Turkish Stock Market Tumbles

Turkey's stock market fell by more than 10 percent Monday amid fears the nation could lose out on a multi-billion dollar aid package after parliament refused to allow in some 62,000 U.S. troops for a possible war with Iraq.

Prime Minister Abdullah Gul refused to say Monday whether his government would ask Turkish lawmakers to reconsider the resolution to authorize U.S. deployment.

"We are analyzing the situation and we will see what happens in the next few days," Gul said in a news conference.

The government failed to gather enough support among ruling party lawmakers Saturday for parliament to allow in the U.S. troops. Parliament's decision stunned Washington and seriously jeopardized U.S. planning for a northern front against Iraq, a crucial part of the Bush administration's war strategy.

A top member of Turkey's governing Justice and Development Party, Eyup Fatsa, said Sunday that a new vote was not planned for the "foreseeable future." But Foreign Minister Yasar Yakis appeared to leave the door open.

Asked if the proposal would be back on the agenda this week, Yakis said: "The process (of evaluation) will be completed, then it will come." He did not elaborate.

Gul will be out of the country Tuesday and Wednesday for a meeting of the Organization of Islamic Conference, likely delaying any vote at least until Thursday.

Saturday's vote could mean the end of a $15 billion package in grants and loans promised by Washington to compensate Turkey for any losses incurred in war.

Turkey's markets were counting on that money to boost the country's ailing economy and the stock market fell by 1,445 points, or 12.5 percent, in trading Monday to close at 10,128 points.

The Turkish lira dropped by close to 5 percent, trading at 1,670,000 to the dollar, before the Central Bank announced it would intervene in the exchange rate if necessary, bringing the lira back up to 1,643,000.

Economists said they expect the markets to continue to fall, although at a slower rate.

"If we see any convincing positive statement from the government regarding the authorization and the United States continues to be patient, I think there's a chance that the markets recuperate," said Tevfik Aksoy of Global Securities.

Gul tried to reassure the markets, saying Turkey would have no difficulties in repaying its large international debts if the U.S. aid plan does not come through.

The premier also announced that the Cabinet had finished work on the 2003 budget and vowed to stick by strict reforms demanded by the International Monetary Fund, such as increasing transparency in the public sector and cutting spending.

Juha Kahkonen, the IMF's chief for Turkey, immediately welcomed the premier's statement.

Asaf Savas Akat, economy professor at Istanbul's Bilgi University, noted that the government announcement had succeeded in calming the markets, with interest rates rising only by 5.75 percent to 60 percent and no rush for dollars amid the population.

Several newspapers reported Monday that the motion to allow in U.S. troops would not be brought back to parliament before Sunday's by-elections.

Justice party leader Recep Tayyip Erdogan is expected to be elected to parliament in the by-election, allowing him to become prime minister. In forming a new Cabinet, he could purge the current government of ministers strongly opposed to the motion and resubmit it to parliament.

This process could delay a new vote until March 17, the newspaper Sabah said, allowing Turkey to wait and see if the U. N. Security Council approves a resolution authorizing military action to disarm Saddam Hussein.

The Islamic-rooted ruling party is in disarray, torn between popular opposition to war and fears of possible lasting damage to Turkey's historically close ties with Washington.

A Justice lawmaker, Elsonmez Yarbay, said Monday that more concessions were needed from Washington for legislators to approve the deployment.

Turkish and U.S. officials negotiated for weeks on the military, economic and political conditions of the deployment. But a Western diplomat, speaking on condition of anonymity, said Washington believed an agreement had been reached and no further negotiations were expected.

Ships carrying equipment and some of the 62,000 U.S. troops who would be based in Turkey are already awaiting deployment off the Turkish coast, a sign of how sure Washington was of Turkish support.

Gul spoke with U.S. Secretary of State Colin Powell on Sunday, according to a statement from Gul's office. Powell "emphasized that relations between friends Turkey and the United States were solid," the statement said.

Besides the possible loss of U.S. funds, Ankara could also lose a say in the future of neighboring Iraq if there is a war. That is a critical issue for the Turks, who fear a war could lead Kurds in northern Iraq to declare an independent state and in turn inspire
Turkey's own Kurdish minority.

By Harmonie Toros