//REPEATING//ECONOMY-TURKEY: Preparing For The EU Membership

By IPS Correspondents Reprint | | Print |

Nadire Mater

ISTANBUL, Jan 10 2000 (IPS) - Interest rates in Turkey have fallen from 170 percent to 15 percent overnight. Hard currency rates too have dropped, with investors scrambling to purchase government bonds.

Turkish consumers, not used to falling inflation rate of more than 100 percent overnight, is perplexed and confused by the immediate effects of government’s three-year austerity programme, while the business community and economic analysts are delighted by the move.

“This is a revolution,” says Gazi Ercel, the governor of the Central Bank of Turkey. “The public buys the hope of falling inflation rates, unprecedented in the past three or four decades.”

“Turkish economy will be flourishing in spite of austerity measures as the interest rates continue to fall,” says Carlo Cotarelli, the Representative of the International Monetary Fund (IMF) in Turkey.

In spite of fierce opposition from Turkey’s powerful labour unions, Ankara’s structural adjustment programme is gaining public support, as measures are justified for Turkey’s membership of the European Union (EU).

“Inevitably we should make these reforms if we are going to be part of European Union,” says Turkish Prime Minister Bulent Ecevit. “We will be able to complete democratic reforms in one year and fulfill our economic obligations in three years, so that no roadblocks will be placed on our accession to full membership by 2004.”

The measures include reducing the current inflation rate of 68.8 percent to 25 percent, drastic cuts in public expenditures, radical reduction of agricultural subsidies, privatisation of state-owned industries, revamping of the social security system, reduction of interest and hard currency rates and restructuring of the banking system.

Prior to signing a stand-by agreement in December, the ruling coalition had already fulfilled the IMF’s preconditions by passing new legislation on tax, banking and social security reform, while lifting domestic barriers for foreign capital influx.

The IMF has provided Turkey 4 billion US dollars credit for the implementation of the programme in accordance with the agreement.

“A difficult period unfolds for the labour,” says Vahdettin Karabay, the leader of the Progressive Trade Unions Confederation (DISK). “We will staunchly fight against privatisations, lay-offs and falling wages. We will march to capital Ankara from across the country and start a general strike when necessary.”

Karabay also has urged the Labour Platform, an ad hoc body comprising a number of labour unions and confederations, to prepare for a fight against the austerity measures.

However, the “Anti-inflation Platform”, which groups industrialists, has called for a “public consensus” to support the economic measures. “Workers and public employees too should join us,” says Zafer Caglayan, chair of Ankara’s Chamber of Commerce.

“We are desperate for political consensus,” he says. “All should make some sacrifice”.

Workers are, however, least optimistic that the sacrifices will be shared. “For decades public employees and workers have paid the price,” says Idris Yalcin, a post office clerk in Istanbul. “Pay- hikes remain at 15 percent while inflation is 68 percent. If we are to share the price, then why the price increases are not frozen at 15 percent.”

Serdar Sen, an economic analyst from Turkey’s weekly “V Ozgurluk” says “the measures are part of a global EU and US strategy to prepare Turkey as their partner for its key role in the future global operations in Cental Asia and the Caucasus regions.”

“They are most concerned with economic and social stability in Turkey,” he says. “The programme will also have immediate domestic effects, as it practically aims at eliminating the gray-economy, mafia links and money laundering.”

“Reducing the purchase power on a massive scale and practically pumping all savings into the stock exchange, the programme aims at keeping the interest and hard currency rates at a minimum,” Sen says.

“The public expectations of falling inflation rates had been so high that the target of 25 percent by the year end has gained massive support,” Sen told IPS. “Even critics of neo-liberalism have been silenced.”

But Mehmet Tas, owner of a small restaurant in Istanbul’s Sultanahmet district, says: “VAT (value added tax) has risen to 17 percent and new taxes are imposed daily. Those who could stand will survive.”

Tas, who is Kurdish, doubt if the measures fit the contradictory needs of Turkey’s war-torn Southeast region. Mostly Kurdish populated, the region’s economy has almost collapsed during 15 years of bloody fighting between the Kurdish guerrilla and the Turkish army.

“The region is desperately in need of public investment,” says Seyhmus Diken, a board member of local Diyarbakir Chamber of Commerce.

“Here we need not austerity but affluent programmes,” Diken told IPS. “If Turkey expects to catch EU standards in three years, instead of increasing the tax burdens, public investments should be channeled here.”

“As the armed conflict has come to a standstill, resources should be channeled to the region’s economy,” Diken says.

“Political consensus”, the catchword of Turkish business, “should certainly include a solution to the Kurdish question,” he says. “And Turkey should not hang (detained) PKK (Kurdish Workers’ Party) leader Abdullah Ocalan, and implement rapid democratic reforms, if stability is desired.”

“We will be seeing the outcome by the end of February,” says Husamettin Kavi, chair of Istanbul Chamber of Industry. “This is an all-Turkey programme. And we desperately need a social consensus.”

According to him, Turkey is passing through one of the rare moments in history. “We have a three-party coalition government with a parliamentary majority, and they are aware of the risks of failing to implement the programme,” Kavi says.

“A difficult time lies ahead,” says Birol Lider, an office worker in Istanbul.

Lider says the public, who had been deceived by successive governments in the past, is satisfied that the programme’s implementation will be strictly controlled by the IMF. “As a worker who pays his taxes, I hope this time my sacrifices will not be in vain,” he says.