Turkey Waits for Ailing PM's Next Move

Wed Jul 10, 7:02 PM ET

By Claudia Parsons

ANKARA (Reuters) - Turkey was waiting Thursday for any hint of ailing Prime Minister Bulent Ecevit's next move as he resists pressure to step down, deepening a political crisis that markets fear could scotch a crucial IMF ( news - web sites) loan deal.

As a team of IMF inspectors arrives in Ankara to see economic officials, the country will be keeping an equal watch on a power-broking politician Husamettin Ozkan, who has help push the crisis to a head by deserting Ecevit.

The premier has kept a stony silence since his nationalist coalition partners dropped a bomb-shell at the weekend, calling for elections in November.

Monday Ecevit faced a mutiny in his own party. One of his closest allies, Ozkan, abandoned the government and Ecevit's Democratic Left Party (DSP), taking with him more than 30 parliamentary deputies.

Wednesday saw a flurry of meetings -- Ecevit with his allies, Ozkan with possible suitors -- but few immediate results for a country desperate for stability.

The activity is likely to continue Thursday.

Ecevit, veteran leader of a country viewed by Washington as a key Muslim ally in its "war against terror," seems determined to prove it is business as usual, chairing a cabinet meeting on Wednesday and meeting his coalition party leaders.

But the 77-year-old cannot stay silent for ever and Turks, financial markets and international investors will be watching for the slightest hint of what he plans to do.

The other burning question is whether Ozkan will succeed in building a rival political dream team involving Foreign Minister Ismail Cem and Economy Minister Kemal Dervis. The three met at Cem's official residence Wednesday night.

"Cem and Ozkan are strong political players and they have the support and I think the desire to form a strong political party," said Deutsche Bank economist Marco Annunziata.

"The reason why everybody in the market likes the idea is that would be one party that would likely come out well from the elections. It would concentrate three characters into one party and would minimize the risk of fragmentation," he said.

Markets fear the political turmoil may scotch a $16 billion IMF loan pact drawn up to help the country out of two financial crises that struck Turkey in 2000 and 2001.

Turkey is already the International Monetary Fund's biggest debtor with loans topped up after crises in November 2000 and February 2001. Its debt burden is enormous.

IMF inspectors held talks in Istanbul Wednesday at the start of the latest review of the program linked to a disbursement from the fund of the latest $1.1 billion, to take place possibly after its board meets in early August.

The IMF said on July 4 that loan disbursements under the program had totaled about $11 billion by then. The current $16 billion loan package took total loans paid or committed by the IMF to Turkey to over $30 billion.

The IMF team moves to Ankara Thursday for talks with economic officials.