Devlet Bahçeli, the leader of the Nationalist Movement Party (MHP) has been the historical catalyst in Turkish politics for the last quarter century. He joined the ruling government with the closure of the Felicity Party (SP) in the late 90s and the subsequent military coup that effectively put him in power. He was the one who called for the dissolution of the pre-Justice and Development Party (AK Party) government, paving the way for the AK Party's win in 2002. He was the force that allowed for the election of President Recep Tayyip Erdoğan's predecessor and nominee, Abdullah Gül to be elected. He joined President Erdoğan in his call for a presidential system and joined forces with the AK Party in the run-up to the November 2019 elections. Ever the stalwart for change, Bahçeli called for early elections Tuesday catching markets off guard.
The current global slowdown in financial markets coupled with increased energy prices has meant uncertainty for Turkish businesses. Bahçeli implied that this current government would be unable to govern under the cloud of economic uncertainty short of a renewed mandate. After meeting with President Erdoğan late Wednesday, the government accepted his call for early elections and decided Turkey would go to the polls on June 24. Early reactions to these early elections is very positive with the Turkish lira gaining sharply against the U.S. dollar following the announcement. Where will Turkey go from here and what is in store for financial markets? The outcome of the election will undoubtedly answer this question, however, a few scenarios are possible.
The current system of government, namely the parliamentary system will be replaced on June 24 and the office of the prime minister will be dissolved. The presidential system will be implemented with the president being elected independently from the legislature. In other words, it is possible that the president and the governing party are of opposite ideologies as is often the case in the United States. This system of government will ultimately bring stability to Turkey as it has the U.S. Perhaps this will also signal an end to snap elections for the foreseeable future. A constant monkey wrench in the ability for investors to accurately predict the future of the country, snap elections are a never-ending cycle of uncertainty and need to be curtailed, lest Turkey become like Italy and hold near semi-annual elections.
The real question on the minds of the electorate and investors is who will govern following the June 24 elections? Current polls put the AK and MHP "coalition" in first place followed by the Republic People's Party (CHP) and finally the İYİ Parti (Good Party) and SP coalition. Whether or not the Good Party will participate in the election is not yet clear, however, I personally would like to see all parties participate. Let all parties participate and allow the people to give a clear mandate to whoever wins the elections so that there are no excuses following the elections.
The reality is, whoever wins the elections, will be in store for major challenges. The recent attack on the Syrian regime's chemical weapons plants in Syria may signal the beginning of an escalation of the civil war that has ravaged that country for nearly seven years now, or may signal the end of fighting altogether. President Trump's recent walking back of comments by U.S. ambassador to the United Nations, Nikki Haley's, make it likely that Trump is finished in Syria. Haley had mentioned a new round of anti-Russia sanctions while Trump quashed these speculations. Trump also called for an Arab country to take the place of U.S. Armed Forces that are slated to leave Syria makes this is a near certainty.
Should the Syrian war come to an end and détente be reached, the Turkish economy would prosper. The repatriation of 3.5 million refugees would being and the rebuilding of Syria would commence. Trade between the two countries would be good for both and international support in rebuilding Syria would be a prerequisite for its quick recovery. Such a recovery would also be in the best interest of the West as rebuilding Syria would be far cheaper than sponsoring refugees in Europe and the United States.
I foresee constructive discussions in the 66 days left to the June elections and look forward to a Turkey that can move forward in the face of an uncertain global economic climate.