Turkey

With the war in neighbouring Iraq appearing to be winding down, attention in Ankara and Istanbul turned this week to the probable financial and economic costs of the conflict. There was also an almost audible sigh of relief from most analysts, whose pre-war 'optimistic scenarios' looked to be proving more accurate.

When Turkey’s prime minister starts suggesting the government should issue war bonds, and citizens pay $100 a head or donate a slice of personal wealth to pay off the national debt, there is bound to be a suspicion or two about the state of public finances. But when these proposals come after a recent failure to secure major loans from the US, while an IMF review has been going on for months without result and a major war has broken out next-door, anxiety ratchets up another notch. However, despite all these worrying signs, Turkey continues to return some remarkably healthy looking vital statistics.

With hopes all but vanishing of a US financial aid package offsetting Turkey’s war losses, the country’s markets spent last week in gloomy mood. While interest and dollar rates jumped, financial institutions moved fast to try and head off a more general decline.

Despite the release of some healthy looking vital statistics, Azerbaijan’s leaders were in sombre mood after US-led forces invaded Iraq last week. Predictions that the war would lead to delays in major energy projects, and even a strategic shift away from the Caspian and Central Asia, received wide airing.

After parliament’s shock decision against the deployment of US troops in Turkey, the week opened with many measuring the economic cost of this razor’s edge rejection.

While Turkey became the focus at NATO of perhaps the worst rift in US-European relations in decades, back in Ankara and Washington the International Monetary Fund (IMF), the US Treasury and the Turkish government were doing a good deal of number crunching during the week. Up for analysis were the cost of a war and the price of economic reform.