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A Japanese-style recession but without the wealth

Although Bulent Ecevit’s ruling coalition has signed up to an impressive programme of reforms, it will be years before they will be implemented or show their full effect. Meanwhile, with the banking bubble burst, Turkish companies find themselves bereft of capital. Rescue money from the IMF will mainly go towards paying off foreign debt.

Bulent Ecevit

Turkey's political and economic environment has been calm since February 2001 when a massive, unexpected devaluation caused the Turkish lira to lose 69% of its value over the rest of the year. But the lull results from incidental rather than fundamental changes.

The IMF, for which Turkey is now the biggest loan customer, has signed a new $16 billion cheque for 2002-04. This has averted an almost certain debt default. But what happens next year and the year after that?

Turkey seems to be stuck in a Japan-style no-growth recession. But Japan is swimming in wealth and its recession is a result of its political establishment's inability to make reforms. Turkey is swimming in poverty but has been on an unprecedented reform binge since 1999.

Bulent Ecevit, the 77-year-old prime minister, who has been a prominent figure since the late 1950s, is no reformer.