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PM Erdoğan keeps critical tone against credit rating agencies

23 May 2012, Wednesday /DOĞAN YILDIZ
Ever since rating agency Standard & Poor’s (S&P) lowered its outlook on Turkey’s sovereign credit rating a few weeks ago, a time when the markets expected an assessment completely in the opposite direction, it has become common conduct for Prime Minister Recep Tayyip Erdoğan to point fingers at those controversial credit rating agencies. At a forum in Kazakhstan on Wednesday, Erdoğan voiced similar comments to large audience.

Speaking at the 5th Astana Economic Forum, Erdoğan continued with his strong criticism of credit rating agencies, accusing them of following a “political and ideological agenda” rather than remaining loyal to what pure scientific observation and analysis demand. He said: “These agencies should base their ratings fairly on the economic conditions of the country. Otherwise, this will cause inequality and will seriously damage the economies of emerging countries, as it is unusual for them to downgrade the ratings of developed countries.” He added: “At this point, I’m addressing my final warning to the rating agencies and I will bring this issue to the table at the upcoming G-20 meeting.” During his speech, noting that the global economy is going through a difficult time, the prime minister expressed the critical importance of the forum as it provides grounds for discussing regional and global economic problems and finding ways to resolve them. He explained that the financial crises that began in the US and still continue in the eurozone have created political and social problems, stressing the significance of acting collaboratively to find solutions as the policies implemented by countries on their own have been unsatisfactory and that the effectiveness of measures rely on unity. He added, “The developments in the eurozone, which is also Turkey’s largest trade partner, are of serious concern to us.” Erdoğan called on eurozone countries to act together, stating, “These countries should be responsible and focus on their financial discipline as this would be beneficial for the welfare of the world economy.” Although the crises have even fueled discussions about ending the European Union, he said the ongoing crises also provide grounds for the EU to strengthen its structure and that at numerous meetings with EU leaders, the importance of integration with EU standards was over-emphasized. Following a statement by Erdoğan on Tuesday about the possible creation of a Turkish credit rating agency, Deputy Prime Minister Ali Babacan said Turkey may cancel its contract with S&P at any time. “If necessary, we may cancel our contract with S&P at any time. There has been no decision to do so yet, but we may take this step in the future. We do not have a contract with [credit rating agency] Fitch,” Babacan said.

Key investor says ratings should not be taken into consideration

Mark Mobius, who is known for his expertise on emerging markets, said on Wednesday that the ratings of credit agencies are skipped over when decisions regarding investments are being made, according to an Anatolia news agency report.

Mobius, who serves as the emerging markets fund manager for California-based Franklin Templeton Investments Inc., said his company does not consider these ratings. He added, “We will continue to invest in Turkey now and in the future.” Noting the dynamism of the Turkish economy, he stated, “Turkey will continue to be at the center of interest for international investors.” He added that fluctuations in the eurozone are better than its destruction, which would be caused by the exit of Greece. Mobius also said lessons should be learned from the developments in the eurozone. “Despite all this, I am confident the Turkish economy will achieve a soft landing and control inflation.”

International credit rating agency S&P cut its outlook on Turkey’s BB sovereign credit rating earlier this month, saying risks to its creditworthiness had risen as a result of its high debt and worsening terms of trade as demand for its exports weakens.

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