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As the world lender heads to Istanbul for its summit, Ankara weighs the merits of a multibillion-dollar loan.
ISTANBUL, Turkey — At the start of the financial crisis, Prime Minister Recep Tayyip Erdogan seemed confident that the troubles of financial markets abroad wouldn’t scratch the shiny veneer of success that the Turkish economy has cultivated in recent years.
Time and again he has argued that there is no need for Turkey to renew a multibillion-dollar loan program with the IMF that expired in May 2008.
“The crisis has bypassed Turkey,” he said last fall, with more than a hint of swagger.
Since then things have changed.
Youth unemployment rose to a historic 16 percent last February, leaving one in four jobless. Exports declined nearly 40 percent in May as compared to last year's figure. The GDP shrank by a record 13.8 percent in the year to the first quarter, making Turkey one of those countries hardest hit by the crisis.
Now, as the fund's annual meeting approaches — this year it is being held, of all places, in Istanbul, Oct. 6 and 7 — Erdogan is beginning to talk about doing a deal with the IMF after all — a move that is being widely debated within Turkey and among international economists.
Local opposition to any deal became all too obvious this week in Istanbul when anti-IMF protesters interrupted an address Thursday by the IMF's managing director, Dominique Strauss-Kahn, at Bilgi University. One protester threw a shoe at Strauss-Kahn as he spoke about the global economy. The man then tried to storm the stage, before police intervened and escorted him away.
The Hurriyet Daily News quotedthe IMF director for external relations, Caroline Atkinson, as saying that Strauss-Kahn laughed over the shoe-throwing incident and said “students are students.” Strauss-Kahn said earlier Thursday that there was no tension between Turkey and the IMF over a possible loan from the Washington-based fund, the newspaper reported.
But in Turkey, which has had nearly 20 IMF loan programs, the IMF is still seen as a symbol of foreign pressure. According to the Anatolia news agency, the shoe thrower could become a symbol of resistance to that pressure.
Under any agreement between Ankara and the IMF, the fund would likely pump up to $20 billion into the Turkish economy. But to get an IMF loan, Turkey would have to reduce its deficit, which would mean cuts in government spending or increased taxes. In other words, the IMF is seen as the cause of potential financial pain.
Despite the enormous impact of the financial crisis on Turkey, the government appears to have insulated many from the effects. On the streets of central Istanbul, life goes on very much as it did before the crisis hit, with bars and restaurants packed and Champagne-drenched clubs blasting music into the night.
The financial markets are holding their breath as they wait to see if Turkey will take the plunge and sign a new IMF deal or go it alone.
Meantime, analysts are divided over whether Turkey should accept the IMF deal.