Three banks and 10 brokerage houses, the glitzy end of the boom, have failed, robbing about 50,000 depositors of funds. The government has been forced to guarantee all bank deposits of all sizes to stop a run on the banking system.
In short, Turkey is facing its worst economic crisis since the late 1970s. While there is a general reluctance to face this truth, it may not be possible for people to avoid it much longer.
At Turkey's request, a delegation from the International Monetary Fund started talks this week on a standby agreement and line of credit. So far the mission has made cautiously friendly noises about Turkey's future and produced an austerity package that includes heavier taxes, faster privatisation and real reform in the public sector.
'The basic problem here is credibility . . . Basically the economy is sound. The productive infrastructure is sound and has potential,' Thomas Reichmann, head of the IMF team, said.
'Everybody in Turkey seems to see this crisis as a small blip in the unstoppable advance of the great Turkish nation,' a manager of one foreign bank said. 'What they don't realise is we have not even begun to see the worst.'
The slump has dealt a body blow to business in Istanbul, the country's main city and financial capital. Traffic jams have evaporated, industrial production has plummeted and wholesale suppliers' warehouses have emptied. Whole categories of imported luxury goods have retreated from the shelves of a generation of newly opened supermarkets.
Gleaming new cash machines have been left empty all over the country as banks play the overnight markets with the money. A bank that last year pushed personal credit in any currency to its clients for cars, houses or anything now posts a prohibitive 500 per cent annual interest rate. 'We just don't want to lend,' a clerk said.
The crisis has also frozen trading in Turkey's foreign debt. Standard & Poor's has just downgraded the country's credit rating for the third time this year.
Unless there is a miraculous recovery in tourist revenues - unlikely because of Kurdish threats of terrorism - most foreign bankers in Istanbul argue that some rescheduling of the country's dollars 66bn of foreign debt is essential this year.
Foreign liabilities do not end there. In an act of desperation last month, some Turkish banks bought foreign currency, notably from Swiss banks, and did not pay for it. Estimates of total foreign lending to the ailing, non-state-guaranteed Turkish banking system start at dollars 300m. The Turkish treasury is giving conflicting signals about whether it will cover these.
Unfortunately the April austerity programme leaves virtually untouched Turkey's black economy - estimated to be about the same size as the country's dollars 50bn official gross national product - and ignores the fact that only about 10 per cent of Turkey's 33 million voting-age citizens are registered taxpayers.
'How sad it is. We need the IMF to show us the picture hidden by the men and women who have been telling fairy tales to the people for years,' wrote Osman Ulagay, one of Turkey's best economic commentators.
Like most people in Turkey, Mr Ulagay believes the critical problem is that the weak 10-month-old coalition government of the Prime Minister, Tansu Ciller, retains barely a shred of domestic credibility. Frequent U-turns, absence of team work and a failure to take advice have made her look incompetent.
But there is no obvious democratic alternative to Mrs Ciller, 47 years old and Turkey's first woman Prime Minister, whose bravery, ambition and shamelessness mean that she is likely to cling to her position until the next elections in 1996.
Industrialists and some in the secular elite are playing with alternative ideas. One is a technocrat government under the ambitious but uncharismatic former governor of the central bank, Rusdu Saracoglu. Another is the usual answer to Turkey's politico-economic crisis every decade - a state of emergency or military intervention.
But the army is already tied up with one of the government's most expensive enterprises, the struggle against Kurdish guerrillas, and shows no sign of wanting to take more responsibility.
The worst scaremongers see a possible takeover by the pro-Islamist Welfare Party, which did unusually well in March local elections, taking 19 per cent of the national vote and the cities of Ankara and Istanbul. The party's leadership is intensely anti-Western and attacks the practice of interest and other basic tenets of Western finance.
But the threat is exaggerated. Half of Turkey's trade is with Europe. And anybody who knows Turkey well knows that Turkish Islam, if left to itself, is in the great majority a very pragmatic and distant cousin of the fundamentalism practised by Iranians and Arabs.
'In one way, what has happened is very good. The crisis has shown us, the elite, that we had lost touch with the people and were living in rose gardens but surrounded by sewage,' one woman bank manager said.
Not everybody is despairing. Turkey has always paid its lenders back in full. The Ottoman Empire's debts were finally paid off in the late 1980s, as was the last rescheduling from 1982. Brave foreign investors, remembering dizzying ups and downs since the Istanbul Stock Exchange was relaunched in 1986, are keeping a floor under the market by buying up stocks at little over the value of underlying assets.
Much of the good news about 1980s Turkish dynamism, financial liberalisation and hunger for success still holds true. Cheaper Turkish exports are showing signs of renewed vigour. Quietly, well-managed foreign banks and well-capitalised businesses are doing fine.
Western commercial representations, including those of Britain, still encourage foreign investment. Apart from those exporting to Turkey, subsidiaries of large British companies in Turkey have not reported significant difficulties.
'This is a period where the rich will get richer and the poor will be eliminated. We will pull through. It all depends on whether the political system survives,' the Turkish manager of a foreign bank said.
The risks and rewards were neatly summed up by Sabah newspaper's chief commentator, Gungor Mengi. 'It seems we Turks do not know how to make repairs,' he said. 'We only know how to smash down and then rebuild from scratch.'
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