IMF flexible, deal may be signed in December

State Minister Mehmet Şimşek's remarks last week signaling progress in the talks with the International Monetary Fund, or IMF, has agitated the markets and made economy bureaucrats even more hopeful, predicting a deal would be reached as soon as December.

Requesting anonymity, a top bureaucrat told business daily Referans that the IMF had proposed a stand-by deal for 18 months. Negotiations are focused on a deal that can last as long as 18 months or even two years, and the talks have reached "a certain point," he said.

Noting that with Christmas just around the corner it could cause further delay and a possible agreement may be postponed until February, which would have a very negative impact on the markets.

"We consider all of these factors. In my opinion, there is no doubt the deal will be signed in December and its implementation will start as soon as the beginning of the new year. The preparations will be concluded accordingly," the bureaucrat said.

The question of public spending
He said there was no conflict of opinion between the government and the IMF on the so-called primary budget surplus, which excludes interest payments on debt. "The IMF would be willing to accept a primary surplus floating around 2 percent," he said.

The IMF is "flexible," as everyone accepts that in times of such global economic crises, growth is what needs to be focused on, he added. Political authorities will determine whether the deal will be a normal stand-by or a precautionary stand-by, he said.

Commenting on allegations that the IMF was demanding a radical cut in public spending, claimed to be almost equal to the government's 2009 investment budget; "That is absolutely not true," he said. "It is not possible for the IMF to be that harsh in such a period. We are about to reach a common ground."

More hopeful of a positive result from the IMF talks than State Minister Mehmet Şimşek, who is actually involved in the talks, the economy bureaucracy is also far more optimistic on the extent of the current crisis.

Market reflexes
The same bureaucrat, who also conducts activities on preventive measures against crises, defined the current troubles in banking as "reflexive actions." Events that may severely damage the financial system are not happening at present and the issue does not create an urgent threat for the upcoming period, he said.

"We see reflexive acts taking place, mainly out of fear But we do not see any noteworthy foreign capital outflow. Still, banks recall loans as a precaution, or firms lay off workers. In reality we did not sustain such a harsh blow [from the global crisis] that would necessitate such action."

Regarding the possibility of a "government measures package" that was reported widely in the press Thursday, the official said they were "revising the measures one by one and discussing with friends from various institutions."

"Such media stories are related to demands we received [from industry representatives] at those meetings. Nothing is certain about the content and the extent of a package."

Reiterating the negative mood in the markets, he said, "It is not as if we are underestimating the issue. However, it should not be exaggerated, either. It is crucial to keep things going without disrupting fiscal discipline."

The draft of a measures package will be revealed at the Economic Coordination Board meeting, which will be held under the presidency of Deputy Prime Minister Nazım Ekren with top ministers, he said. Then, he added, it would be up to the government to make a decision.