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Lira Tanks As Germany Pressures Bank To Cut Turkey Funding

Following yesterday's US decision to decline a visa for a Justice ministry delegation, it was Germany's turn today to put the screws to Turkey. As Bloomberg reports, Germany is actively working to cut funding to Turkey from the country’s state-owned KfW bank, the European Investment Bank and the European Bank for Reconstruction and Development, people familiar with the matter say.

Germany’s government “is closely following the political and legal developments in Turkey,” the Finance Ministry says in a statement to Bloomberg; ministries coordinate positions “and possible conclusions for the investment policy of international development banks,” while loans for private-sector projects are subject to appraisal on a case-by-case basis.

While none of the institutions or banks have imposed a formal freeze on funding, they’ve all imposed tighter restrictions, the people said, asking not to be named, as the matter is sensitive.

 

Increased scrutiny affects financing for companies and banks seen as being tied to or influenced by the Turkish government.

 

Some German commercial banks are also reviewing their exposure to Turkey, amid deteriorating ties between the governments of Berlin and Ankara, the officials said.

 

Commerzbank is altering its relations with some Turkish banks to mitigate reputational risk that could occur through those links, according to one person.

 

EIB “is exercising utmost care in conducting due diligence appraisal of new projects in Turkey,” a spokeswoman for EU’s bank says, adding that financing volume in 2017 will turn out to be lower than in previous years; “EIB views current political developments in Turkey with concern”

And that has sent Lira back to new lows...