The crisis in Turkey is worsening, foreign currency debt defaults in view

Since the crisis in Turkey seems to be reaching a critical phase, I want to write a separate post on it, apart from the daily commentary. Now, if you read my post on Turkey from a month ago, you can see my worry was the emerging markets universe. But now, the contagion has spread to Europe in terms of bank holdings of Turkish assets. So this opens another area of potential contagion from the crisis in Turkey.
The political dimensions
Since this crisis is as much political as it is economic, let me mention a few threads that are creating the tension. The first is the rapprochement of Turkey and Russia. From a NATO perspective, because Turkey intersects Europe and Asia and is a gateway to the Middle East, it is seen as a key defense against Russian expansion and a bulwark against turmoil in ...


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