Turkish Prime Minister speaks of canceling S&P’s contract

Turkish Prime Minister speaks of canceling S&P’s contract

ISTANBUL - Hürriyet Daily News
Turkish Prime Minister speaks of canceling S&P’s contract

Traders are seen at the Istanbul Stock Exchange in this file photo. The Turkish government has been criticizing major credit rating companies for underplaying the country.

Turkish Prime Minister Recep Tayyip Erdoğan has stepped us his verbal attacks on Standard & Poor’s (S&P) by threatening to cancel Turkey’s annual contract with the global credit rating agency, daily Hürriyet reported yesterday.

The prime minister said he found S&P’s decision to lower Turkey’s economic outlook from positive to negative utterly ideological.

“We sign a contract with the S&P every year. We may review it and cancel it unilaterally if needed. We are working on this issue. There is no obstacle against this,” he told a group of journalists during his visit to Pakistan, where he attended a second high-level cooperation council meeting between the two countries in Islamabad.

Signaling that Turkey may found its own rating agency, he said: “It is highly beneficial to take such a step. [The Turkish rating agency] may find members.”

It was not possible to deem global rating agencies free of political agendas, he said.

Debate to continue

“They try to upgrade the rating of a country that is going bankrupt, but they downgrade ours. Another agency has downgraded Greece’s rating from BB to CC. We will discuss these agencies at the G-20,” he said.

The rating agency downgraded Turkey’s outlook from Positive to Stable on May 1, drawing fire from the prime minister since then.

S&P officials have said Turkey’s rating was not downgraded and that the negative outlook assessment was due to European economic woes which may have adverse effects on the country.

Touching on the issue of whether canceling contracts with other rating agencies, namely Moody’s and Fitch, might pose a risk for the Turkish economy, Erdoğan said: “They do not determine contract debts. They only make your work easier. You might end up scampering around a little more [in order to secure loans].”

The fact that Turkey does not make “imaginary budgets” has earned the country confidence in the world, he said.

Main opposition Republican People’s Party (CHP) leader Kelam Kılıçdaroğlu criticized Erdoğan’s suggestion to found an agency. “Who would believe your word?” Kılıçdaroğlu asked during his parliamentary group meeting yesterday.

“This is a normal trade relationship, so you can cancel the contract any time. But what happens afterwards is the question,” Selim Suhan Seçkin, the chairman of Saha, a Turkish rating firm, told the Hürriyet Daily News yesterday in a phone interview. “Unfortunately, the distribution of money in the world is based on ratings these agencies give,” he said, adding that the prime minister was right in complaining about it as the performance of the staff of the three large global rating agencies and the methodology employed in deciding ratings were all questionable.

Seçkin said a rating agency should be founded by the private sector and should be comprised of independent staff. “A rating agency will not serve the purpose if it is founded in care of the state,” he said.

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