Turkish Prime Minister Bulent Ecevit met with his coalition partners Saturday, February 24, to discuss Ankara's next steps to cope with mounting financial turmoil. One of the top items on the agenda was a possible shake-up of the cabinet and senior economic chiefs following the Turkish lira's 36.1 percent fall against the dollar in the past two days. The currency slumped after a government decision, announced on Thursday, to let it float.
Ecevit first disclosed late Friday that a cabinet re-shuffle was not out of the question. He said a possible reshuffle was likely to be announced one or two days after a meeting of the coalition partners. Saturday's talks follow angry calls from the opposition and trade unions for a cabinet reshuffle, with some calling on the government to resign.
Also on the agenda of the meeting was the appointment of a new deputy prime minister to handle economic issues, the prime minister said. "We have not discussed this yet, but as important economic decisions have been made, their implementation makes such a forward-looking move necessary" he added.
As the coalition partners were meeting, Economy Minister Recep Onal convened the managers of the country's 13 banks to discuss ways to cope with a severe liquidity squeeze. During the meeting, also attended by top economy officials, Onal was expected to inform the bankers on the current economic situation and urge calm in a bid to stabilize the volatile markets, press reports said Saturday.
Turkey's latest wave of financial woes — the second in three months — began Monday when Ecevit clashed with the president in a key security meeting, saying that there was a "serious crisis" at the top of the state.
Prospects of political stability sent the Istanbul stock exchange plunging, while interest rates on the interbank money market skyrocketed amid a serious cash shortage. In a bid to contain the crisis, the government abandoned its predetermined currency rate regime — a key pillar of its three-year stand-by deal with the International Monetary Fund — and let the lira float.
Experts said that the damage caused by the crisis and collapse of the currency would be seen in rising prices, slowing economic growth and increased debt repayments, most of which are due in dollars.
They also predicted that the move would cause massive damage to banks, which have large foreign currency debt and stocks of government bonds in Turkish lira. But the head of Turkey's banking watchdog, Zekeriya Temizel, said Saturday that all Turkish banks had fulfilled their obligations on Friday.
Temizel denied rumors that the state would seize control of banks crushed by the latest cash shortage. "It is betraying the economy to spread rumors that there are institutions which need to be taken outside the system," said Temizel. "There are none," he said, in a statement carried by Anatolia.
But one inevitable outcome of the financial turmoil will be the revision of Turkey's ambitious economic program, which had aimed to slash chronic inflation running at an annual 39 percent at the end of 2000.
State minister Tunca Toskay gave the first signal Friday that the government would have to revise its year-end goal of holding inflation to 12 percent this year. He did not give a new estimate.
An IMF delegation headed by the Fund's Turkey Desk chief Carlo Cottarelli is already in Ankara to discuss changes to the government's economic policies.
Monday's crisis came as the markets were picking up after a similar cash shortage in November 2000, which sent Turkey running to the IMF for help. In response, the IMF supplied Ankara with an emergency aid package of 10 billion dollars in return for pledges to speed up privatization and reform the ailing banking sector. — (AFP, Ankara)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com )