with the U.S. Federal Reserve’s new raised interest rates, according to the Washington Post.
The lira’s fall has been made worse by President Erdogan’s insistence that the central bank keep interest rates low.
Recent disputes with the U.S. has also prompted Trump to double tariffs on Turkish steel.
Turkish borrowers currently owe $82 billion to Spanish banks, and $38 billion to French ones.
These and other foreign banks are set to suffer big losses should the debt default.
The Erdogan administration has blamed ‘foreign threats’ for the country’s financial turmoil, and has urged citizens to sell dollars and gold to support the lira.
An action plan to stem losses is supposedly in the works.
In the meantime, the central bank is taking steps to make short-term credit more accessible to banks.