US offers Turkey billions in loans

US offers Turkey billions in loans

Turkey was not expecting much from the US budget

The US has surprised Turkey with an offer of up to $8.5bn in loan guarantees, despite their disagreement over the deployment of American troops.

The package falls well short of the $6bn in direct aid, which could have secured $24bn in loans, in exchange for "full cooperation" on Iraq, which was rejected on 1 March by the Turkish Parliament.

But President George W. Bush's war budget for Iraq offers Turkey much more than they expected and could ease the economic blow of the war.

"A portion of this ($1bn in grants) may be used by Turkey to pay fees to cover the budget cost of up to $8.5bn in direct loans or loan guarantees to help Turkey in carrying out comprehensive economic and financial reforms and relieving potential balance of payments needs that may result from hostilities in Iraq," the White House budget document said.

Budget plans

The budget, which still needs to be approved by the US Congress, said the grants could be used to secure loans or loan guarantees "not to exceed $8.5bn."

The offer may be rejected by Congress, where many members are annoyed that Turkey did not offer itself as a staging post to allow over 60,000 US troops to invade Iraq.

Turkish officials have told Reuters that they would stick to their budget plans drawn up with the International Monetary Fund in exchange for $16bn.

The plan does not include the US offer.

Turkey and the US are also at odds about Ankara's wish to deploy troops into the independent-Kurdish areas of northern Iraq.

Parliament has authorised overflights by US warplanes to attack targets in northern Iraq.