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The diplomatic row between Turkey and the Netherlands highlighted the growing rift between Ankara and the rest of Europe ahead of an April 16 Turkish referendum. On the agenda is sweeping constitutional reforms, including granting President Recep Tayyip Erdogan new executive powers that opponents say could undermine Turkey’s democracy.

Turkey’s ruling Justice and Development Party, AKP, made the presidency central to its campaign during the 2015 general elections. One year later, the party declared it would hold a national referendum that would catapult the presidency from a ceremonial role to a “nearly all-powerful position as head of government, head of state and head of the ruling party.”[1]

Naturally, Turks across Europe are weighing in on the debate. Their efforts to hold a pro-Erdogan rally in the Netherlands was blocked by Dutch authorities. Turkish ministers were also barred from landing in the Netherlands to campaign for the much-anticipated referendum. In response, Turkey has threatened diplomatic sanctions against Rotterdam and vowed to pull out of last year’s highly controversial migrant deal.

At home, AKP is scrambling to contain a faltering economy that many argue is heading for an imminent crisis. The economy contracted sharply in the third quarter, falling 2.7%.[2] That was the second contraction in three quarters, highlighting the growing headwinds facing the developing nation of 75 million.

Prior to the latest skid, Turkey’s economy had performed well thanks to heavy inflow of foreign funds and loans, which analysts say amount to $40 billion a year. Those funds spurred job creation and incomes. At the same time, privatization and broader economic growth resulted in improvements to healthcare, education and social assistance.

AKP’s race to install a “one-man regime” could threaten stability in a country deeply divided along political lines. It could also undermine the inflows of foreign capital that have propped up the Turkish economy over many years.[3] Analysts say those funds were already being diverted long before the recent crisis as investors looked to greener pastures in the United States and other regions. Factor in last year’s failed coup d’etat, multiple deadly terrorist attacks and Ankara’s military role in Syria, Turkey is not looking like a place which will attract investor interest anytime soon.

The outcome of the upcoming referendum will have far-reaching consequences on the Turkish nation and its diplomatic relations with Europe. It may also dissuade foreign inflows and remittances at a time when the country desperately needs an economic spark.

[1] Dominique Soguel (January 21, 2017). “Turkey constitutional changes: what are they, how did they come about and how are they different?” Independent UK.

[2] Trading Economics. Turkey GDP Growth Rate.

[3] Mustafa Sonmez. “Turkey’s AKP scrambles to curb economic woes until referendum.” Al-Monitor.

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