'Financial Times': Turkey Markets Stabilize a Bit in Anticipation of IMF Deal
DAVID HAFFENREFFER, CNN ANCHOR: A century ago, as the Ottoman Empire was dying out, Turkey was often referred to as "the sick man of Europe." Now, in the midst of a banking crisis, modern Turkey is sick once again. Hugh Carnegy, world news editor of the "Financial Times," joins us now from the "FT"'s London newsroom. And Hugh, good morning. What is the latest on this front? Obviously, the IMF is talking about an emergency loan here, but what type of structural changes need to take place?</s>HUGH CARNEGY, WORLD NEWS EDITOR, "FINANCIAL TIMES": Good morning. Yes, well, as you just mentioned quickly that the markets in Turkey have stabilized a bit this morning. We have got overnight rates in the money markets of a mere 300 percent, whereas they were up over 1,000 percent and the equity market is up a bit, too, as they anticipate an IMF deal. I mean, essentially, what the IMF will be up to is trying to underpin a structural reform program they already had underway in Turkey, and a key part of that is the banking system which, frankly, has been in certain areas rather corrupt, and it needed a lot of cleaning up. And in fact that was what sparked this crisis because when he government moved in and finally began to take action against the banks, closed some of them down, and began to start taking out cases against some of the corrupt management that was going on, a lot of foreign investors in Turkey took flight because they didn't know how far this was going to reverberate through the system, they started selling Turkish assets and suddenly ka-pow -- the markets went sinking, overnight rates went racing up, liquidity crisis all over the place, and Turkey was in the mess we see today.</s>HAFFENREFFER: Now despite the actions that the Turkish government has done, there is still some concern that the government has not done enough to fight inflation, revamp its banks, and also sell state enterprises. Are they looking like they will be able to take the tough moves that they need to do?</s>CARNEGY: Well, the government we have there at the moment has been forging ahead and making some progress. I think, you know, that we have to give them some credit for knuckling down. And as I say, one of the ironies of this crisis is that it was partly sparked by them trying to get to grips with the banking system, which is a vital part of it. But the liquidity crisis, the high interest rates, will that force them to devalue? That would unwind though the whole thing. So, as I say, I think the important thing now, as far as the IMF is concerned, is to try to get this thing back on the track, and then push the government into speeding up the reform process. And I think the political will is more or less there, but, as we have seen, there are so many weaknesses in the system that it can come unstuck at any moment.</s>HAFFENREFFER: Hugh Carnegy at the "Financial Times." And as you mentioned, the financial markets there are stabilizing just a bit.