US embassy cable - 05ANKARA1202

C O N F I D E N T I A L ANKARA 001202 
 
SIPDIS 
 
 
TREASURY FOR INTERNATIONAL AFFAIRS - DLOEVINGER, ASHAH AND 
CPLANTIER 
NSC FOR BRYZA AND MCKIBBEN 
 
E.O. 12958: DECL: 03/04/2009 
TAGS: EFIN, EAID, PREL, TU 
SUBJECT: MILD INITIAL REACTION TO CONGRESSIONAL DECISION ON 
FINANCIAL AGREEMENT APPROPRIATION 
 
REF: ANKARA 1095 (NOTAL) 
 
Classified By: Ambassador Eric S. Edelman, for reasons 1.4(b) and (d). 
 
1. (C) Summary: Turkish financial markets seem to have 
shrugged off the House Appropriations Committee decision to 
reallocate the $1 billion in extraordinary assistance offered 
to Turkey in the FY03 Iraq Supplemental.  The Government has 
also handled it well, including in a positively-spun Turkish 
Treasury press release. Turkish officials remaining concern 
is that the issue remain "technical" and not get caught up in 
domestic politics. End Summary. 
 
Light media coverage of the House Appropriations Committee 
decision: 
--------------------------------------------- --------------- 
 
2. (SBU) Local media coverage of the House Appropriations 
decision to reallocate the $1 billion appropriated for the 
U.S.-Turkish Financial Agreement (FA) was light.  Although 
news services reported the news early in the day on Friday, 
they did not highlight it.  When econoff called Istanbul 
analysts as markets opened, only one of the three he spoke to 
had heard the news.  During the day, local financial news 
stations showed little interest, focusing instead on U.S. 
data releases.  Late in the day Friday, and on Saturday, 
local press picked up the US Treasury statement and U/S 
Taylor's comments to Bloomberg, but did not treat it as a 
major story. 
 
Markets Shrug Off the News: 
-------------------------- 
 
3. (SBU) As the Istanbul analysts correctly predicted, the 
Appropriations Committee move was not a big story for 
markets.  At the opening all markets--equities, foreign 
exchange and government securities--strengthened slightly. 
By mid-day, the stock market had slipped 0.09% but it closed 
up 0.38% on the day. Interest rates on the benchmark bond 
eased from 16.78% at Thursday's close to 16.47% at the close. 
 The lira strengthened slightly against both the euro and the 
dollar, closing at 1.2775 against the dollar. Markets seem to 
have been driven, as they have since the beginning of the 
year, by extraordinarily high foreign inflows. In Monday 
morning trading, both the lira and government securities 
continued to strengthen, while equities were mixed. 
 
GOT Seems to Take it in Stride: 
------------------------------ 
 
4. (C) MFA Under Secretary Ali Tuygan, in a conversation with 
the Ambassador, seemed pleased that local reaction was muted. 
 He thought it was good that the GOT public statement came 
from Treasury, keeping it on "technical" grounds. 
 
5. (C) Indeed, a Turkish Treasury statement, released around 
10:30 AM Friday, referred to the recent strength of the 
Turkish economy, stressed that the IMF program had not 
assumed any usage of the US facility, and blandly took note 
of the House Appropriations Committee decision, saying the 
GOT would stay in close touch with the U.S. Treasury as the 
Congressional process continued. 
 
Comment: 
------- 
 
6. (C) Though post understands that Minister Babacan agreed 
with Under Secretary Taylor that both would make public 
statements, in the end Turkish Treasury merely issued the 
statement on their web site.  The low-key approach may have 
helped keep the local reaction mild. 
EDELMAN