In a move that has sent shockwaves through Ankara’s political landscape, a Turkish court has removed two prominent opposition politicians from office, escalating the long-running battle between President Recep Tayyip Erdoğan and his rivals. The ruling, which ousted the co-mayors of a major Kurdish-majority city, has drawn an immediate response from the UK, with the Foreign Office calling for ‘full respect for democratic processes and the rule of law.’
For investors, this is yet another tremor in Turkey’s already shaky investment case. The lira, already nursing heavy losses against the dollar, briefly touched fresh lows on the news. The country’s benchmark BIST 100 index shed 2.3% in afternoon trade as foreign portfolio managers hit the sell button. The message from the markets is clear: political instability is a tax on capital.
The court’s decision to remove the opposition figures is the latest chapter in Erdoğan’s crackdown on dissent. Since the failed coup attempt in 2016, the president has centralised power, purged the civil service, and jailed journalists and politicians. The opposition, meanwhile, has struggled to mount a coherent challenge. But this latest move feels different. It strikes at the heart of local governance and raises questions about the viability of next year’s elections.
The UK’s intervention, while diplomatically measured, underscores a growing unease in Western capitals. “We are concerned by today’s court ruling,” a Foreign Office spokesperson said. “Democratic governance requires that all political actors can operate freely and without fear of reprisal.” The statement, though carefully worded, is a clear signal that London is watching the situation closely. For British businesses with exposure to Turkey, it is a reminder that political risk remains elevated.
But what does this mean for the bottom line? Turkey’s economy is already in a precarious state. Inflation is running at nearly 50%, the central bank has been forced to hike rates aggressively, and the current account deficit remains stubbornly wide. The removal of opposition leaders will not help. It adds to the perception that Turkey is a one-party state where the rule of law is subordinate to political expediency.
Foreign direct investment, which was already anaemic, is likely to suffer further. Capital flight is a real risk. Turkish residents have been piling into hard currencies and gold for years, and this latest political shock could accelerate that trend. The central bank’s reserves, already depleted by unconventional policies, are not in a position to stem the tide.
For Erdoğan, the calculus is different. He is playing to a domestic audience, rallying his base with strongman rhetoric and portraying the opposition as a threat to national security. The court ruling, handed down by a judiciary that is widely seen as loyal to the president, is a tool to neutralise his rivals ahead of the elections. Whether this strategy will hold is another matter. The economy is the president’s Achilles heel, and if voters blame him for their declining purchasing power, the opposition may yet find a chink in his armour.
The UK’s call for democratic rule of law is unlikely to change Erdoğan’s behaviour. He has weathered international criticism before. But it does put London on the right side of the argument for now. For investors, the lesson is clear: Turkey is a high-risk, high-uncertainty play. The market’s patience is finite, and the yield on Turkish government bonds, though juicy, is not enough to compensate for the political hazard.
In the City, analysts are already revising their growth forecasts downward. The removal of opposition leaders is a symbolic blow to Turkish democracy, but it is also a tangible risk to the country’s economic stability. The lira’s slide, the stock market’s retreat, and the bond sell-off are the market’s verdict. And as any good financier knows, the market is seldom wrong.
