Turkey confident economy can handle pressures

WASHINGTON (Reuters) – Turkey’s economy is easily capable of absorbing both internal and external shocks, Economy Minister Mehmet Simsek said on Friday in response to rising concerns over its possible military operations in northern Iraq. Turkish financial markets have been unsettled since parliament on Wednesday authorized the country’s troops to conduct operations in northern Iraq. These would target Kurdish rebels who use the region as a base from which to attack Turkey. «I think the Turkish economy has come a long way from being vulnerable to every single small internal or external shock,» Simsek told a meeting of investors and bank analysts in Washington. «Of course, we will take further steps and respond to any pressures if needed, but I do believe Turkey’s economy can withstand current pressures,» he said. Simsek reaffirmed, however, Turkey’s decision to chase Kurdish rebels in Iraq. «The US has always supported us and we also supported the Iraq war in every single way but our friends also need to understand that we cannot accept that our neighbors can be used to attack Turkey,» he said. Baghdad, backed by Washington, has urged Turkey to refrain from military action, saying this could destabilize the wider region, but has also told the rebel fighters to leave Iraq. Fiscal discipline Simsek promised the government will remain committed to fiscal discipline despite a decision on Thursday to cut its 2008 primary surplus target to 5.5 percent from 6.5 percent of the gross national product. Simsek argued that a 6.5 percent target, which Turkey has sought during the past five years, is «a huge effort, especially for non-oil-producing countries.» The primary surplus, which excludes interest payments, is seen as a key indicator of Turkey’s state finances. «The 5.5 percent primary surplus that we are targeting for 2008 is still credible, and should continue to help keep the debt-to-GDP ratio on a downward trend and help us achieve investment grade» from credit rating agencies, he said. Among the reforms needed to keep Turkey on the road to becoming a European Union member, the priority right now is the overhaul of the social security system, according to Simsek. «We would like to push it through the parliament sometime over the next couple of months, and we would like to implement it in the earliest possible time in 2008,» the minister said, adding that, without the huge deficit of the social security system, Turkey would post «significant budget surpluses.»