Tuesday, 14 June 2011

The Election Was The Easy Part

Turkish Prime Minister Tayyip Erdoğan has once again proved himself to be the most successful vote getter in modern Turkish history. In Sunday’s election he increased the ruling Justice and Development Party’s (AKP) share of the vote from an already high 47% in 2007 to a staggering 50%. Give the man his due. He knows his audience, and he knows what buttons to push during a campaign.

Now the real work begins. Despite the massive vote total, AKP could have a more difficult time because it actually has fewer members of the new parliament than it did in the previous one. Due to the peculiarities of the Turkish election system AKP has 326 members of parliament, down from the 340 in the previous parliament and less than the 330 required to re-write the constitution unilaterally and submit it to a national referendum. Voters gave a clear message that that dreaded word in Turkish politics, compromise, will be needed to change the constitution. This will not be easy.

One of the major reasons for the relative shortfall in AKP members of parliament is that independent candidates representing Kurdish voters won 36 seats, mainly from the southeast. Normally a political party in Turkey must win at least 10% of the total vote to enter parliament. One way around this is to run as an independent and avoid the 10% national barrier. This is essentially what the Kurdish party members did, and it now has a strong voice in the parliament. The other two parties in parliament are the main opposition Republican Peoples’ Party (CHP) with 26% of the vote and the National Movement Party (MHP) with about 13%.

This new alignment in parliament will present Erdoğan with an early challenge. But perhaps his major challenge will be to rein in an economy that is forging ahead, but on increasingly shaky foundations. This, too, will not be easy. One indication of those shaky foundations is that the April 2011 Current Account Deficit (CAD) increased 75% over the same month in 2010. For the first four months of the year the CAD jumped 114% compared with last year. This deficit will most likely reach 9% of GNP by year-end. Alarm bells should be ringing, but so far the government shows no signs of hearing them.

One London-based bond trader noted that spreads on Turkish debt have not changed much since the election and last CAD data, but traders are anticipating that the Central Bank will be forced to raise interest rates soon. Although the government may not be doing very much about the deficit, equity investors are beginning to get nervous. The Istanbul Stock Exchange index is down almost 8% for the year, and leading stocks like Garanti Bank are down 9.2%, Akbank is down 14.7%, and Isbank has dropped 11.3% so far this year.

But slowing down the economy will be politically difficult. The booming economy, especially the real estate sector, of the last eight years has made many people extremely wealthy, and the strong economic growth was a major part of the AKP election campaign. As one investor put it, “Erdoğan has never met a bulldozer or ton of cement that he didn’t like.” The prime minister has announced major projects like a third bridge over the Bosphorus, a canal from the Black Sea to the Sea of Marmara to supplement the Bosphorus strait, and ambitious plans for nuclear power plants on the Mediterranean coast and the Black Sea Coast. Russia and Japan are the leading contenders to build these plants in a country that rivals Japan for earthquake risk. So far, no one has mentioned just how Turkey will finance these projects. All these ambitious plans are in addition to the roads and construction projects that have turned much of the country into a huge building site. Tighter fiscal policy combined with increasing interest rates could put a lot of these projects at risk, and developers and banks that lent to them could face difficult days. The prime minister will need all of his renowned leadership qualities to manage this transition to more controlled growth without alienating some of his core constituents.

And then there are the Kurds. No one is quite sure how they will deal with their increased representation in parliament. How much autonomy will they demand during negotiations on the new constitution? In theory it shouldn’t be too difficult to pry four votes from the 36 independent deputies to approve a constitution that can be submitted to a national referendum. But exactly what will the Kurdish deputies demand in return for their votes? Will the restive Kurdish population be satisfied with the changes or will it resort to more direct action like the so-called Arab Spring? How much will the prime minister be willing to compromise on his own plans for a new constitution, plans that could include changing the entire Turkish political system from parliamentary system to a system with a strong president similar to the French model? Compromise has never been a major part of Erdoğan’s agenda, and it remains to be seen if the election results will change that attitude.

And what about the ‘culture wars’ in Turkey between the old elite and the new power structure based in Anatolian towns and cities instead of Istanbul? “What good does it do to replace one authoritarian regime (the old military/political/business elite) with another one based on uneducated Anatolian AKP supporters that want revenge on Turkey’s traditional power structures,” asked one very well educated young Istanbul woman.

Also lost in the election campaign and immediate aftermath was any positive mention of the European Union. In his speech immediately following the election Erdoğan mentioned Turkey’s goal of having good relations with countries ranging from Bosnia to Azerbaijan and the Middle East in general. Not once did he mention the EU. The EU is increasing seen in Turkey as an intrusive, condescending force in Turkish affairs, and negotiations for membership are going through the motions without any real commitment on either side.

If the prime minister’s inbox wasn’t already full to bursting, he’s also got Israel and Cyprus to deal with in his spare time. The Israel issue will come to a head fairly soon if the so-called aid flotilla starting in Turkey actually attempts to run an Israeli blockade of Gaza. Now that the election is over some people are hoping that the Turkish government quietly directs this flotilla to Egypt where the goods can be transported to Gaza without provoking a harsh Israeli response. And then there’s Cyprus where he not only has to deal with intransigent Greek Cypriots but also with Turkish Cypriots opposed to Turkey’s policies on the divided island.

It promises to be a very interesting summer in Turkey.

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