Turkish lira at record low, stocks slide after coalition talks ends

Turkish lira at record low, stocks slide after coalition talks ends

Turkish lira at record low, stocks slide after coalition talks ends

AFP photo

The Turkish lira hit a record low and stocks tumbled 3 percent on Aug. 13 after coalition talks between the ruling Justice and Development Party (AKP) and the main opposition Republican People’s Party (CHP) ended negatively, setting the stage for a snap election.

“It’s not clear when elections will be. But the idea is that it probably will act as yet another catalyst that impedes investment,” said Manik Narain, a strategist at UBS in London.

“The big risk is that we end up having repeat elections and nothing changes. That introduces a lot of uncertainty for Turkish business and the economy.”

The AKP failed in June’s elections to win a single-party majority for the first time since coming to power in 2002. Prime Minister Ahmet Davutoğlu has until Aug. 23 to find a coalition partner and form a government or face snap elections.

“The outcome is negative,” a senior official with the main opposition CHP told Reuters, following the more than hour-long meeting in Ankara between Davutoğlu and CHP leader Kemal Kılıçdaroğlu that followed weeks of talks between their two parties.

President Recep Tayyip Erdoğan, who founded the AKP, is said to prefer an early election as the party’s best chance of regaining power. Party officials say its leadership has been encouraged by improvements in opinion polls, which suggest it could win a majority if an election were held now.

Turkish Prime Minister Ahmet Davutoğlu said on Aug. 13 the chances of an early election had increased “greatly” after efforts to form a coalition between his AKP and the CHP failed.

In a televised speech, Davutoğlu said there was currently no basis for a government partnership.
The lira, already one of the worst performing major emerging market currencies this year, tumbled to 2.8210 against the dollar, its weakest on record.

The main stock index fell as much as 3 percent before recovering some losses.