Erdoğan taking Turkey and the AKP to stormy waters

Step by step, Erdoğan is taking the ship of Turkey into dark waters.

But, the more he behaves driven by his basic instincts, the more he antagonises whomever he sees and chooses as adversaries, his party, AKP, is also driven to an existential dilemma.

The AKP has come to the end of its journey. It has fulfilled its mission and seen its limits, has noted great success in economy, much less so in democratisation and dşplomacy, and there appears to be no more arsenal of energy to create a Turkey based on tolerance, diversity and high morality. It is losing the battle.

Yet it will be a slow motion loss: the alternative is lacking. Thus, it will be a painful journey from now ıon.

As reported by Today’s Zaman:

‘Corruption, a large and troublesome problem for Turkey, led to the demise of several governments in the past and analysts warn that the same fate might await the Justice and Development Party (AK Party), some of whose members have been targeted as part of a major bribery and fraud operation along with dozens of businessmen and bureaucrats, unless the party proves itself “clean.”
AK means – rather, meant – ‘pure’. Given the defiance to remove ministers, Erdoğan is damaging the party speedilyü, and it is bound to cause a split, sooner or later. 
‘Suddenly, the AK Party is looking decidedly grubby.’
He continues:
‘In response to the allegations, Erdogan has fired dozens of Istanbul police chiefs involved in the arrests, the same ones he defended and praised over their handling of the Gezi Park protests earlier this year. He says the corruption cases are part of the same plot he detected behind the Gezi Park protests, conducted by the same dark morass of international conspirators. Except that now the police who cracked down on the protesters must be part of the conspiracy, too.

This is just untenable. To make it stick and purge Gulen’s supporters from the police force, prosecutor’s office and courts, Erdogan will have to crack down in ways that will destroy what remains of Turkey’s independent law enforcement institutions and media freedoms. That will deal a huge blow to the so-called Turkish model, the idea that Turkey had cracked the code for implementing genuine democracy in the Muslim world. And that would be a tragedy, because the Turkish model is real and important, if overhyped, oversimplified and already under strain.’

John Hannah sees serious gloom, perhaps the end of Erdoğan, ahead.

In an article in Foreign Policy, he elaborates his point that Erdogan’s political fortunes have been seriously weakened:

‘Starting with his intolerant, imperious, and menacing response to Gezi six months ago, he’s clearly lost his golden touch. He’s making mistakes and miscalculations, repeatedly. He appears increasingly erratic, authoritarian, and thuggish. He’s alienating enemies, to be sure, but allies as well — not just among the Gulenists, but within his own camp, too. His aura of invincibility has been cracked. The widespread fear he induced in large swathes of Turkish society has been partially breached. For the first time in a decade, there are signs that he may be vulnerable politically.

Already, there are rumors that there soon could be further resignations of Gulenists from the AKP parliamentary coalition, including perhaps a small number of cabinet ministers. On the economic front, this week’s news sent Turkey’s stock market and currency tumbling, and it is entirely possible that a drawn out crisis could precipitate large-scale capital flight from the Turkish market. Depending on how bad the news gets, one can even imagine Erdogan’s own comrades in the AKP starting to look for ways to distance themselves from him in an attempt to salvage their careers. The implosion of the AKP coalition, while perhaps still not likely, suddenly seems within the realm of possibility.

Nevertheless, given Erdogan’s near-total mastery over Turkey’s political scene for more than a decade, it’s still probably a stretch at this point to bet against him — much less count him out. Even in the wake of Gezi and other events, there’s not yet a lot of hard evidence that either he or the AKP have suffered a major hit in popularity. And it’s even harder to make the case that Turkey’s rather hapless secular opposition parties have been major beneficiaries of the Islamists’s internecine showdown.

What does seem far more probable today than six months ago, however, is the prospect of an Erdogan who has been seriously chastened, weakened, and constrained. If in upcoming elections, the AKP loses control of certain key cities and sees its majority in parliament significantly eroded, it will be viewed as a direct repudiation of Erdogan’s alarming bid to become a modern-day sultan. It could empower other figures within the AKP with greater inclinations toward a more tolerant, moderate, and consensus-driven form of politics. It would signal that Turks had at long last grown fed up with Erdogan’s particular brand of demagoguery, bullying, and creeping Islamist authoritarianism.’

And, from now on, much will be about the course of economy, Erdoğan’s ground of strength:

‘As Turkey struggles to contain its latest political crisis, fears of a run on its currency — dormant since the summer — have quickly re-emerged’ reported Landon Thomas Jr in his blog with the NYT:

After arrests this week of Prime Minister Recep Tayyip Erdogan’s political and economic allies, the Turkish lira has plunged. The dollar reached a high of 2.092 against the lira, as foreign investors sold Turkish stocks and bonds and Turks shifted their savings into dollars.

For now, the financial uncertainty in Turkey seems to be largely localized, a consequence of ever- fickle Turkish politics. Nevertheless, markets in other large emerging markets like Brazil and India did experience a brief wobble this week, and with investors uncertain about the effect that a stingier Federal Reserve will have on the global economy, the prospect of other countries’ catching Turkey’s flu cannot be wholly discounted.

While the spate of arrests included top ministers in Mr. Erdogan’s Islamist government, the real cause for concern for investors was the crackdown on the heart of the celebrated Turkish growth story: the powerful nexus that connects Mr. Erdogan to construction magnates and the banks that finance them.

Among those taken for questioning was the chief executive of the government-owned Halk Bank, one of the country’s larger banks, and Ali Agaoglu, a billionaire real estate developer with close ties to the prime minister.

The overcrowded Istanbul skyline that has resulted from this building boom was a factor behind the protests in Gezi Park in the spring. But Turkey’s creditors are more concerned that the bulk of these projects and others throughout the country were funded by cheap dollar loans.

Turkey is not the only emerging market to take advantage of rock-bottom dollar interest rates to finance its growth ambitions. Brazil, India, Indonesia and South Korea have followed a similar path. All these countries felt the pressure of weaker currencies even before the Fed’s decision to pull back from its bond-buying program.

None of these emerging markets, however, are as dependent as Turkey is on short-term dollar funding which, unlike longer-term loans, can be quickly pulled by jittery lenders.

According to economists at Barclays in London, Turkey must borrow over $200 billion next year from abroad — with the bulk of that figure coming from corporations and banks. If those credit lines are cut, Turkey will run out of cash and will need a bailout from the International Monetary Fund.

“The big risk is the rollover risk,” said Sebnem Kalemli-Ozcan, a Turkish economist at the University of Maryland who studies the impact of financial crises in emerging-market economies.

“This is what we call a balance-sheet crisis, with Turkish companies having their assets in Turkish lira and their liabilities in dollars,” she said. “It reminds me very much of the Asian crisis.”

For now, there has been no sign of the panic selling across continents that was a hallmark of the Asian collapse in 1997 and that forced the I.M.F. to bail out countries like Indonesia and South Korea.

But in an increasingly interconnected global financial system, one in which concerns about economic stagnation and high levels of private-sector debt in emerging markets have been paramount, analysts and policy makers will be keeping a close eye on how these countries respond to events in Turkey in the weeks and months ahead.’