The upheaval in Turkey has rattled the global economy which is already jittery from Brexit and the attack in Nice. And it raises more headaches for the European Union.
Investors are bracing for volatility in global markets on Monday as the world assesses the impact of the failed coup and the subsequent crackdown by President Recep Tayyip Erdogan. Turkey's currency, the lira, has already dropped 6 per cent against the U.S. dollar and many expect foreign investors to shy away from the country.
"Uncertainty is set to shape Monday's open following the failed coup in Turkey over the weekend. Coming in the wake of recent horrific events, the risk is that notably tourism will suffer more durable damage," Michala Marcussen, head of global economics at Societe Generale, said in a note on Sunday.
Turkey is far from a major economic power, ranked about 20th in the world, but it's big enough that the turmoil will reverberate around the world and in Canada. And its location, straddling Europe and the Middle East, makes it a critical transit point, particularly for trade in energy.
Roughly 3 per cent of the world's oil supply travels on tankers through the Turkish Straits between the Black Sea and the Mediterranean. Two major pipelines also bring oil to the Mediterranean port of Ceyhan from fields in Azerbaijan and Iraq, and there are plans to pipe gas from Azerbaijan to Europe through Turkey. Oil prices ticked up on the weekend over fears of a disruption to the supply lines and analysts will be watching the government's reaction to the coup carefully.
Airlines and travel companies are already feeling the impact from the weekend's violence. Several airlines briefly halted service to the country and tour operators were scrambling to bring thousands of people home. On Sunday, most airlines resumed flights, although many were operating at reduced schedules, and tour-company Thomas Cook AG said its flights to Turkey were largely full.
Many travel companies were already reeling from Britain's vote to leave the European Union on June 23. EasyJet and International Airlines Group, which owns several airlines including British Airways and Iberia, issued profit warnings after the vote. And last week, British travel company Lowcost Travelgroup filed for bankruptcy protection impacting more than 100,000 travellers.
The Canadian government urged Canadians to avoid non-essential travel to Turkey and many other countries have issued similar warnings. Canada's economic links to Turkey are relatively small, with about $2.4-billion worth of merchandise traded annually. But dozens of Canadian companies operate in Turkey, including mining companies Eldorado Gold, Alamos Gold and First Quantum. And Canada has been trying to win new business in the country's growing telecommunications and energy sectors. Companies contacted on the weekend said their operations had not been affected by the upheaval and their staffs were safe.
For Turks, the turmoil comes as the economy was already showing signs of cooling. The economy had been growing at a steady pace in recent years and expanded by 4.8 per cent in the first three months of this year.
But the instability in recent weeks is beginning to take its toll. Tourism had been falling for months and visitor numbers from Europe were already down 28 per cent this year before Friday's failed coup. Bookings to Istanbul plunged by nearly 70 per cent after last month's attack on Istanbul's Ataturk Airport. Deputy Prime Minister Mehmet Simsek took to Twitter on Sunday to offer reassurances.
"The macro fundamentals of our country are solid. We are taking all necessary precautions. We are strong with the support of our people and strengthened political stability," he said.
Turkey's relations with the EU will also be put the test in the wake of the coup attempt. Turkey applied to join the EU in 2004 and it still has to meet a long list of requirements. The possibility of it becoming a member has raised concerns in other European countries, notably Britain where Turkey's EU membership became a major issue in the recent referendum. Many on the Vote Leave side raised fears about a flood of Turkish immigrants pouring into Britain as a major reason for the country to pull out of the EU. Those on the Remain side said Turkey was decades away from meeting the EU qualifications.
How President Erdogan responds in the aftermath of the coup will be critical in the country's push toward EU membership. There have already been concerns in the EU about Mr. Erdogan tightening his grip on power, restricting the media and limiting other democratic rights.
For now, the EU is supporting the government. It issued a statement that backed "the democratically elected government, the institutions of the country and the rule of law."