One danger, analysts said, is that new loans from the I.M.F. and World Bank will ease the financial crisis enough for politicians to return to business as usual, even if it means forsaking the final installments.
"The acid test will be whether this three-party coalition stands behind its commitment," said Mr. Duna. "If it does, it will mark the beginning of the decoupling of politics and economics in Turkey." [end clip]
"Decoupling" appears to be the main goal behind globalization, while eliminating "crony capitalism" is being put forward as the reason behind the "tough love" of the international financial institutions.-pk]
http://www.nytimes.com/2001/05/18/world/18TURK.html
New York Times/International May 18, 2001
Turkish Bailout Is Joined to a Political Overhaul By DOUGLAS FRANTZ
ISTANBUL, May 17 — Turkey's leaders have won promises of $16 billion in new loans for their ailing economy, but now confront the infinitely tougher task of reforming a bankrupt political system, effectively doing away with the state-controlled economy created by Mustafa Kemal Ataturk when modern Turkey was founded in 1923.
The sweeping overhaul demanded as a condition for the bailout has backed the shaky governing coalition into a corner: its leaders can either stop using state assets to reward cronies and win votes or try to wriggle out of the commitments and risk a halt to the loans and worse financial disaster.
"This can be a defining moment in Turkish history," said the Swedish ambassador, Henrik Liljegren, dean of Ankara's diplomatic corps. "Without the external support, the politicians would not have agreed to these far-reaching reforms."
Political fault lines have opened already. The two junior parties in the governing coalition have opposed some changes and the senior party headed by Prime Minister Bulent Ecevit may prove too weak to keep them in line.
Polls show the coalition's popularity plunging as prices rise. Opposition parties are clamoring for new elections, which might only bring new instability.
Parliament has approved legislation to implement many reforms like restructuring the banking system and privatizing 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.
"The new economic program is campaign-finance reform," said Muharrem Kayhan, a business owner and official with the Turkish Industrialists and Businessmen's Association. "It is against the grain of politicians, but there is a realization that they have to carry it out."
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.
To hold successive coalitions together, each party got control over particular ministries and associated industries to raise money and reward supporters. State-owned businesses are widely regarded as grossly overstaffed; one former minister recently acknowledged hiring 14,000 temporary workers.
The crony capitalism started to unravel in February after a dispute between Mr. Ecevit and the country's president over the pace of investigations into bank corruption. The financial markets were alarmed, creating a crisis that sent the value of the Turkish lira plummeting and prices soaring. One victim was a year-old anti-inflation program supervised by the International Monetary Fund.
The Bush administration insisted the bailout be tied to economic reforms, and Turkey was desperate 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 requirements and laid down some benchmarks, including privatizing telecommunications and restructuring 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 reform package was assembled by the new minister of economy, Kemal Dervis, a former World Bank executive who left Turkey in 1978. Mr. Dervis was brought back by Mr. Ecevit to restore confidence and attract new international loans.
In less than three months, Mr. Dervis has soared to the top of public opinion polls and is being touted as a future prime minister. Opposition parties eager to take advantage of the coalition's weakness are alarmed by his popularity.
"He is limited in his power and the necessary reforms can be realized only by a new government," said Ertan Yulek, deputy chairman of the Islamic-oriented Virtue Party. "You will never be able to grow a tropical plant in a cold climate."
Elections may not benefit the opposition either. Polls show that none of the five leading parties would get enough votes to join a new government, evidence of the depth of disenchantment with the current system.
One danger, analysts said, is that new loans from the I.M.F. and World Bank will ease the financial crisis enough for politicians to return to business as usual, even if it means forsaking the final installments.
"The acid test will be whether this three-party coalition stands behind its commitment," said Mr. Duna. "If it does, it will mark the beginning of the decoupling of politics and economics in Turkey." [end]