Turkey drops six zeros from its banknotes

ISTANBUL - Turks accustomed to prices in millions, even billions of lira awoke on Saturday to banknotes stripped of six zeros; a break with years of economic crisis and a move to what many hope will be a brighter European future.

Under the slimlined currency, a cup of coffee will sell for about 4 New Turkish Lira (YTL), instead of 4,000,000 old-style.

Turkey's currency has long been something of a symbol of national disgrace, bamboozling foreign visitors and reminding Turks of three decades of political turmoil and hyperinflation.

"We are very happy to have rid Turkey of such a shame, of multi-zeroed banknotes," said Prime Minister Tayyip Erdogan after drawing money from a cash machine in the northwestern town of Safranbolu, where he was on new year holiday with his family.

"We are happy to reinstate the dignity of the Turkish lira," he was quoted as saying by Anatolian news agency.

Launch of the new currency is seen as part of the country's drive to show the European Union it now has a strong market economy ahead of entry talks due to begin in October. Inflation has fallen from 150 per cent in the mid-1990s to single digits.

Turks had boasted, with some chagrin, the world's highest denomination banknote of 20 million lira. That, along with other old notes, will now be phased out completely by 2006, with both sets of notes used in parallel for a transition period.

Coins, similar in style now to euro coins, will also return to widespread use. There are 1.345 New Turkish Lira in US$1 ($1.40).

As before, both coins and banknotes will bear the image of Mustafa Kemal Ataturk, founder of the modern Turkish secular republic.

Turks welcomed the new lira when shopping in the early hours of Saturday, some clearly amazed by the small denominations.

"I believe it will be good for business. The fewer the zeroes, the easier the calculations," said Arda Sait Okten, a 20-year-old technician from the capital Ankara.

Officials from the Central Bank, who masterminded the switch to YTL, said the whole operation had gone smoothly.

Sertac Ozinal, general manager of the BKM credit card umbrella group of banks, said: "Almost 100 per cent of the entire banking system had successfully switched to the new system in all transactions by three minutes after midnight."

"The YTL is not only a currency without six zeroes but also a hope for an end to expensive living and high inflation," wrote Erdal Saglam, a leading economy columnist, in the mass circulation daily Hurriyet.

The annual consumer inflation rate for 2004, to be announced on Monday, is expected less than the 10-per cent target, the lowest in three decades.

"The government should avoid any lethargy from the falling inflation and keep the fight to lower it further to the two or three per cent level," he said.

The government last month signed an agreement with the International Monetary Fund for a new three-year standby deal worth US$10 billion to succeed a successful US$19-billion programme with the Fund that eliminated the effects of the 2001 crisis.

- REUTERS