Clashes between the anti-government protestors and riot police continued until Wednesday 3 AM in Istanbul’s Taksim Square, near Gezi Park where the protests initially started over development plans that would have replaced the park with buildings.

Turkish riot police moved into Taksim Square Tuesday morning to disperse protestors from the square, using water cannon and tear gas. The early morning attack by the police was a surprise because PM Recep Tayyip Erdogan earlier said he would meet a delegation of protestors on Wednesday. Following police crackdown on the protestors, it is a question mark if there is room for dialogue between the protestors and government. The Taksim Solidarity Platfrom, which leads the protests, said that it did not receive invitation from the PM. Actually; the names invited to a meeting with the PM do not seem to have direct link with the protestors in Gezi Park.

Speaking at his ruling AKP’s group meeting Erdogan said he would not bend into the protestors’ demands (referring to the Platform’s demands). You may call this roughness but this Recep Tayyip Erdogan would not change, the PM said. The Platform’s initial demands included the sacking of police chiefs in Istanbul and Ankara and the release of all protestors and a halt to the use of tear gas by police. The group also demanded that government announce the cancellation of plans to demolish Gezi Park.

Following the assault Tuesday morning thousands of people gathered in Taksim Square and fresh clashes erupted. Barrages of tear gas were fired in to the square. The unrest continued into Wednesday morning. Bulldozers were brought in to clear protestors’ barricades. Istanbul’s governor Avni Mutlu claimed that marginal groups attacked police. The governor urged people to leave the square and said that police would continue to intervene until protestors leave. The protestors also clashed with police in the capital Ankara and reportedly thousands of people took to the streets in the country’s third largest city in Izmir.

The White House said on Tuesday it was concerned by attempts in Turkey to punish individuals for expressing free speech and called for dialogue to resolve differences between the government and protesters. We continue to follow events in Turkey with concern, and our interest remains supporting freedom of expression and assembly, including the right to peaceful protest, White House spokeswoman Caitlin Hayden said in a statement.

Protests have put the local currency and shares under pressure. If the unrests continue or escalate this may deter foreign investors and may lead to capital outflow. Turkey needs capital inflow to finance its widening current account deficit. Turkey’s CDS rose to 10-month high of 181 basis points, reflecting investors’ anxiety over the situation in the country.

The benchmark Bourse Istanbul-100 index was down almost 2% d/d on Tuesday. Two-year government bond yields rose to 6.53% from 6.37% on Monday.