Eurasia Group is pleased to release the fourth year-ahead outlook in our series of "Top 7 political risks for 2007," in which analysts from the Europe & Eurasia practice consider political risks associated with Turkey's year-long electoral cycle and a slowdown in the EU process.
Turkey faces presidential elections in May and parliamentary elections in November. According to the outlook, there are two parts to the electoral challenge. "First, there is likely to be a fierce controversy between the ruling Justice and Development Party (AKP) and the secularist establishment over the parliamentary vote to select Turkey's new president in May," write analysts. But "while the presidential elections will create much political noise, the November national elections will be much more important for markets. This is because the stability and reform process that has characterized Turkish politics since 2002 is largely due to the AKP's large parliamentary majority."
Analysts say that unless Turkey were to suffer a major economic downturn, the conservative and market friendly AKP is likely to win a second mandate but it is unclear whether it will retain its majority. "A return to coalition government, even if led by AKP, could hurt fiscal discipline, slow progress on economic and political reform and generate political instability."
The outlook outlines the political and economic factors that will shape the electoral campaign, as well as significant foreign policy issues. "On the EU front, 2007 is expected to be a "transition year" as Ankara is unlikely to meet EU's demands concerning Cyprus and democratic reforms before the elections," write analysts. "But it is the fate of Iraq and, in particular, the quasi-autonomous Kurdish region in North Iraq that threatens to create the most foreign policy problems for the AKP [and] � also affect Turkish-US relations."
The Top 7 Political Risks: