|
Turkey president vetoes central bank chief pick |
 |
 |
 |
|
Written by Reuters
|
|
Sunday, 26 March 2006 09:25 |
|
Turkey's president, known to be deeply uneasy about the ruling party's Islamist leanings, has vetoed the government's choice to head the central bank for the next five years, a move likely to unnerve markets on Monday.
Prime Minister Tayyip Erdogan's office said on Saturday that President Ahmet Necdet Sezer had rejected candidate Adnan Buyukdeniz, the general manager of an Islamic bank in Turkey.
It did not give a reason for the move, which is seen reflecting Sezer's desire to limit the number of Islamist-oriented officials in high office.
Financial markets have been nervous over failure to quickly pick a successor to Sureyya Serdengecti, who retired last week after overseeing Turkey's recovery from a deep financial crisis in 2001.
The veto is a setback for Erdogan and comes amid criticism of the government's secretive handling of the appointment process, which has hurt bonds, the lira currency and the stock market.
"The market reaction will certainly be negative. An important uncertainty is emerging. In any case, this is negative and the government's statements on this will be very important," said Emre Tezmen, managing director of Tera Stock Brokers Inc.
"A serious uncertainty on monetary policy will appear for the short term. Having an acting governor at the head of the central bank is not sufficient for markets," he told Reuters.
Erdogan, with roots in political Islam, said a new candidate would be presented to the president.
"Now we will send a new candidate. I cannot give you a name. We will decide this in the cabinet," he told reporters.
Sezer also rejected the deputy governor candidates, Merrill Lynch analyst Mehmet Simsek and state planning agency official Birol Aydemir. The decree was returned to the prime minister's office on March 23, the statement said.
"The cabinet decree on the central bank management was not approved because the presidential office did not deem it appropriate," the statement sent to Reuters said.
LIMITED MARKET PRESSURE SEEN
The lira eased to 1.3470 to the dollar on the interbank market on Friday, and Istanbul's main stock market index <.XU100> fell 2.8 percent on concern over a possible veto.
"For that reason, a new reaction could be limited but there will be selling pressure on the markets. The lira could touch 1.36 against the dollar on Monday," said Haluk Burumcekci, chief economist at Fortis bank in Istanbul.
Lehman Brothers emerging markets research director in London Tolga Ediz said: "I do not expect a shock in the market as generally this was expected to happen."
Erdem Basci was made interim governor on March 14. Financial markets had hoped internationally respected Serdengecti, appointed by the previous government, would be re-appointed.
Basci is now likely to remain in that position in the short term. Basci has been criticized for being close to the government and too inexperienced for such a senior position, although he was previously a deputy governor.
Sezer, regarded as the last constitutional line of defense for Turkey's secular tradition, has previously vetoed AKP draft laws and appointments.
SECULARISTS DISTRUST AKP
Turkey's powerful secularist establishment, which includes the military and the judiciary, views the AKP with deep distrust due to its Islamist roots.
The AKP has been accused of using powers of appointment to put supporters with similar Islamist principles in top positions at public institutions.
Buyukdeniz heads the interest-free finance group Albaraka Turk, which operates according to Islamic law.
Analysts expect the central bank to come under pressure to weaken the lira and trim high interest rates as political parties begin preparing for presidential and parliamentary elections next year.
The AKP remains by far the most popular party in Turkey and is also credited with seeing a return to economic growth, foreign direct investment and stability.
Erdogan, who successfully obtained EU-accession talks status for Turkey in October, sought to reassure nervous markets this week by pledging support for a strong lira and that monetary policy would remain unchanged.
"The government has mishandled the appointment process of the governor, which will undermine the government's standing abroad but won't really hurt it much domestically," a government official, who declined to be named, told Reuters.
International Monetary Fund Managing Director Rodrigo Rato called on Turkey on Friday to stick to an economic program of fiscal discipline or risk losing the macro-economic credibility it has earned in recent years.
Turkey, which has a $10 billion standby accord with the fund, has been criticized for easing taxes and boosting pay for civil servants -- a move seen linked to elections. |