The lira is under pressure again, and for good reason. Turkey's high court has delivered a ruling that effectively dismantles the main opposition party, a move that reeks of authoritarian consolidation and sends a clear signal to foreign investors: your capital is not safe here. As Erdoğan tightens his grip, the Foreign Office is watching. But the market has already priced in the risk.
This is the kind of political intervention that makes a mockery of the rule of law. The constitutional court's decision to shut down the Peoples' Democratic Party (HDP) over alleged ties to Kurdish militants is a judicial coup dressed up in legal jargon. It is a power grab that undermines the very foundations of democratic accountability. And it comes at a time when Turkey's economy is already teetering on the edge, with inflation running at over 80% and the central bank's credibility in tatters.
Let's talk about the numbers. Turkey's 10-year government bond yield has surged past 20% as foreign investors dump their holdings. The lira has lost nearly 40% of its value against the dollar this year alone. Capital flight is accelerating. This is not a market correction. It is a rout. And the court's ruling is just the latest nail in the coffin for investor confidence.
Erdoğan's economic policies have been a textbook case of what not to do. He insists on cutting interest rates despite soaring inflation, a move that defies all conventional wisdom. The result is a currency crisis that shows no signs of abating. Now, with the opposition crushed, there is no political check on his policies. The market hates uncertainty, and Turkey is now a one-man show.
Meanwhile, the Foreign Office's monitoring is a token gesture. What can they realistically do? Impose sanctions? That would only deepen the crisis. The reality is that Turkey is too big to fail but too chaotic to save. The West needs Turkey on NATO's southern flank, but Erdoğan's behaviour makes cooperation increasingly difficult.
The real question for investors is whether this is a buying opportunity or a value trap. Some hedge funds are circling, betting on a policy U-turn or a bailout. But betting on Erdoğan is like betting on a roulette wheel. The odds are stacked against you.
In the long run, Turkey's economy will need a complete overhaul. That means independent institutions, fiscal discipline, and a return to orthodox monetary policy. But none of that is likely under the current regime. The political system is rigged, and the market knows it.
For now, the gilt yields will continue to spike, the lira will continue to slide, and the Foreign Office will continue to watch. It is a sad state of affairs for a country that once boasted Europe's fastest-growing economy. But that is the price of autocracy. The bottom line is clear: Turkey is a risky bet with diminishing returns.
