Turkish president approves pro-EU, reform cabinet

By Hidir Goktas and Emma Ross-Thomas

ANKARA (Reuters) - New Turkish President Abdullah Gul on Wednesday approved a pro-EU cabinet, reflecting Prime Minister Tayyip Erdogan's determination to push ahead with stalled political and economic reforms needed to join the bloc.

As foreign minister, Gul helped Turkey win European Union accession talks status in 2005 and he is the first politician with a background in political Islam to become president in mainly Muslim but constitutionally secular Turkey.

His appointment has irritated the powerful armed forces.

After meeting Gul at the presidential palace, ally Erdogan named Ali Babacan as Gul's successor as foreign minister. U.S.-educated Babacan will keep his role as chief negotiator in the EU membership talks, which were partially frozen last year.

"I prepared the new cabinet as a team who have the skills to realize our goals for the coming period ... I believe that we formed a strong team," Erdogan said.

The lira firmed 0.7 percent on the announcement to 1.3180 against the dollar. Analysts welcomed the reform-minded team, which includes one of their old colleagues, former Merrill Lynch economist Mehmet Simsek, who will be economy minister.

Erdogan, who has pledged to bring the AK Party more to the centre of Turkey's political landscape, appointed several other ministers with more secular credentials.

"Erdogan has tried to blend experience in office with some new blood, while also bringing good technical experience to the table ... This appears as a relatively market-friendly cabinet, which offers the prospect of continuity and reform," said Tim Ash, an economist at Bear Stearns.

Gul, 56, has said he will continue to be active in foreign affairs, and many observers expect him to overshadow the much younger Babacan on the international stage.

The ruling Islamist-rooted AK Party won a sweeping victory in a parliamentary election in July but was unable to form a government until now because of objections by Gul's secularist predecessor Ahmet Necdet Sezer.

The West and the Muslim world are watching Turkey, a strategic player in a volatile region, to see how it combines a secular-based constitutional democracy with Islam.

The military's top brass snubbed Gul's swearing-in ceremony in parliament on Tuesday and on Wednesday appeared to give him a chilly reception at a prestigious military graduation ceremony.

The military and secular elite fear his presidency will lead to a creeping subversion of the secular order. He denies this.

END OF CRISIS?

Turkey's military considers itself the ultimate guardian of the secular republic founded by Mustafa Kemal Ataturk and has ousted four governments in the past 60 years.