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Germany enters fray to calm Turkey turmoil

Their leaders arrange meeting of both countries’ finance ministers

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BERLIN: Angela Merkel is reminding Turkish President Recep Tayyip Erdogan that he has a potential ally in Berlin.

As Erdogan seeks to shield Turkey’s economy from a feud with President Donald Trump, he and the German chancellor spoke by phone on Wednesday to arrange a meeting of both countries’ finance ministers.

While Berlin isn’t offering any aid, the conversati­on reflects the stakes on both sides and Germany’s sway as the biggest economy in Europe.

Germany wants Turkey to avoid a financial meltdown and can’t allow the country to descend into chaos, according to a person familiar with Merkel’s thinking who asked not to be identified discussing government deliberati­ons.

In an overture that signals normalisin­g relations after a series of diplomatic clashes, Germany plans to host Erdogan for a state visit on Sept 28.

“No one has an interest in the economic destabilis­ation of Turkey,” Merkel said in Berlin this week.

Germany is Turkey’s biggest economic partner by far, accounting for some 37bil (US$42bil) in bilateral trade last year. About 6,500 partly or wholly-owned German companies operate in Turkey. Meanwhile, Turkey ranks 16th among Germany’s export markets, ahead of Japan and many smaller European Union countries.

Those ties are prompting warnings by Germany’s business community, including criticism Erdogan’s attempts to exert control over Turkey’s central bank and his humanright­s record.

The market turmoil reflects “a crisis of confidence,” Joachim Lang, executive director of the Federation of German Industries in Berlin, said in a statement.

“There’s the risk of a recession if financial stability isn’t restored. Only a stable political environmen­t will gain foreign investors’ confidence.”

When the two finance ministers meet, Germany’s Olaf Scholz is likely to tell his Turkish counterpar­t that any kind of support from Berlin requires “a shift to a credible monetary policy that’s independen­t, with higher interest rates,” Holger Schmieding, chief economist at Berenberg, said by phone.

With Erdogan and Trump clashing over the detention of an American pastor in Turkey, the Turkish president’s fraught history with Merkel doesn’t help.

Relations deteriorat­ed as Erdogan consolidat­ed power after a failed coup in 2016, prompting disputes that led Germany to withdraw troops from Turkey and a long-running diplomatic standoff over a jailed German journalist.

And while Erdogan’s path to better relations with Europe leads through Berlin, Germany won’t offer a rescue on the scale of the US$$15bil Qatar pledged to invest in Turkey.

“Any help that Germany could give right now would be small compared to the problems at hand,” Schmieding said.

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