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The Only Game in Town

4 minute read
ANDREW FINKEL / Istanbul

Even TV game shows in Turkey struggle in an economy gone haywire. The network producing the popular show ‘Who Wants to Be a Millionaire’? are calling it ‘Who Wants to Be a 500 Billionaire’? Even so, the lira jackpot is worth 45% less in dollar terms than it was after a devaluation crisis that started two months ago. In one recent episode a young man in the hot seat won 500 million Turkish lira, worth about $400 dollars and a round of applause for knowing that Kemal Dervis — the new Economics Minister and the man charged with pulling Turkey back from the edge of economic collapse — gave up a senior job in the World Bank.

Dervis now finds himself in a contestant’s chair but his is a game with a big difference: there is only one question — how can Turkey climb out of its quicksand of debt? And there is only one conceivable answer — by making deep and painful structural reforms. The prize for getting it right is a recovery worth hundreds of billions — and that’s dollars, not lira.

Dervis’ biggest challenge is getting others to accept the answer. This means disciplining his new colleagues in Ankara to dismantle the very system of patronage and spoils on which they depend. It also means convincing a population already disillusioned by endless corruption scandals that they have to tighten their belts just one more time. The political establishment hopes that Dervis’ reforms will reach just far enough to allow them to return to their old habits and send him packing back to Washington.

The international community is in a different quandary. The European Union regards Turkey as an important market and the U.S. sees it as a strategically important ally. Everyone wants to see change for the better. On the other hand, the Bush Administration came to office openly skeptical of funding the sort of bailout package that Turkey says it desperately needs. Ankara has been through 16 IMF agreements in the last four decades and Washington is reluctant to throw good money after bad. To send in a new squadron of rescue cavalry too quickly risks frustrating the incentive to reform that is the basis of international bailouts.

Last week the IMF and World Bank decided that doing nothing would be even worse, promising a $10 billion rescue package in addition to funds already agreed in return for an increase in the tempo of reform. A sign that Turkey is taking its obligations seriously came with last week’s resignation of Energy Minister Cumhur Ersumer in response to accusations of corruption. Such political correctness would have been unimaginable in the pre-Dervis age of just two months ago.

The current crisis began last February with a dispute between the Prime Minister and President about the pace of an anti-corruption drive. Turks, already jittery about the pace of reform and the value of the currency, went on a shopping spree for foreign imports. With that collapse in confidence, the Central Bank was forced to allow the lira to float free and then set astronomical rates of interest — which in February reached highs of 7,500% — to prevent a total run into foreign currency. There are worse hurdles to come. In such an atmosphere foreign institutions were unwilling to increase their Turkish exposure, drying up sources of credit and sending the country into even deeper recession.

The crisis is causing real pain. “I know people who are selling their refrigerators,” said Fatih Yildiz, a demonstrator at one of the increasingly frequent public protests in Ankara. He said he lost his job in a furniture workshop when his employer could no longer pay the rent. “If I am ashamed that a rich country should be looking for money abroad, then politicians should be very ashamed,” he said. At the moment, Ankara is not so much embarrassed as relieved. The Turkish parliament was at last slogging its way through legislation designed to get politics out of the economy.

Though the terms of the IMF package are still under negotiation, its benefits will likely be back-loaded to reward movement toward government transparency. Turks who want to be millionaires will then have to do it themselves through good business management, not by buying or peddling influence. “Don’t look to Ankara for help,” Dervis told a gathering of Turkish business leaders last week. The hardest move of all is to announce that the game is over.

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