Turkey's President Recep Tayyip Erdogan accuses US of 'stab in the back' as currency crisis worsens

Turkey's president has accused the US of trying to "stab it in the back", as his country moved to stem its economic woes amid a diplomatic spat with Washington.

Turkey's central bank announced a series of measures to ease a currency crisis that Recep Tayyip Erdogan has branded the result of an "economic siege".

But the Turkish lira, which has nosedived over the past week, tumbled another 7% on Monday as the central bank’s measures failed to restore investor confidence.

The situation has been caused by concerns over Mr Erdogan’s economic policies, but comes as a dispute between Turkey and the US grows more entrenched.

The lira has dropped some 45% this year.

  • What has Turkey's president said?

In a series of speeches Mr Erdogan has showed no sign of backing down in the stand-off against America, a Nato ally.

He said: “Turkey is faced with an economic siege. We are taking the necessary steps against these attacks and will continue to do so.”

The lira hit a record low of 7.23 per dollar late on Sunday, but Mr Erdogan has ruled out the possibility of higher interest rates, which economists said are needed to stabilise the currency.

He also threatened to seek new alliances and partners – a veiled hint at closer ties with Russia – and warned of drastic measures if businesses withdraw foreign currency from banks.

Simon Derrick, chief currency strategist at BNY Mellon, said that in the absence of a decisive rate hike, “it is hard to look at these announcements as being anything more than temporary calming measures, rather than solutions to the problems at hand”.

The Turkish president has struck a defiant tone Credit: AP

  • What measures has Turkey taken?

The lira recovered some of its losses after Berat Albayrak, the country’s finance chief – and Mr Erdogan’s son-in-law – said the government had readied an “action plan” to ease market concerns.

He also said the government had no plans to seize foreign currency deposits or convert deposits to the Turkish lira.

The central bank said it had taken a series of steps to “provide all the liquidity the banks need”.

The moves are meant to grease the financial system, ease any worries about trouble at the banks and keep them providing loans to people and businesses.

In times of high uncertainty, banks tend to shy away from lending to each other. A so-called credit crunch, a lack of daily liquidity, can cause a bank to collapse.

Turkey was hit by a financial shockwave on Friday Credit: AP

  • What is the dispute with the US about?

The dispute with the US has centred on the continued detention of an American pastor who is on trial for espionage and terror-related charges. The US has responded by slapping financial sanctions on two ministers and later doubled steel and aluminium tariffs on Turkey.

Turkey’s foreign minister said the US will not achieve aims by exerting pressure and imposing sanctions on Turkey.

There are concerns about the government’s economic policies as well as a dispute with the US Credit: AP

Addressing a conference in Ankara gathering Turkish ambassadors, Mevlut Cavusolgu called on the US to “remain loyal to ties based on traditional friendship and Nato alliance” with Turkey.

Mr Cavusoglu said: “We support diplomacy and negotiations but it is not possible for us to accept impositions.”

Meanwhile, Turkey’s interior ministry said it will take legal action against hundreds of social media accounts that it says are provoking a drop in the lira.

The ministry said it had initiated legal investigations against 346 social media accounts “which posted content provoking the dollar exchange rate”.

The Istanbul public prosecutor’s office announced it had begun investigating “those who had taken actions which threatened economic stability”.

The Capital Markets Board of Turkey issued a similar warning to those who spread “lies, false or misleading information, news or analysis”.