By continuing to occupy large areas of Cyprus, Syria and Iraq, funding jihadists groups in Syria and Libya, maintaining military bases in Africa, the Middle East and the Balkans, and violating Greece’s airspace on a daily basis, Turkey has put a major strain on its economy.
But how much of a strain?
A newly released report by New Economy has found that Turkey is the third ranked country worldwide at risk of bankruptcy.
This comes as three senior Turkish officials quoted by Reuters on Friday said they feared a second currency crisis.
Treasury and central bank officials have held bilateral talks in recent days with counterparts from Japan and the United Kingdom on setting up currency swap lines, and with Qatar and China on expanding existing facilities, the officials said according to Reuters.
Cevdet Yilmaz, the ruling AK Party’s deputy chairman for foreign affairs, confirmed on Thursday that Turkey was seeking swap agreements.
“We are having negotiations with different central banks for swap opportunities,” he told a panel discussion, adding: “It is not only the U.S., there are also other countries.”
He did not give further details.
“Talks are in a better position especially with Qatar, China and Britain,” said the first senior official, who requested anonymity. “I am optimistic that a certain amount of resources will be provided” and an agreement should “not take too long”.
The two other officials said Turkey reached out to Japanese representatives about possible funding, with one adding that talks need to be speeded up if a swap line is to be secured, Reuters reported.
However, as each day passes, Turkey becomes ever increasingly risk of bankruptcy. As previously reported by Greek City Times, Turkey’s three big banks of Garanti, Akbank and the Mustafa Kemal Atatürk-founded İşbank, are at high risk of bankruptcy too.
The Reuters report was a few days ago and there has not been an update on the swap agreements. Each passing day puts Turkey in a more vulnerable and indebted position.
In addition, the report that Turkey’s three big banks are at high risk of bankruptcy was reported over a week ago. So what is new?
According to the New Economy report, “during the last two weeks, the CDS (Credit Default Swaps) of both the Turkish state and its banks have been exploded at desperately high prices, indicating that Turkey’s probability of bankruptcy is extremely high. The CDS level for Turkish state bonds remain so high, that they moved from ranking 6th globally a few days ago, to third position now.”
New Economy explains that “CDS are the so-called risk premiums, that indicate the ‘cost’ for someone to insure their money in the event that an obligation such as currency bond is not paid. In other words, the price of CDS is the safest indicator of whether an organisation, company or state will go bankrupt. Prices in CDS below 100 points show bankruptcy probability below 1%, while prices above 600 points show that the probability of bankruptcy exceeds 5%. […]”
The report explains that Turkey’s failed wars against Libya and Syria have been a major problem for its economy, putting the country’s bankruptcy probability at over 30% in the forthcoming period. This has put Turkey behind only Venezuela and Argentina, but “without having the US embargo that Venezuela has, nor the vast debt that Argentina brings.”