Clearly, Turkey’s democracy has taken a severe blow—cushioned only by the unequivocal stance of the opposition leaders and the media against the coup. Once again, the nation managed to break this pattern of ten-year coups. This offers the country a matchless opportunity for reconciliation. Granted, Erdogan has had an exceptionally rough weekend and his frustration with those responsible for or implicated in the coup is understandable. He is correct in calling “for their punishment under the full force of the law of the land.” It will, however, now be critical that he ensure that the rule of law is upheld and rises to the challenge of winning the hearts and minds across a deeply polarized nation. He has the tools for it in his repertoire and had successfully wielded them in the past—especially between 2003 and 2011, when he served as prime minister. In hindsight, this period is often referred to as AKP’s “golden age,” when the economy boomed, democracy excelled, and Turkey was touted as a model for those Muslim-majority countries aspiring to transform themselves into liberal democracies.

As he steers the country from the brink of civil war, Erdogan needs to rise above a majoritarian understanding of democracy and do justice to the aspirations of a public that heeded his call by pouring into the streets and squares to defeat the coup attempt. This is the least that the Turkish public deserves. This would also be a move in the right direction for Turkey’s neighborhood, which desperately needs a respite from the turmoil resulting from the war in Syria, the instability in Iraq, Russia’s territorial ambitions and now Brexit. This is the moment when a stable, democratic, transparent, accountable and prosperous Turkey needs to come to the fore on the world-stage. The United States needs it too. As much as the White House declared its faith in the strength of Turkey’s democracy and its support for the elected leadership, there is a clear chance for forging closer cooperation between the two countries. The first step in cooperation should be in bringing to justice the perpetrators of this coup, followed by measures to enhance Turkey’s capacity to address and manage the many challenges facing Turkey and its neighborhood.

Eoin Treacy's view

With mass killings in Europe, civil unrest becoming a factor in the US election cycle, wars in Syria, Iraq and Yemen, an increasingly expansionary geopolitical attitude in Russia and China exhibiting an adventurous proclivity it is easy to conclude standards of governance are deteriorating. Yet we should not forget that Argentina has a new reform minded president, India and Indonesia are led by reform minded administrations and even Nigeria is making strides towards improving conditions albeit from about the lowest base imaginable. 

We have long highlighted that the trajectory of governance is more important than the absolute level at which it stands. When we look at Turkey, a democratically elected government is preferable to a military dictatorship. The fact Erdogan is an aspiring despot who continues to try to make his position permanent is far from desirable but still trumps the certainty of dictatorship. It is now up to Erdogan how he handles the situation and we can hope he embraces equanimity despite little evidence in his character that that is likely. 

The Lira has at least stabilised over the last year and despite the political gyrations of the last few days failed to make a new low. The 7.5% 1-week repo and 9% overnight deposit rate might be contributing to that relative strength not least when interest rates elsewhere have been trending lower. 

The UK listed iShares MSCI Turkey ETF was somewhat overbought at last week’s peak and pulled back today before bouncing from the region of the trend mean. It will need to hold the region of 1800p if potential for continued higher to lateral ranging is to be given the benefit of the doubt.