Political and Economic Update
AKP and MHP will begin negotiating in earnest on the details of the constitutional reform bill this week. We expect a compromise and a referendum in April-May. If MHP backtracks AKP could resort to early elections.
Tensions with the EU are rising by the day. European Parliament could pass a motion recommending the suspension of accession talks with Turkey as early as this week. We consider a parting of ways with EU very damaging.
Trump’s security advisors are no fans of Islam, which suggests Erdogan would have a very difficult time getting along with his counterpart on this topic. In Syria, Turkish forces and its allies are stuck at the gates of al Bab. In Iraq, Shia militia are about to enter Turkmen town of Tal Afar where an ethnic cleansing is a possibility.
The unemployment rate rose in August, consumer confidence (Bloomberg HT flash index) tanked in November, and the budget data worsened further in October. It is time to take a hard and comprehensive look at our troubles, but this is an impossible thing even to debate, given the political context.
Cosmo predicts the EM sell-off will continue, doing further damage to fragile countries like Turkey. Only pre-emptive action by CBRT could mitigate the damage. If the CBRT holds back, the options are very unpleasant.
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