World Bulletin / News Desk

 Turkey faces weeks of political turmoil after the ruling AK Party lost its parliametary majority in weekend polls, dealing a blow to President Tayyip Erdogan's ambitions to acquire sweeping new powers.

The election result could also prompt some soul searching in the AKP, Turkey's dominant political movement for more than a decade, where in recent years religious conservatives, with Erdogan's support, have gained the ascendancy at the expense of centre-right and liberal elements.

Erdogan, strident in his attacks on opponents he has in the past accused of betraying Turkey, seemed conciliatory in first comments after the poll - a stark contrast to his triumphalist appearances after recent local and presidential elections

"Our nation's opinion is above everything else," he said. "I believe the results, which do not give the opportunity to any party to form a single party government, will be assessed healthily and realistically by every party.

MARKET SHAKEUP

As election results indicated the ruling Justice and Development (AK) Party was the winner of Sunday's general election, the Turkish lira hit record low against the dollar and the stock exchange plummeted about 10 percent on Monday.

The lira fell to 2.799 against the dollar in early hours of trading, then fell back to about 2.78 on Monday morning.

The Turkish stock exchange Borsa Istanbul plummeted 8.15 percent in opening session. Then it recovered a little to a loss of about 6.10 percent in early trading hours.

The Central bank announced on Monday that the deposit interest rate for the dollar was reduced to 3.5 percent from 4 percent and the rate on euro deposits to 1.5 percent from 2 percent. 

Erdogan, Turkey's most popular modern leader but not one used to compromise and negotiation, had hoped a crushing victory for the AKP would allow it to change the constitution and create a more powerful U.S.-style presidency. Opponents feared his vision lacked checks and balances, the judiciary already weakened by purges of officials Erdogan accuses of conspiring to topple him.

EARLY ELECTION POSSIBLE

Deputy Prime Minister Numan Kurtulmus told reporters the AKP would try to form a coalition government as its first option and was optimistic that it would be able to do so, but added that an early election could be on the cards if it failed.

A coalition without the AKP, he said, was impossible.

The right-wing Nationalist Movement Party (MHP) is seen as its most likely partner. But its leader Devlet Bahceliall but ruled out such a deal on Sunday, saying Turkey should hold a new election if the ruling party was unable to agree a coalition with other opposition groups.

"The possibility of a government coming out of the current situation is very slim," one senior AKP official said, ahead of a meeting with Prime Minister Ahmet Davutoglu and party leaders to evaluate Sunday's outcome.

"With these results, an early election seems inevitable."

Two other AKP officials also told Reuters a new election looked unavoidable, while Finance Minister Mehmet Simsek warned a coalition would not be as reformist as a single-party government.

"Everything, from the economy to big projects, is currently on hold, and we don't have the luxury of continuing with an uncertain and weak government at a time when the world is facing great economic risks," a second senior AKP official said.

"NEW TURKEY"?

The AKP's failure to win an overall majority marks an end to more than a decade of stable single-party rule and is a setback for both Erdogan and Davutoglu.

Both men had portrayed the election as a choice between a "new Turkey" and a return to a history marked by short-lived coalition governments, economic instability and coups by a military whose influence Erdogan has now reined in.

Sunday's big winner, the pro-Kurdish Peoples' Democratic Party (HDP), which crossed a 10 percent threshold to enter parliament for the first time, has also ruled out going into coalition with the AKP.

Its co-leader Selahattin Demirtas said on Sunday the election outcome had put an end to talk of the stronger presidential powers championed by Erdogan.

A third AKP official said an agreement with the MHP was possible and warned that a failure to do so could lead to prolonged uncertainty that could erase some of Turkey's hard-won economic gains.

"Though it is not a very strong option, it is the only option for a government with AKP ... The only thing that can relieve the markets at this point is an AKP-MHP coalition," the official said. 

COALITION POSSIBILITY

Two high-profile members of Turkey’s ruling Justice and Development (AK) Party have suggested that a coalition government is a more likely scenario than a re-run of Sunday’s general election.

Ministers Bulent Arinc and Numan Kurtulmus were speaking on Monday in Ankara ahead of a crucial board meeting of their AK Party.

Deputy Prime Minister Arinc said his party was the winner of June 7 general election, claiming that the “success” of the pro-Kurdish Peoples’ Democratic Party (HDP) was the result of efforts by other opposition groups to “overthrow” the AK Party.

Arinc invited the main opposition Republican People’s Party (CHP), Nationalist Movement Party (MHP) and the HDP to try and form a governing coalition “if they can”.

Kurtulmus said a coalition seemed the best option now and that early elections were very unlikely.