New banking restrictions in Turkey, an Egyptian court rules on island transfer, and French electricity workers strike.
NEW BORROWING LIMITS FOR TURKISH BANKS, CURRENCY SLIDES
Last week, Turkey’s central bank announced it was halving the limit that banks could borrow from one another – an activity known as interbank lending – to $2.9 billion. The new limit is aimed at arresting the country’s currency slide by encouraging banks to borrow from overseas institutions. It’s hoped this will increase demand for the Turkish lira and therefore boost its value. The measures take effect on Monday.
Turkey’s currency has fallen 12 per cent against the US dollar since Jan. 1, making it 2017’s worst performing currency thus far. On Friday, President Erdogan went to the extraordinary step of asking Turks to exchange their foreign bills for lira to prevent further declines.
Increasing political volatility has spooked investors, accelerating the currency slide. The economy has slumped since July’s failed coup, contracting by 2.7% in the third quarter of 2016. This has been compounded by domestic security concerns and the impending political showdown over an April referendum designed to concentrate President Erdogan’s power.
Turkey’s central bank raised interest rates in November but surprisingly left them unchanged in December. Economists have urged the bank to increase rates again at its Jan. 24 meeting to firm up the currency; however, political pressure may prevent this. President Erdogan has repeatedly called for low interest rates to boost the economy, casting doubt over the central bank’s independence.
FINAL DECISION ON FATE OF RED SEA ISLANDS
On Monday, Egypt’s Supreme Administrative Court will rule on the validity of a deal to hand over the Red Sea islands Tiran and Sanafir to Saudi Arabia.
After the deal was concluded in April, an estimated 2,000 people turned out to vent their anger at the arrangement – the biggest demonstrations since President Sisi took power. Opposition groups have organised further protests for Monday.
Cairo maintains that the two uninhabited islands belong to Saudi Arabia and only came under Egyptian administration upon Riyadh’s request in 1949. Nonetheless, many Egyptians view the deal as an outright sale; just days before it was announced Saudi Arabia announced a $21.5 billion aid package for Egypt.
Administrative courts have already voided the deal twice but the government succeeded in overturning those decisions. If the court rules to uphold these rulings, it will give them more authority but would also invite questions about political influence in the country’s judiciary, possibly sparking further protests.
Sisi’s government has already forwarded the deal for approval by parliament. If, as is expected, the government’s appeal succeeds on Monday, parliament is expected to ratify it in the coming weeks.
FRENCH ELECTRICITY WORKERS STRIKE
Workers at France’s state-run electricity utility EDF will hold a 24-hour strike beginning at 9pm Paris time on Monday. The action is likely to result in some power outages but EDF – the world’s largest electricity producer with 58 active nuclear plants – has not confirmed this.
Monday’s strike is being led by the CGT trade union, which says the action is a response to cuts in social benefits provided by utility companies.
France has experienced an increase in industrial action in recent months. Massive walkouts paralysed the country’s public transport system in July after the government pushed through controversial new labour laws making it easier for companies to hire and fire. With the economically liberal Francois Fillon leading in polls for April’s election, it’s likely workers’ rights will continue to come under pressure.
In an unfortunate coincidence, unseasonably cold weather is expected to hit France in the coming week, with temperatures dropping to as low as -6°C on Tuesday. Any sustained power outages could make life very uncomfortable indeed for the 77 per cent of French homes and businesses that are powered by EDF.