Turkey economy plan unveiled

ISTANBUL, Turkey -- Turkey's new economic chief Kemal Dervis has announced the first steps of his plan to extricate the country from financial crisis.

On Wednesday, Dervis announced an ambitious plan to deal with the deep and expensive hole he said the country's state banks were in and plotted the outlines of a monetary policy for the country and its newly-floated lira.

Markets have been impatiently waiting for such guidelines since Monday, when the country returned from a week-long religious holiday to survey the wreckage of a $11 billion IMF programme sunk by financial crisis and the float of the lira.

The currency had slipped more than 32 percent against the dollar by the end of trade on Wednesday. Stocks were 14 percent below their levels on Monday.

Dervis, a U.S.-educated economist, portrayed the crisis as an opportunity for wholesale reform of problems that have long plagued the economy of NATO member and EU membership candidate, Turkey.

IMF watches developments

"Sometimes in the lives of nations, a crisis is also an opportunity," Dervis said in his first policy announcement since being summoned from Washington amid market turmoil.

"This (crisis) gives a chance to solve and eliminate long-term problems. I think in the banking sector we how have this opportunity in our hands," he told a news conference.

But solving those problems will not come cheaply.

His plan said that relieving the overnight liquidity problems of three huge state banks would cost around $13 billion. The country has also put 12 troubled banks, whose bad loans are estimated to exceed $6 billion, in receivership.

Some of the cost of handling the state banks' problems would be met through domestic debt issues, while foreign financing will be used to handle some of the remainder, his plan said.

The IMF says it still supports Turkey, but has held back from any promises of extra assistance until the country starts laying out a coherent economic plan.

Dervis presented the bank announcement as emergency steps. A full economic programme, replacing the IMF-backed anti-inflation plan abandoned last week, would be announced next week.

"Stable growth will be maintained from the second half of this year after setting up macroeconomic balances," he said.

Dervis, a former World Bank official, was appointed to head Turkey's post-crisis recovery partly in the hope that his experience would smooth relations with international lenders.

Reuters contributed to this report.

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