Bloomberg News

Turkey’s Top Four Generals Resign After Erdogan Tension

July 29, 2011

(Updates with new army chief in fourth paragraph, opposition politician in 12th, analyst in 14th.)

July 29 (Bloomberg) -- Turkey’s top four generals stepped down, the first such mass resignation in the country’s history, amid tensions with Prime Minister Recep Tayyip Erdogan over alleged military plots to undermine his government.

Chief of General Staff Isik Kosaner asked to leave because he “deemed it necessary,” state news agency Anatolia reported in Ankara today, citing no one. The chiefs of the army, air force and navy resigned soon after, NTV news channel reported. Those three were due to retire at the end of August, NTV said. The lira fell as much as 1.3 percent and credit-default swaps rose 10 basis points to 193, data provider CMA said.

Erdogan, re-elected in June, has reduced the secularist armed forces’ power over Turkish politics since he came to power in 2002. His party was formed after the closure of an Islamist movement he belonged to. More than 40 serving generals, or about a tenth of the senior ranks of NATO’s second-largest army, are under arrest after prosecutors alleged that they planned bomb attacks to undermine Erdogan’s administration.

“This will be managed with no tanks on the street,” Tim Ash, head of emerging-market research at Royal Bank of Scotland Group Plc in London, said in an e-mailed comment. “But this increases risk perceptions of Turkey and comes at a bad time given concern over the economy overheating. The lira will come under more short-term pressure.”

President Abdullah Gul appointed Necdet Ozel as the new land forces chief after a hastily arranged meeting with Erdogan at his palace in Ankara, CNN Turk news channel said.

Lira Slides

Turkey’s lira, the worst performer today among 178 countries excluding Gambia, fell 0.7 percent against the dollar at 9:58 p.m. in Istanbul. It has lost 4.4 percent this month. Bond and stock markets were closed.

Erdogan campaigned for June 12 elections on a pledge to rewrite the constitution that was drafted under military rule after a coup in 1980. That would cement his victory over the generals, who accuse him of imposing Islamic values.

The armed forces have deposed four governments in the past four decades and see themselves as guardians of the secular state established by national founder Mustafa Kemal Ataturk in 1923.

“The balance of power has shifted decidedly in favor of the government over the recent years, which could limit the fallout from the resignations,” Inan Demir, chief economist at Finansbank AS in Istanbul, said in an e-mailed comment. Still, the resignations are “unprecedented” and “the situation is extremely fluid.”

Ataturk

The departures come as Erdogan tries to keep intact an economic boom that swept him back to power last month in a victory that put him on course to be the longest serving Turkish leader since Ataturk. The country’s trade deficit swelled to a record $10.2 billion in June, the statistics office said today, and the lira last week fell to the lowest in more than two years.

Erdogan has chipped away at the powers of the military since his Justice and Development Party was elected with a mandate to press for European Union membership. In 2003, he ended army control over the National Security Council, the body on which politicians and general meet to discuss security threats. In the same year he ignored the generals’ objections to a United Nations plan for the reunification of Cyprus. The army failed to block the appointment of Erdogan ally Abdullah Gul as president in 2007 after Erdogan called elections.

“Tension has become unpreventable and unmanageable since the government took control of the judiciary and now set its eyes on the armed forces,” nationalist opposition leader Devlet Bahceli said in a statement on his party’s website.

Jailed Suspects

Courts in Istanbul have jailed scores of former and current military officers, as well as journalists and academics, on charges that they conspired to weaken Erdogan’s government through violent attacks designed to create instability. The defendants say the cases are based on forged documents.

“The fact that Kosaner, who had a relatively better relationship with the Erdogan’s party than his predecessors, was the one to pull the trigger, reflects the depth of tensions,” Kaan Nazli, director of emerging markets at Medley Global Advisors in New York, said in e-mailed comments. “In recent weeks a series of new indictments were unveiled that implicated more officials, directly impacting the process of appointments at the Supreme Military Council.”

Generals are appointed by the Supreme Military Council, a bi-annual meeting of the prime minister and the armed forces. Final approval lies with the president.

Trials

Today’s resignations followed a meeting in Ankara between Kosaner, Erdogan and President Abdullah Gul to discuss promotions of senior military staff that are due to be decided at a Supreme Military Council that starts Aug. 1.

Erdogan was pushing to block the promotions of the generals and admirals who were jailed as part of the coup plot trials and force their retirement, according to a report in Cumhuriyet newspaper on July 5. None of them have been convicted.

The resignations were the general’s “way of expressing their response to the government’s arbitrary decisions,” Gursel Tekin, a deputy head of the main opposition Republican People’s Party, said in a telephone interview.

--With assistance from Linda Shen in London. Editors: John Fraher, Mark Bentley

To contact the reporters on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net Steve Bryant in Ankara at sbryant5@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.


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