by Manuel Alvarez-Rivera, Puerto Rico
Turkey will be holding an early parliamentary election this Sunday - three months ahead of schedule - in the wake of an impasse over the election of a new president between the Islamist-oriented Justice and Development Party (AKP) government of Prime Minister Recep Tayyip Erdogan and the country's staunchly secular elite.
Turkey's head of state is presently chosen by the country's unicameral Parliament, the Grand National Assembly, and the ruling party wanted to elect Foreign Minister Abdullah Gul as president. Despite the fact that Erdogan's government has pursued Turkey's membership in the European Union (EU) and introduced a number of liberal reforms in order to bring Turkish law in line with EU standards, the opposition parties accuse Gul and AKP of having a hidden Islamist agenda that constitutes a threat to the country's strict separation of religion and state - the legacy of Kemal Atatürk, the founder of modern Turkey - and boycotted the presidential election. As a result, the required two-thirds quorum was not attained, and the Constitutional Court subsequently annulled the election. Meanwhile, Turkey's army - which regards itself as the "defender of secularism" - expressed its "concern" regarding the presidential vote. In 1960 and 1980 the military overthrew civilian administrations, and in 1971 and 1997 it pressured democratically elected governments out of office.
However, Prime Minister Erdogan - who has sought to portray his Justice and Development Party as a moderate Islamic political force, similar in outlook to the Christian Democratic parties of Western Europe - secured parliamentary approval for a package of constitutional amendments that would provide for the election of the president by popular vote for up to two five-year terms (instead of a single seven-year mandate), and for the Grand National Assembly to be chosen every four years, instead of every five. The amendments will be submitted to voters in a referendum expected to be held next October, following a ruling by the Constitutional Court which rejected challenges brought forward by outgoing President Ahmet Necdet Sezer and the country's main opposition party, the left-wing, secularist Republican People's Party (CHP).
Members of the Grand National Assembly are chosen in multi-member constituencies by a proportional representation (PR) electoral system that has gained notoriety due to an unusually high - and highly controversial - electoral threshold, set at ten percent of the nationwide vote since 1983. Earlier this year, the European Court of Human Rights ruled that Turkey's 10% threshold was not in violation of the European Convention on Human Rights, but at the same time noted that "it would be desirable for the threshold complained of to be lowered and/or for corrective counterbalances to be introduced to ensure optimal representation of the various political tendencies."
Elections to the Turkish Grand National Assembly has further information on Turkey's electoral system.
The ten percent threshold - introduced by the 1980-83 military government to prevent a recurrence of the excessive parliamentary fragmentation and resulting governmental instability that characterized Turkish politics for much of the 1970s - has had a mixed record over the years. Following eight years of single-party governments headed by the free market-oriented Motherland Party (ANAP), no party secured an overall majority in the 1991, 1995 and 1999 general elections, and for eleven years the country was ruled by a succession of largely weak, unstable coalition cabinets.
However, the 2002 parliamentary election brought an unprecedented political upheaval: four of Turkey's major parties at the time - the Democratic Left Party (DSP), the far-right Nationalist Action Party (MHP), ANAP and the right-of-center True Path Party (DYP) - were wiped out when they fell below the threshold, while the recently established AKP, a successor of the Virtue Party and the Welfare Party - previous Islamist parties disbanded by Turkey's Constitutional Court - won a large parliamentary majority with 34.3% of the vote. Besides AKP, only CHP overcame the ten percent barrier and secured parliamentary representation (having previously failed to do so in the 1999 general election); over forty-five percent of the votes were cast in favor of parties which failed to cross the threshold and obtained no seats in the National Assembly, including the Democratic People's Party (DEHAP) - the legal vehicle of Kurdish nationalism - which won the largest number of votes in thirteen provinces in south-eastern Turkey.
The ongoing exclusion of pro-Kurdish parties from the Grand National Assembly has been yet another sore point for Turkey's sizable Kurdish population, which is not officially recognized as an ethnic minority. For most of the 20th century, successive Turkish governments sought to forcibly assimilate the Kurds, which were officially designated as "Mountain Turks" or "Eastern Turks", and use of the Kurdish language was strictly prohibited. These restrictions were relaxed in 1991, and under pressure from the EU, broadcasts and education in the Kurdish language were legalized in 2002.
Successive pro-Kurdish parties have had to deal with intense hostility from the authorities, which have repeatedly sought to identify the former with the outlawed Kurdistan Workers' Party (PKK) and its successors, which wage a violent campaign to establish an independent Kurdish state. However, this situation is just one manifestation of a widespread perception that equates (or is unable to distinguish between) legitimate dissent and subversion. Despite the adoption of major reforms in recent times, organizations such as Amnesty International remain critical of Turkey's human rights record, and Freedom House continues to classify Turkey as a partly free country.
Under Erdogan's tenure, the Turkish economy has enjoyed several consecutive years of strong growth, and opinion polls show AKP well ahead of its opponents; among the latter, only CHP and MHP appear to be above the minimum ten percent of the vote required to secure parliamentary representation. However, the nationwide threshold does not apply to independents, which are running in record numbers in the election; in fact, the Democratic Society Party (DTP) - the successor of DEHAP - has fielded independent candidates in what could prove to be a successful attempt to circumvent the electoral barrier. Thus, while AKP appears likely to prevail in the election, it is less clear that it will retain an absolute majority in the Grand National Assembly, and Prime Minister Erdogan has announced he will retire from politics if the ruling party is not returned to office as a single-party government.
Update
The ruling Justice and Development Party (AKP) of Turkish Prime Minister Recep Tayyip Erdogan will remain in office after having scored a second landslide victory in the elections to the Grand National Assembly held last July 22.
Definitive results of the election, released by Turkey's Supreme Election Council on Monday, July 30 were as follows:
Justice and Development Party (AKP) - 16,327,291 votes (46.6%), 341 seats
Republican People's Party (CHP) - 7,317,808 votes (20.9%), 112 seats
Nationalist Action Party (MHP) - 5,001,869 votes (14.3%), 70 seats
Independents - 1,835,486 votes (5.2%), 26 seats
Democrat Party (DP) - 1,898,873 votes (5.4%), no seats
Young Party (GP) - 1,064,871 votes (3.0%), no seats
Felicity Party (SP) - 820,289 votes (2.3%), no seats
Others - 783,204 votes (2.2%), no seats
84.2% of the electorate turned out to vote, up from 79.1% in 2002.
The major election winners were AKP, whose share of the vote increased substantially with respect to the 2002 legislative election, and the Nationalist Action Party, which staged a comeback and returned to Parliament after having lost all its seats in the 2002 debacle. Meanwhile, the Republican People's Party - which ran in alliance with the Democratic Left Party (DSP) - barely improved over the combined 20.6% share of the vote won by CHP and DSP in 2002. (Turkey's electoral law forbids electoral coalitions, but political parties get around this restriction by having their candidates stand under the banner of an allied party.)
Despite polling a larger percentage of the vote, both AKP and CHP lost seats to MHP and to twenty-six successful independent candidates. AKP's losses were largely offset by its sizable vote increase and the party retained a reduced but nonetheless substantial parliamentary majority, but CHP suffered heavy seat losses. Twenty of the newly-elected independent deputies are affiliated with the pro-Kurdish Democratic Society Party (DTP) - which successfully circumvented the electoral threshold - and the remaining six independents include notable personalities such as former Motherland Party (ANAP) leader and ex-Prime Minister Mesut Yilmaz, who won a seat in Rize province (ANAP did not contest the 2007 parliamentary election).
Although the percentage of votes cast for parties that failed to cross the ten percent barrier required to obtain parliamentary representation fell from forty-five percent in 2002 to thirteen percent in 2007, the figure remains high by Western European (but not Eastern European) standards. The main casualty of the electoral threshold was the Democrat Party (DP; formerly the True Path Party), which had fallen just below the threshold in 2002 but lost further ground in the 2007 election.
While AKP won a decisive victory at the polls, the issue that brought about the early election - the designation of a new president - remains unsettled. The Supreme Election Council has scheduled the referendum on constitutional amendments (which among other things would provide for the direct election of the president) for next October 21, but in the meantime Turkey's head of state will have to be chosen by the Grand National Assembly. It is anticipated that the ruling party will renominate Abdullah Gul as its presidential candidate, but the military has made it clear that regardless of the election outcome, they still hold the view that Turkey's next president must be a committed secularist: as General Yasar Buyukanit, Turkey’s Chief of the General Staff bluntly put it, "the views of the Turkish Armed Forces do not vary from day to day."
Perhaps more importantly, following the election AKP is further behind the two-thirds majority required to elect a new president, which means the ruling party is in no position to impose its candidate of choice. Prime Minister Erdogan has indicated his willingness to compromise on the issue, but insists the candidate must come from his party. Although Erdogan has proven to be a very skillful politician, it remains to be seen if he can reach an agreement with the opposition parties and prevent a showdown with the armed forces.
Turkey elects an Islamist president covers the election of Abdullah Gul as President of Turkey.
Tuesday, July 17, 2007
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Special Feature, The German Economy At A Glance
Welcome to the Global Economy Matters Blog. Below you will find the normal chronological blog posts. But first here is our Monthly Special Feature which in January 2008 focuses on Germany. Here you will find charts which provide background data on the German economy. We hope these will be of some help to the first time reader here, making it easier to contextualise, assess and get to grips with the general argument being presented on the blog. The big question which arose concerning the Germany economy in 2007 was whether or not the new found dynamism in German economic activity constituted some form of remaissance, and formed part of a global decoupling process whereby a sustainable recovery in domestic demand was taking place. Analysts on this blog never really accepted this view. The key question and central enigma associated with the German economy is really why domestic demand should have remained so congenitally weak over such a considerable period of time.
Since this phenomenon is also to be observed in the the two other societes with very high (circa 43) population median ages - Italy and Japan - we postulate that demographics and population ageing processes offer some part of the explanation here.
Basically what we can observe as societies move above the 40 median age mark are a number of stylised facts. Weakness in domestic private consumption would be one of these, absence of consumer credit driven property booms would be another, growing pressure on the national debt as the elderly dependence ratio steadily rises would be another, and growing dependence on export growth for sustaining GDP growth would be the central feature of the whole edifice.
We hope you will find the background data presented here useful in assessing the argument which we are presenting on this blog, which is basically that a key component in the longer term growth stagnation from which Germany is suffering has its roots in the underlying demographics. Basically and in the long run (possibly with a 30 year lag) fertility does matter. Please click on thumbnails for better viewing.
What follows is a very rough and ready attempt to describe in broad brush strokes how the contemporary German economy actually works. First off, and as is well known, German society is ageing, and at the same time the German population has started declining. Not only is Germany's median age rising, the proportion of the population in the key 25-49 age group is now falling.
As can be seen from the chart this crucial age group touched its highpoint in 1997/98. This could be thought of as the moment of maximum capacity for the German economy since it includes the crucial 25 to 40 household-former, first-time-homebuyer group. In terms of credit expansion, it is this group which drives a significant part of internal demand.
The age group also includes another important group, the 35 to 50 years one. This group drives an economy in productive terms, since these are the prime age workers. If you think of a society as a 100 metres sprint athlete, then there is an age when this athlete is at the maximum of his or her running potential, an age after which each time they can only run the 100 metres more slowly.
Well a society is the same in terms of its collective economic potential, without addressing underlying issues either through fertility or immigration, it can only move forward more and more slowly. Consumption becomes flat, and GDP growth - gioven the external dependence - fragile.
Private consumption has hovered pretty close to the 60% mark for many years now, while government consumption - after moving sharply upwards as a total share in the first half of the 1970s has subsequently remained pretty constant, moving around the 19% of GDP mark. The big difference has been in the importance of fixed capital formation (GFCF) which reached from 1975 to 2000hovered around the 22 - 24% of GDP mark.
Prior to 1975 GFCF was at a much higher level, while post 2000 it has dropped substantially And So what we can see is that the year between, say, 1975 and 2000, when GFCF remaind a more or less constant share of GDP, constituted - to use the language of neo-classical economics - the constant growth period of the German domestic economy.The years prior to 1975 were the convergence, or "catch-up" years
And especially the 1960s, after Germany finally broke out of the destruction and devastation of WWII - while the years after 2000 constitute what the neo-classicists would call the "balanced growth period", although as we can see, it isn't very balanced, and there certainly isn't a steady state.
2008 Forecasts: There is a consenus at the present time that the German economy is slowing. Where there is no real consensus is over the rate at which it is slowing and where and when it will settle. It is clear that GDP growth in 2007 will be below the heady 3.1% annual rate achieved in 2006. The OECD last December revised their 2007 German forecast down to 2.6%, and their 2008 one down to 1.8%. The IMF in their October World Economic Outlook forecast growth for 2007 at 2.4%, slowing to 2% in 2008. Morgan Stanley's Elga Bartsch, while optimistic that the German economy will whether the credit crunch better than most (and here she may well be right) is somewhat more sanguine, putting 2008 growth at 1.5%. In general though I rather doubt her overview that "Germany could well be on the way to becoming the new growth locomotive in Europe." and especially her suggestion that "the phase of underperformance in terms of GDP growth, which has plagued Europe’s largest economy for years, is clearly over." Unfortunately, what we are arguing on this blog is that Germany's GDP growth rates since the mid 1990s are not some special kind of "underperformance", but what can be expected from a society with a rapidly rising median age which is increasingly dependent on exports rather than domestic consumption for growth.
The EU commission in it's November 2007 forecast was also convinced that the German economy was now on a "solid growth path", forecasting 2.5% growth for 2007 and 2.1% for 2008.
I personally will be very surprised if we see growth in the region of 2% for the German economy in 2008, and I even consider the 1.8% from the OECD and 1.5% from Morgan Stanley still on the high side given the extent of downside risk. Basically the reasonably favourable depreciation rules which currently apply to German investment have been changed as of 1 January 2008, and we might reasonably expect to see some sort of impact on investment comparable with the negative shock which hit private domestic consumption following the VAT rise on 1 Jan 2007. In addition all the indications suggest that German consumption will continue to be weak in 2008. So if consumer consumption is at best flat, governemnt consumption equally so, and investment and construction weakening, we are simply lefy with export growth, and here the outlook is definitely more negative in 2008 than it was in 2007. The Spanish economy (one important German customer) is visibly wilting by the day, as is the UK (another big customer), but it is to Eastern Europe we must look for the biggest impact on German exports of any correction in 2008. Just one data point should suffice, Germany exports roughly the same value of goods to the Czech Republic (and more to Poland) as it does to China. This means that Geramny is proportionately not that exposed to any slowdown in China, but hugely exposed to any sudden shift in growth and demand in the East of Europe.
So I would say, that on current data, 1% growth in Germany in 2008 look a reasonable estimate at this point, but that this needs to be taken to mean with considerable downside risk. Germany is now tremendously dependent on what happens elsewhere, and until what does actually happen elsewhere becomes clearer it is difficult to be more precise on Germany.
The only apparent bright spot on the horizon is employment, but I am dubious that in the context of Germany's ageing workforce this will work through as some are hoping, as I expain at some considerable length in this post here. My opinion is that Germany will enter recession at some point during 2008, and that we may well have 2 consecutive quarters of negative growth. The continuing high euro will maintain pressure on German exports, and high oil and food prices will maintain pressure on the inflation front, at least in the first half of 2008. The ECB will probably switch stance towards rate reductions at some point, but since, as Elga Bartsch among many others so eloquently argues German internal consumption and investment are not especially dependent on credit conditions, easing from the ECB may not have as much impact as one would hope for.
Key Posts For Understanding The Present Path of the German Economy
Is The German Economy Heading For Recession in 2008?
Employment and Unemployment in Germany January 2008
Germany Economy, What Price the VAT Effect Now!
The German Economy, Employment, Export Shares and Age Structure
Structural Aspects of German Export Dependence
Does NeoClassical Steady State Growth Really Exist?
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