In blow to Turkish govt, Constitutional Court rejects headscarf law

By bne IntelliNews June 6, 2008

Nicholas Birch in Istanbul -

Turkey's Constitutional Court has struck down a government-sponsored law aimed at ending headscarf bans in universities on June, in a controversial decision many see as a dry run for an on-going closure case against the government.

In a brief note released at 6pm on June 5, the court said the headscarf legislation "contravened principles of secularism". Judges voted 9 to 2 to uphold bans, a court spokesman said.

The decision did not come as a surprise. Since last spring, when secularists and the Islamic-rooted AKP government clashed over presidential elections, the staunchly secularist judiciary has taken over from the army as the government's number-one adversary. "This is the starting point for the closure of the government", says Nurhan Toguc, chief economist for Ata Invest, a brokerage.

On air, senior government officials were more cautious, with government spokesman Cemil Cicek declining to comment until the court published detailed reasons for its decision. Behind closed doors, though, AKP MPs are convinced the party's days are numbered and have been fatalistically echoing Toguc's prediction for weeks. They point out that the AKP's efforts to end headscarf bans form the backbone of the case a prosecutor opened at the Constitutional Court in March to ban the party for "anti-secular activities." Had the court ruled to uphold an end to headscarf bans, one senior AKP member said, "it would knock the stuffing out of the closure case against us."

Quoted in the daily Vatan, another lawmaker took the same point a step further, arguing that a court ruling in favour of headscarves would destroy a weak opposition whose only stick to beat the AKP is the issue of secularism. Take that stick away, and "nobody will get close to us for a decade at least", he said.

Tense but stable

The lira fell to 1.2450 in after-hours trade today, 1.3 percent weaker than its interbank close on Thursday. Yet, despite the widespread acceptance that the court's decision ups the chances of political chaos, analysts are not expecting any very rapid movement in the markets. "There's a tendency to over-exaggerate the role of domestic politics on Turkey's economic troubles this year", says Ozgur Altug, economist at Raymond James in Istanbul. "The whole world is going down."

While she says she doesn't think markets have priced in an AKP closure yet, Nurhan Toguc isn't expecting "anything drastic" either. "Foreign investors will wait in deposits, savings and overnight issues and wait for interest rates to go higher, before going into bonds", she predicts.

With equities slipping nearly 30% since the beginning of the year and likely to continue on down, "it's easy to miss the forest for the pessimistic trees", says one respected broker who asked not to be named. "But you only have to look at the $5bn in FDI so far this year to see that long-term investors continue to see Turkey as a strong opportunity."

Turkish expert at the Washington-based Center for Strategic and International Studies, Bulent Aliriza thinks that common comparisons of Turkey to other developing countries - soaring inevitably upwards - need be taken with a slight pinch of salt. Turks "are used to living on a cliff edge, they're experts at fixing broken engines with bits of chewing gum", he says. "But their system creates [political] crisis after crisis. Sooner or later they'll have to come to terms with the fact that there's something seriously wrong."

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