Turkey declares three-month state of emergency

Turkey declares three-month state of emergency
Under the state of emergency Erdogan will be able to bypass parliament and rule the country by decree, and suspend fundamental rights and freedoms.
By bne IntelliNews July 21, 2016

Turkey has declared a three-month state of emergency as its government widens a crackdown on thousands of military personnel, civil servants, policemen, academics, judges and prosecutors in the wake of the coup attempt.

Under the state of emergency, the government and President Recep Tayyip Erdogan will be able to bypass parliament and rule the country by decree. Fundamental rights and freedoms could be restricted or suspended.

The emergency has been declared in order to fight swiftly and effectively with the terrorist organisation that is responsible for the botched putsch, Erdogan said, adding that the purpose of the state of emergency is to eliminate the threats to democracy, the rule of law, and the rights and freedom.

The government blames US-based cleric Fetullah Gulen and his supporters for the coup attempt. It says Gulen supporters have infiltrated the police force, judiciary, and the military over decades and established what Erdogan calls a “parallel state”. The failed coup gives Erdogan the opportunity to get rid of Gulen supporters within the state apparatus.

Prime Minister Binali Yildirim said the state of emergency will not disrupt people’s daily lives. He also called on people to remain on the streets to show solidarity with the government.

Europe’s reaction will be closely watched. Brussels is already voicing concern regarding the purges and the direction Turkey is taking after the coup plot. But, Erdogan is likely to shrug off criticism from Ankara’s Western allies.

In an interview with Al Jazeera on July 20 hours before the declaration of emergency, Erdogan suggested that foreign countries might have been involved in the failed coup attempt. He also reiterated that Turkey would reinstate the death penalty.

Besides the row over the extradition of Gulen from the US, Washington will also be worried that a demoralised Turkish military may be hampered in its efforts to counter Islamic State. More than 6,000 soldiers have been detained on suspicion of having links to the Gulenist network and for their alleged involvement in the coup attempt. More importantly, a third of the country’s some 360 generals are in custody.

One question is how the country’s opposition - parliamentary and non-parliamentary - will react to the declaration of emergency and whether they will challenge the decision.

All parties in parliament stood firmly against the coup attempt and showed solidarity with the government. But the main opposition party CHP and the pro-Kurdish HDP already said they are against the declaration of state of emergency. CHP called for a demonstration on July 24 in Istanbul’s Taksim square against the coup.

Non-parliamentary groups have become less effective at mobilising people after the government crushed the Gezi protests back in 2013. Fewer and fewer people are now attending anti-government demonstrations which the police do not tolerate and immediately suppress. One danger is the possible confrontation between anti-government and pro-government groups on the streets.

Implications for the economy

Deputy PM Mehmet Simsek is optimistic that the state of emergency will not have an impact on the economy. “The life of ordinary people and businesses will go un-impacted, uninterrupted, business will be as usual. We're committed to a market economy”, Simsek tweeted on July 21. I'm confident Turkey will come out of this with a much stronger democracy, a better functioning market economy and an enhanced investment climate."

But the main rating agencies are not so optimistic. The lira fell to a record low on July 21 on the news that S&P cut Turkey's foreign currency credit rating. “We believe the polarization of Turkey's political landscape has further eroded its institutional checks and balances, S&P said. The rating agency expects a period of heightened unpredictability that could constrain capital inflows into Turkey's externally leveraged economy.

As a result, S&P lowered its foreign and local currency sovereign credit ratings on Turkey to 'BB/B' and 'BB+/B', respectively, from 'BB+/B' and 'BBB-/A-3'.

"The negative outlook reflects our view that Turkey's economic, fiscal, and debt metrics could deteriorate beyond what we expect, if political uncertainty contributed to further weakening in the investment environment, potentially intensifying balance-of-payment pressures," it explained.

Earlier this week, Fitch warned that the attempted coup and the authorities' reaction highlight political risks to the country's sovereign credit profile, while Moody’s placed Turkey’s credit rating on review for downgrade.

Erdogan was angered by S&P's rating downgrade, saying that it was a politically motivated decision.

Moody’s has also placed on review for downgrade the ratings of the following eight Turkish corporates: Anadolu Efes, Coca-Cola Icecek, Dogus Holding, Koc Holding, OYAK, Turkcell, Tupras and Sisecam.

The main stock exchange index, BIST-100, was down 1.67% on July 21. There will be more volatility in the stock exchange and currency market. In the wake of the coup attempt, the central bank has promised more liquidity to banks. All measures will be taken to ensure financial stability if deemed necessary, the central bank said in a statement on its website on July 17.