Tuesday, February 10, 2009
PM Erdogan says Turkey to make ideal decision on IMF agreement
Turkey appears to be wisely walking away from an IMF loan deal that would require strict fiscal discipline and a balanced budget, even as economic conditions continue to deteriorate.
(Read story here.
Turkey should repudiate the remaining IMF debt and stimulate aggressively--something the government can do as Turkey is a currency issuing nation.
While it is not likely that Turkey will walk away from its remaining debt to the IMF, it indicated that it is prepared to "go its own way."
This is bullish for the Turkish lira, which has fallen sharply in the past six months. I like shorting the euro and buying the lira (short EUR/TRY). The eurozone has no fiscal independence now since member nations that use the euro are no longer currency issuers.