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Turkish Lira Plunges Most Since 2008 As Yet Another Political Crisis Appears Imminent

Just two days ago, a veteran executive of Turkey's ruling Justice and Development Party (AKP) party said that neither an early election nor an extraordinary party congress is on the agenda amid rising speculation over the party’s highest decision-making body’s move to remove the authority to appoint provincial party officials from Prime Minister Ahmet Davutoglu.

As Hurriyet reported on May 2, the 50-seat Central Decision and Executive Board’s decision, which was made with the support of 47 members on April 29, has been widely considered as one of the clearest signs yet of tensions between President Recep Tayyip Erdo?an, the founding leader of the party who wants an executive presidency, and Davutoglu, who would be sidelined if the country’s parliamentary system were to be replaced.

"We just held our congress recently. We have Turkey’s problems and things we have to fulfill on our agenda. Neither congress nor early elections are on our agenda. The elections will be held in 2019,” AKP Deputy Chair Mehmet Ali Sahin said in an interview with NTV on May 2. 

Sahin’s remarks were in response to a comment by main opposition Republican People’s Party (CHP) leader Kemal Kilicdaroglu, who suggested there were signs indicating preparations by the ruling party, which secured a single-party government in the Nov. 1, 2015, early elections to govern Turkey for four years, for yet another snap election. The AKP’s party congress was held in September 2015.

In other words, anything suggesting the cracks between the PM and the president are getting wider would be seen as confirmation that Turkey is suddenly embroiled in a bitter, behind the scenes scandal.

Indeed, Sahin downplayed talk of an internal crisis in relation with the MKYK decision and said, “Nobody should expect the AKP to shoot itself in the foot.” “If they want to go to early elections, then they should table their own proposal for this,” Sahin said.

Sadly for Turkey, and for those long the Turkish Lira, it appears that the fissures were indeed as bad as some had speculated because moments ago Bloomberg blasted the following:

  • TURKEY'S AK PARTY SAID TO PLAN CONVENTION IN 15 DAYS

Bloomberg adds that Turkish Prime Minister Ahmet Davutoglu will take the ruling party to an extraordinary congress amid a widening rift over leadership with President Recep Tayyip Erdogan, according to a person familiar with the matter.  Davutoglu to hold a press conference Thursday at 11am, CNN- Turk reports.

Davutoglu had met with Erdogan in Ankara today to ask that the president respect the prime minister’s authority and allow him to do his job; Davutoglu was said to be considering an extraordinary convention to vote on AK Party leadership should he not be able to reach agreement with Erdogan at the meeting, the person said

The implication is that the prime minister, Davutoglu, who has been engaging in crisis talks with Erdogan over the past weeks, may be about to resign but not before he creates a major rift within the AKP. For those unfamiliar with the back story, here is the FT:

Recep Tayyip Erdogan, Turkish president, held crisis talks on Wednesday with Ahmet Davutoglu, his handpicked prime minister, in an effort to resolve a deepening rift that has spooked financial markets and fuelled speculation that Mr Davutoglu could be about to resign. The possibility that Mr Davutoglu, who has become frustrated by Mr Erdogan’s attempts to limit his independence, may quit helped to drive Turkish stocks 2 per cent lower on Wednesday.

 

 

The prime minister, a soft-spoken academic-turned politician, has proven to be an effective negotiator with the EU, but incapable of outmanoeuvring Mr Erdogan’s supporters in both the media and parliament. Wednesday’s meeting in Ankara was described by one person close to Mr Davutoglu as an “urgent crisis”.

 

On Friday, while Mr Davutoglu was overseas, the ruling AK party stripped him of the ability to choose local and provincial leaders. This deprived him of a vital source of influence over the party’s rank and file, who remain loyal to Mr Erdogan, the most popular leader Turkey has had in more than half a century.

 

Mr Davutoglu, who addressed parliament on Wednesday with uncharacteristic brevity, hinted at his own resignation. He said that he was prepared to shun, “with the back of my hand, any job that a mortal would not think of leaving”.

Needless to say, the PM was unhappy at this attempt to more of his control, an action that was clearly spearheaded by none other than Erdogan.

The market's reaction was immediate.

Upon confirmation that a major schism is developing within the AKP, the Lira crashed a whopping 4.5%, margining out countless longs, and plunging the most since October 2008.

 

FX traders' plight aside, if the convention is confirmed, it means that Turkey is about to be swallowed in yet another bitter political crisis, which will likely result in Erdogan concentrating even more power, unless of course he is stopped which in turn would meat more rioting, more civilian casulties, and even less media freedom to describe one nation's collapse into a despotic, authoritarian state.

Ultimately, should Turkey end up with a political vacuum, then suddenly the fate of millions of refugees will become very unclear; and if those refugees start making their way to Europe once again then the implications for Merkel and the rest of Europe's leaders will be dire.