A possible second legal bid to close Turkey's ruling AK Party may stand a better chance of success than the first and may hit markets harder than last year when investors fled on fears of political turmoil. Speculation surrounding a second closure case grew this week as newspapers reported ruling AK Party arch-nemesis Abdurrahman Yalcinkaya, the prosecutor behind the first closure case, was investigating allegations of illegal party links to a German-based charity. The centre-right, pro-business AK Party narrowly escaped closure last year even though it was found guilty of being a focal point of Islamic activity. That trial sent markets into a tailspin and left investors to ponder whether it would bring an end to six years of AK Party rule; a period of stellar economic growth and political stability unprecedented in decades. A fresh closure case would likely rein in investment and push bond yields higher as it would again force the government to focus on survival rather than pursuing reforms towards EU membership that help attract more foreign investment. Many members of the secularist judiciary still want to see the AK party shut down and a second closure case would not be a surprise, said Professor Ergun Ozbudun, expert on constitutional law at Ankara's Bilkent University. The issue is whether Deniz Feneri, an Islamist charity operating in Germany, channelled funds to the AK Party. “Under the Constitution a party cannot receive funding from a foreign person or institution, but to establish such a case is very difficult,” said Ozbudun. If the case can be proven, he said, “then yes, the party can be closed.” The AK party denies any link to Deniz Feneri, but such a case could spell danger. “It's much more concrete and explicit in the constitution than the grounds for closure presented in the first case,” Ozbudun said. The court papers have already been sent to the Appeals Court where Yalcinkaya is chief prosecutor, but he has made no statement on the dossier yet. In a speech on Friday though, he did stress his role in defending the secular constitution. “The chief prosecutor's main duty is to protect the constitutional order, democracy and the secular republic and to monitor and sanction those that act against the constitution and democratic rules,” Yalcinkaya said. The first prosecution played a role in the stock market's 12 percent fall from the time the case opened to the final hearing. Another court case would hit hard the lira currency, already looking overvalued. It would also dim medium-term investment prospects at a time when the appetite for risk is already low and the government's fiscal discipline is looser as it tries to spend its way out of the economic crisis. ‘Fiscal policy is looser than ever and monetary policy (interest rates) is in single digits. In such an environment such a shock would upset markets seriously ... (bond) yields could go up further, even double,” said Oyak Securities Chief Economist Mehmet Besimoglu. Turkey's highly politicised judiciary has clashed heads with the government numerous times, including over an attempt to ease a ban on the Islamic headscarf in universities, which analysts say provided fodder for the original closure case. Some analysts say a current investigation into a shadowy ultra secularist organization called Ergenekon, which has seen the arrests of numerous judiciary figures as well as retired and serving military officers, is retribution for the closure case. A second closure case would come at a time when the party is weaker in the eyes of the electorate following a slide in its support among voters in March local elections, a first for the party that rose to power in 2002. With lower public support the AK Party would be in a weaker position to defend itself in court. “Lower support will be an additional weakness to the party during a closure case, because it would be much more difficult to close down a party that has high support as opposed to one whose support is waning,” said Sinan Ulgen of the Centre for Economics and Foreign Policy Studies think-tank in Istanbul. “It would create quite a degree of political uncertainty, undermining the economic stability of the country and its role as a target for foreign investment.”
