Turkey Chides Europe Over Crisis

By JOE PARKINSON

ISTANBUL—Turkey’s economics czar Ali Babacan on Tuesday berated European policy makers for failing to quell the debt crisis and stressed that heightened risks have shifted Turkish policy makers’ focus to preventing recession rather than cooling the rapidly growing economy.

Speaking to reporters in Istanbul, the government’s top economic policy maker, who also holds the title of deputy prime minister, said: “The crisis in Europe is getting deeper and we are watching with concern. We have been saying this for months—Europe has a lack of will for taking decisions.”

Mr. Babacan said the deepening crisis could affect the Turkish economy despite its low debt dynamics, meaning that Ankara has shifted its focus to tackling the risk of recession.

The minister’s criticism reflects a growing impatience in Ankara with what is perceived to be the failure of European politicians to stem the debt crisis from enveloping world markets.

The comments also chime with the actions of Turkey’s central bank, which surprised markets in August by cutting the benchmark interest rate to a fresh low, citing the darkening economic outlook.

Mr. Babacan stressed that the recession risk trumped the threat from still-benign inflation, suggesting Turkey would keep its loose policy expansive.

Investors in recent months have sold off Turkish assets, citing the risk that its rapidly expanding economy was overheating, fueling its key imbalance: a ballooning current-account deficit. Data on Monday showed that Turkey’s economy expanded a faster-than-expected 8.8% in the second quarter from the same period a year ago. That followed a growth rate of 11.6% in the first quarter; the fastest expansion of any Group of 20 economy.

Mr. Babacan said work was continuing on Turkey’s medium-term economic program, which will likely be unveiled at the end of September and certainly before an Oct. 17 deadline.

Investors have called on Ankara to announce a fiscal tightening in the program, but Mr. Babacan’s bearish forecast could point to policy remaining expansive.

Write to Joe Parkinson at [email protected]

via Turkey Chides Europe Over Crisis – WSJ.com.