The crisis rocking Turkey's three-year-old coalition government means that key political and economic reforms will now be on hold. Since the currency's collapse in February, 2001, the government of center-left Prime Minister Bulent Ecevit had shown great success in fighting inflation, stabilizing exchange rates, and promoting structural reforms. That program has been backed by over $16 billion in International Monetary Fund support.

But key pro-reform members of the government are now fleeing, including Deputy Prime Minister Husamettin Ozkan, once considered Ecevit's heir apparent in the Democratic Left Party. The immediate issue has been the declining health of Ecevit, who has been in and out of the hospital since May. Were Ecevit to resign or die, the prime ministership would fall to Deputy Prime Minister Devlet Bahceli, leader of the far-right Nationalist Action Party, which is part of the ruling coalition. The hard-line Bahceli, who has consistently fought reforms meant to draw Turkey closer to the European Union, is calling for early elections in November.

A key test now will be whether reformist politicians will coalesce around Ozkan, who says he will form a new party. These are likely to include respected figures such as Economy Minister Kemal Dervis and Foreign Minister Ismail Cem. Yet such a grouping would have little grassroots support and would likely fare poorly in general elections. Fearing shaky times ahead, ratings agencies have downgraded Turkey's foreign currency bonds.

By David O'Byrne in Istanbul

Edited by Rose Brady

Before it's here, it's on the Bloomberg Terminal. LEARN MORE