Turkey's chief prosecutor has asked the country's constitutional court to cut off public funding to the ruling Justice and Development Party (AK), in what could prove a serious blow to the Islamist-based movement.
Erdogan became prime minister earlier this month
Sabih Kanadoglu made the announcement after the collapse of his efforts to ban the AK, which won a landslide victory in last November's elections.
Mr Kanadoglu sought to outlaw the AK on the grounds that it had failed to obey a constitutional court order demanding it remove Recep Tayyip Erdogan - then its chairmen and now the country's prime minister - from office after he was convicted of Islamist sedition for citing a poem.
While all political parties in Turkey are entitled to seek private funding, they rely heavily on assistance from the treasury - especially in the run-up to elections.
Soon after the AK won the November elections, the Turkish parliament overturned a constitutional ban which prevented Mr Erdogan from becoming prime minister because of the conviction for sedition.
The change was part of a package of measures bringing Turkey into line with the European Union, which it aspires to join and which has criticised Turkey's record on freedom of speech and human rights.
Banning the AK is now naturally out of the question - but there is now the punishment to partially or totally cut off
treasury funding to the party
Mr Erdogan was named prime minister earlier this month.
Mr Kanadoglu, whose case has been criticised by human rights groups, said he accepted closure of the prime minister's party was out of the question.
But he insisted that the party should nonetheless suffer for its refusal to follow a court order regarding Mr Erdogan.
"When a constitutional order is violated, a legal result occurs. What should be protected here is the binding status of the decision of the constitutional court and non-violation of that order," he said.
"Banning the AK is now naturally out of the question. But there is now the punishment to partially or totally cut off
treasury funding to the party."
The AK, as a party with Islamist roots, has come in for close scrutiny from the Turkish army, regarded as the guarantor of the country's secular constitution.