Markets back Turkish finance plan

Dervis: "We've burned our bridges"

ANKARA, Turkey -- Turkey's financial markets have given a cautious welcome to government plans to end the country's financial crisis.

Economic Minister Kemal Dervis, who announced a reform package on Saturday, had urged the markets to remain patient while he ends funding talks with the IMF.

Shares on the main Istanbul index were up 2.7 percent at the close of Monday morning's session while the lira strengthened against the dollar in a central bank auction.

But markets will have to wait a few days more, possibly until Thursday, before any package of foreign loans essential to the implementation of the programme is announced.

The financial crisis was sparked by a political row between the prime minister and president in February, spreading panic to the markets. It has led to about 500,000 layoffs and triggered violent protests.

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Dervis told the country's squabbling political leaders on Monday that there could be no retreat from the economic rescue programme.

"We've burned our ships, we've burned our bridges," Dervis was quoted as telling several newspapers.

The new austerity package includes slashing government spending by nine percent as part of efforts to tame inflation, curb interest rates and allow for stable growth.

"These steps bring Turkey significantly closer to a programme that could be supported by the international community," the IMF said in a statement.

A statement by the U.S. Embassy in Ankara described Dervis' blueprint as a "strong new economic reform programme."

But some analysts have pointed to an absence of remedies to halt the lira's slide against the dollar.

Government control of the lira's value was abandoned in February when an IMF plan collapsed.

Dervis said he was "very hopeful" Turkey would win loans from foreign donors -- in the range of $10-12 billion -- this week.

"Our aim is to set Turkey fast back to the growth that it deserves," Dervis said on Saturday.

He emphasised that it would be a "long-term fight" to tame the two-month crisis which has seen the value of the lira drop by nearly half.

"We can't continue like this. We can't grow like this, with high debt, high interest rates," Dervis said. "We can't go on saying: 'let's get a little more aid.'"

Shares on the main Istanbul index gained more than eight percent last week in anticipation of the economic plan.

IMF officials will hold a press conference in Ankara this week, outlining if and what money the Washington-based Fund will provide Turkey.

Dervis is also seeking monies from Group of Seven countries.

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Turkish Government
International Monetary Fund
Turkish Prime Minister's office
The World Bank

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