Turkey Rules Out Early Elections as Narrow Win Draws EU Concerns

EghtesadOnline: Turkey won’t call early elections to speed up the transfer of power to President Recep Tayyip Erdogan, the nation’s deputy prime minister said after a narrow referendum that drew criticism from the European Union.

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18 April 2017

Mehmet Simsek said the government will instead focus on restoring political stability and kick-starting growth now that voters have approved a shift from a parliamentary-led system to an executive presidency. The comments quelled speculation the ruling AK party would hold a snap election, providing a respite to an economy that’s suffered from years of political turmoil, Bloomberg reported.

“Last night, President Erdogan also made it very clear that the next elections will be held in November 2019, and that there would be a period of adjustment, a period of transition,” Simsek said in an interview in Ankara on Monday. “So I think it’s been very clear that elections are not on the agenda.”

One of the reasons foreign investors have fled Turkey in recent years is the lack of political stability. Five national elections in just three years have damaged confidence in an economy that is also suffering under the weight of terror attacks and a government crackdown on opponents following an attempted coup last July.

The lira strengthened 1.5 percent to 3.6541 per dollar at 2:37 p.m. in Istanbul, trimming its loss in the past year to 22 percent. The Borsa Istanbul 100 Index of equities advanced 0.9 percent.

Simsek, a leading architect of Turkey’s economic policies over the past decade, has long promised a series of reforms to make Turkey’s $857 billion economy grow faster and reduce a current-account deficit that leaves Turkey vulnerable to the swings of foreign-currency inflows. The government hasn’t tackled those reforms, including an overhaul of the tax system and labor policy, because the AKP has been preoccupied with fighting off electoral challenges.

Slim Margin

The success of a package of 18 changes to the constitution was narrow, with about 51.4 percent of Turks approving it. The result came at the end of a divisive two-month campaign during which Erdogan accused opponents of the vote of supporting “terrorists” and denounced as Nazi-like the decision of some EU countries to bar his ministers from lobbying the diaspora.

“The margin of the ‘yes’ camp’s victory does at least mean that Erdogan is unlikely to call early elections -- which does provide an element of political stability for investors,” according to Nigel Rendell, a senior analyst at Medley Global Advisors LLC in London. Still, a market rally will likely be more muted than expected despite the reform talk as “most will only believe it when they see it,” he said.

One thing concerning investors is Turkey’s deteriorating relationship with key allies including the EU, which it has sought to join for half a century. Those concerns deepened on Sunday after Erdogan said the government might hold a referendum on reinstating the death penalty -- a move that would finish off Turkey’s accession prospects - and a European Parliament official said the president’s sweeping new powers weren’t in line with European standards.

German Chancellor Angela Merkel on Monday urged Turkish leaders to open talks with opponents after opposition parties alleged fraud and demanded a recount after election officials accepted ballots without official stamps. France urged Erdogan not to use the result to bring back capital punishment.

Simsek downplayed the risk of a deterioration in relations and said talk of a possible vote on capital punishment is still at an early stage. “The idea that it would derail Turkey-EU relations and allow Turkey to drift away, let’s not overdo it,” he said.