Turkey’s rating stable

ANKARA (Reuters) – Moody’s Investors Service said yesterday it did not expect Turkey’s political crisis to derail the European Union candidate’s Ba3 credit rating – three notches below investment grade. «Despite tensions over the selection of the next president due to the military’s objections to the ruling party candidate, the government’s Ba3 ratings… are sufficiently capable of absorbing such volatility,» sovereign credit analyst Kristin Lindow said in a statement. But the ratings agency cautioned that «considerable uncertainty remains on how the situation will play out.» Moody’s rating is on a par with the BB- ratings held by Standard & Poor’s and Fitch Ratings. Turkey has called early parliamentary elections for July 22, three months early, after the government’s candidate for president, Foreign Minister Abdullah Gul, was blocked by opposition lawmakers. «Politics will become more complex should a new parliament comprised of more political parties replace the current alignment in the upcoming elections, as now seems likely,» the Moody’s statement said. The specter of military intervention was roundly criticized by the European Union and others, but it has added an unpredictable element to the political process. Turkey’s secular establishment believes the ruling Justice and Development Party (AKP) and Gul, an ex-Islamist, would undermine the strict separation of state and religion. Gul and the AKP deny the claim. Moody’s Lindow said: «We continue to expect that Turkey’s impressive positive turnaround during the past six years will remain largely intact, mitigating the risks posed by the country’s heavy public and external indebtedness. While recent difficulties have understandably shaken the confidence of financial markets and have raised additional concerns about Turkey’s EU membership prospects, the most likely outcome to the political crisis will be a new civilian government committed to ongoing reform.»