Turkish PM defiant amid financial chaos

The lira's value has plummeted

Turkish Prime Minister Bulent Ecevit has dismissed opposition calls for the resignation or reshuffling of his cabinet amid a growing financial crisis.

Mr Ecevit held an emergency meeting of his coalition allies on Saturday to discuss the crisis, which has seen the Turkish lira being devalued by almost 40% in the past few days.

After Saturday's meeting, Mr Ecevit said in a statement that the government had agreed measures to alleviate the economic situation that would be implemented on Monday, but did not specify what these would be.

Bulent Ecevit: "A change of government would do the country great harm"

He added: "Rumours spread by certain circles that the government should quit are far from the truth and a change in the cabinet is out of the question.

"Both a change of government and desires to create an atmosphere of early elections at a time of economic bottleneck would do the country great harm."

The financial crisis followed a row between Mr Ecevit and President Ahmet Necdet Sezer, which panicked foreign investors who feared that the most stable government Turkey has seen for years was about to collapse.

Earlier this week, as the lira's value plummeted, the government abandoned attempts to support it by intervention in the currency markets.

Economic analysts say the damage caused by the crisis and collapse of the currency will be seen in rising prices, slowing economic growth and increased debt repayments, most of which are due in dollars.

The Istanbul stock market has been in freefall

They also predict that the move will cause massive damage to banks, which have large foreign currency debt and stocks of government bonds in Turkish lira.

One inevitable outcome of the financial turmoil will be the revision of Turkey's ambitious economic programme, which had aimed to slash chronic inflation running at an annual 39% at the end of 2000.

International Monetary Fund officials are in Ankara to discuss modifications to the programme.

Mr Ecevit's three-party coalition's 21 months in power is the longest of any government for the past five years.

International investors saw Mr Ecevit as Turkey's best hope to carry out the painful economic and democratic reforms needed for membership in the European Union.

But many Turks are angry that the value of their wages has been eroded in value as the government cut pay raises to help reduce inflation.

US President George W Bush telephoned Mr Ecevit on Friday to express Washington's support for Turkey's economic policies.