Populist economics on the up as Turkish ruling party expects closure

By bne IntelliNews May 23, 2008

Nicholas Birch in Istanbul -

Increasingly convinced it will be closed down by the courts for anti-secular activities, Turkey's governing AK Party looks to be preparing the ground for early elections later this year, unnerving investors with a string of populist economic measures.

Amid rumours farming subsidies might be on the way, the latest piece of fiscal relaxation came late last week, when parliament approved an employment package including an amnesty for employers falling behind on social security payments. The International Monetary Fund (IMF), whose $10bn stand-by agreement with Turkey expired on May 10, described the move as "regrettable."

The move "runs counter to the... medium-term economic programme" that the AKP announced earlier this month, the IMF's Turkey director Lorenzo Giorgianni complained on May 21, describing the move as "a backward step."

Consigned to its fate

Coming a fortnight after the government announced cuts to the primary surplus target to free up money for investment in the impoverished southeast, the amnesty has widely been interpreted in Turkey as evidence AK is resigned to closure and early elections. "The argument is that if you know you're on the way out, there's less reason for you to keep budget discipline", says Erkan Savran, research head for the brokers AK Securities. "Plus you're looking to sweeten up your electorate."

Pessimism certainly appears dominant inside AKP, whose efforts to seek inter-party agreement on constitutional changes making it more difficult for courts to close parties down were sharply rebuffed by opposition party heads. Interviewed this week by Reuters, an unnamed cabinet minister said, "the AKP will be closed, [PM Tayyip] Erdogan is expected to be banned and some other members too. This view is shared by many in the cabinet."

The date of early elections would depend on the date of the court's decision, which could come any time between July and November. Descended from a more traditional Islamist party closed down by the courts, AKP would stand under a new name.

Apart from closure, the only realistic option facing AKP is for the staunchly secularist 11-judge Constitutional Court to vote 6 to 5 against it. With 7 votes needed for closure, such a result would represent a serious warning but nothing more. Following comments made this weekend by the court's head about a ruling that would strengthen "democracy, secularism and law", many speculated a 6-5 decision was on the way. Given another senior judge attacked the government on May 22 for trying to influence the judiciary, that seems less likely.

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