People walk past a currency exchange office on August 13, 2018, in Istanbul, Turkey, where the lira hit another record low overnight. Photo: Chris McGrath via Getty Images

Details about the U.S–Turkey crisis have been unfolding over the past few days: a pastor as stage hostage, frozen assets for ministers on both sides, tariffs on Turkish exports of aluminum and steel to the U.S., a Trump tweet here, a fiery Erdogan speech there. But this is only the spectacular side of the story.

The big picture: The troubles of the Turkish lira have deep roots. Turkey is a structural-deficit country: It needs both short-term money on a daily basis and foreign direct investment in the long run. While the ruling Justice and Development Party (AKP) initially managed these fundamentals fairly well after it came to power in late 2002, doing so has become incompatible with President Erdogan's autocratic governance.

Autocratic countries can survive the absence of rule of law if they sit on a wealth of oil or gas (Saudi Arabia, for example). But Turkey has neither, and its economic survival depends on exports, short-term funding, long-term direct investment, and extensive foreign borrowing. All of these economic lifelines presuppose confidence on international markets, especially in Europe and the U.S.

President Erdogan has done much to undermine that confidence since his first election in 2014, drastically shifting Turkey's political system away from liberal democratic fundamentals toward one-man rule. Erdogan has been fighting the Turkish Central Bank for years, at great risk, against high interest rates, while his desire to create an Islamic class of entrepreneurs has distorted public tenders. With a weakened parliament, a judiciary under political influence, a compromised media, and a permanent propensity to blame all the country’s woes on imaginary enemies, Turkey has seen its international financial rating sharply deteriorate.

The bottom line: Turkey’s president has driven the economy into a narrow, dead-end alley, where measures taken on currency and interest rates run counter to what’s needed, and where the narrative about resisting the U.S. economic “war” will only squeeze the country further.

Marc Pierini is a former EU ambassador to Turkey and a visiting scholar at Carnegie Europe.

Go deeper

7 hours ago - Podcasts

Facebook boycott organizers share details on their Zuckerberg meeting

Facebook is in the midst of the largest ad boycott in its history, with nearly 1,000 brands having stopped paid advertising in July because they feel Facebook hasn't done enough to remove hate speech from its namesake app and Instagram.

Axios Re:Cap spoke with the boycott's four main organizers, who met on Tuesday with CEO Mark Zuckerberg and other top Facebook executives, to learn why they organized the boycott, what they took from the meeting, and what comes next.

Boycott organizers slam Facebook following tense virtual meeting

Illustration: Sarah Grillo/Axios

Civil rights leaders blasted Facebook's top executives shortly after speaking with them on Tuesday, saying that the tech giant's leaders "failed to meet the moment" and were "more interested in having a dialogue than producing outcomes."

Why it matters: The likely fallout from the meeting is that the growing boycott of Facebook's advertising platform, which has reached nearly 1000 companies in less than a month, will extend longer than previously anticipated, deepening Facebook's public relations nightmare.

Steve Scalise PAC invites donors to fundraiser at Disney World

Photo: Kevin Lamarque-Pool/Getty Images

House Minority Whip Steve Scalise’s PAC is inviting lobbyists to attend a four-day “Summer Meeting” at Disney World's Polynesian Village in Florida, all but daring donors to swallow their concern about coronavirus and contribute $10,000 to his leadership PAC.

Why it matters: Scalise appears to be the first House lawmakers to host an in-person destination fundraiser since the severity of pandemic became clear. The invite for the “Summer Meeting” for the Scalise Leadership Fund, obtained by Axios, makes no mention of COVID-19.