Lars Christensen
Danske Bank A/S
Local elections will be held in Turkey during the weekend and it is certain to be a referendum on Prime Minister Erdogan's leadership.
The opinion polls show 40-45% support for Erdogan's AKP party, significantly less than the nearly 50% the party got in the parliamentary elections in 2011 but more than the 38% support in the 2009 local elections.
Erdogan has said he would consider it ‘a victory’ if he gets more votes than at the last local elections. However, if AKP gets less than 38% it is likely to be seen as a major defeat for Erdogan, which would further increase his political troubles. Furthermore, there is a clear risk (from Erdogan's perspective) that AKP will NOT win in Istanbul and/Ankara, which would be pretty catastrophic for him.
What to watch out for. Will AKP get more than 38% of the vote? Will AKP win Istanbul and Ankara? If it is a yes to all these, Erdogan will be able to declare victory. If not, internal opposition to his leadership within AKP is likely to rise further.
Our view. Erdogan is in serious trouble and AKP could lose both Istanbul and Ankara. This would put renewed pressure on the Turkish markets.
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