The Turkish high-profile corruption scandal, whose fallout has so far resulted in the jailing of the sons of the Turkish minister of the interior Muammar Guler, just escalated sharply following the abrupt resignation of three key ministers from PM Erdogan's government. Earlier today, first Economy Minister Zafer Caglayan and then Interior Minister Muammer Guler submitted their resignations to Prime Minister Recep Tayyip Erdogan Wednesday morning. A few hours later, they were joined by Environment and Urban Planning Minister Erdogan Bayraktar who also tendered his resignation as a member of parliament, however instead of doing so in a complacent manner, he lashed out at the PM and called for his resignation which roiled markets following an earlier relief rally.
As a reminder, Turkey has been shaken by three sensational corruption investigations last week that led to dozens of detentions and 24 arrests of people ranging from influential business leaders to senior bureaucrats and the ministers' sons. Caglayan's son Salih Kaan Caglayan, Guler's son Baris Guler and Bayraktar's Oguz Bayraktar were among those arrested in the sweep, which Recep Tayyip Erdogan, Turkey's prime minister, called a "dirty operation" to smear his administration and undermine the country's progress.
Today's developments are likely the beginning of the end for the current Prime Minister, because the shakeout "signaled a deepening rift in Mr. Erdogan's government." As the WSJ reports, while the economy and interior ministers joined the premier in condemning the bribery investigation as a plot to weaken the ruling Justice and Development Party, or AKP, Mr. Bayraktar lashed out at Mr. Erdogan for forcing the resignations, and in doing so also called for Erdogan's resignation.
"I don't accept being pressured because of this investigation, which involves bribery and corruption, and being told to 'resign and issue a comforting statement,'" Mr. Bayraktar said, according to his office. The minister, whose son was questioned in the probe, denied wrongdoing. "To soothe the nation, I believe that the prime minister should resign, too," he said.
Earlier in the day, the other ministers who quit echoed Mr. Erdogan's allegations that the probe was politically motivated.
"It is very clear that the operation performed as of Dec. 17 is a dirty setup against our government, our party and our country. I have resigned from my post of economy minister to help bring out the truth and spoil this ugly game, which has included my child and my close colleagues," Mr. Caglayan said in a written statement, according to his spokesman, who declined further comment.
The local markets were whipsawed by the developments, first rallying after the first two resignations, but falling sharply when Mr. Bayraktar called on the prime minister to quit.
The benchmark BIST-100 stock index reversed gains, falling 3.5% to 66555.3 in afternoon trading. The lira declined 0.5% to 2.0876 against the dollar, creeping toward Friday's record low. The government's borrowing costs rose as its benchmark two-year bond yields pared gains to 9.60% from 9.42%, after closing at 9.68% Tuesday. Bond yields decline as prices rise.
"With the two ministers' resignations in the morning, the lira gained because the market saw it as a positive step that would reduce prevailing political uncertainties. But the third minister's resignation, and call on the prime minister to step down, deteriorated investor sentiment," said Gokce Celik, an economist at Finansbank in Istanbul. "Turkey's lira has been under extra pressure recently due to domestic political uncertainties... it's going to be difficult for it to stabilize as the year draws to an end."
What may be behind the ongoing scandals? According to Al Jazeera, the investigations are widely believed to be linked to the recent tensions between the United States-based Turkish cleric Fethullah Gulen's movement and Erdogan's AKP that, many analysts say, used to be allies in the past in a struggle against Turkey's politically dominant military. The tensions, which have been festering for months, peaked after the government's plans to abolish private prep schools. Gulen owns a large network of such schools. Erdogan recently said that those behind the investigations were trying to form a "state within a state", an apparent reference to Gulen's movement, whose followers are influential in Turkey's police and judiciary.
Corruption in state tenders, money laundering, bribery, gold smuggling and distribution of prime land among favourites are among the accusations put on the suspects, sources at Istanbul chief prosecutor's office told Turkish media. Formal criminal charges are going to be revealed after the prosecutor's office announces the actual bills of indictment for the three simultaneous investigations it has been carrying out.
Those detained include the sons of Interior Minister Muammer Guler, Economy Minister Zafer Caglayan and Environment Minister Erdogan Bayraktar. Various well-known businessmen were also detained, including Suleyman Aslan, the chief executive of Turkish state bank Halkbank, and Ali Agaoglu, a construction tycoon, as well as Mustafa Demirand, the mayor of Istanbul district Fatih. Some of these prominent people were arrested while others were released by court order, all pending trial (much more on the tensions within the Turkish government here).
As for just how the CIA is involved, as it always tends to be in any strategic government destabilization process, we will likely find out shortly.
Credit to Zero Hedge
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