Turkey Economy

The Turkish currency lost more than 40% of its value Thursday after a political and financial crisis brought on by tumbling stock prices forced the government to abandon exchange controls. Turkey's second financial crisis in three months has sent the stock market tumbling, weakened the government of this key U.S. ally in the Middle East and sent jitters through emerging markets from Russia to Brazil.

In middle age, Hasan Erol drifted into the wondrous world of Turkish high finance with great experience in quilt-making and tire-repairing. Now he is "The Professor," shrewdly riding a get-rich-quick bubble in a gambler's annex to the world's most breathtaking stock market. Most mornings, a big chunk of the professor's million-dollar stock portfolio, bearer shares in come-on hues of blue, red and green, lies on the table before him in a smoky cafe not far from the storied Golden Horn.

Prime Minister Tansu Ciller ordered massive repairs to Turkey's debt-damaged economy on Tuesday in the boldest reform and economic stabilization package the country has seen since 1980. Turkey's leader turned in the best television performance of her troubled nine-month premiership in announcing the sale or closure of dozens of public-sector companies, a huge wave of price increases and a freeze on wages. "We may have hyper-inflation and stagnation if no measures are taken. . . .

With words of encouragement from President Bush, Turkish officials began talks Friday with the International Monetary Fund on a new strategy to curb inflation after a political and financial crisis forced them to abandon currency controls. A week of market turmoil cost the Turkish lira more than 40% of its value, but it steadied at about 1 million to the dollar Friday as banks held back from currency trading.

Turkish hoarders, mistrustful of paper securities, have turned their country into a pot of hidden gold. Economists say there's enough of the precious metal socked away to pay off the country's entire $36-billion foreign debt. "Turkey's gold stock is huge . . . all physical. Now it must be as much as 3,500 metric tons," Istanbul-based economist Ersin Pertan said. "The 3,500 tons is the conservative figure," he added.

As tensions escalate in the Persian Gulf, the economic ripple effects are starting to take a toll in the region, with billions of dollars being withdrawn from local banks, investment plans suddenly placed on hold and hundreds of thousands of expatriate workers facing the loss of jobs.

Turkey said early today it was abandoning its controlled currency program, allowing the lira to float in a dramatic bid to curb a financial crisis racking the country. The move, after 12 hours of emergency talks, all but spelled the end of a three-year program launched amid high hopes in January 2000, and dealt a heavy blow to Prime Minister Bulent Ecevit. Inevitable devaluation may bring some social hardship.

Hafize Ozal, a strong-willed matriarch in her 80s, believes that Turkish women should obey strict Islamic dress codes. Zeynep Ozal, a young, urban Turkish woman, owns a chic boutique and is married to a drummer in a rock band. The two women embody the national debate that accompanies breathtaking change today in an East-West land of ancient minarets and latter-day yuppie bars.

"Turkey, the only Muslim state to have created a republic and secular nation state, has knocked on the door of the European Community. She awaits your reply." Thus did Turkish President Turgut Ozal, then prime minister, sign off his book "Turkey in Europe," which put forth his argument for the EC to accept Turkey's April, 1987, membership application. Four disappointing years later, Ozal has updated the work and is still knocking.

Turkey is rising. In the last decade, the country's economy has nearly trebled in size. Just 10 years ago, the average Turk had one-fifth the income of the average European. Today, Turks are only 30% less wealthy than European Union citizens. Given Europe's financial doldrums, Turkey could catch up in the coming years and realize its 4-centuries-old dream of becoming a great power again. But on the political front, Turkey is still a mixed bag. The nation is vacillating between becoming a global power or taking a parochial path under the governing Justice and Development Party's (AKP)