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DE RUEHIT #0258/01 0871034
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P 281034Z MAR 07
FM AMCONSUL ISTANBUL
TO RUEHC/SECSTATE WASHDC PRIORITY 6809
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UNCLAS SECTION 01 OF 02 ISTANBUL 000258 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR INTERNATIONAL AFFAIRS - JROSE/KMATHIESEN 
USDOC FOR 4200/ITA/MAC/EUR/PDYCK/CRUSNAK 
 
E.O. 12958: N/A 
TAGS: PGOV EFIN TU
SUBJECT: BANKERS' TAKE ON POSSIBLE ELECTION OUTCOMES 
 
REF: ISTANBUL 252 
 
ISTANBUL 00000258  001.2 OF 002 
 
 
¶1. (SBU) Summary:  Istanbul bankers and key business leaders 
are evenly divided on Prime Minister Erdogan's presidential 
aspirations with some claiming he would be a fool to take the 
highly respected but largely ceremonial position while others 
claim Erdogan's ego will not allow him to forego the 
opportunity to claim the highest position in the Turkish 
political structure.  They agree however that the Presidency 
is his for the taking, noting that the AK Party has both 
strong party discipline and sufficient votes to triumph 
without having to seek support outside the party.   Most 
private sector observers agree that a decision by Erdogan to 
forgo the presidency will improve the AKP's chances in the 
November parliamentary elections as well as reassure 
investors and the business community.  End Summary. 
 
Background 
---------- 
 
¶2. (SBU) As noted reftel, Istanbul based business leaders do 
not appear overly concerned by the possibility of current PM 
Erdogan becoming President.  Bankers and business leaders 
tend to agree that an Erdogan decision to forgo the 
Presidency would both place the AK Party in a stronger 
position for the November Parliamentary elections and give 
strong impetus to economic growth for the remainder of the 
year.  Business community observers are divided over whether 
Erdogan will opt to run for President, but agree that if he 
runs he has the votes needed to succeed. 
 
¶3. (SBU) Agreeing with comments recently made by Economy 
Minister Babacan to an investor group, most private sector 
analysis indicates Parliamentary elections will be shaped by 
the number of parties that cross the 10% threshold rather 
than the percentage of votes each party receives.  If three 
parties cross the 10% threshold AKP would need 27.5% of the 
vote to obtain a slim one seat majority and about 30% for a 
sustainable majority.  However, if four parties cross the 
threshold AKP would need 33.5% of total votes cast for a one 
seat majority and more than 35% for a sustainable majority. 
The one seat majority analysis does not take into account the 
possibility of several DTP politicians winning seats as 
independents, which would dilute the impact of an AKP 
plurality.  Given current poll ratings, this analysis 
indicates that if more than two parties make it into 
parliament the AKP will find it very difficult to hold onto a 
majority. 
 
Scenario 1:  Erdogan Remains as Prime Minister 
--------------------------------------------- - 
 
¶4. (SBU)  A financial analyst who believes opting for the 
presidency would be "completely illogical and therefore very 
unlikely" argues poll numbers and the likelihood AKP would be 
forced into coalition come November will make Erdogan choose 
to remain Prime Minister.  If PM Erdogan chooses not to run 
for President, his decision will be greeted with a strongly 
positive market reaction, according to every observer we have 
spoken with.  This would likely include increased foreign 
direct investment on the part of companies currently awaiting 
election results as well as increased confidence that a 
reform-minded AKP would retain majority control of parliament 
in November's elections.  Although often accompanied by 
disdain for AKP's social / cultural platform, most financial 
analysts and many business leaders agree that the Erdogan-led 
AKP government has been the most reform-minded, liberal 
government in the history of the Republic.   The large AKP 
majority and the longevity of the government have also 
provided a rare, extended period of political stability that 
has supported business confidence. 
 
Scenario 2:  Erdogan Opts for the Presidency 
-------------------------------------------- 
 
¶5. (SBU)  Market analysts agree that an Erdogan presidency 
would not lead to mass protests or other civil disturbance. 
A well-connected industrialist told us Erdogan's months-long 
flirtation with the presidency was carefully orchestrated to 
"exhaust opponents and inure public opinion to the idea of 
President Erdogan."  A leading financial analyst who believes 
Erdogan will run for President recently told us he expected 
an Erdogan candidacy would not "trigger the army's wrath in a 
traditional sense."  He expects a more subtle reaction 
instead with the media and the 'secular establishment' 
working to create a "perception of besiegement" by arguing it 
 
ISTANBUL 00000258  002.2 OF 002 
 
 
is unhealthy for one party to control the prime ministry, the 
parliament and the presidency.  Private sector observers 
generally agree that if a coalition government emerges after 
the November elections it would likely be both more populist 
and less reform oriented than the current AKP majority 
government.  In fact, the private sector seems far more 
worried about the possibility of a coalition government prone 
to populist economic policies than about an Erdogan 
presidency. 
 
Comment 
------- 
 
¶6. (SBU)  It is impossible to know whether PM Erdogan will 
opt for the presidency, however from the Istanbul private 
sector perspective it would clearly be better for market and 
investor confidence if he did not.  In contrast to our 
academic and media contacts, business leaders (who as a rule 
are just as "secular" as the others) aren't arguing that an 
Erdogan presidency would be bad from a social / cultural 
perspective, but instead have focused on the potential for 
sustained orthodox economic policy that could come from 
continued majority party control of parliament.  Several more 
years of AKP control of Parliament would potentially enable 
the government to tackle social security entitlements as well 
as engage in a gradual reduction of tax rates.  These 
far-reaching economic reforms are key to sustaining long-term 
growth, but are next to impossible to enact in an election 
year and extremely unlikely to occur under a populist-leaning 
coalition government.  End Comment. 
 
OUDKIRK