Prices Rise in Turkey

By HARMONIE TOROS, Associated Press Writer

ISTANBUL, Turkey (AP) - Turks were further hit by the country's political and financial crisis Wednesday, as gasoline and natural gas prices rose, a bank was declared insolvent and a car company fired 150 employees citing the impact of the lira's fall.

Meanwhile, Prime Minister Bulent Ecevit said his country is hoping for $25 billion in loans. A team from the IMF (news - web sites) is in Turkey holding talks and there was no immediate comment on Ecevit's suggestion. It was not clear if Ecevit was looking for loans from Western countries or international institutions like the IMF or World Bank (news - web sites).

Ecevit plans to meet with World Bank Vice President Kemal Dervis on Thursday.

The 10 percent hike in gasoline and natural gas prices on Wednesday is expected to lead to an increase in the prices of many goods.

The lira fell 1.5 percent against the dollar Wednesday, closing at 925,100 lira to the dollar. That represents a 26 percent drop since last week.

The lira's depreciation came after a clash between Ecevit and President Ahmet Necdet Sezer sparked a sharp fall in the stock market and sent interest rates skyrocketing last week. Stocks rose Wednesday, as a key indicator gained 1.4 percent on the Istanbul stock market.

Karsan car company, which assembles Peugeot-licensed commercial vehicles in Turkey, announced Wednesday it was laying off 150 workers. The company said that it was forced to fire the workers because of the lira's drop.

Many economists expect more layoffs.

The crisis and the government's decision to abandon its currency exchange rate controls hit the already fragile banking system particularly hard.

Daily Radikal warned Turks against running up credit card bills, saying the interest rates had increased from 6 percent to 9 percent a month. Officials at one of Turkey's largest private banks, Ottoman Bank, said the monthly rates would increase by 2 percent Thursday.

``Everyone is paying the price,'' Economy Minister Recep Onal said.

Turkey's Banking Regulatory and Auditing Board announced Wednesday it was taking over a small private bank, Ulusal Bank, for insolvency. Ulusal is the 12th Turkish bank to be bailed out by the state in two years.

Its sister bank, Demirbank, was taken over by the watchdog in early December of 2000. Ulusal has five branches and 231 employees.

Allegations of corruption in the banking system scared away foreign investors in November leading to a sharp fall in the stock market.

Meanwhile, Ecevit said Wednesday he would not resign despite pressure from opposition parties and some business groups.

``It would not be difficult for me to leave the government. But if I leave the prime ministry now and cause a government crisis, I would not be able to account for it to the nation and history,'' the 75-year-old premier told lawmakers of his Democratic Left Party.

Later, Ecevit was asked if reports that international lenders would extend $25 billion in loans were true. ``That is our wish, that is our hope,'' he replied.

The IMF has already loaned Turkey $11 billion following devastating earthquakes in 1999 and a financial crisis last November. It was not clear if Ecevit's remarks referred to $25 billion in new loans or a total of $25 billion including the previous loans.

The United States has backed earlier loans to Turkey, a key NATO (news - web sites) ally that borders Iran and Iraq.

Private NTV television quoted Deputy Prime Minister Mesut Yilmaz as saying that Dervis had accepted an offer to head Turkey's Central Bank. The previous head, Gazi Ercel, offered his resignation after the financial turmoil.

http://dailynews.yahoo.com/h/ap/20010228/bs/turkey_economy_1.html

-- Martin Thompson (mthom1927@aol.com), March 01, 2001