Turkish court to hear case against ruling party

Turkish court to hear case against ruling party

By Vincent Boland in Ankara

Published: March 31 2008 14:35 | Last updated: March 31 2008 22:32

Turkey’s highest court on Monday sent investors running for cover after judges agreed to hear a case that could lead to the closure of the governing party and to long bans for the country’s political leaders.

Shares on the Istanbul stock market – 72 per cent of which are foreign-owned – fell nearly 3 per cent and the lira continued to tumble against the euro at the prospect of months of political and economic uncertainty.

The country’s chief prosecutor accuses the Justice and Development party (AKP) and its leaders, all with roots in political Islam, of trying to impose sharia law. The case has divided the country, which has a tradition of militant secularism, and undermined the financial markets.

Foreign investors heavily exposed to Turkish assets and nervous over global market turmoil took fright at the prospect of rising political risk in Turkey, one of the best-performing emerging markets during the past few years.

Ozgur Altug, an economist at Raymond James Securities in Istanbul, said; “Maybe the courts won’t close the AKP, but you can forget about any reforms for the next six to eight months.”

The Istanbul market is about 28 per cent lower so far this year on the back of the deteriorating international environment. Turkey is dependent on foreign investment inflows to finance its current account deficit, which some forecasts say could reach $46bn in 2008, or about 5.5 per cent of gross domestic product.

The case against the AKP accuses Recep Tayyip Er­dogan, prime minister, Ab­dul­lah Gul, president, and senior party leaders of “anti-secular activities”. It is closely connected to a decision by the government in February to ease restrictions on wearing a headscarf at universities. The AKP’s opponents saw that as a typical example of the party’s “majoritarian” approach to government, in which it exploits its parliamentary majority to pass laws aimed exclusively at its socially conservative electoral base.

A few hours before the constitutional court announced its decision yesterday, official figures showed a sharp slowdown in economic growth in 2007. GDP expanded by 4.5 per cent for the year, compared to 6.9 per cent in 2006, and below the official target of 5 per cent. Economists at ExpresInvest, a brokerage in Istanbul, said Turkey had “entered a period of high political volatility”.

The 11 constitutional court judges voted unanimously to hear the case, which could last all year. While the court’s decision was expected, analysts warned that the threat to close the AKP, which won a landslide election victory eight months ago, could lead to months of stalemate and a long legal battle at a time when Turkey faces critical decisions on the European Union and economic reform.

It represents a new and potentially decisive round in a long fight for legitimacy between the party and Turkey’s secular elite – the military, judiciary and republican opposition. They accuse the AKP of having a “hidden agenda” to turn Turkey into an Islamist society, a charge the AKP denies.

Suat Kiniklioglu, an AKP member of parliament, told the Financial Times: “This case is being used by the establishment as a last chance to subvert the transformation of this country.”