Turkey’s election update -- Closer to EU membership
August 29, 2007
On August 28, Turkey gave a resounding vote of support for the current Muslim-led government of Prime Minister Recep Tayyip Erdogan. Erdogan's Presidential candidate, Foreign Minister Abdullah Gul, was elected as President of Turkey.
In May, Gul was opposed by the secularist military, who are afraid that Gul would make the country more Islamist, like Iran. Turkey has been without a President since May 16, when the former President, Ahmet Necdet Sezer, stepped down. His successor will be elected by Parliament, not the people of Turkey. At that time, the military's threat of a coup jeopardized Turkey's accession into the EU.
In July, the ruling AK party won 46.6% of the votes in a special parliamentary election that had been originally scheduled for November 4th. Prime Minister Erdogan had called the election to show the military that he had a strong mandate to govern. The AK party's strong showing means there is less chance of a military coup. Turkey's stock market rose 5% on the news, and the Turkish lira strengthened against the dollar to its highest level in two years. Foreign investors own 70% of Turkey's stock market.
What Turkey’s election means:
Under Erdogan, Turkey has progressed economically. FDI has increased from $1 billion to $20 billion annually. GDP growth has been 7% annually since 2001. Erdogan is credited for progress on EU accession talks. Most Turks feel that the AK party can maintain a balance between Islamic beliefs and secular governance.
According to many analysts, the real struggle within Turkey is between the secular military powers and the Muslim democratically-elected powers. Behind this struggle is a fear by the secular military that the Muslims will further erode their power by increasing democracy and joining the EU.
The EU warned it would be bad for Turkey’s accession plans to the EU if the military intervened in the political process. The army has ousted four governments in the last 50 years, most recently in 1997, when it acted against a cabinet in which Gul served.
Although the Prime Minister runs the country, the Presidency has emotional leadership since that was the position held by the founder of modern Turkey, President Ataturk. In addition, the President is the Commander-in-Chief, and appoints not only the heads of the armed forces, but also the leaders of the universities and courts.
Action steps:
Turkey has, once again, become a safe place in which to invest. Talk to your financial planner about including it among your emerging markets funds.
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Source: (Der Speigel, A Test of Turkey's Maturity, 8/28/07)
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