US embassy cable - 02ANKARA8780

C O N F I D E N T I A L ANKARA 008780 
 
SIPDIS 
 
 
TREASURY FOR OASIA - MILLS 
USDOC FOR ITA/MAC/DDEFALCO 
NSC FOR QUANRUD AND BRYZA 
 
 
E.O. 12958: DECL: 12/02/2007 
TAGS: ECON, EFIN, PGOV, PREL, TU 
SUBJECT: AMBASSADOR DISCUSSES ECONOMICS WITH DEPUTY PM SENER 
 
 
Classified by Ambassador W. Robert Pearson.  Reasons: 
1.5(b,d). 
 
 
1.  (C)  Summary:  In his initial call on Deputy PM Sener 
December 2, Ambassador stressed that the USG wanted the 
government's economic program to succeed, highlighted the 
important role financial markets would play in the coming 
months, and suggested those markets would be looking for a 
strong primary budget surplus, privatization, further bank 
reform, and continuation of a strong, independent bank 
regulator.  In his positive but very general response, Sener 
said the GOT's top economic challenges were reducing 
inflation and the public debt, indicated the government would 
work within the existing IMF program, and stressed the need 
for accelerated privatization.  He called the primary surplus 
"key," but did not mention a number; he also did not comment 
on banking.  Sener also gently noted concerns about the 
economic impact of a possible Iraq operation.  End Summary. 
 
 
2.  (C)  Ambassador paid an initial call December 2 on Deputy 
Prime Minister Abdullatif Sener, who is responsible for 
economic issues and oversees (directly or indirectly) the 
Privatization Administration and the Bank Regulatory and 
Supervision Agency (BRSA). 
 
 
3.  (C)  Ambassador said the USG wants the new government's 
economic program to succeed, and also wants to support that 
program.  He noted that the government's most severe critic 
would be investors, and urged the government -- as it 
implements its program -- to keep its eye on the markets.  By 
next Spring, he noted, Turkey is likely to send its economic 
team to London and New York to woo investors, and it will be 
important that those investors like what the new government 
will have done.  They will be looking specifically for a 
large primary surplus, further privatization, continued 
banking reform, and maintenance of a strong, independent bank 
regulatory agency. 
 
 
4.  (C)  Sener responded that the new government had 
inherited the problems of high inflation, a large public 
debt, and volatile growth.  It also inherited an economic 
program worked out with the IMF.  "From an economic point of 
view, it is not wise to stop or radically change such a 
program."  In fact, Sener added, the existing program shares 
the new government's goals of cutting inflation, reducing the 
debt stock, and promoting sustainable growth.  As a result, 
the government's intent is to continue with the existing 
program, while adding some details important to the AK Party. 
 
 
5.  (C) Sener called the primary surplus "key" to reducing 
interest rates and the debt stock.  Public sector reform is 
also important.  In that context, Sener said privatization 
was important not only to generate revenues, but also to 
increase economic efficiency.  He complained that 
privatization had largely stopped in the past two years, and 
said the government would work to develop a good, rapid 
privatization program for 2003.  Sener predicted that the 
suffering from the economic program would end soon, and 
commented positively that the program gives more emphasis to 
growth in the coming years. 
 
 
6.  (C) Sener noted that a group of Western business 
executives who had visited him earlier in the day had asked 
about the economic impact of a possible Iraq operation. 
Ambassador responded that the USG hoped that the combination 
of the UN resolution and strong international pressure would 
convince the Iraqi regime to disarm without war.  Should a 
military operation be necessary, the USG would seek to 
protect the Turkish economy (and the economic program) as 
much as possible from the impact, while maintaining a close 
dialogue with the GOT. 
 
 
7.  (C) Comment:  Some of Sener's statements -- such as 
noting the importance of the primary surplus, playing down 
the social problems associated with the economic program, and 
highlighting the congruence between AK's goals and those of 
the current IMF program -- hint at a backing away from some 
of AK's more troubling economic statements.  On the other 
hand, Sener did not address banking reform, which is a major 
question mark now, and his comments were so general that they 
left a lot of wiggle room. 
PEARSON