Turkey’s Erdoğan pushes to overturn Istanbul vote; lira slides

(Story was updated with central bank interest rate decision in the final paragraph.)

Turkish President Recep Tayyip Erdoğan said his governing party would persist with efforts to overturn the result of local elections in Istanbul.

There were “thieves at the ballot boxes” and widespread irregularities, Erdoğan said in televised remarks in istanbul on Monday before departing for Moscow for meetings with Russian President Vladimir Putin.

“There are not just a few irregularities, it is almost across the board,” Erdoğan said. “As I said before, the election process is over. Now it’s time for the legal process. The point of reference for this legal process is the Supreme Election Board (YSK).

“We have seen that organised crimes have been committed, we are seeing it, they say. As a political party, we have also observed that these organised operations have been carried out.”

The lira extended earlier losses, dropping 1.1 percent to 5.69 per dollar.

The governing Justice and Development Party (AKP) applied to the election board at the weekend for a full recount of invalid votes in the Istanbul election, won, according to preliminary YSK results, by opposition politician Ekren İmamoğlu. A partial recount is already underway. İmamoğlu is ahead by almost 16,000 votes with 90 percent of the count complete, although his lead has shrunk by more than a third since that process began.

Erdoğan said prosecutors are involved in the criminal aspects of the Istanbul election and will continue to be.

Sadi Güven, head of the YSK, refused to comment on the election proceedings to reporters in Ankara, saying the legal process continued. 

The YSK has already thrown out a request by the AKP to recount votes in Ankara, which it also lost to the opposition Republican People’s Party (CHP) in the March 31 election. The CHP is considering legal action against the YSK for discrepancies in procedure since the vote, according to press reports last week. 

The main BIST 100 share index fell 1.6 percent to 97,216 points.

Some economists and analysts who cover Turkey have said they are concerned that Erdoğan may succeed in overturning the result in Istanbul unjustly, leading foreign investors to sell Turkish assets.

The lira slumped by 28 percent against the dollar in 2018 and extended those declines this year as Erdoğan, who rules via a full presidential system of government since last June, increased his grip over economic policy-making. He also became embroiled in political spats with the United States over Syria, a detained U.S. pastor and his planned purchase of Russian air defence missiles.

Erdoğan's decision to push for repeat elections in Istanbul, after they were ruled out by the YSK in Ankara, is the worst case scenario for Turkish markets, said Tim Ash, senior emerging markets strategist at Blue Bay Asset Management in London.

"As if Turkey needs yet another election," he said. "The market wants the government to get on with solving the economic problems."

The lira also fell on Monday after the central bank resumed lending at its benchmark interest rate of 24 percent. It had stopping doing so late last month, forcing banks to borrow at higher rates of interest, in an effort to defend the lira.