Bratislava, August 14 (TASR) – Slovakia and the eurozone as a whole shouldn’t be directly affected by the Turkish economic crisis at the moment, but Europe’s economy can feel certain effects via banks, especially Spanish, Italian and French ones, which have significant claims in the country, analysts told TASR on Tuesday.
The Turkish lira has been plummeting recently, with a freefall being somewhat decelerated by an intervention on Tuesday by the country’s central bank, which pulled the lira back from a record low recorded on Monday. Slovenska sporitelna bank analyst Katarina Muchova noted that the Turkish currency has lost 24 percent of its value compared to the US dollar since last Thursday, while it’s lost 21 percent against the euro.
Muchova pointed out that the Turkish contagion is also being transmitted to currencies, stocks and bonds of other emerging economies. “It’s also to be felt on the euro exchange rate, as markets have been disturbed by the asset involvement of certain European banks (mainly Spanish, Italian and French) in Turkey. Nevertheless, the eurozone, including Slovakia, shouldn’t feel the direct effects of the Turkish crisis for now,” said Muchova, cautioning that developments in the next few days will be of key importance.
According to Saxo Bank FX Strategy chief John J. Hardy, the euro has weakened as well, which was due to political division in Europe concerning willingness to bail out the affected banks. However, the euro isn’t expected to lose more than a few percent, said Hardy.
“Business exposure towards Turkey stands at a relatively high number in absolute figures – around €90 billion – but this is only a small percentage of overall exposure outside the EU,” said Hardy.
At the same time, Turkish banks will have to restructure loans taken out from European banks, while “this will make the credit crisis even worse, and Turkey will need a long time to recover from it,” said Hardy, adding that foreign creditors will be reluctant to provide loans to Turkish banks for some time.
Meanwhile, Turkey is very unlikely to be bailed out by the International Monetary Fund due to attitudes held by the country’s President Recep Tayyip Erdogan, added Hardy.