On Sunday evening, in our traditional week ahead preview, we gently suggested that things were likely to deteriorate further in Turkey this week.
Over the weekend, Anadolu reported that 43 polling station officials stand accused of having links to President Erdogan’s archenemy Fethullah Gulen. That was clearly a pretext that set the stage for the high election board to rule in favor of AKP, which has been attempting to secure a re-run of the Istanbul vote for weeks.
Erdogan’s farcical effort to effectively nullify the results of the Istanbul election is entirely consistent with Turkey’s ongoing descent into one-man rule. Obviously, Turkey’s pretensions to democracy are absurd, but one shouldn’t lose track of the fact that things are getting worse over time. Erdogan has been hard at work stripping away the last vestiges of democratic norms since he consolidated power last summer.
Headed into the local elections in late March, we variously insisted that while Erdogan would be willing to accept a less-than-perfect outcome, the prospect of a sweeping defeat would be a bridge too far. He would, we argued, nullify selected results by dictatorial decree before he would accept a result deemed too damaging to the party.
Well, sure enough, the Istanbul vote has been contested for weeks. CHP’s Ekrem Imamoglu finally assumed office on April 18, but AKP was pushing hard for a re-run of the mayoral vote citing widespread fraud. Around the same time, market angst around the country’s suspicious reserve accounting piled pressure on the currency.
A week later, on April 25, CBT dropped their tightening bias in a wholly unsurprising move that nevertheless shocked some EM watchers who have spent the last year clinging to the notion that the central bank retains some semblance of independence.
Exactly none of the issues outlined above have been resolved and neither, generally speaking, has the extremely contentious S400 spat between Washington and Ankara.
Well, anyone who was holding out hope that democracy would prevail in Istanbul was disappointed on Monday because (wouldn’t you know it), the high election board decided to nullify the municipal election results and call a new vote, at the request of Erdogan.
The lira promptly plunged on the news.
The Turkey ETF was similarly beset and it doesn’t help that this comes on a day when risk assets were already under siege from trade concerns.
If these levels hold, Monday will be the third-worst day of the year for the vehicle (bottom panel).
The new vote is scheduled for June 23. If you have any questions about how that’s likely to go, I would refer you to November 2015, when AKP managed a “surprisingly” dominant performance in a re-do of that year’s June vote in which the party lost its parliamentary majority for the first time in more than a decade.
If you’re an EM watcher and you didn’t see this coming, you have nobody to blame but yourself.