Turkish Coalition Collapses

[kurdeng at aps.nl]

(1) Turkish Coalition Collapses

ANKARA, Turkey (AP) -- Prime Minister Tansu Ciller resigned Wednesday after a
party pulled out of her coalition government to protest austerity measures that
have prompted one of the biggest labor walkouts in Turkey's history.

Ciller, Turkey's first woman prime minister, refused to call early elections,
and said she would try instead to form a new government. She said she would
stay on until a new government is in place.

"What the country needs at the moment is not elections but a solution.
Solutions are endless in a democracy," said Ciller, leader of the True Path
party.

Earlier Wednesday, Deniz Baykal withdrew his Republican Peoples Party from the
government after a three-hour meeting with Ciller.

Baykal, who was elected party leader last week, faced strong criticism from the
party's traditional base -- blue-collar workers and civil servants -- who
opposed the austerity program that has kept wage increases well below
inflation.

Baykal's announcement came hours after more than 160,000 workers in state-run
industries went on strike at the start of one of the biggest walkouts ever in
Turkey. The number of striking worker is to gradually increase to 350,000 by
Oct. 2.

"The most appropriate move will be to call for early elections," Baykal said.
General elections are scheduled for the fall of 1996.

Ciller, who was a professor of economics before becoming prime minister in June
1993, launched the austerity program under the supervision of the International
Monetary Fund. She does not want to call elections while Turks are feeling the
effects of the harsh economic measures.

The government has refused to offer more than a 5.4 percent salary hike, while
the union has demanded a 72 percent increase to keep up with inflation.

Mesut Yilmaz, leader of the main opposition Motherland Party, said Wednesday he
would be willing to form a coalition government with the True Path if an
election date were set.

(2) Turkish PM's resignation casts cloud over Eurobond

By Alexander Smith

LONDON, Sept 20 (Reuter) - A $300 million Eurobond launched by Turkey on
Tuesday and hailed within hours as a hugely successful return to the market
could flounder following Prime Minister Tansu Ciller's decision to step down,
syndicate managers said on Wednesday.

Launched as the final chapter in a carefully engineered return to the
international capital markets, the Turkish bond could even be abandoned
altogether under a so-called force majeure clause, they added.

"That would obviously be the choice of last resort. But this certainly
constitutes a potential force majeure," said one.

A force majeure clause, exempting parties from their obligations under a
contract, can be invoked when an event occurs outside the control of the
contracting parties. But JP Morgan, the lead manager of the three-year deal,
would only invoke this if there was a massive run on the bonds and after
consulting Turkey, syndicate managers said.

Ciller resigned as head of a right-left coalition in a dispute with her social
democrat partners over domestic security policy. She made the announcement in
late afternoon but then took on the role of caretaker until a new government
can be formed.

The price of the Eurobond, launched at 99.741, slipped by almost a point on
news of Ciller's resignation, traders said. This caused the yield spread over
U.S. Treasuries to widen from the launch level of 300 basis points (three
percentage points) over to 325 b.p. over at 1600 GMT, a syndicate manager at
one U.S. firm said.

The fact investors who had bought the bonds would not yet have paid for them
was one reason the transaction could be aborted by the lead manager, syndicate
sources said.

Payment date for the issue is October 5.

Although early indications showed a sell-off in the paper, this was not
sufficiently pronounced for the deal to be shelved immediately, the syndicate
official at the U.S. firm said.

"At 325 (basis points) over it is less than a 10 percent sell-off," he said,
but did not discount further widening. But JP Morgan would be carefully
considering its options and talking to all the main parties involved, he added.

Earlier in the day the issue had narrowed to 287 b.p. over, from a Tuesday
night close of 295 b.p.

Turkey completed a series of investor roadshows last week as it sought to
convince institutional investors that it was on the road to recovery after an
economic crisis in 1994.

Eurobond players said the mission had been largely successful, with some
healthy U.S. demand for the bonds. But Europe had been the biggest buyer of the
bonds, with significant Asian and Middle Eastern interest, and only when news
of the political situation had filtered through to them would the full impact
on the deal be known, traders said.


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 * Origin: APS Amsterdam (aps.nl), bbs +31-20-6842147 (16:31/2.0)