In Turkish heartland, businessmen laud Erdogan's central bank tirades

By Humeyra Pamuk KAYSERI, Turkey (Reuters) - President Tayyip Erdogan's tirades against the central bank may be stoking turmoil in Turkish financial markets, but they are winning praise from a class of industrialists who have thrived over the past decade and see him as a pillar of their success. Ahmet Hasyuncu has turned his humble family cotton mill in Kayseri, a city in the conservative Anatolian heartlands, into a multi-million dollar textile exporter over the past decade, thanks largely, he says, to cheap loans and political stability. Here and in neighbouring cities, dubbed "Anatolian Tigers" for their entrepreneurial zeal and strong growth rates, loyalty to Erdogan runs deep. He is widely held as Turkey's greatest modern leader, delivering hospitals and schools and ending an era of unstable coalition governments. "Without the economic policies of last ten years, without the political stability, and the credibility that allows banks to offer cheap loans to Turkey, this growth, these investments would have been unthinkable," said Hasyuncu, 63. "If Mr Tayyip is crying out loud everyday to get interest rates cut, it is for us. It is to keep the investments going," he said in his office in Kayseri's industrial zone, home to more than 900 small and medium-sized manufacturers. It is a very different view seen from the trading floors of Istanbul. Erdogan's latest attack on the central bank on Wednesday, slamming its interest rate policy as "unsuited to the realities of the Turkish economy", has raised concern about the future of its governor and of Deputy Prime Minister Ali Babacan, seen by foreign investors as an anchor of market confidence. The lira hit a record low on Friday and economists have started to question whether Turkey could lose its investment grade ratings from agencies Fitch and Moody's, key to foreign flows into its stock market and bonds. But with a parliamentary election in June, and Erdogan keen for the AK Party he co-founded to win the bigger majority it needs to boost his presidential powers, he looks unlikely to change a stance championed by his loyal supporters. "Other than Germany, there's no country in Europe I look up to anymore. Our roads, facilities, plants, all are better ... This has all happened thanks to AK Party policies," said Aydin Murat Yakici, general manager of the Hascelik steel producer. "The biggest driver of growth has been cheap money. It is not possible for us industrialists and investors to grow without loans." CHAMPION OF THE UNDERDOG Erdogan's rhetoric on interest rates is part of a blunt populism that has often played on a schism in Turkey between a Western-facing, largely secular class suspicious of his Islamic ideals and a pious segment of society that sees him as a hero. He has accused an "interest rate lobby" of speculators of pushing for higher rates, casting them as growing rich on interest at the expense of hard working industrialists, the real bedrock of Turkey's economic success. It is a narrative that has helped him win elections. "Ten years ago, companies like us were snubbed by foreign investors. We couldn't find money for Libor plus 4.5 pct. When our banks managed to put together $50 million (32 million pounds) syndication loans, they were celebrating," Hasyuncu said. "I like Mr Tayyip's determination. He stands tall. He pressed on with investments and today we have companies the Arab world and Europe admire. No-one can afford to snub us anymore." Turkey has seen strong economic growth since the AK Party came to power in 2002, averaging 7 percent until the global financial crisis of 2008. Growth this year is forecast by the government at four percent. In Kayseri, the number of firms in the "Organised Industrial Zone", where investment is rewarded with state subsidies, has more than tripled in the last decade, while the city's exports have risen to around $2 billion a year from $600 million. The central bank cut all of its main interest rates on Tuesday despite inflation running at above its target, but Erdogan and government officials loyal to him dismissed the move once again as not enough. Embattled Central Bank Governor Erdem Basci appeared on Friday to dismiss any suggestion that he might resign, saying that public duty should be performed for the full period in which it is assigned, meaning the battle is likely to rage on. "Look around you, all of this infrastructure, all these roads, hospitals, these were possible because we were able to borrow at a much lower cost," said Mahmut Hicyilmaz, head of Kayseri Chamber of Commerce. "How could I keep investing with current interest rates?" (Writing by Nick Tattersall; editing by Janet McBride)