The Chancellor has offered cash-strapped Turkey Germany’s credibility to help halt the country’s economic chaos.
Speaking by phone to the Turkish leader on Wednesday, Mrs Merkel agreed on a meeting between both countries’ finance minister over the following days.
Holger Schmieding, chief economist at Berenberg, argued the meeting between the two finance ministers will be a double-edged sword for Turkey.
He said Germany’s Olaf Scholz will likely tell his Turkish counterpart that any kind of support from Berlin will require “a shift to a credible monetary policy that’s independent, with higher interest rates”.
He said: “Any help that Germany could give right now would be small compared to the problems at hand.”
The German Chancellor has also doubled down by offering a possible state visit of Mr Erdogan in Germany on September 28.
Despite Berlin not yet offering any financial aid, its support alone could still help the Lira to recovery from the record nosedive experienced in the past two weeks.
Mrs Merkel said earlier this week: “No one has an interest in the economic destabilization of Turkey.”
According to a person familiar with Mrs Merkel’s thinking who asked not to be named, Germany can’t allow Turkey to descend into chaos, Bloomberg reported.
One of the main reasons of this new opening to Turkey can be found in Berlin’s fear a collapse of Ankara would raise the number of refugee’s arrivals in Europe, Bloomberg experts added.
In July 2018, Turkey was hosting 3.9 million refugees, 3.5 million of which were from Syria, according to figures shared by the UN Refugee Agency, UNHCR.
Turkey is also in the top 20 German exports markets, ahead of Japan and many European Union countries.
Mrs Merkel’s opening to Turkey comes after a spat from Mr Erdogan.
In 2017, he likened German authorities to Nazi soldiers for blocking rallies by Turkish voters’ campaigning for a referendum to expand his powers.
And in 2016, after the failed coup, Mr Erdogan detained a German journalist – freed earlier this year.
Volker Kauder, who heads Merkel’s party caucus in the German parliament, explained the Rhein-Neckar-Zeitung newspaper these offences haven’t been forgotten.
He said: “We’re facing big foreign-policy challenges at this time.
“Those need to be discussed and for that reason alone, Erdogan is welcome.
“But we need to talk about all of the problems.”
Ms Merkel’s decision of helping Turkey hasn’t been welcome by all German politicians.
The leader of the CDU-CSU faction in the German Bundestag, Volker Kauder (CDU), has rejected aid for Turkey in the country’s severe economic crisis.
He said: ”I see no way that the EU can help Turkey beyond the already ongoing support.
” Turkey is not an EU member.”
Mr Kauder attributed the situation of the country “also to the politics of their government”.
He added: ”Now comes the trade conflict with the US, which also has political reasons.”
Turkey is currently in a trade dispute with the US after Donald Trump issued hefty tariffs against the country.
The currency lost 28 percent of its value against the dollar since the beginning of August.
And in the past eight months, it fell more than 40 percent, sparking fears amid investors.
On Tuesday, the lira gave the first sign of recovery, strengthening around 6 percent against the dollar after Turkey’s central bank pledged to provide liquidity.