FM Maas says German companies hesitant to risk investing in Turkey

Germany’s Foreign Minister Heiko Maas said in an interview with Die Zeit on Wednesday that German companies are hesitant to risk investing in Turkey and added that Turkey’s justice system was at fault for a decreasing amount of German investment in Turkish industries.

In the past two years, German business investment in Turkey have declined nearly 20 percent, the newspaper said, and German companies have begun delaying investments.

Turkish President Recep Tayyip Erdoğan is to meet with German President Frank-Walter Steinmeier and Chancellor Angela Merkel on a two-day state visit beginning on Thursday. Erdoğan is also expected to meet with German business leaders in Berlin and hopes to attract more investment to Turkey, Deutsche Welle (DW) reported. Erdoğan also aims to convince the German government to support investment in Turkey by extending credit to German companies.

The economy ministers from both nations met in Berlin last week, reaching an agreement to expanding bilateral economic ties. The meeting came after steep declines in the Turkish lira and US sanctions imposed on Turkey due to its detention of a number of US citizens.

“Turkey today did not request aid. They won’t during President Erdoğan’s visit, either,” German Finance Minister Olaf Scholz said last week after meeting with the Turkish ministers, according to DW.

Moody’s Investors Service on Wednesday downgraded the long-term foreign currency deposit ratings of nine Turkish banks from B1 to B2. The banks affected by the Moody’s move are Akbank T.A.Ş., Alternatifbank A.Ş., ING Bank A.Ş. (Turkey), QNB Finansbank A.Ş., T.C. Ziraat Bankası, Türk Ekonomi Bankası A.Ş., Türkiye Garanti Bankası A.Ş., Türkiye Vakıflar Bankası TAO and Yapı ve Kredi Bankası A.Ş.

The downgrades were driven by the lowering of Turkey’s foreign currency deposit ceiling to B2 from B1 on Sept. 24.

In a statement on Wednesday Moody’s said the downgrades were driven solely by the lowering of Turkey’s foreign currency deposit ceiling and do not reflect bank-specific credit considerations. “The lowering of the ceiling reflects Moody’s view that the risk of the government intervening to prevent the withdrawal of foreign currency-denominated deposits in order to conserve Turkey’s foreign currency reserves has risen.”

“As a consequence, the long-term foreign currency deposit ratings of 9 banks are now constrained at B2. An upgrade is unlikely, given the current negative outlooks on the banks. However, the outlooks could stabilize should the Turkish lira become more stable, if there were a structural reduction of the reliance of Turkish banks on foreign currency funding, the banks’ stock of problem loans stabilize, and returns on tangible assets stabilize in line with recent years”, the agency said.

A downgrade can be driven by persistently high market volatility, a spike in corporate defaults, lower capital ratios or a material reduction in banks’ profitability beyond Moody’s expectations.

The lira has lost nearly 40 percent of its value against the dollar this year, sparking a sell-off in emerging market currencies and weighing on global stocks. The crisis has been precipitated by investor alarm about President Recep Tayyip Erdoğan’s influence over monetary policy.

The sell-off has been fueled by a deepening dispute between Turkey and the United States, with Washington imposing sanctions and vowing to continue to do so until the release of a US pastor on trial in Turkey.

Meanwhile, Turkey’s Sözcü newspaper wrote that Erdoğan would not get his wish to hold a rally for Turks living in Germany.

Erdoğan had planned speeches in Berlin, Cologne and Dortmund. All three events were canceled after the German government was cold to the idea, according to a report by Sozcü. Erdoğan’s plans instead have been revised to meet with Turkish businesspeople at the Adlon Hotel in Berlin.

During his three-day state visit, Erdoğan will meet with Merkel at a critical point in Turkey’s relations with the West. European countries were alarmed last month at the plummeting value of the Turkish lira, and foreign investment has retreated in recent months. The visit aims to improve ties despite questions over Turkey’s domestic rights abuses.

Erdoğan will have lunch with Merkel on Friday. Afterwards, both will visit a war memorial. The Sözcü daily also reports that the German government will pay 215,8 million euros to Turkey for its housing of Syrian refugees.

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