David O'Byrne in Istanbul -

One of the truisms of Turkish politics is that with local government funded almost exclusively by central government, voting in local elections is conducted almost exclusively on national issues.

Even before the corruption investigations launched back in December, Turkey's local elections on March 30 were always going to be a referendum on the 12 years of rule by the Justice and Development Party (AKP) of Prime Minister Tayyip Erdogan, focused firmly on the presidential elections scheduled for August this year and a general election in June 2015.

August's presidential election is being viewed by many as a watershed for Turkish politics, not just because it's the first time in Turkish history that the electorate has been offered the chance to elect the head of state, but also because as such it will likely set the tone of Turkish politics for far longer than the four years the elected president will serve. Not for nothing was Erdogan last year trying to build cross-party support for amending the Turkish constitution to allow a French-style executive presidency.

The graft probes launched at the end of last year seem to have ended that hope, despite them having apparently been stymied by the sacking and transferring of dozens of senior police and prosecutors, and the passing of new legislation that makes the judiciary answerable directly to the government.

Now, following a stream of leaks of illicit telephone recordings allegedly featuring Erdogan, members of his family, senior ministers, bureaucrats and prominent businessmen, all implying improper or illegal behaviour and many suggesting corruption on what, even by Turkey's poor standards, purports to be an entirely unprecedented scale, he is left fighting for his political life.

Challenged

With the AKP almost certain to retain control of Turkey's two biggest cities Istanbul and Ankara and by far the largest proportion of the vote in the local elections, the focus is on whether the party will poll well enough to avoid a challenge against Erdogan's leadership from within the AKP. "This election alone won't change anything - one way or another," says Cengiz Aktar, professor of political science and senior scholar at Istanbul Policy centre, suggesting that Erdogan's primary aim is to "cover up the allegations and continue business as normal".

However, he doesn't believe that will be possible. "There is no quick fix, and we may have some very shaky months ahead," he explains, pointing out that it is far from clear who from the AKP will contest the presidential election in August.

According to Oral Calislar, veteran political commentator and columnist on Turkish daily Radikal, polling less than 40% will present the AKP with the major headache of whether to risk trying to get rid of Erdogan and his acolytes. But over 40%, he suggests, and the party will be happy to have Erdogan as its candidate in the August presidential election, with current president and AKP founder, Abdullah Gul, returning to lead the party. "We will see a change in style," says Calislar. "Gul is a very different politician, less confrontational."

A more pragmatic style may help defuse tensions in Turkey, but it remains to be seen whether it will enable the government to fully address the graft allegations or repair Turkey's international image, which even before the corruption probes and the Twitter ban had been badly tarnished.

As recently as two years ago Turkey was still being touted as a model for how a majority Muslim country can operate as an effective parliamentary democracy to the "Arab Spring" states newly emerged from the yoke of tyranny and corruption. But Turkish policy on Syria has left the impression of a country unwilling or unable to face up to the spread of violent Islamic extremism across its borders even when it explodes in violence with its own borders - as it did in March with the killing of two Turkish gendarmes by Albanian Islamist fighters returning from Syria.

What is clear is that whoever leads the AKP into next year's general election will need to face up to not just a growing lawlessness and an apparent flood of unregulated armaments, but also an economy that increasingly appears to be headed for a hard landing.

Landing with a bump

Economists concur that while fourth-quarter GDP growth figures due out on March 31 will confirm that the Turkish economy grew by just over 4% last year, government projections of 4% growth for the whole year are wildly optimistic. A central bank survey of analyst projections produced an average of 2.65%.

According to Inan Demir, chief economist at Turkey's Finansbank, 1.7% is more realistic. He points to a combination of the US Federal Reserve tapering its quantitative easing programme affecting Turkey's traditional dependence on external financing and Turkey's domestic political problems. "The news flow from Turkey is confusing to say the least - it's a much less attractive market for investors than it was a few years ago," he says.

The possibility of continued political instability affecting the economy is one that has apparently also occurred to the government, with Finance Minister Mehmet Simsek warning in a recent interview that a bad local election result for the AKP could affect the government's 4% growth target.

Lower growth from lower investment would also reduce the government's ability to finance its existing current account deficit, hence limiting the scope for increased government spending ahead of the presidential poll in August and next year's general election. This could prove crucial given that many Turks vote less on party loyalty than on short-term economic gains - a factor that apparently played a part in a decision to impose a ceiling on the retail price on transport fuels less than a week before the local polls, in a move one fuel importer described to bne as "irrational and purely political."

But the prospect of falling support for the AKP is one that could bring mixed results. "Markets tend to buy single-party governments and sell coalition governments," warns Demir.

However, he adds that a collapse in support for the AKP and the country moving towards elections that result in a potentially unstable coalition could mean the government emerges from the local elections emboldened. "Instead of being more inclusive in their policies, [the government] could choose to be more isolationist and confrontational - that could equally unnerve investors," he cautions.

Equally too, it could have repercussions far beyond Turkey's borders, with the Russian invasion of Crimea and the worsening situation in Syria signalling that the coming period will not be an easy one - even before any further instability Turkey's domestic issues may cause.