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Q&A: Turkey's economic crisis

ANKARA, Turkey (CNN) -- CNN correspondent Chris Burns has been covering the economic turmoil and protests that have followed in Turkey. He explains what lies behind the crisis and how it is affecting Turkish people.

Q. How did this crisis start?

A. It began in mid-February, when Prime Minister Bulent Ecevit clashed with President Ahmet Necdet Sezer over reform. The president said Ecevit was not moving fast enough to combat corruption in the banking system.

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Q. What has happened to the Turkish economy?

A. The value of the lira has plunged nearly 50 percent, prices -- especially on imports -- have soared, and hundreds of thousands have lost their jobs. Growth that was booming at six percent last year, could fall to minus four percent this year, analysts say.

Q. What has the government done to help the economy?

A. The government has offered to roll back interest rates for small business owners and allow them to delay tax payments.

Q. How has this affected foreign investment in Turkey?

A. Investors pulled out of the market, helping to send the financial markets tumbling. However, with the plunge of the lira, many foreign investors are back bargain-hunting.

Q. What role has the International Monetary Fund played in the crisis?

A. It was an earlier IMF plan, backed by $12 billion in loans, that collapsed in the crisis. The fund had been demanding reform, including cleaning up the banking system. It is now offering billions of dollars in loans again, though perhaps about half the original amount, in exchange for similar reforms. It has been criticised by many in Turkey for causing the crisis, though others say the it had been demanding reforms Turkey needs to make in any case.

Q. Why are public protests being held?

Because of the declining living standards and rising unemployment as a result of the crisis. Unions are also protesting a government plan to freeze salaries for over 400,000 state workers for six months as part of the austerity plan mandated by the IMF.

Q. How has the crisis affected Turkish people?

Prices on imports like gasoline, cars, electronics, computers, etc, have risen as much as 50 percent. That has repercussions on domestic prices as well. Meanwhile, hundreds of thousands have lost their jobs.

Q. How long is the crisis likely to last?

A crystal ball question. This obviously depends on how quickly the government can carry out reforms, and whether social and political resistance prevents it from doing so. It also depends on foreign investors coming back and whether foreign lenders come to Turkey's assistance. Many lenders have donor fatigue after years of Turkish economic mismanagement. Turkey exports of textiles and other goods and if the world economy goes into recession that could also put a brake on recovery.



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