Turkey gains monetary credibility

The start of the 21st century was traumatic for Turkey. A strategy for disinflation based on a fixed exchange rate set up in 2000 collapsed. The lira was forced to float in February 2001, and then plunged. The destabilising effect was compounded by September 11 and its aftermath. Lower export demand, tourism and reduced access to financial markets clobbered the economy. The banking system faced near ruin, and the use of public funds for restructuring meant debt spiralled to 90% of GNP in 2001