Speculation is rife that Germany could be ready to offer Turkey financial aid when President Recep Erdogan visits the country next month, but analysts say it's unlikely that Ankara would ask for help.
Andrea Nahles, the leader of the Social Democratic Party (SPD), a junior partner in Chancellor Angela Merkel's conservative coalition government, said at the weekend that German aid for Turkey, which is experiencing an economic crisis, was a possibility.
"A situation might arise where Germany needs to help Turkey, regardless of political tensions with President Recep Tayyip Erdogan," Nahles said in an interview published Sunday, adding that, "Turkey is a NATO partner who we cannot ignore."
However, Berlin appeared to seek to distance itself from Nahles' comments on Monday, with a government spokesman saying the question of financial assistance for Turkey is "not relevant at the moment," Reuters reported, and that it is up to Turkey whether it wants to ask the International Monetary Fund (IMF) for help.
Whether Turkey, which is experiencing currency volatility amid a public spat with the U.S., would ask anyone for help is another matter, experts believe.
"(Financial assistance) could be on the cards but I don't see (the chance of) this happening as very likely," Olaf Boehnke, senior advisor at Rasmussen Global, told CNBC's "Capital Connection" on Monday.
"Most of all because Erdogan and his government are so reluctant to accept any foreign support because there's an issue of pride for them. But if there would be scenario where (they) would actually need this kind of assistance, I think Germany would give assistance, definitely."
Turkey's dispute with the U.S. centers heavily over the country's detention of American pastor Andrew Brunson and President Donald Trump has not ruled out economic sanctions if Ankara does not free him.
George Dyson, Turkey analyst at Control Risks, told CNBC on Friday that the crisis "appeared to have deepened over the last week."
"Both the key players, Trump and Erdogan, are real personality politics people and the aesthetics of any resolution will be very important. They'll both need to be able to save face through whatever deal or arrangement is reached," he told CNBC's "Capital Connection."
However, BlueBay Asset Management strategist Timothy Ash told CNBC that it was hard to see how possible financial assistance from Germany could help that much "unless there is resolution with the U.S."
"Turkey is still dependent on dollar funding, and unless sanctions risks are moderate, it's hard to see even a German/European bailout making that much difference," he said in an email to CNBC.
Ash added that Turkey needs to normalize its domestic monetary policy, such as introducing higher interest rates, and "to sort things out with the U.S.," noting that "Europe is not an alternative to the relationship with the U.S."
The first to blink
The souring of relations between Washington and Ankara comes at a bad time for Turkey and has caused the lira, already in turmoil due to concerns over Erdogan's possible influence over the country's monetary policy, to fall further against the dollar.
This year, the dollar has strengthened just over 50 percent against the Turkish currency. The central bank has kept interest rates high to contain inflation, but Erdogan wants lower interest rates to encourage spending and economic growth.
Adding insult to injury, credit ratings agencies Moody's and S&P downgraded Turkey's credit rating last week and the latter said it expects a recession in Turkey in 2019.
While Turkey has enjoyed a resurgence in economic activity and growth under the aegis of Erdogan, whether it can continue to thrive amid misgivings over his long-term leadership and possible influence over monetary policy is uncertain.
Turkey has recovered from previous bouts of volatility brought on by political and economic instability and analysts tend to think it can do so again, but they noted that resolving its dispute with the U.S. was crucial. Christopher Granville, managing director global political research at TS Lombard, told CNBC on Monday that "there's a huge amount at stake for Turkey in its basic alignment with the U.S. and these things are not dissolvable overnight."
Still, he noted that even solving the dispute with the U.S. quickly would not "solve the Turkish problem from investors' point of view."
Some analysts have pointed to the resilience of the Turkish economy, however. Saker Nusseibeh, chief executive of Hermes Investment Management, told CNBC's "Squawk Box Europe" on Monday that, "Turkey is resilient and it has more similarities with India (than other emerging markets). And for all its faults it does have a democratic institution of government that does have the support of the popular vote, and President Erdogan is quite a pragmatist when it comes to his country, so he'll find a way out of this."