US embassy cable - 03ANKARA1406

UNCLAS SECTION 01 OF 02 ANKARA 001406 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR E, P, EUR/SE AND EB 
TREASURY FOR U/S TAYLOR AND OASIA - MILLS 
NSC FOR QUANRUD AND BRYZA 
 
 
E.O. 12958: N/A 
TAGS: ECON, PREL, TU 
SUBJECT: TURKEY'S ECONOMY MARCH 5 AM:  MARKETS BEGIN TO 
RALLY ON HOPES OF SECOND RESOLUTION 
 
REF: ANKARA 1378 
 
 
Sensitive but unclassified, and not for internet 
distribution. 
 
 
1.  (SBU)  Summary:  Turkish financial markets improved 
throughout the morning of March 5, and at mid-day appeared 
poised to continue a rally.  Yields on T-bills strengthened 
five percentage points in morning trading.  This positive 
market sentiment is based on two statements indicating that 
the GOT will seek a second parliamentary resolution.   First, 
on March 4 evening, AK Chairman Erdogan told the AK 
parliamentary group that "daily emotions" should not be the 
basis of national decision-making, and that the MPs should 
take decisions based on the country's future.  Second, at 
mid-day March 5, TGS Chief of Staff Ozkok told the press the 
military had the same view as the GOT regarding the 
parliamentary resolution on troop deployments.  Also on March 
5, Deputy PM Sener defended the 2003 budget macro-economic 
targets, especially the 5 percent growth target, against 
press criticism.  End Summary. 
 
 
Markets Up On Erdogan and Ozkok Statements 
------------------------------------------ 
 
 
2.  (U)  At mid-day March 4, Turkish markets had rebounded 
from the lows of Monday morning March 3 and appeared poised 
to continuing strengthening. 
 
 
--  The benchmark T-bill (maturity of March 3, 2004) 
strengthened 5 percentage points in morning trading, from 
yesterday's 62.5 percent to 57 percent. 
 
 
--  The lira appreciated about one percent, closing at TL 
1,621,000 to the dollar. 
 
 
--  The Istanbul stock exchange was flat in morning trading, 
but analysts say it will jump up following the noon lunch 
break. 
 
 
Chief of Staff Ozkok Statement Supportive of GOT 
--------------------------------------------- --- 
 
 
3.  (SBU) Before meeting with Northern Cyprus leader Rauf 
Denktas in early afternoon March 5, TGS Chief of Staff Hilmi 
Ozkok issued a press statement that addressed in part the 
troop deployment parliamentary resolution.  Ozkok said: 
 
 
--  "The Turkish military's view is the same as the 
Government's view as reflected in our government's resolution 
submitted to our parliament." 
 
 
Erdogan's General Statements Underpin 
Local Market Optimism 
------------------------------------- 
 
 
4.  (SBU) Behind market optimism lies AK chairman Erdogan's 
statements on the evening of March 4 to his parliamentary 
group.  These general statements, well covered on TV and 
newspapers March 5, are being interpreted by markets here as 
indicating his intention to force a second parliamentary vote 
once he becomes PM.  Locals see an implied threat that those 
AK MPs who don't vote with him will "not be fulfilling the 
responsibilities placed on us by the people." 
 
 
5.  (U) Following are the parts of Erdogan's speech to the AK 
parliamentary group reported in local press as "on the 
subject of the second parliamentary resolution": 
 
 
--  "Those who hold positions of responsibility must not rely 
on daily emotions when making steps forward.  It is 
imperative to take decisions aimed at managing the country's 
future." 
 
 
--  "I also understand my friends' hesitations.  But if we 
don't look at issues from all perspectives, we can't fulfill 
the responsibilities placed on us by the people and we can't 
do our duties." 
 
 
--  Erdogan also had an implied warning for the U.S., per the 
local press, when he told press before the Group meeting, 
"For Turkey's own security and the territorial integrity of 
Iraq, we will not remain observers.  ON the subject of 
intervening to address problems, which method will be applied 
will be decided in the coming days." 
Deputy PM Sener Defends Macro Targets 
------------------------------------- 
 
 
6.  (U) On March 5 morning, Deputy Prime Minister Sener 
defended the 2003 budget's macro-economic targets against 
recent press criticism.  He stressed there is no plan to 
revise the 5 percent growth or other targets.  Speaking 
before the Ankara Chamber of Industry, he said: 
 
 
--  The fiscal saving measures announced by the government 
(note:  a total of TL 15.8 quadrillion or nearly $10 billion, 
reftel) will not lead to a contraction of domestic demand and 
will not slow the growth rate. 
 
 
--  "There is no problem in reaching the year-end inflation 
targets" (note:  targets are 20 percent CPI and 17.4 percent 
WPI, though first two months WPI is already over 8 percent.) 
WPI will drop in coming months, he predicted. 
 
 
--  Asked about the high interest rates in the March 4 
Treasury debt auctions, he said expects rats to decline in 
coming months and not to present debt roll-over problems. 
PEARSON