Turkey Politics

Turkey

Turkey: Deteriorating security situation complicates coalition talks

August 3, 2015

After being dealt a significant blow in 7 June’s parliamentary elections, Prime Minister Ahmet Davutoglu and the governing Justice and Development Party (AKP) began coalition talks in July, although the possibility of another election seems to be inching closer. The AKP lost the parliamentary majority it has held since 2002, resulting in the first hung parliament in over a decade. The AKP won 258 seats in the 550-seat parliament, falling 18 seats short of a majority government. If no government can be formed by 24 August, President Recep Tayyip Erdogan has the right to call a snap election. So far, the most likely partner for a coalition looks like the main opposition, the Republican People’s Party (CHP). On 26 July, Kemal Kilicdaroglu, head of the CHP, stated that his party was prepared to work with the AKP ending weeks of political impasse. However, coalition negotiations are still in the early stages and there are major ideological differences between the parties.

The deepening political uncertainty over if and when a new government will be formed is complicated by in a rapid escalation of violence linked to the Kurdistan Workers’ Party (PKK), a separatist group, and the regional Islamic State (ISIL) conflict. Following a suicide bomb that killed mostly pro-Kurdish activists in July, the PKK have launched a series of violent attacks in Turkey and the country has responded by conducting air strikes on PKK camps as well as by stepping up strikes on ISIL targets. The escalation in fighting has jeopardized the PKK and the Turkish government’s two-year-old ceasefire in recent days and has increased political tension in the country. June’s election saw the rise of the People’s Democratic Party (HDP), which became the first pro-Kurdish party ever to be represented in parliament and was a driving force behind the AKP’s loss of support. Some analysts have linked the increased violence between the state and PKK as a strategy to erode support for the HDP and influence potential snap elections. Turker Hamzaoglu, EEMEA Economist at Bank of America Merrill Lynch adds:

“Early elections in November is now our base case. The base case for the political outlook has been deteriorating gradually since late 2Q. First, the expectation was that AKP would rule with a narrow simple majority. Then the elections coalition became the base case. And now it seems Ankara is ready for another round of elections. […] Our meeting with political parties in Ankara suggests HDP is not welcome in coalition scenarios. MHP has already launched its election campaign, and CHP and AKP sound like coalition talks are just for formality. “

Turkey’s economic prospects have been clouded by recent events. The recent escalation of violence could make coalition negotiations more difficult and the possibility of snap elections or a deterioration in the security situation could weigh on the country’s economy.

Panelists took a wait-and-see-approach this month and left their growth projections for 2015 unchanged. The panel expects GDP to expand 3.0% this year and sees it picking up to a 3.5% increase in 2016.


Author: Angela Bouzanis, Senior Economist

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