Turkish markets rock

[surorus]

ANKARA, Feb. 21 ¡X Prime Minister Bulent Ecevit held emergency talks into the night on Wednesday in a bid to halt a crisis that ripped through Turkey's financial markets after his bitter public feud with the country's president

 

The International Monetary Fund (IMF) in Washington said it was in continuous talks with Turkish authorities and was waiting to hear from Ankara about what it proposed to do. Ratings agencies said they were following the crisis with deep concern.

 

Ecevit met economic officials including Central Bank Governor Gazi Ercel, one of the architects of an IMF-backed financial reform programme now in deep danger, for six hours before taking a short break without making comment. Speculation grew of a possible devaluation of the country's currency.

 

The government was under heavy pressure for decisive action on a crisis that many see as self-inflicted.

 

The Istanbul Stock Exchange recorded its biggest single day percentage loss, over 18 percent on Wednesday.

 

Overnight lending rates, around 40 percent last week, hit an average of 4,000 percent in a squeeze more intense than that which forced Turkey to seek $7.5 billion in IMF aid in December.

 

Ecevit, seeking to calm markets, said earlier in the day his government would continue to function despite Monday's clash with President Ahmet Necdet Sezer over issues of power sharing and corruption at a meeting of political and military chiefs.

 

''It's clear, the (president and I) have serious political differences,'' Ecevit told an emotionally charged meeting of his parliamentary group. ''We are still obliged to work together.

 

LIRA DEVALUATION MOOTED

 

His junior coalition party, Motherland, dismissed speculation the veteran premier might resign.

 

''There's no power vacuum, there won't be early elections,'' deputy Beyhan Aslan quoted Motherland leader and deputy premier Mesut Yilmaz as telling a closed party meeting. ''Turkey must continue on its path as though this event never happened.''

 

Businessmen and analysts speculated that Turkey might decide to devalue the lira, abandoning a controlled mechanism that is central to the country's IMF-backed financial reform programme.

 

Some, however, felt that if devaluation were chosen as a solution, it might more likely take the form of a float.

 

''Letting lira float freely might be better than a one-off devaluation,'' one banker said. ''In this case, the market determines the value of lira itself and Turkey can reach an equilibrium of foreign exchange and interest rates soon.''

 

He said the lira might weaken sharply if Turkey lets its currency float freely as a first reaction.

 

''But the market will reach a balance soon and the lira may even recover part of early losses.''

 

On Monday Ecevit stormed out of a meeting of the National Security Council (MGK) -- a body that embraces political and powerful military leaders -- accusing President Ahmet Necdet Sezer of insulting him and declaring a ''serious crisis.''

 

The clash, in which Sezer apparently questioned the efficacy of government anti-corruption operations, was the culmination of months of tension between the two men. Sezer has drawn Ecevit's anger several times by overriding his decrees and vetoing laws.

 

The MGK meeting, suddenly abandoned, will resume on Monday. ''I'm not sure what the atmosphere will be,'' Ecevit said.

 

Turkey's problems have erupted less than three months after a financial crisis that brought its reform programme to the brink of collapse. Since then, the country had appeared to be making progress on its three-year programme.

 

 

POLITICS THWARTS ECONOMICS

 

Inflation, which had soared towards 100 percent in the 1990s, was coming down, if not as quickly as hoped. Fiscal balances have improved, the primary surplus has increased and the lira has been stable in line with targets.

 

Ultimately political leadership appears to be lacking.

 

The spur to the crisis was Sezer's criticism, before army generals and civil servants, of Ecevit's anti-corruption drive.

 

Corruption in government and commerce is a barrier both to economic reform and European Union entry. The energy ministry, run by Ecevit's conservative coalition allies, has been the focus of one notable probe. Top-level officials have been charged but the minister resists calls for his resignation.

 

Some fear that by hacking at the walls too vigorously, the whole edifice of Turkish government could be endangered.

 

The military, widely seen as the ultimate guardian of civil order here, has made no public comment but must be wary.

 

Banking operations, an Achilles heel of the Turkish economy, looked vulnerable. Turkey extended the trading hours of key money markets on Wednesday to allow banks time to settle their accounts with each other, a symptom of the growing problems.

 

''These latest developments have even put banks with no problems in difficulty,'' said analyst Alper Ozge of GFC.

 

Sourse:[/url]MSNBC

 

[ February 21, 2001: Message edited by: surorus ]

[MJ]

Leading articlef: Edgy days in Ankara: The problems are not just economic

The Guardian - United Kingdom; Feb 23, 2001

 

The swift, sudden onset of the financial crisis now gripping Turkey has

cruelly exposed to public gaze the fragility of its democratic institutions.

Problems posed by rampant sleaze triggered the row between Prime Minister

Bulent Ecevit and President Ahmet Necdet Sezer. Mr Ecevit was certainly

unwise to blow his top so alarmingly and may yet pay a heavy political price.

But many if not most countries suffer corruption scandals. Just look at the

Dumas trial in Paris, the Kohl affair in Germany, or Bill Clinton's present

unedifying travails.

 

Turks face undoubted difficulties arising from their government's IMF-backed

economic reforms. Only last December, an emergency Dollars 10bn infusion was

required (and supplied). But Mr Ecevit's unlikely coalition of nationalists,

social democrats and conservatives has made real progress since 1999 in

cutting inflation, reducing the deficit and advancing deregulation and

privatisation. Lots of other countries have suffered similarly painful

adjustments. In similar vein, the floating of the lira is likely to reignite

price inflation in the short term and will increase pressure on public sector

wages. But if reassuring statements from the IMF and the US Treasury

yesterday are to be believed, the crisis need not spell an end to Turkey's

economic reformation nor will it necessarily spawn an Asian-style

international market meltdown.

 

What makes this Turkish crisis different, and potentially dangerous, is the

way it has dramatised the public's deep-seated lack of confidence in the way

their country is run. While the French or the Germans can be reasonably sure

that official sleaze will be eventually be exposed if not punished, Turks

have no such assurance. While IMF belt-tightening may work elsewhere, Turks

worry that in Turkey, "reform" will somehow end up favouring the wealthy

elite, as has always been the way in the past. This lack of confidence feeds

in turn on more fundamental concerns that the Turkish state has yet to

establish a credible system of democratic governance that responds to the

wishes of ordinary people, respects the rights of of ethnic and religious

minorities like the Kurds and the Armenians, and is secure enough in its

pro-western, secular credo to allow Islamists and leftists (and the media) to

follow their beliefs and freely express their views. The fount of all this

distrust is the Turkish military. The author of three coups since 1960 and

the silent nemesis of Islamist prime minister Necmettin Erbakan in 1997, the

army continues to wield decisive, unaccountable, menacing influence.

 

This institutional weakness handicaps Turkey now, as it wrestles with its

plunging currency. It handicaps its broader, future hopes of becoming a

modern, prosperous, civil society. This democratic deficit also continues to

undermine its key aspiration to join the EU. How Turkey's real rulers behave

during the coming days will be closely watched.

[MJ]

Turkey, IMF try to ease crisis

 

BY HARMONIE TOROS

Associated Press

 

Published Saturday, February 24, 2001, in the Miami Herald

 

ISTANBUL, Turkey -- Turkish officials met with international lenders

Friday to discuss ways to shore up the economy amid worries over a

political and economic crisis that saw the nation's currency plunge in

value.

 

Carlo Cottarelli, the International Monetary Fund's Turkey chief, met

with Finance Minister Sumer Oral a day after Turkey decided to drop

currency exchange rate controls, allowing the value of the lira to

plummet against the dollar.

 

Prime Minister Bulent Ecevit said the decision to float the currency

-- which contributed to a 36 percent devaluation over two days --

would be good for the economy in the long term.

 

Currency controls were abandoned after a dispute between Ecevit and

the President Ahmet Necdet Sezer, who had criticized the government

for failing to fight corruption.

 

Turkey, a NATO member and U.S. ally, launched a stabilization program

in January 2000 to cut the deficit and bring inflation down to a

one-digit figure in 2002.

 

The government insists that the broad aims of its anti-inflation

program, backed by $11 billion in IMF funds, remain unchanged although

targets will have to be revised.

 

There have been concerns that Turkey's economic crisis could spread to

other emerging markets.

 

International bankers and economists hope the decision to float the

currency will help prevent a repeat of the Russian and Asian financial

crises of the 1990s, when investors fled developing markets worldwide,

triggering major financial crises.

 

Banks continued to hold back from trading in the currency market on

Friday and there was little trade in Istanbul's exchange bureaus,

where rates varied widely.

 

``The Turkish government is learning from the mistakes other emerging

markets made in the past,'' said Sonja Gibbs, chief economist Nomura

International in London. ``They were quick to allow devaluation

instead of trying to stave it off. The hit was quick and sharp instead

of long and drawn-out.''

 

Overnight interest rates fell to 1,335 percent, compared to Thursday's

average of 2,700 percent. The Istanbul stock market gained close to 6

percent Friday.

 

In Washington, President Bush ``expressed his ongoing support for

Turkey's economic policy,'' in a five-minute telephone call with

Ecevit, White House Press Secretary Ari Fleischer said.

 

Bush urged Ecevit to cooperate with the IMF Fund and to continue

economic reforms, said Mary Ellen Countryman, a spokeswoman for the

National Security Council.

 

In a fresh blow to the government, the Constitutional Court on Friday

annulled certain articles of Turkey's new pension reform design to

curb the deficit in the debt-ridden social security system.

 

The reform increased minimum retirement age for men from 50 to 60 and

from 45 to 60 for women. The court ruled that a gradual increase in

retirement age for people who joined the social security scheme before

the law passed September 1999, was unconstitutional.

 

Analysts say the ruling could cost the state hundreds of million of

dollars. The government can appeal the ruling.

 

Meanwhile, Turks awoke Friday to a new reality: The sudden devaluation

had wiped out savings and slashed the value of their wages.

 

The move has left citizens dazed and angry, and many were pointing the

finger Friday at their leaders.

 

``Life stopped,'' said shopkeeper Yalcin Nergis, standing outside an

exchange bureau checking the lira exchange rate. ``We're bewildered

and we don't know what to do.''

[levonyeshilian]

today 1 dollar was 1.097.000 turkish liras.......

[MJ]

Publication date: 12-Jul-2001

Reprinted from RatingsDirect

 

News Outlook on Seven Turkish Financial Institutions Revised to Negative From Stable

Analyst: Emmanuel Volland, Paris (33) 1-4420-6719; Scott Bugie, Paris (33) 1-4420-6680

 

 

PARIS (Standard & Poor's CreditWire) July 12, 2001--Following yesterday's outlook revision and ratings affirmation on the Republic of Turkey (B-/Negative/C; see press release dated July 11, 2001), Standard & Poor's revised to negative from stable its outlooks on the following Turkish financial institutions:

 

Export Credit Bank of Turkey,

Turkiye Is Bankasi A.S.,

Dogus Holding A.S.,

Turkiye Garanti Bankasi A.S.,

Osmanli Bankasi A.S.,

Korfezbank A.S., and

T.C. Ziraat Bankasi A.S.

 

At the same time, Standard & Poor's affirmed all its long- and short-term ratings on the institutions. (See list below for all ratings.)

 

At present, the ratings on the above Turkish financial institutions reflect primarily the high-risk political and economic domestic environment, and the entities' direct exposure to Turkish government debt. The banking sector remains fragile, despite recent steps taken by the government to strengthen it and to close down weak organizations. In the current climate of a recession and high real interest rates, many banks could see a significant rise in their nonperforming loans to the private sector, and more of the weaker entities could be taken over by the Savings Deposit Insurance Fund (SDIF). The disposal of the banks already in the SDIF's portfolio is finally about to start. In the meantime, the state banks might need further capital increases as they begin to write off bad loans and make charges for restructuring and retrenchment. The government has folded state-owned Turkiye Emlak Bankasi A.S. into Ziraat Bankasi and plans to privatize 51% of the latter by early 2003; it also plans to privatize 100% of Turkiye Halk Bankasi A.S. in 2002, with the support of a loan and technical assistance from the World Bank. This process, however, could take longer than is currently scheduled, during which time the banks in question could continue to distort the banking system and prove a further liability to the government.

 

Standard & Poor's also rates five Turkish banks on a public-information (pi) basis. Akbank T.A.S., Yapi ve Kredi Bankasi A.S., Pamukbank T.A.S., and Turkiye Vakiflar Bankasi T.A.O. are rated single-'B'-minus-pi, and Turkiye Halk Bankasi A.S. is rated triple-'Cpi'. No action has been taken with respect to the ratings on these five banks. Standard & Poor's does not publish outlook statements on 'pi'-rated entities. OUTLOOK: NEGATIVE Recent slippage in IMF-program implementation has undermined market confidence and kept real interest rates in Turkey higher than previously envisaged. In addition, continued weakness in the banking sector and an expected 5% contraction in GDP this year are likely to have a negative effect on the banks' asset quality and financial performance. Nonperforming loans have already increased at certain banks, and the banking system remains vulnerable to further asset-quality deterioration if the economic recession is prolonged, Standard & Poor's said. -- CreditWire

 

 

OUTLOOKS REVISED TO NEGATIVE FROM STABLE; RATINGS AFFIRMED

 

Ratings

Export Credit Bank of Turkey

FC counterparty credit ratings B-/Negative/C

Senior unsecured debt B-

Short-term debt C

 

Turkiye Is Bankasi A.S.

Counterparty credit ratings B-/Negative/C

Certificates of deposit B-/C

 

Dogus Holding A.S.

Counterparty credit ratings B-/Negative/C

 

Turkiye Garanti Bankasi A.S.

FC counterparty credit rating B-/Negative/--

Certificate of deposit B-

 

Osmanli Bankasi A.S.

FC counterparty credit ratings B-/Negative/C

Certificates of deposit B-/C

 

Korfezbank A.S.

FC counterparty credit ratings B-/Negative/C

Certificates of deposit B-/C

 

T.C. Ziraat Bankasi A.S.

FC counterparty credit ratings CCC+/Negative/C

Certificates of deposit CCC+/C

 

 

 

This report was reproduced from Standard & Poor's RatingsDirect, the premier source of real-time, Web-based credit ratings and research from an organization that has been a leader in objective credit analysis for more than 140 years. To preview this dynamic on-line product, visit our RatingsDirect Web site at www.standardandpoors.com/ratingsdirect. Standard & Poor's.

Setting The Standard.

 

 

Published by Standard & Poor's, a Division of The McGraw-Hill Companies, Inc. Executive offices: 1221 Avenue of the Americas, New York, NY 10020. Editorial offices: 55 Water Street, New York, NY 10041. Subscriber services: (1) 212-438-7280. Copyright 2001 by The McGraw-Hill Companies, Inc. Reproduction in whole or in part prohibited except by permission. All rights reserved. Information has been obtained by Standard & Poor's from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Standard & Poor's or others, Standard & Poor's does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or the result obtained from the use of such information. Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securities.