Turkish Foreign Minister Quits Dervis Does U Turn

ANKARA (Reuters)–Turkey’s ailing–embattled Prime Minister Bulent Ecevit suffered a bitter blow on Thursday when his foreign minister quit–but avoided a second defection when his economy minister was persuaded to withdraw his resignation.

Ismail Cem quit as foreign minister–and was briefly followed by Economy Minister Kemal Dervis–but he later said he was withdrawing his resignation.

"Upon the requests of the president and prime minister–I have accepted that my resignation will not be processed," Dervis–credited as the architect of Turkey’s $16 billion economic recovery deal with the IMF–said in a short statement.

Dervis said he had initially offered his resignation also on Ecevit’s request after a short meeting between two earlier in the day–indicating that President Ahmet Necdet Sezer–who has clashed with Ecevit in the past–may have played an important role in persuading Dervis to stay.

Ecevit–fighting back amid a mutiny among his followers–urged over 35 deputies who have resigned this week to return to his Democratic Left Party (DSP).

"Some of our friends are serving the purposes of those circles who want to destroy the DSP–they are falling into a trap," he said in his first public statement since his rightist coalition partners sparked a crisis by demanding early elections be held in November.

Markets have fallen this week on fears government turmoil could unhinge the multi-billion dollar IMF-backed loan pact–negotiated by Dervis to revive the economy after a 2001 crisis halved the lira’s worth and pitched Turkey into its worst recession since 1945.

Developmen’s will be watched closely by Washington which views Turkey as a chief Muslim regional ally in its "war against terror" and by the International Monetary Fund (IMF) whose biggest debtor is Turkey.

The resignations and withdrawal came in a day of high drama as an IMF team arrived in Ankara to review progress on reforms–part of the loan pact–and had talks briefly with Dervis.

Markets and the media were awash with speculation that a "troika" of Dervis–Cem and Husamettin Ozkan–the man who launched rebellion against Ecevit this week by resigning from his government and party–would form a new party.

The troika held a widely publicized meeting on Wednesday night–their embraces and smiles captured by cameras and splashed across all mainstream newspapers.

Its aim would be to take over government from Ecevit–ill for the last two months–and push stalled reforms–or at least to contest early polls.

Ecevit is refusing to resign but has signaled early polls may be inevitable.

Thursday’s statement suggested he stood by his intention not to resign and would fight hard against errant erstwhile allies.

Events may now force his hand. More than 35 deputies–including seven ministers–have resigned from his government and DSP this week. More resignations could end his government’s majority in parliament.

"We still need to see if this paves the way for more bombs to fall on the DSP. It’s expected more people will leave the party. I don’t think it will be a small number who will break from the party," said Ilter Turan–a political science professor at Bilgi University in Istanbul.

Tolga Ediz–director in global economics at Lehman Brothers–said markets urgently needed a swift resolution.

"From here onwards my expectation is that the DSP is just going to disintegrate–the government is going to disintegrate," he said. "The market needs a quick resolution at this point."

The government has been engulfed in infighting and bereft of vigor since Ecevit–77–fell ill two months ago–raising fears on markets that the IMF program might be unhinged.

Interest rates have soared adding to the country’s debt burden and choking nascent economic recovery.

Rumors that Dervis might resign had pushed the lira lower earlier in the afternoon and the Central Bank intervened to support the currency in late afternoon trade.

Cem–foreign minister for the last five years–said he would explain his decision to resign at a news conference on Friday.

European Commission President Romano Prodi canceled a planned visit to Turkey on Thursday. EU diplomats have warned the political turmoil in Ankara could put new strains on its sensitive relations with Brussels.

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