Will the PM keep Babacan in charge of the economy?

If it would be possible to reduce the outlook of foreign investors regarding the political atmosphere in Turkey to one single unknown, that would be the continuation of the economic policies as steered by Deputy Prime Minister Ali Babacan, without any distortion by populist policies. If it were possible to add another sentence, it would be an independent and functioning judicial system – but the first would be Babacan and his policies at the roots of the Justice and Development Party (AK Parti) governments.

The fact is Babacan is no longer a candidate for the June 7 elections. He will not be an MP because of a bylaw of the AK Parti banning more than three consecutive terms in parliament. Yet, there is no constitutional obstacle for a prime minister to appoint ministers from outside the parliament.

It is also a fact that Tayyip Erdoğan, even before he was elected president in August 2014, was not extremely happy (when he was still the PM) with the line represented by Babacan and Finance Minister Mehmet Şimşek (and also with the Central Bank) because that did not relax financial discipline as much as Erdoğan wanted so as to have a freer hand in the economy.

Especially after appointing Yiğit Bulut, a nationalist, Western-skeptic economy writer as his chief economy adviser in 2013, the discrepancies grew between Erdoğan and Babacan’s team. The rumor was that Erdoğan suspected the Babacan-Şimşek team was under Western financial circles more than he desired and in political terms within the AK Parti, was closer to former President Abdullah Gül than himself. In short, Erdoğan wouldn’t like to see Babacan and Şimşek at the steering wheel of the economy any longer.

In the meantime, however, two developments have taken place. The abrupt depreciation of the Turkish Lira against the U.S. dollar and the uncertainties over a too-strong AK Parti after the election which could lead the way to a super-presidency that Erdoğan desires made Erdoğan acknowledge the fact that in order to keep foreign capital investing in Turkey, the Babacan line has to be kept.

PM Ahmet Davutoğlu already had a contingency plan for that. He asked for the resignation of the head of Istanbul Stock Exchange (BİST) İbrahim Turhan, who is counted as a member of the Babacan team, to be a candidate for the June 7 elections in order to assure international investors that the Babacan line would continue. Davutoğlu also wanted Şimşek, actually a London investment expert in parliament, again in order to keep him at bay.

And on the day that President Erdoğan revised his election target from the ambitious 400 seat to 335, a bit higher than the 330 which is needed for a referendum (for his super-presidency), Davutoğlu said during a live interview on Turkey’s NTV that he might consider ministers in his new cabinet from outside the parliament, while also thinking aloud that Babacan would still be around.

That doesn’t mean that Babacan will exactly be in the next cabinet keeping the same position, but it is now a possibility. This signal alone shows that both Erdoğan and Davutoğlu have started to think that it is going to be a tough election on June 7.