Turkish financial tremors subside

Click to follow
SEVEN days of financial quakes and tremors may have shaken Turkey, but the money-changers working the crowded market at the Swordmakers' Gate of Istanbul's Grand Bazaar did not seem much stirred.

'It's stabilised now; it's fine. The banks and the currency bureaux have all made a stack and the bill will be paid in inflation by Mr Average, as usual,' said Hassan Oz, stepping aside for an armoured American Jeep to squeeze through the alleyway with another small mountain of cash.

Passing tourists snapped photos of the scrum of men gesticulating with the latest in pocket- telephone technology. Little did they know that the crumbling medieval caravanserais and the traders' scruffy appearance disguised slick computer backrooms, safes full of gold bars and a market that had put plenty of money back into their pockets.

The pound sterling is now worth 26,000 lira and the dollar 17,500 lira, both up about 20 per cent locally so far this year. All the indications are that holiday-makers can count on the lira remaining weak. The only trouble is that they may discover, as Turkish consumers already have, that many hoteliers and rug-merchants now post prices in dollars to protect their earnings.

Days of pressure on the lira forced the Turkish government to cave in on Tuesday evening, when it brought official prices into line with the free market by announcing a 12 per cent devaluation. The last official devaluation was in 1980, part of an austerity package that failed to prevent Turkey's last military coup in that year. The latest measures may trip up Turkey's 7.1 per cent GNP growth in 1993, but few expect another military intervention, despite the military's high-profile role in the war with Kurdish rebels.

Unfortunately for Turkey's long-suffering Mr Average, the Prime Minister, Tansu Ciller, did not dare announce firm measures to tackle 71 per cent inflation or the bulging budget deficit. A recent new tax on rich investors was actually abolished to attract money back into the lira. Mrs Ciller, elected seven months ago, stressed the one victory of the two-week lira crisis, saying: 'Let the free market do the work.'

But Mrs Ciller's determination has not overcome the weaknesses of her coalition government, and the Turkish political system, as the country heads for key local elections on 27 March.