ECONOMY

AKP lawsuit warning

ANKARA – A lawsuit to ban the governing party could damage Turkey’s political and economic stability, Prime Minister Recep Tayyip Erdogan said as he prepared to meet with his top economic ministers to discuss ways to minimize the impact. «Confidence and stability» have been central to achieving a record six consecutive years of growth, Erdogan told his party’s lawmakers in Ankara yesterday. European Union foreign policy chief Javier Solana said in Brussels that the petition asking the Constitutional Court to outlaw the Justice and Development Party (AKP) poses a «grave» risk to Turkey’s EU bid. The lawsuit may distract the government from its agenda, limiting economic growth that’s already the slowest in six years just as a global credit crunch reduces expansion. It also threatens the future of a single-party government that has attracted record foreign investment and began entry talks with the EU after expanding democracy and reducing the military’s role. «The case will not be resolved quickly and the persistent uncertainty is going to hit spending on investment and domestic demand,» said Ozan Gaziturk, an economist for Istanbul-based lender Sekerbank TAS. «No matter how much they deny it, the political agenda is sure to slow down the economic reform process.» Economic team The Ankara meeting was the first full gathering of the Justice and Development Party’s economic team since March 14, when a prosecutor asked the Constitutional Court to outlaw the party and ban its leaders, including Erdogan, from politics. The AKP met yesterday to discuss a political response. The AKP’s priority remains to «solve Turkey’s chronic problems one by one,» Erdogan said, promising to pass legislation to ease curbs on freedom of speech next week. The European Union has been demanding changes to Article 301 of the penal code because it has been used to prosecute hundreds of writers and academics for expressing their opinion. Progress toward EU membership has slowed since Turkey started entry talks in 2005. Turkey has begun talks in six of the bloc’s 35 policy areas and completed one. The EU blocked talks in eight areas to protest Turkey’s trade embargo against the Republic of Cyprus, an EU member. «I hope the Supreme Court is sensible in its ruling because it would be a hard blow for Turkey and a blow for Turkey’s relations with us in Europe,» Solana told the European Parliament’s foreign affairs committee yesterday. The legal case won’t derail the government’s plans to sell assets such as electricity distribution grids and hold an initial offering in telephone company Turk Telekomunikasyon AS, Economy Minister Mehmet Simsek said in an interview last Friday. The government is also planning legislation designed to make the labor market more flexible, he said. Growth is likely to slow to 3.9 percent in 2008 from 4.5 percent last year, in part because the closure case will make the AKP unwilling to make painful economic changes, Citigroup Inc economist Ilker Domac said in a note to investors yesterday. «Bleak prospects for the revival of reform efforts following recent political developments further complicate the growth outlook,» he wrote. Gross domestic product expanded 3.4 percent in the last quarter of the year, the same as the previous three months and the slowest rate since the start of 2002. Stable single-party government under the AKP helped draw about $42 billion in foreign direct investment over the last two years, more than in all of the previous years.