ANKARA: The political crisis engulfing Turkish Prime Minister Recep Tayyip Erdogan has cost the economy $100 billion, a top official said Monday, as financial markets rebounded after days in freefall.

Deputy Prime Minister Bulent Arinc said a sweeping corruption probe that has shaken the core of Erdogan's adminstration was a “plot aimed at tarnishing Turkey's prestige at home and abroad”, a frequent government refrain since the scandal erupted.

“We are talking about damage of over $100 billion,” Arinc said after Turkey's first cabinet meeting since a major reshuffle last week forced by the resignation of three ministers over the probe.

Turkey had been seen as a model of democracy in the Muslim world and an emerging economic power but the crisis sent its currency and shares plunging.

However, the battered financial markets bounced back Monday.

The lira rallied to 2.1239 against the dollar after hitting a record low of 2.17 last week as Erdogan faced mass protests and growing calls to resign.

The Istanbul stock exchange surged 6.42 per cent.

Erdogan, struggling to keep his grip on power after 11 years as the country's almost unassailable strongman, has vowed he would survive what he has branded a “dirty” plot to try to topple him.

A string of public figures including high-profile businessmen and the sons of three ministers were rounded up on December 17 over allegations of bribery for construction projects as well as illicit money transfers to sanctions-hit Iran.

Local media reports have also suggested his son Bilal may face investigation.

It is the worst crisis since June when Erdogan faced a month of mass street demonstrations against what critics said was his increasingly authoritarian rule and attempts to impose his Islamic values on society.

Erdogan named 10 new ministers, almost half the cabinet, after his interior, economy and environment ministers stepped down last week following the detention of their sons.

The turmoil has exposed rifts within his own Justice and Development Party (AKP) and a power struggle with an influential US-based Muslim cleric, Fethullah Gulen.

It has also sullied the reputation of his party which took office in 2002 with a pledge to root out corruption and which takes its name from AK, meaning “clean” and “pure” in Turkish.

The government has suggested that Gulen loyalists, who wield considerable influence in the police and judiciary, were forcing the corruption inquiry to undermine Erdogan in the runup to the March elections.

“This operation is an assassination attempt ahead of elections,” new Interior Minister Efkan Ala was quoted as saying by pro-government Sabah daily.

“This is almost a coup to topple the government.”Gulen, who has been living in self-imposed exile in Pennsylvania since 1999 after being accused of plotting to form an Islamic state, has denied involvement in the corruption probe.

'Ugly slander'

Neither Gulen nor his Hizmet (Service) movement has “any hostility” towards the government, according to the Journalists and Writers Foundation, a non-profit group of which Gulen is honorary president.

It voiced “deep concerns” over what it said were the authoritarian tendencies of the AKP, and rejected allegations that Gulen's movement was acting on behalf of foreign powers to establish a parallel state as “ugly slander”.

“It is obvious that in Turkey any government involved in corruption... has lost trust and credibility,” it said in a statement.

Erdogan's government has ordered the sacking of dozens of police chiefs linked to Gulen or who oversaw sweeping raids on December 17 that saw the detention of dozens of people including the ministers' sons and high-profile businessmen.

Among those charged with bribery is Suleyman Aslan, the chief executive of Turkey's state-owned Halkbank, which is accused of being involved in illegal gold sales to Iran in return for energy imports.

“It is the first time in the history of the Turkish republic that a prime minister is defending thieves. How can someone who defends thieves be prime minister,” said Kemal Kilicdaroglu, leader of the opposition Republican People's Party.

Anti-government demonstrators have taken to brandishing shoeboxes at anti-government protests after $4.5 million in cash was found stashed in boxes in Aslan's home.

Turkey's once powerful military, the self-declared guardian of the secular state which has launched three coups, has said it would not get involved in the latest crisis.

Since taking office, the Islamic-rooted government has reined in the military with a series of court cases against top army brass.

An AKP lawmaker suggested at the weekend that the government could change the law to pave the way for retrials of hundreds of convicted army officers but Arinc said Monday such a move was not on the agenda.