June 13 (Bloomberg) -- Turkish Prime Minister Recep Tayyip Erdogan promised to seek consensus in writing a new constitution after winning re-election for a third term, and said his victory will invigorate pro-democracy movements in the Middle East.
Erdogan’s Justice and Development Party, or AKP, won 50 percent of the vote with more than 99 percent of ballots counted, and 326 seats in the 550-member parliament, according to preliminary results published by local media. That leaves him short of the 330 votes needed to call a referendum on the constitutional changes that Erdogan says are his top post-election priority.
“We’ll go to the opposition and we’ll seek consultation and consensus” to draft a constitution that will satisfy all sections of the population, Erdogan said in a victory speech from a balcony at party headquarters in Ankara. “We will bring democracy to an advanced level, widening rights and freedoms. The responsibility has risen, and so has our humility.”
Erdogan’s third term could make him the longest-serving leader since Turkey’s founder Mustafa Kemal Ataturk. His re-election with an increased share of the vote, the largest in almost half a century, will help the premier consolidate his victory over the military, which introduced Turkey’s current constitution after a 1980 coup, and which has accused Erdogan of seeking to impose his Islamic values on Turkey’s secular laws.
Yields on two-year lira-denominated bonds fell 3 basis point to 8.84 percent at 4:45 p.m., the lowest in 11 days. The lira strengthened to 1.5725 per dollar while the main ISE-100 stock index gained 0.6 percent.
“Markets are reacting favorably to the sweet-spot win for AKP,” Tunc Yildirim, a director at broker Standard Unlu in Istanbul, said in e-mailed comments. “The key will be whether Prime Minister Erdogan will stick to his promise of reaching out to other parties to draft a new constitution.”
Erdogan, 57, served as mayor of Istanbul from 1994 until 1998, when he was sentenced to jail for inciting hatred by reciting a religious poem. He says his party is committed to preserving Turkey’s secular system while loosening restrictions on the practice of Islam. It has sought to lift the ban on headscarves at universities and make it easier for graduates of religious schools to enter universities.
Presidential System Debate
Turkey’s economic advance was key to Erdogan’s appeal to voters on the campaign trail. The $740 billion economy grew at an annual rate of more than 5 percent during nine years of AKP rule, making it the world’s 16th largest. Inflation slowed to about 7 percent from 30 percent in the period, and the stocks benchmark rose more than sixfold, led by companies such as lender Turkiye Garanti Bankasi AS.
Erdogan has argued for a shift from Turkey’s current parliamentary system to a presidential one, in which he himself would be the leading candidate for the top job, a proposal other parties have rejected.
The main opposition Republican People’s Party had 26 percent of the vote and the Nationalist Action Party 13 percent, giving those parties 135 and 53 seats respectively, according to projections from the preliminary results. Independent candidates, mostly backed by a party advocating autonomy for Turkey’s Kurdish minority in the southeast, won the other 36 seats. The AKP’s vote rose from 47 percent in 2007, when it won 341 seats.
A result “where the AKP continues in power but needs to co-operate with the opposition is the most market-friendly outcome,” said Ari Metso, chief executive officer of Helsinki-based Taaleritehdas East Asset Management who helps manage a 110 million euro ($158 million) Turkey-focused equity fund.
The parliament will probably start work on a new constitution in September, said Huseyin Celik, a deputy chairman of AKP. The government will work with opposition parties to draft the new document and will start with areas where there is a consensus, he told NTV television today.
On the economy, Erdogan’s third-term challenges will include a widening trade gap that threatens an abrupt halt to Turkey’s boom.
The current account deficit ballooned to more than $63.4 billion in the 12 months through April, or about 8.6 percent of GDP, compared with a government forecast of $42 billion for the year. The increase was driven by rising demand for imported raw materials and consumer goods as the economy expanded 8.9 percent last year.
Turkey’s current-account deficit, inflation and bank credit growth mean that the “jury remains out” on an upgrade by one step to investment grade, Fitch Ratings said today.
The government should now impose a “tight fiscal policy supporting the central bank in its efforts to calm down slightly-too-strong GDP growth,” Metso said.
Erdogan can point to improvements in Turkey’s public finances that have brought Turkey close to investment-grade rating. Fitch Ratings, which ranks Turkey one step below that status, said in October that changes to the constitution after elections may justify an increase.
Treasury projections show that Turkey -- once the International Monetary Fund’s biggest borrower after tapping it for about $26 billion of loans following a 2001 banking crisis - - will pay off its remaining $4.9 billion debt to the IMF by 2013. That’s a contrast with the European Union countries, including Turkey’s neighbor Greece, that have been forced to take IMF loans in the last three years as their economies unraveled amid a debt crisis.
Foreign Policy Agenda
Rebuffed in its efforts to join the EU, Turkey now borrows at 10-year yields lower than at least eight members of the 27-nation bloc.
In the Middle East, where popular revolts have swept away longtime leaders this year, Erdogan’s political success and Turkey’s economic progress have been cited as a model by opposition parties including Egypt’s Muslim Brotherhood.
His government last week said it will keep the country’s southern border with Syria open to refugees fleeing a crackdown on pro-democracy demonstrations. About 5,000 Syrians have already sought shelter in Turkish camps.
Erdogan, who has had friendly ties with Syrian President Bashar al-Assad, slammed the violence against protesters and said he will apply pressure to the Syrian government after the election.
“He’s now facing a very heavy foreign policy agenda, starting with Syria as early as today,” said Soli Ozel, a political scientist at Bilgi University in Istanbul. “If Syria’s going to explode, and it looks like it might, then who’s going to be playing a major role in dealing with the fallout? Turkey.”
Erdogan told the crowd outside his party headquarters last night that his election win would help pro-democracy movements throughout the Middle East. “Damascus will benefit as much as Ankara,” he said.
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