Turkey renews attack on ratings agencies

Recep Erdogan, the Turkish prime minister, has stepped up his attack on the international credit ratings agencies, accusing them of damaging his country¿s economy.

A tanker passes beneath a bridge over the Bosphorus in Istanbul. The Turkish government has accused credit ratings agencies of damaging the country's economy. Kerem Uzel / Bloomberg News

ASTANA, KAZAKHSTAN // Recep Tayyip Erdogan, the Turkish prime minister, has stepped up his attack on international credit ratings agencies, accusing them of damaging his country's economy.

The Turkish government last month launched a verbal attack against the agencies after Standard & Poor's, one of the big three global agencies, downgraded its outlook on Turkish sovereign debt.

Speaking at the Astana Economic Forum in Kazakhstan, Mr Erdogan said: "The credit raters can hurt countries. We have to reevaluate how they work.

"They have become a political force that affects countries, and we need to do something about the criteria they use as they can hurt and hinder the development not only of Turkey but of the world economy."

In Astana, Mr Erdogan suggested his government would take action against the ratings agencies.

"I have already warned them, and they must take into account the consequences of their actions," he said without elaborating.

He said this month that Turkey might set up its own agency to rate its sovereign debt.

The row between Turkey and the agencies is mirrored by grievances felt by some European governments, notably France and Italy, about recent downgrades of their creditworthiness.

The United States also reacted angrily last year when it lost its long-standing AAA rating on sovereign debt. Although S&P revised its opinion on Turkey only from "positive" to "stable", the move meant that the agency was not going to award investment-grade status to the country in the near future.

Turkey believes this does not reflect the country's economic prospects and fears it will increase the nation's borrowing costs on global capital markets.

"Our economy has gone through serious reforms and consistent policies," Mr Erdogan said.

"We have protected the economy from the waves of the financial crisis. The banks only suffered a small adverse effect from the financial crisis," he said.

"Our reaction to the crisis with a stimulus package should serve as an example to all countries. It is still our ambition to be one of the world's top 10 economies within a matter of years."

S&P is concerned about Turkey's large current-account deficit, and its exposure to the crisis in the euro zone, which is the country's largest trading partner.

Robert Mundell,a Nobel Prize winner in economics and a professor at Columbia University in New York, said the rating agencies "failed abysmally to warn about the EU crisis when they should have been able to predict it".

"They're not the best, but they're the best we've got," he said. "If you have a government setting up ratings systems, nobody will believe them because they are tied up too close with governments."

Economists are divided on prospects for the Turkish economy.

Some believe the country's high growth rates - at 8.5 per cent last year the highest of any Group of 20 country except China - justify a premium rating and argue that the agencies have got Turkey wrong.

"I think many in the market would have a lot of sympathy with Turkey and Mr Erdogan," said Tim Ash, an economist at Royal Bank of Scotland.

Others point to the country's current-account deficit, which has been growing at a fast rate, and its vulnerability to external factors if the global economy hits another downturn in the wake of the euro crisis.

There are also concerns over inflation, which at more than 11 per cent is the highest in more than three years.

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