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DAVID C. CUTHELL

The past two weeks have been, as Charles Dickens famously wrote, “the best of times, the worst of times.” So momentous have these events become, that it is hard even to remember what was going on pre-Gezi, or more short-handedly PG. Now we are in the after Gezi (AG) era. This era might be summed up as a period in which the stunning events are slowly internalized. Battle lines are slowly reforming, yet life assumes some semblance of normalcy. This however might just be an interlude before the next major shock. In my opinion, the next major shock will not come from a renewal of the clashes nor a return to the angry rhetoric of the past week, but from the markets themselves.

Clearly a lot of damage has been done. Lives have been lost, thousands have been injured and it has become clear that a new opposition movement has begun to coalesce, at least as a movement or party in its infancy. This holds some promise that a true opposition will emerge over time, much in contrast to how the Gezi movement and the AKP’s reaction took place without so much as a shout or even a whimper from the two other opposition parties, if in fact one can remember who they are. The coming weeks and months will offer some tantalizing hints as to how the Turkish political system will look like in the coming years. Much to the chagrin of the prime minister, social media will clearly play a pivotal role.

In the meantime however, another element will move to the forefront of the public’s attention, more specifically the economy. Gezi Park, and the manner in which the government responded, has raised some major concerns not just in Turkey, but across the globe. With the prime minister now daily engaging in ad hominem attacks on those European leaders who have expressed their concerns, there has come a quiet but noticeable change in how eurozone leaders now view the present Turkish government and its policies. Some have been so bold as to declare this as proof positive that Turkey can never be a member of the EU. Others are saying the same thing but with much milder language. Regardless of how one approaches the issue, it is quite clear that significant and perhaps permanent damage has been done to both the government’s prestige and credibility as democratic and balanced.

This promises to be very bad news for the Turkish economy. Certainly the tourism industry will suffer cancellations this summer and beyond. Should this become a sustained downturn, those regions heavily dependent on tourism will sink into recession. Beyond this, the real estate market can only weaken from pre-Gezi levels as buyers will wait and sellers will be forced to lower prices. As elsewhere in the West, owners’ lower equity will place downward pressure on prices.

An even better barometer of sentiment and the direction of the economy can be seen in the Borsa Istanbul (BIST) 100 index. In the coming weeks, perhaps even sooner, the IMKB will almost certainly again probe the 75,000 level. Should it breakdown from that level, many investors who use chart analysis will look to sell. Given the current sentiment, it appears that the coming weeks and months will require investors with strong stomachs and an ability to handle sleepless nights.