Turkish markets stabilize after costly damage from political crisis
Turkey's stock market steadied on Tuesday, February 20, after costly damage from an unprecedented clash between Prime Minister Bulent Ecevit and the president, amid calls from cabinet ministers for calm. Shares on the Istanbul stock exchange recovered to close up 85.5 points, or 0.9 percent, at 8,768 points. The index had slumped 14.6 percent on Monday to close at 8,683 points.
But the interbank money market remained tense, with overnight interest rates soaring on Tuesday to an average of 1,112 percent, reaching as high as 3,000 percent in some transactions. The central bank was able to recover some $4 billion of the $5 billion it was forced to inject into the money market to prop up the Turkish lira on Monday. The treasury sold one-month bills worth 1.492 thousand trillion Turkish liras ($2.2 billion), with an average yield of 144.2 percent, an interest rate well above the expectations of investors.
On the stock market, investors initially dumped shares as they registered sharp disappointment at the outcome of the bill tender, sending the national index plunging more than 600 points in a few minutes before steadying.
Economy minister Recep Onal remained upbeat over the tender result, saying Ankara would have no trouble in meeting a debt redemption of 3.9 thousand trillion Turkish liras ($5.7 billion) on Wednesday.
Fearing political instability, the markets plunged Monday after Ecevit stormed out of a National Security Council meeting following criticism by President Ahmet Necdet Sezer that his government's fight against corruption was not satisfactory. Ecevit accused Sezer, a former head of the constitutional court, of making "grave accusations" against him and declared that a "serious crisis" had erupted. The cabinet, meanwhile, demanded a public aplogy from the president.
Sezer countered that the accusations were unjust and that a minister in Ecevit's coalition government had sparked the dispute. While both Ecevit and Sezer kept silent on their row on Tuesday, some ministers called for calm. "What needs to be done is for everyone to act calmly and contribute to eliminate this sour episode," Labour Minister Yasar Okuyan said.
Defence Minister Sabahattin Cakmakoglu, meanwhile, urged Turkish politicians to "let this affair be a thing of the past, but nonetheless draw lessons from it". The devastating economic effects of Monday's dispute underlined how fragile were Turkey's efforts to overhaul its troubled economy under a three-year, $4 billion stand-by program with the International Monetary Fund.
In a bid to calm down investors on Tuesday, Ecevit stressed that Ankara would not deviate from its ambitious economic targets. "The government is determined to implement the program as it has done until now. Domestic and foreign circles should have no doubt about this," he said in a written statement.
IMF's first deputy managing director Stanley Fischer, in Ankara for routine talks on the stand-by program, also lent support by saying that the government was determined to push ahead with economic reforms.
Monday's plunge on the stock market came as Turkey was recovering from the effects of a grave liquiduty squeeze in November 2000 which sent Ankara running for emergency IMF funds. Turkey secured $10 billion of rescue aid from the Fund in return for pledges to speed up privatization and carry out banking refoms. —(AFP)
© Agence France Presse 2000
© 2001 Mena Report (www.menareport.com)