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Turkey: Prime Minister Faces Deadline To Rescue Economy

Time is running out for Turkish Prime Minister Bulent Ecevit as he struggles to extricate his country from a 45-day-old economic and financial crisis. Thousands of angry workers demonstrated over the weekend to protest an IMF-backed reform program that Turkish leaders hope to adopt within the next two weeks. Analysts say the coming two weeks will be crucial for Ecevit's government.

Prague, 3 April 2001 (RFE/RL) -- The clock is ticking for Turkish Prime Minister Bulent Ecevit as he seeks to pull his country out of a month-and-a-half-old economic and financial crisis.

The International Monetary Fund -- or IMF -- is set to approve, or deny, further financial aid to Turkey by the end of this month. It has in effect given the Ankara government two weeks to adopt an emergency recovery plan to restructure the country's ailing economy.

Over the past weekend, tens of thousands of people -- led by Turkey's largest confederation unions -- took to the streets to protest the IMF-backed plan. They say the plan will put additional burdens on both private- and public-sector workers.

The demonstrators chanted slogans hostile to the IMF and called for an end to poverty and corruption. Clashes were reported 31 March in the Black Sea port of Samsun, where police beat protesters with truncheons to break up the rally. There were no reports of trouble elsewhere.

On 1 April an estimated 10,000 small-businessmen gathered in the streets of the western town of Bursa to protest against the government's economic policy.

Unemployment stood at more than 18 percent before the latest financial crisis, which began in mid-February. But the economic daily "Dunya" says that since then, hundreds of thousands more workers have been laid off, notably in the textile and shoe-production industries.

Media have also been badly hit. According to figures released by the Journalist's Assembly Initiative, about a fourth of the country's journalists and newspaper printers have been dismissed in the last month.

Most of Turkey's media outlets are owned by banking corporations. Yarkin Cebeci is a chief economist at the Istanbul-based Osmanli Bankasi, or Ottoman Bank. He told our correspondent that the government may not be able to overcome the crisis soon.

"The main impact now is on the banking and media sectors. The real sectors will be affected later on. On the labor market's side, the situation is not very bright. And I don't expect any recovery until the last quarter of this year."

Turkey's new economy chief Kemal Dervis is working on a program of major structural reforms that he says should win support from international lending organizations. Even though details of the reforms have not yet been disclosed, union leaders have already strongly criticized the government's policy.

In its 2 April edition, the "Cumhuriyet" daily quoted Bayram Meral, the secretary-general of Turkey's largest union confederation, Turk-Is, as saying that the new program will not enjoy the support of the workers. Another union leader, Recai Baskan of the Hak-Is confederation, has urged the government to take measures against poverty.

Some unions have warned that a reform program based on targets set by the IMF would trigger countrywide work stoppages and demonstrations.

Orhan Morgil, an adviser to Turkey's Union of Chambers of Commerce and Industry, says that Ankara can not do without foreign help. Morgil tells RFE/RL the Turkish citizens' trust in their leaders and in international financial institutions has eroded dramatically in the past few weeks.

"Most people are fed up with the IMF and the World Bank. They think that there should be a national economic program mainly financed by internal resources and that we should not follow the policies demanded by the IMF and the World Bank."

Last weekend's protests were staged amid speculation that Ecevit's government might be soon forced to step down and make way for what is termed an "interim regime." The temporary government would consist of technocrats installed with the approval of the National Security Council, or MGK, an advisory body dominated by the military that is considered the country's most important decision-making body.

Last Friday the MGK, which consists of both high-ranking military officers and political leaders, issued a statement dismissing rumors about a possible "interim regime." The statement expressed confidence that the government would overcome the current difficulties.

Still, some analysts say the next few days will be crucial for Ecevit's three-party coalition government.

Columnist Erdal Saglam wrote 31 March in the mass-circulation "Hurriyet" daily: "Politicians should not talk but only work. The people, the private sector, and domestic and financial circles expect them to take action."

Last week brought additional bad news for Turkey's battered economy.

On 30 March the government scrapped the much-awaited sale of 51 percent of Turkish Airlines. Turkey's privatization board admitted that all nine potential investors which had previously expressed interest in buying the stake failed to make a final offer.

The government expected to finalize the sale in April after the deadline for bids had been extended by one month to 30 March.

Privatization of the national air carrier is one of the prerequisites set by the IMF to continue financial aid to Ankara.

Turkey's privatization program officially started in 1984 under then Prime Minister Turgut Ozal. But it has been delayed by endless political disputes and strong resistance from opposition parties and Turkey's traditional system of patronage.

Dervis returned last week from an apparently fruitless fund-raising trip to the United States, Germany, and France. Speaking to reporters upon his return, he said Turkey needs $10 to $12 billion in foreign aid to cope with the crisis.

Such aid would allow Turkey to reinvigorate its national currency, the lira, which has lost a third of its value since 19 February, when a row between Ecevit and President Ahmet Necdet Sezer sparked the current crisis.

Turkey's latest financial troubles also effectively destroyed an IMF-backed three-year plan to curb inflation worth some $11 billion.

The IMF has said it may decide to bring forward more than $6 billion of loans already promised to Ankara when the institution's board meets at the end of the month (28 April). Turkey has asked the IMF permission to use this aid, initially meant for other purposes, partly to finance its budget deficit.

IMF officials say they will not offer any fresh loan to Turkey. But bank analyst Cebeci thinks that international lenders may show more generosity with respect to Ankara's most immediate needs.

"I believe that there is a chance that the IMF can increase its lending by a couple of billion dollars. But, you know, even [$6 billion] is quite a large figure. These [$6 billion] would be a first positive step. And I believe further financial support might come from the World Bank as well."

A World Bank delegation is expected in the Turkish capital later this week for talks with cabinet members.

An IMF team, due to meet with Turkish leaders yesterday, has postponed its visit to Ankara until next week. This should leave economic chief Dervis enough time to outline his reform program in a letter of intent to IMF Managing Director Horst Kohler.

Dervis, himself a former World Bank vice president, has repeatedly said he is confident that the government will find a way out and come to an agreement with foreign lenders.

Last week Ecevit urged the Turkish parliament to set aside partisan differences and quickly pass 15 proposed laws that would help make structural changes in the economy.

Dervis has expressed hope that the bills will be voted by the middle of this month, a target that Ecevit has described as "unrealistic."

The government said yesterday it has already sent four of the 15 expected laws to parliament. But it also warned that it needs more time to work on the rest of the reforms asked for by the IMF.

Also yesterday, the government decided to restructure three of the country's four state banks. Reforming the country's ailing banking sector is a crucial part of the program that the government is working on with the IMF.

The main opposition group, the Islamic Virtue Party -- the third largest group in the legislature -- said last week that it will support Ecevit's efforts to push the proposed laws through parliament. But yesterday Virtue Party leader Recai Kutan warned the government against a policy that he said "could, in the long term, drag the country into a swamp."