Turkey has come through a most traumatic time in the last few days, as its currency was effectively devalued by nearly 30 per cent against the dollar following a bitter confrontation between the prime minister and president. It is a multi-faceted crisis, involving financial, political and administrative issues and deep popular anger over the way it has been handled by the political class and over who will bear the costs involved. The outcome undoubtedly will affect Turkey's overall reform programme and its preparations for entering the European Union. Mishandled, it could set them back decisively.
Mr Bulent Ecevit, the prime minister, was furious when President Ahmed Necdet Sezer accused the government of failing to tackle corruption effectively or seriously. Their confrontation came at a meeting of the National Security Council, where political and military leaders meet and at which Mr Ecevit felt particularly vulnerable to criticism. He had sponsored the president's candidature last year, but has become increasingly frustrated by his involvement in sensitive decisions. The governing coalition brings together Mr Ecevit's social democrats, but also the conservative Motherland party and traditional nationalists. It is committed to a radical reform programme to reduce inflation, cut the budget deficit, deregulate and privatise the economy and prepare the administrative and legal systems for EU membership. These objectives were negotiated with the International Monetary Fund and the European Union. They have involved willing sacrifices by ordinary people in the expectation of improved living standards and human rights to come.
The clash over corruption has exposed a deeper conflict of interests between the old system and the new. Much of Turkey's remarkable economic buoyancy has been built on easy credit and state tenders, especially in the energy and construction sectors, resulting in high interest rates and soaring inflation. This has placed limits on Mr Ecevit's capacity to move against elements of his coalition on the question of corruption with the speed the president and prime minister would both like.
The fall-out from their clash has left much of the reform programme at least temporarily in ruins and angered many people who find themselves substantially worse off, as if their material sacrifices were in vain. The financial and banking systems are exposed to a run on their resources, with debt repayments becoming suddenly more expensive, interest rates soaring and billions wiped off share prices. The political class has taken a major beating; so far there have been few sustained calls for Mr Ecevit to resign, but rather for a major reshuffle of his government. If he and the president were to resign and the coalition to collapse Turkey's political crisis would certainly deepen to the point where its reform programmes would be altogether endangered. That would encourage a nationalist backlash and conceivably tempt the military to intervene once again in the political system. There is much at stake internally and within the wider region as these issues are resolved in coming days.