: On April 14 a Turkish spokesman said the country expects a higher inflation rate during 2001 and for the overall economy to contract by three percent. Inflation is expected to hit 52.5 percent, well over the 12 percent Turkey forecast last year. For 2002, the government expects a retail inflation rate of 20 percent. These are, of course, terrible figures, given the IMF-backed economic reform program Turkey began to pursue three years ago. On April 15 the Turkish government announced an austerity program that will cut government spending by nine percent during the next year and hold wage increases to the inflation rate. More ominously, Turkish news sources reported that the economic crisis, which began in February, has put nearly 500,000 Turks out of work. On April 16, the Turkish economy received another serious blow as Standard and Poor's downgraded Turkeys long-term credit rating. S&P lowered Turkeys sovereign credit rating despite an IMF endorsement of the Turkish fiscal crisis response plan. (For what its worth, the rating dropped from B to B-. Bond dealers say Turkeys banks have almost $20 billion out in bad loans.) The political bottom line: higher unemployment and high inflation mean more political disruption. Islamist radicals dont like the Euro-Turks and the secular Turkish state. Though Islamic radical states (eg, Iran) have terrible economic records, failed economic liberalization strengthens the Islamists appeal. On April 17 Turkey said that farmers would be allowed to pay off loans at pre-crisis interest rates. This is a farm subsidy but agriculture is absolutely crucial to maintaining social stability. There are, obviously, limits to austerity. (Austin Bay)