Turkey's sparring leaders meet

Foreign Minister Ismail Cem arrives at the meeting

Turkey's President Ahmet Necdet Sezer and Prime Minister Bulent Ecevit met on Monday for the first time since their acrimonious argument over corruption in the banking sector.

The two leaders faced each other, along with other members of the government, at a National Security Council meeting on Monday morning.

The row, which blew up a week ago, sparked a devastating financial crisis in Turkey.

Panicked foreign investors began pulling out of the country over fears that the most stable government Turkey has seen for years was about to collapse.

The mass exodus forced the government to devalue the Turkish lira by abandoning a currency peg linking the lira to the US dollar.

A 'fruitful' meeting

Following the morning meeting, Mr Ecevit made a brief comment. "It was a fruitful and very useful meeting," he said, with a smile.

Bulent Ecevit: "A fruitful meeting" with the president on Monday

He declined to comment on whether his relationship with the president had improved.

The military-dominated National Security Council was also reticent. It issued a statement about progress in relations with the European Union but made no mention of the financial crisis.

The crisis began when Mr Ecevit walked out of a similar meeting last Monday after the president allegedly accused him of tolerating corruption.

IMF revisions

The Turkish government is also meeting with officials from the International Monetary Fund to review a three-year anti-inflation programme for the country.

Gazi Ercel (right) helps the IMF's Stanley Fischer on leaving a meeting last Tuesday

Last week's decision to devalue the lira, which lost more than 35% of its value, has undermined a central plank of the IMF programme.

Turkey is also shortly expected to appoint a new central bank chief, after the resignation of the previous governor of the bank, Gazi Ercel.

The Treasury undersecretary Selcuk Demiralp has also resigned.

Mr Ercel and Mr Demiralp are both architects of Turkey's disinflation and the IMF reform plan.

Ercan Kumcu, a former central banker, is tipped to replace Mr Ercel if his resignation is accepted. Mr Kumcu is a board member at the private Tekfen Bank and a columnist for the mass-circulation Hurriyet newspaper.

Mr Ercel was reported on Monday as saying he had quit because he believed Turkey needed a new IMF programme and a new team to run it.

Liquidity crunch

Also on Monday, in an attempt to ease a liquidity crunch in the bank lending sector, the Turkish central bank intervened in the money markets.

The markets are relieved

Hakan Azci
Global Securities

The news boosted the stock market in Istanbul. The main index, the ISE National-100, closed up 6.42% on Monday.

The stock market lost more than a third of its value last week.

The central bank, normally only active in the late afternoon, was the first to trade on the overnight interbank market, where banks borrow money from each other.

It was lending money at 150%. This was well below rates in excess of 7000% hit last week at the peak of the crisis.

"So far so good. The central bank has started injecting liquidity," said Hakan Azci, a strategist at the brokerage, Global Securities, in Istanbul. "The markets are relieved."

No reshuffle

The prime minister continues to resist pressure to reshuffle ministers in his cabinet, despite criticism from opposition politicians.

Mr Ecevit has said that a change of government would do the country great harm.

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