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Turkish Bailout Is Joined to a Political Overhaul
ISTANBUL,May 17-Turkey's leaders have won promises of $16 billion in new loans for their ailing economy, but now confront the infinitly tougher task of reforming a bankrupt political system, effectively doing away with the state-controled economy created by Mustafa Kemal Ataturk when modern Turkey was founded in 1923.
This can be a defining moment in Turkish history," said the Sweedish ambassador, Henrik Liljegren, dean of Ankara's diplomatic corps. "Without the external support, the politicans would not have agreed to these far reaching reforms."
Polls show the coalition's popularity plunging as prices rise. Opposition parties are clamoring for new elections, which might bring new instability.
Partliament has approved legislation to implement many reforms like restructoring the banking system and privitizing more industries. The question is how far and how quickly the leaders will move to dismantle a system that is the lifeblood of 'Turkish politics'.
For years, Turkish governments have ordered state banks to provide cheap loans to special interests and businesses, which in turn contributed to party coffers. The banks also provided cut-rate loans to farmers and small businesses to win support. Often loans were not repaid and state banks are saddled with $20 billion in bad debts.
The Bush administration insisted the bailout be tied to economic reforms, and Turkey was 'desparate' enough to agree. On Tuesday, the I.M.F. board approved $8 billion in new loans. Coupled with other assistance, total aid could reach $16 billion by year's end.
In a letter to Mr. Ecevit last week, President Bush expressed confidence that Turkey would meet the requirments and laid down some benchmarks, including privitizing telecommunications and restructoring the banking industry.
Some Turks saw a warning between the lines. "The letter asks Turkey to transform itself to be part of the global system and also conveys that if it does not, Turkey has no one to blame but itself for becoming a third-rate or fourth-rate nation," said Cem Duna, an investment consultant and former diplomat.
"The acid test will be whether this three-party coalition stands behind
its committment," said Mr. Duma. "If it does, it will mark the beginning of
the 'decoupling' of politics and economics in Turkey."
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