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The Economy: An Unresolved Issue

The Turkish economy was severely hurt by the increase in oil prices after 1973. Conditions deteriorated over the next several years, reaching the crisis level by 1977. Inflation reached a rate exceeding 50 percent that year, while unemployment was unofficially estimated at as high as 30 percent of the available workforce. Domestic industries also lost ground in export markets because of increases in the cost of raw materials and energy. Turkey's trade deficit reached US$4 billion in 1977, contributing to a balance of payments deficit nearly five times the 1974 level. Becoming skeptical of Turkey's ability to repay existing debts, a number of foreign creditors refused to extend further loans. As a result, the country virtually ran out of foreign exchange to meet its immediate commitments and was faced with national bankruptcy, which was averted only when the Central Bank intervened by suspending payments for many imports and, in effect, forced credit from foreign exporters.

Under pressure from the International Monetary Fund (IMF--see Glossary), the Demirel government belatedly announced such measures as a 10 percent devaluation of the currency and substantial increases of some government-subsidized prices. By the end of 1977, Turkey had accumulated a total external debt of more than US$11 billion. The Ecevit government came to power in January 1978 with a stabilization program that essentially had had to be approved by the IMF and the OECD. The plan included incentives for foreign investment and further price adjustments to restrain domestic demand. An international consortium of six banks collaborated in restructuring the Turkish debt and arranged for a US$500 million loan to the Central Bank for economic development. Subsidies to state-directed enterprises were cut, but Ecevit insisted on increased public spending for employment and regional development, which he argued were required to maintain "domestic peace."

Despite the stabilization program, another major devaluation of the Turkish lira (for value of the Turkish lira--see Glossary), and rescheduling of the foreign debt, there were no clear signs in 1978 that economic recovery was under way. In fact, austerities imposed under the program had the opposite effect to what was intended. Because of energy conservation efforts and restrictions imposed on imports of raw materials, industrial production fell. Consequently, exports lagged and unemployment continued to increase. State enterprises registered losses of about US$2 billion for the year. Because of a lack of confidence in the government, the stabilization program failed to attract new investment from abroad.

On returning to office in November 1979, Demirel proposed a new economic stabilization program that for the first time emphasized private-sector initiatives. The program, drawn up in consultation with a consortium of international banks, was approved by parliament, and Turgut Özal, an economist, was placed in charge of implementing it. Some progress was recorded, but the government's attention was diverted by intensified political violence, which by mid-1980 was claiming twenty or more lives a day.

Challenges to Public Order

Turkey faced recurrent political violence throughout the 1970s. Political parties, particularly those of the extreme right, organized strong-arm auxiliaries for street fighting. Kurdish nationalism and sectarian divisions were also factors. From time to time, specifically from 1971 to 1973 and again in December 1978, the frequency of such violence and the involvement of increasing numbers of persons led to the imposition of martial law in parts of the country.

Most of the violence-prone groups of the right were apparently attached, directly or indirectly, to Türkes and the MHP. The best organized of these, the Gray Wolves, were armed and regularly resorted to terrorist tactics. Other groups--particularly those on the left--used violence in the hope that the reaction of the state would lead to revolution. Their members assaulted politicians and public officials, the police, journalists, and members of rival groups. United States military personnel stationed in Turkey were also targets of attack. Some groups involved in the violence were identified with the Kurdish nationalist movement.

The Ecevit government initially tried to play down the significance of Kurdish separatism and to avoid actions that might alienate the many Kurds who supported the CHP and lead them to join extremist groups that they might otherwise ignore. Opposition members in the Grand National Assembly, who tended to identify any sign of restiveness in the Kurdish regions with Kurdish separatism, insisted on stronger measures from the government. In April 1979, the martial law that had been proclaimed in some parts of the country the previous December was extended to provinces with Kurdish-speaking majorities.

Estimates vary, but some sources claim that as many as 2,000 persons died in political violence in the two-year period 1978-79. The single most serious incident erupted in the town of Kahramanmaras in December 1978, when more than 100 persons were killed in sectarian conflict between Sunni and Alevi (see Glossary) Muslims. The incident led to the imposition of martial law in the Kahramanmaras Province that same month.

The military became increasingly uneasy over continued criticism of the armed forces in the Grand National Assembly. The apparent inability of successive governments to deal with problems of the economy and public order led many in the military to conclude that the 1961 constitution was defective. Their frustration with the political process was confirmed in September 1980, when the assembly was unable to fulfill its constitutional responsibility to elect a new president.

Data as of January 1995

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