Turkish opposition slams Erdogan after cenbank governor ousted

* President replaced governor with critic of high interest rates

* Financial markets tumbled in response to the move

* Opposition parties hold Erdogan responsible for economic woes

ANKARA, March 23 (Reuters) - Opposition parties say Turkey is paying a steep price for President Tayyip Erdogan’s wayward economic policies after his shock firing of the central bank governor sent Turkish financial markets reeling.

Erdogan dismissed Naci Agbal on Saturday, two days after the governor raised rates to curb inflation. Erdogan then appointed a critic of tight policy who is expected to reverse recent rate hikes, fuelling fears of political meddling in monetary policy.

The lira slumped as much as 15% after the move, stocks dived and government yields jumped, piling pressure on the credit-fuelled emerging economy, which has been prone to booms and busts during Erdogan’s 18 years in power.

Sahap Kavcioglu, a former lawmaker from Erdogan’s ruling AK Party (AKP) who shares the president’s unorthodox view that high interest rates cause inflation, is Turkey’s third central bank chief since mid-2019.

“Turkey is paying the price for Mr Erdogan’s thoughtless and reckless decisions with high interest rates, unemployment and high inflation,” Iyi Party chairwoman Meral Aksener told her party’s lawmakers in a speech in parliament.

Erdogan recently announced an economic reform package but Aksener said it lacked credibility. She said Turkey’s economic woes - with inflation above 15%, high unemployment and a gaping current account deficit - left no alternative to high rates.

“High interest rates have become necessary. High interest rates are a fever medicine, not a permanent cure. As the treatment is delayed, it is inevitable for the patient to die,” said Aksener, head of the fifth largest party in parliament.

‘UNPRECEDENTED INCOMPETENCE’

Faik Oztrak, deputy head of the main opposition Republican People’s Party (CHP), slammed what he called the AKP’s “ideological blindness”.

“It is truly unprecedented incompetence to cause the Turkish lira to lose more than 10% in a single day two days after interest rates were raised,” he told a Monday news conference.

Erdogan has not commented on the move but a deputy head of the AKP, Nurettin Canikli, said Agbal had been dismissed because he did not use monetary policy instruments rationally.

Aksener said her party supported Agbal prioritising price stability and faulted Erdogan’s economic management, under a presidential system which came into force after a 2018 election.

“Turkey has no macroeconomic problems. Turkey has macro-Erdoganic problems... What is the solution? To immediately get rid of this failed system and return to a parliamentary democracy,” she said. (Additional reporting by Ali Kucukgocmen Writing by Daren Butler Editing by Dominic Evans and Gareth Jones)