Turkish Parliament Meets on Critical Agenda

Turkey

Economic News

22 Jul 2010
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The Turkish Parliament began meeting on July 29th to set a date for early elections and to consider reforms that need to be passed if Ankara is to begin membership talks with the European Union.



A parliamentary committee has approved the November 3rd date for snap polls championed by the coalition member Nationalist Action Party (MHP). It will now face a full vote.



Separately, another committee is to consider reforms needed to advance Ankara's EU bid, opposed alone by the MHP.



Prime Minister Bulent Ecevit has repeatedly denounced early elections, saying the country's edgy economy and fledgling EU aspirations could be derailed by an uncertain political future. The country's jittery markets have been soothed by the prospect of early polls - originally set for April 2004 - after months of uncertainty.



Markets rose ahead of the meeting, climbing on July 26th 3.23% to close at 10 069, and the lira also closed lower to the dollar to 1 680 000 from 1 684 000 on July 25th.



The current government is hanging on by a thread, as Ecevit's Democratic Left Party (DSP) has been sapped of its former strength after a mass exodus of deputies from his parliamentary grouping.



Leading the DSP defections were Husmettin Ozkan and Ismail Cem, whose new center-left New Turkey Party (YTP) has filled its ranks with former DSP deputies.



Speaking at a group meeting of his party on July 29th, Cem said he fully supported early polls, which he considered the only way out of the current crisis.



"There has been serious disagreement among the coalition partners. Consequently, Turkey is ungovernable. Turkey needs a serious and responsible government," Cem said.



The current left-right coalition has been bogged down in infighting over key EU reforms, which include scrapping the death penalty and easing curbs on broadcasting and teaching in the Kurdish language.



"The YTP will be the pioneer of Turkey's full membership to the EU," he said.



The coalition's third member the Motherland Party (ANAP) was unmoved on July 29th by a personal plea from Ecevit to remove its support for early polls.



"I spoke to (Deputy Prime Minister Mesut) Yilmaz to see if I could dissuade him from early elections but it was impossible," he said.



Ecevit could prevent the road to early polls by resigning, but on Monday he insisted that he would remain in office. Rumours that he might quit the government sent the lira to near record lows on the day.



The current political crisis was sparked when the 77-year-old Ecevit fell ill in early May. He has been in and out of hospital since, receiving treatment for a series of ailments that has kept him from his duties and raised fears that the country’s unstable political outlook could derail a huge stabilization package backed by the International Monetary Fund (IMF).



Ecevit is squarely against early polls, insisting that further turmoil is in store if his left-right coalition is unable to continue until its regular mandate ends.



Ecevit on July 25th warned that early polls could harm Turkey’s economy and earlier in the week called on his coalition allies to openly work to delay them. A week ago, he referred to the possibility of early elections as "dangerous."



But the likelihood of the current government taking the country to regular polls in 2004 seems a slim chance.



Bahceli said on July 22nd that he would quit the three-party coalition if polls were not held on November 3rd.



And Ecevit’s own DSP has suffered from mass defections that has left his parliamentary grouping half of its former size and added members to the nascent YTP.



It is believed that the new party will be helped in the eyes of international lenders by the expected addition of Economy Minister Kemal Dervis, who was brought into the government a year ago to steer the country’s $16bn IMF-backed reform pact.



Dervis, who has no party affiliation, had offered in the midst of the DSP exodus his own resignation from the government, which he quickly retracted on the urging of President Ahmet Necdet Sezer. Ecevit said recently that the government would carry on regardless of Dervis’s future in the cabinet.



Dervis is widely credited with guiding the country towards recovery after a crisis in February 2001 saw the lira lose half of its value and the economy shrink by nearly 10%. It is the country’s worst crisis since 1945.



But reforms aimed at the start of EU membership talks and the fate of the IMF pact look in jeopardy.



As the country’s political scene roiled in uncertainty, an IMF delegation was in town to consider progress in implementing conditions for loans to the country, including the rehabilitation of the beleaguered banking system, which was at the heart of the current economic crisis.



But Turkey desk chief Juha Kahkonen said at the end of the IMF delegation’s two-week inspection that inflation goals were in reach and that the fund’s board of directors would likely meet in August to consider the release of a $1.1bn loan tranche.



Speaking on July 29th on private television station NTV, Faik Oztrak, the Treasury minister, said early elections could mean that Parliament might not be able to meet to consider pressing new laws.



However Oztrak indicated on July 25th that the economy could sustain shocks from political wrangling for a "reasonable" period of time.



"The economy can handle the high interest of debt turnover for a reasonable period of time, depending on a solution to political developments," he said.



He also said that a year-end inflation target of 35% would probably be met and "it could even be below this."



A date for early elections is expected to be cleared by the middle of the week, when parliament votes on the measure, with EU reforms likely to be considered afterwards.

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