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Dervis warning over Turkey reforms

Bulent Ecevit
Turkish PM Bulent Ecevit has taken steps to secure international crisis loans  

ANKARA, Turkey -- Turkey's Economy Minister Kemal Dervis has vowed to resign if the government stalls on economic reforms tied to a new $8 billion loan.

The International Monetary Fund (IMF) is expected to approve the loan -- aimed at helping Turkey escape an economic crisis -- on Tuesday. The loan would pave the way for a further $2 billion loan from the World Bank.

Dervis, a former World Bank official, told the UK's Financial Times newspaper that the international community was reluctant to give Turkey a loan - the third in two years -- and was unlikely to do it again.

A public row between the president and prime minister in February sparked the economic crisis. Since then, the Turkish currency has lost 40 percent in value against the U.S. dollar, and thousands of people have lost their jobs.

Turkey needs the loan to ease investor concern over a swelling domestic debt burden.

Dervis said the alternatives were to default on public debt -- which is expected to approach 80 percent of gross domestic product by the end of this year -- or to "give up" the fight against inflation.

In April, Dervis -- summoned back to Turkey at the height of the crisis -- announced a reform package which included slashing public spending and reforming the banking system.

The programme has a "good chance of success" because of unprecedented public support -- reflected in opinion polls -- to depart from corruption and populism, he added.

"This message of 'let's separate politics from economics, let's not have a rent-seeking system, let's fight corruption' is an extremely popular one," Dervis said.

Squabbling between Dervis and the communications minister from the far-right Nationalist Action Party (MHP) over a law to privatise landline monopoly Turk Telekom -- which was eventually passed at the weekend -- kept markets on edge for weeks.

The privatisation will enable Turkey to sell almost all of the state telecommunications monopoly. It sets a 45 percent limit for foreign ownership and allows the government the power to veto strategic decisions.

Turkey also approved a new banking law on Sunday aimed at avoiding mismanagement of funds and strengthening the sector. It imposes strict regulations on bankers and makes it easier for the state to reclaim the banks' debts by seizing the assets of their owners, as well as those of their relatives.

The banking sector has collapsed into crisis twice in the last six months.

Dervis said that interest rates should come down sharply after the foreign lending comes in, helping to unblock the economic paralysis. Tourism and exports should then drive a recovery in the second half of the year.

But he added: "If the economy remains in the kind of contraction it is in now, if the growth rate is minus six percent rather than three percent, I think it will be hard to keep the fiscal targets."



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RELATED SITES:
Turkish Prime Minister's office
Nationalist Action Party
International Monetary Fund
Turkish Treasury

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