Turkish Prime Minister Bulent Ecevit on Saturday, February 24, defied his critics, insisting the cabinet would neither quit nor be reshuffled, as the country's financial crisis worsened following the floating of the Turkish Lira. "Rumours spread by certain circles that the government should quit are far from the truth and a change in the cabinet is out of the question," Ecevit said in a written statement after meeting his two coalition partners.
"Both a change of government and desires to create an atmosphere of early elections at a time of economic bottleneck would do the country great harm," the statement added. Ecevit's remarks came in response to angry calls from the opposition and trade unions for a cabinet shake-up, with some calling on the government to resign.
The criticism has mounted since Ankara's decision Thursday to abandon a currency peg in the face of a grave cash shortage rocking the money markets. Subsequently, the Turkish lira took a major beating, slumping 36.1 percent against the dollar in two days. But Ecevit stressed that the raging financial crisis made it even more important that his three-way coalition stay in power.
"The government is determined to continue its work in harmony. Measures to put the economy back on track will be implemented at the beginning of the week," he said in the statement. These measures were determined in a second meeting here Saturday between Economy Minister Recep Onal and the managers of the country's 13 banks, to decide what to do to ease the cash crunch.
The participants reached a "unanimous decision on the necessary measures to be taken and implemented for the healthy functioning of the Turkish lira and foreign currency markets," said a statement issued afterwards. It said the unspecified measures would be implemented from Monday morning, when Turkey's financial markets are set to begin a stormy week.
Turkey's latest financial crisis, the second in three months, began Monday when Ecevit clashed with the president in a key security meeting, saying there was a "serious crisis" at the top of the state. The prospect of political stability sent the Istanbul stock exchange plunging, while interest rates on the interbank money market sky-rocketed 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 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 Zekeriya Temizel, the head of Turkey's banking watchdog, said Saturday that all Turkish banks had fulfilled their obligations on Friday. Temizel denied rumours that the state would seize control of banks crushed by the latest cash shortage. "It is betraying the economy to spread rumours 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 came as the money markets and 81-member banking system were slowly recovering from a similar liquidity squeeze which Turkey was able contain through a $10 billion rescue package from the International Monetary Fund (IMF). In return for the emergency funds, Turkey pledged to speed up privatization and primarily to reform its ailing banking system, but little has been accomplished so far. —(AFP)
© Agence France Presse 2000
© 1969 Mena Report (www.menareport.com)
