This is Erdogan playing managing domestic politics. It seems a little bit less stressful than the Imamoglu arrest. This is internal CHP politics. Kilicdaroglu is trying to get his job back, cooperating with the administration to oust Ozel. Erdogan has managed a situation where the opposition is fighting among itself. Erdogan could possibly go to early elections.

That may not happen. The market sell-off was different from the Imamoglu scenario. The central bank and government will manage markets, they have plenty of reserves (160 billion). They'll use them to defend the currency. Worst case, a little hike rates. It's a holiday in Turkey, they have time for politics to calm down. Given higher oil prices, inflation has surprised negatively. There should be scope to hike rates anyway, but they'll try to avoid that, especially if we're in an early election scenario.

Energy is bad news for Turkey, a huge energy importer. Each $10 increase in oil price costs them between 3 and 5 billion on the current account and probably 1.2% inflation. If we see an easing of Gulf tensions, that helps Erdogan out. Turkish markets have held in pretty well despite the Gulf-Iran war scenario, reflecting a good credible team, plenty of FX reserves, and more orthodox policy. They will hike if they have to. If we see a rerun of street demonstrations, markets will be more negative. I don't think Turkish markets are in a meltdown scenario.

What is your current assessment of the health of the eurozone economy? What are the red flags?

My big concern is growth. I'm not sure where growth is going to come from. Germany's auto industry needs a massive rethink. In France, consumption is under pressure. As the US and China have thrown the kitchen sink into the AI boom, Europe has been left behind. My biggest concern is growth and productivity.

Can Europe focus on growth at the same time as keeping their fiscal and public finances in order? Is Europe missing out because they don't have the privilege of the US in running large deficits without consequences?

For Europe, debt is anathema. They avoid it as much as they can. Europe has said no more debt to fuel growth, whereas the US feels they need growth and will eventually handle debt. Europe could afford a little bit more to fuel growth, but it won't because it went through the debt crisis that traumatized everyone.