(In the ANKARA item ``WRAPUP 1-Turkey counts the cost of terror attacks on U.S.,'' please read after the quote in the fourth paragraph, ``...Economy Minister Kemal Dervis told reporters in Ankara.,'' inserting Dervis' position and first name.)

     A corrected repetition follows.

     By Hatice Aydogdu

     ANKARA, Sept 17 (Reuters) - Turkey on Monday hinted Western allies should help ease any extra burden financial burden on its stricken economy from the aftermath of the terror attacks on the U.S.

     Turkey is in the midst of a deep economic crises that erupted in February, leading to a 50 percent slump in the value of the lira currency, the collapse of a counter-inflation plan and a major overhaul of the banking system. It is now struggling to maintain a economic reform programme backed by $15.7 billion in IMF and World Bank loans.

     Stocks fell by 10 percent on Monday, the lira reached a record low of 1,540,000 against the dollar, interest rates have risen again and foreign capital markets look, at the very least, unwelcoming to emerging market countries.

     ``Turkey's strategic importance for the European Union and NATO is rising and within this strategic framework Western allies should consider the cost that Turkey will have to bear,'' Economy Minister Kemal Dervis told reporters in Ankara.

     His words were clearly primed to alert allies to the dangers facing the Turkish economy and, implicitly, the threat to political stability should a protracted conflict develop.

     NATO ally Turkey, bordering the Caucasus, Iraq, Syria and Iran, has a large U.S military presence and itself commands the biggest standing army in NATO's European theatre. Washington sees it as a key ally in a turbulent region.

     A deepening economic crisis could arouse ``demons'' such as islamist militancy. That prospect, well enough telegraphed by Dervis, would not be lost on the United States.

     U.S. planes fly from Incirlik airbase, enforcing a ``no-fly zone'' over the Kurdish enclave of northern Iraq, beyond Baghdad's control since the 1991 Gulf War.

     Prime Minister Bulent Ecevit has said Ankara is willing to support Washington in its response to last Tuesday's attacks on the World Trade Center and the Pentagon that killed thousands.

     It remains unclear what role Turkey would be asked to play beyond intelligence gathering. Certainly, Turkish air bases could be used as part of a strike.

     The United States suspects Saudi-born Osama bin Laden, based in Afghanistan, as being behind the action. It is now preparing for what it calls a sustained ``war against terrorism.''

     Turkey, while welcoming its opportunity to reassert loyalty to its chief ally, the United States, must be very wary of the potential costs it will bear at a time it craves stability.

     Ankara says that since the Gulf War, sanctions against Iraq, once a major trading partner, have cost it some $35 billion and officials feel Ankara has had little compensation for that.

     Dervis told reporters the fallout from the devastating attacks in the United States last week could hurt the Turkish economy, particularly tourism and exports.

     He said it could take time for Turkey to secure new foreign financing from private sources as envisaged in the IMF plan. A eurobond issue scheduled for September might be postponed.

     But Dervis said Turkey was able to delay repayment of part of $5 billion it is due to remit to the IMF next year, and Ankara has discussed that with the IMF. He did not say whether the IMF had agreed to such a postponement but an IMF source in Washington said last week such a move should not be a problem.

     IMF PROGRAMME ``WILL CONTINUE''

     Dervis said Turkey was not at present seeking any extra international funding from institutions beyond the terms of a $15.7 billion package agreed with the IMF and World Bank in May after the financial crisis in February.

     ``The thing that has to be done right now is we have to state clearly that the programme will continue,'' Dervis said.

     He said that despite the worsened global economic outlook, he did not expect major changes in Turkey's end-2001 macroeconomic targets, though there could be small changes.

     Treasury Undersecretary Faik Oztrak said at the same meeting with reporters that under current debt circumstances there was no chance of raising spending or cutting taxes to spark growth.

     Turkey's domestic debt has been swollen by massive issuance to cover bank restructuring and persistently high interest rates have made it punishingly expensive to service the debt. Bond yields have risen again since the U.S. attacks.

     Turkey was forced to float the lira on February 22, abandoning a crawling currency peg that had been the centrepiece of a three-year IMF-backed disinflation programme. The lira has since lost around 50 percent of its value against the dollar.
^ REUTERS@