Analysis: Turkey's costly political row

Political instability is the last the thing the markets want

By Chris Morris in Istanbul

A simmering row between Turkey's Prime Minister Bulent Ecevit and President Ahmet Necdet Sezer has burst into the open in dramatic style, at a time when the country desperately needs some calm political waters.

A theatrical walkout, angry statements, a copy of the constitution thrown through the air.

Ecevit demands an apology

It all sounds highly entertaining, but the end result was billions of dollars wiped off share values, and billions of dollars of valuable foreign exchange reserves spent by the Central Bank to maintain some sense of economic stability.

If this was just a clash of personalities, it could be contained as a political irritant. But it is much more than that.

It has become open warfare about how the state system should operate, and how Turkey should deal with the web of corruption investigations which are casting ever-lengthening shadows over politics, the bureaucracy and the business world.

President Sezer, a former judge and a relative newcomer to politics, wants to leave no stone unturned in the fight against corruption. He has now accused the government of doing too little too slowly, and he has asserted his constitutional right to call for investigations of his own.

The government, and the prime minister in particular, are furious. They argue that they have done more to oppose corruption than any of their predecessors.

Nervous markets

The veteran Mr Ecevit has always been considered a clean politician swimming in often murky waters, and he obviously feels that his integrity has been called into question.

His mistake, however, was to go public with the dispute in full view of nervous financial markets.

The stage is set for a period of heightened political tension which is bound to have an effect on the markets as well

The last thing the markets want, as they watch the government struggling to keep control of an economic austerity programme supported by the IMF, is political instability.

When Mr Ecevit walked out of a meeting with the president and spoke of a serious crisis, rumours of resignation and economic stagnation flowed thick and fast.

The prime minister's subsequent promise that he remained committed both to his job and to economic reform helped calm things down a little, but much of the damage had already been done.

The markets had only just recovered from a liquidity crisis late last year which forced the IMF to act quickly to put together a multi-billion dollar package of financial aid.

Unaffordable luxury

Now the markets are expecting more concrete signs that the reform programme will stay on track.

President Sezer accuses the government of doing too little

The fact that the political dispute is rumbling on will not help matters.

The cabinet has accused the president of acting with disrespect, and it has demanded a public apology.

The row began during a meeting of the National Security Council in the presence of Turkey's military leaders, who have never tried very hard to disguise their suspicion of the political establishment.

So the stage is set for a period of heightened political tension which is bound to have an effect on the markets as well.

The president and the prime minister will have to find a way to work together, or eventually one of them will have to go.

Turkey cannot afford the luxury of waiting too long for a resolution to the conflict.