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Turkish Lira Blows Out As Graft Scandal Comes Back With A Vengeance | Zero Hedge

Turkish Lira Blows Out As Graft Scandal Comes Back With A Vengeance | Zero Hedge.

Update as things just got worseTURKISH POLICE CLOSE DOWN GEZI PARK IN ISTANBUL, CNN-TURK SAYS

As we reported previously, on Monday new revelations in the graft scandal surrounding Turkish PM Erdogan in the form of a leaked phone conversation between him and his son, Bilal, detailing plans how to hide huge sums of cash, by some estimates up to $1 billion, brought back the political crisis that has gripped the nation front and center, and led to renewed demands by the opposition party that the PM resign. It also sent the USDTRY surging to levels not seen in weeks. We said: “Somehow we doubt that Erdogan will resign, however, this latest confirmation that the graft scandal that is and will continue to dodge the Turkish Prime Minister is not going away, may just be the catalyst that pushes the TRY, and with it some of the other recently pacified EMs, back into volatile mode.” Today the crisis is fully back and so is the predicted volatility, with the Lira blowing out by another 400 pip to a level of 2.240, not seen since the first week of February when the Turkish central bank was scrambling to restore confidence in the imploding currency.

What prompted this latest risk flaring? Several things. As Turkish media outlet Hurriyet reportedTurkey’s main opposition took to the streets of Istanbul on Feb. 26 to throw away millions of fake bills, in protest against the latest leaked voice recordings incriminating Prime Minister Recep Tayyip Erdo?an and his son.

In the call, apparently made in the wake of the Dec. 17 graft investigation, the prime minister and his son can be heard desperately trying to hide considerable amounts of cash.

“Everywhere is bribery! Everywhere is corruption!” shouted the demonstrators, a chant coined following the graft scandal, in reference to the symbolic slogan of the Gezi Park protests, while urging the government to resign.

The Republican People Party’s (CHP) candidate for the Istanbul mayoralty Mustafa Sar?gül used harsh language targeting the government over the revelations.

All across Istanbul you can see billboards of the prime minister saying ‘strong will.’ Here is a test of your will. Either you prove [that you are not guilty] or you resign and go,” Sar?gül said, referring to the campaign launched by an NGO close to the government after the corruption scandal surfaced. Huge posters of Erdo?an with the motto “strong will” can be seen across Istanbul, plastered near main arteries, on construction buildings and even on stadiums.

The fresh tape, leaked onto the Internet late Feb. 24 and allegedly featuring four phone conversations, is significant for being the first source to implicate Erdo?an personally in the vast corruption scandal.

The recordings feature Erdo?an and his son discussing how to get rid of a sum of cash equivalent to 2.2 billion Turkish Liras, according to the opposition. In one part of the alleged recording, the son, Bilal Erdo?an, is heard saying that he still needs to dispose of 30 million euros.

In a clear reference to the tape, CHP officials handed out fake money amounting to 30 million euros during a demonstration near Taksim Square, throwing the paper banknotes in the air like confetti.

“We are ashamed of this situation. Those 30 million euros are only a small share of the amount of cash that the prime minister told [his son] to ‘clean’ on Dec. 17. There is also the mother share. Think about how huge that must be,” said the CHP’s Istanbul provincial head, O?uz Kaan Sal?c?.

Erdo?an has virulently rejected the voice recordings on Feb. 25, calling them “fake” and denouncing as a “montage.” CHP head Kemal K?l?çdaro?lu has claimed that they are “as authentic as the Mount Ararat.” The Ankara Prosecutor’s Office has launched an investigation into the tapes, following a request from the ruling Justice and Development Party (AKP).

As we said on Monday, “since Erdogan has already eliminated any judges that are not sympathetic to his regime, the question of how much justice will be revealed is irrelevant.” However, in an indication of how desperate the government is to redirect attention from this latest scandal, a follow up article from Anadolu news agency, reported that a Turkish attorney, Hudaverdi Yildirim, has filed a complaint to Istanbul Chief Prosecutor’s Office against Fethullah Gulen on Wednesday, asking him to be tried of crimes such as, “forming an organization”, ” an organized coup attempt” and “organized deceit”.

Yildirim claimed in his petition that national ‘economic secrets’ and the activities of National Intelligence Service (MIT) were disclosed and an illegal chase was launched.

Referring to the December 17 anti-graft operation, Yildirim said: “National secrets were disclosed at the end of the anti-graft operations, which were illegally conducted and the country’s economy was damaged by around US$ 200 billion.”

Crimes of treason, a coup against a legal government, qualified deceit, and abuse of power were committed at the same time and by the same people, alleged the petition, adding that Fethullah Gulen, “used his political and moral power on prosecutors, by which he becomes instigator of the prosecutors that target legal government”.

The attorney demanded Gulen and his allies be tried of crimes of “forming an organization”, “an organized coup attempt” and “organized deceit and abuse of power.”

An anti-graft operation was launched on December 17 in Turkey, which resulted in the detentions and arrests of high-profile bureaucrats, including the sons of three former cabinet ministers and businessmen.

Turkey’s government claim it is targeted by a group within the state that has international links. Prime Minister Recep Tayyip Erdogan and senior government officials have blamed the group for ‘attempting to run an agenda of its own with the December anti-graft operation’.

Recall that Gulen, a dissident who currently lives in Pennsylvania, was the person whom the government accused of staging the graft probe which revealed just how deep the government corruption rabbit hole truly goes. That the PM is willing to go all the way in this latest scapegoating persecution perhaps confirms just how concerned the administration is, even if for the time being nothing dramatically has changed except for ever bolder revelations of just how much theft and corruption the current Turkish regime has engaged in.

Finally, should indeed the central bank once again lose control of Turkish FX rates, and should the EM crisis once again return, perhaps the DE Shaw correlation algos will finally realize just how far ahead of themselves they have gotten by simply chasing various carry funding currency pairs as an indicator of “fundamental” value.

Ukraine Stocks Plunge To 18-Month Lows As Ex-President Warns Of Imminent “Civil War” | Zero Hedge

Ukraine Stocks Plunge To 18-Month Lows As Ex-President Warns Of Imminent “Civil War” | Zero Hedge.

Following discussions with Merkel, demands to de-escalate tensions from Barrose, and threats of sanctions from President Obama. Ukraine’s President Yanukovych has gone on sick leave from “immense pshcological pressure.” Despite his exclamations that he’ll do everything for the sake of peace, he blames the opposition for “escalating the situation,” which fits, rather ominously with warnings from former presdent Leonid Kravchuk. As The BBC reportsUkraine’s first post-independence president warned the country is on the “brink of civil war”. While the Hyrvnia is not collapsing as much as it was (always the silver lining), money is running away from Ukraine stocks (at 18-month lows), bond term structure is inverted, and CDS are spiking back to recent highs over 1000bps.

The headlines suggest things are getting worse:

  • Ukraine’s Yanukovych Out Sick After Protesters Reject Amnesty
  • *UKRAINE’S YANUKOVYCH SAYS OPPOSITION ESCALATING SITUATION
  • *UKRAINE PRESIDENT SAYS GOVT HAS FULFILLED OBLIGATIONS: IFX
  • *UKRAINE PARLIAMENT FULFILLED CONDITIONS ON AMNESTY: YANUKOVYCH
  • *AUTHORITIES HAVE MET ALL OBLIGATIONS TO OPPOSITION: YANUKOVYCH

Global politicians are responding…

  • *OBAMA PREPARES SANCTIONS AGAINST UKRAINE: REUTERS
  • *EU’S BARROSO SAYS NEED TO DE-ESCALATE TENSION IN UKRAINE
  • *TUSK SAYS NO UKRAINE GOVT CAN COUNT ON EU DEAL IF USES VIOLENCE

Ukraine Stocks are tumbling…

And “civil war” is coming

Via The BBC,

Ukraine’s first post-independence president has warned the country is on the “brink of civil war”.

Leonid Kravchuk, president from 1991 to 1994, urged parliament to “act with the greatest responsibility” as it debates an amnesty for detained protesters.

Mr Kravchuk told MPs: “All the world acknowledges and Ukraine acknowledges that the state is on the brink of civil war.

It is a revolution. It is a dramatic situation in which we must act with the greatest responsibility,” he said in an emotional address that earned him a standing ovation.

Images  suggest this is far from over…

Taxes, Inflation, And Now The Military: Turkish Stocks & Currency Re-Tumble | Zero Hedge

Taxes, Inflation, And Now The Military: Turkish Stocks & Currency Re-Tumble | Zero Hedge.

With tensions remaining high, the brouhaha over the ‘probe’ of government corruption daring to find actual corruption rolls on and now the military is complaining of bent judges in their own ‘coup’ trial:

  • *TURKISH ARMY SAYS EVIDENCE FABRICATED IN COUP TRIAL: HURRIYET
  • *TURKEY ARMED FORCES FILES CASE CITING PLOT AGAINST IT: HURRIYET

Add to this the hike in consumption taxes and fears over inflationary surges and the Lira has re-collapsed back to record lows against the USD and Istanbul stocks are re-tumbling.

The Military involvement (via Bloomberg),

Turkey’s Armed Forces asked the prosecutor’s office to open a case against what it said was a plot targeting it in trials of retired and active duty officers for alleged coup planning, Hurriyet newspaper says, citing a defense lawyer in one of the coup plot cases, Haluk Peksen.

Evidence against members was fabricated to target the Turkish Armed Forces: Hurriyet

Security officials, judges and prosecutors ignored defense of members and manipulated evidence: Hurriyet

Hundreds of military officers, including top generals, have been convicted in a series of cases on charges of plotting to overthrow PM Recep Tayyip Erdogan’s govt

On Inflation and Tax Hikes (via Goldman),

The government hiked various consumption taxes and surcharges on tobacco and alcoholic products, cars and mobile phones, effective from January 2.

We calculate that these tax hikes will add roughly 1.0pp to headline CPI, eradicating almost entirely the favourable base effect (roughly 1pp) set by last year’s administered price and tax hikes. This means headline CPI will be stuck at around the 7.5%-8% range through 2014Q1.

Sustained FX pass-through, pent-up electricity and natural gas price adjustments and possible unprocessed food price shocks (owing to unseasonably warm weather conditions) will likelycontinue to exert upside pressure on headline (and core) CPI. We continue to see end-2014 CPI at 8.3%, well above the 6.7% consensus. However, the risks to our forecasts remain on the upside.

We continue to expect the CBRT to hike (the policy relevant) O/N non-PD lending rate by 225bps to 10% in 2014. More aggressive rate hikes will probably be necessary to anchor inflation expectations, given the large imbalances undermining the TRY.

BofAML also believes the bullish trend in USDTRY is set to continue…

 

Erdogan Says ‘Gang’ Within State Is Imperiling Turkey – Bloomberg

Erdogan Says ‘Gang’ Within State Is Imperiling Turkey – Bloomberg.

Turkish Prime Minister Recep Tayyip Erdogan defended his government from allegations of corruption and said he would fight back against a “gang” within his own state bureaucracy.

Taking his message public seven times in the past two days, Erdogan, 59, has lashed out at what he said was a campaign to destabilize the country in order to benefit financial speculators. The nation’s stock, currency and bond markets fell last week on concern the scandal is widening.

“A new attack has been launched against our government, democracy and the will of the nation,” Erdogan told thousands of supporters yesterday in the town of Turgutlu. “There are circles who are trying to set up a parallel state.”

Anger over the scandal sparked protests for a second day yesterday in several areas, including the Aegean city of Izmir, where police used tear gas and water cannons to prevent demonstrators from reaching a local branch of Erdogan’s party, the state-run Anatolia news agency said.

The protests were reminiscent of anti-government demonstrations that roiled the country in June. Police detained 70 people in Istanbul on Dec. 27, Anatolia reported.

Erdogan said the investigation, which has split the judiciary and pitted bureaucrats against one another, is an attempt to derail the government.

‘Corruption Scandal’

“They’ve dubbed this the biggest corruption scandal of the century,” Erdogan said. “You can’t stain anyone without evidence, you can’t declare them as corrupt from the start.”

On Dec. 27, as he returned to Istanbul, Erdogan was greeted by supporters at the airport. They chanted “traitor Bayraktar,” in reference to former Environment Minister Erdogan Bayraktar, who last week urged Erdogan to step down.

Erdogan is increasing his appearances after a top judicial body blocked his order requiring the government to be notified of investigations, deepening a standoff that sent markets tumbling. That ruling was unconstitutional, Erdogan said. Opposition lawmakers countered that the prime minister was undermining the charter.

“The government isn’t going after thieves,” Kemal Kilicdaroglu, head of the main oppositionRepublican People’s Party, said yesterday in the Black Sea port city of Samsun. “It’s chasing prosecutors and judges, and telling them to not catch the thieves.”

Investigation Urged

He called Erdogan “the prime minister of the corrupt,” and his party urged President Abdullah Gulto probe the allegations.

Turkey’s economy, the largest in the Middle East, has more than tripled in size in nominal terms during Erdogan’s 10 years in office. The majority Muslim country, the region’s only member in the North Atlantic Treaty Organization, shares borders with Syria, Iraq and Iran.

The lira weakened as much as 2.3 percent to 2.1764 against the dollar on Dec. 27, before trading at 2.1549 in Istanbul. The Borsa Istanbul 100 Index (XU100) fell 1 percent at the close to 63,885.22, the lowest since August 2012. Two-year bond yields climbed above 10 percent for the first time since August.

Turkish Finance Minister Mehmet Simsek said on his Twitter account that the economy will be quick to recover from what he called a soft-coup attempt. “We’ll disappoint doomsday sayers again,” Simsek said.

‘Significant Adjustment’

He said the weakening currency will lead to a “significant adjustment” of the current account deficit, though have a limited effect on inflation. Any economic slowdown is “likely to be temporary,” Simsek said.

The corruption investigation has become the battleground in a struggle between the government and followers of a U.S.-based imam, Fethullah Gulen, who is blamed by Erdogan’s supporters for instigating the crackdown. The cleric broke with Erdogan recently, ending a partnership that has helped sustain the single-party government since 2002.

Erdogan yesterday chided the prosecutor, Muammer Akkas, who was stripped of the graft investigation. “Are you a prosecutor or a member of an organization?” Erdogan said.

Fallout spread during the past week, with former Culture Minister Ertugrul Gunay quitting Erdogan’s ruling party, along with two others.

“Security forces can’t collaborate with the government,” Gunay told reporters in Ankara. “I’m warning civil servants who are following unlawful orders not to carry them out — you will be held accountable tomorrow for today’s violation of the rule of law.”

Army Statement

Turkish police have been caught in the struggle between Erdogan and Gulen. About 500 police chiefs were dismissed from their posts and reassigned after the sons of three ministers were among dozens detained. All three ministers were replaced by Erdogan last week.

Turkey’s military, which as recently as 1997 pressured the country’s first Islamist prime minister to step down, has steered clear of the fray.

“The Turkish Armed Forces in no way wants to be involved in political debates,” the military said in a statement.

The army, however, is asking for a retrial of hundreds of its members who were jailed in coup-plot cases, Milliyet newspaper said yesterday, citing what it said were remarks by General Necdet Ozel, chief of the military, during a closed-door National Security Council meeting Dec. 26.

Telephone calls by Bloomberg News to the military’s press office weren’t answered.

European Union Enlargement Commissioner Stefan Fule said in a statement that he was concerned by “the removal of a large number of police officers from their duties” and urged Turkey to “take all the necessary measures to ensure that allegations of wrongdoing are addressed.”

Turkey’s new EU Affairs Minister Mevlut Cavusoglu was quick to respond. The EU shouldn’t reach “prejudiced conclusions while interpreting domestic political developments in Turkey,” he said.

 

Erdogan Says Graft Probe Aims to Derail His Government – Bloomberg

Erdogan Says Graft Probe Aims to Derail His Government – Bloomberg.

Turkish Prime Minister Recep Tayyip Erdogan lashed out four times yesterday at a graft probe that’s ensnared his government as anger over the scandal sparked protests and clashes.

Protests erupted in at least five cities overnight, including Istanbul and Ankara, before being broken up by police with tear gas and water cannons, reminiscent of anti-government demonstrations that roiled the country in June. Police detained 70 people in Istanbul, the state-run Anatolia news agency said.

The country’s stock, currency and bond markets fell this week on concerns the scandal is widening. Erdogan said the investigation, which has split the judiciary and pitted bureaucrats against one another, is an attempt to derail the government and will only benefit financial speculators.

“The operations that started under the guise of corruption are an obstacle to building a new Turkey,” Erdogan said yesterday from Sakarya, a city east of Istanbul.

Turkey’s economy, the largest in the Middle East, has more than tripled in size in nominal terms over Erdogan’s 10-year leadership. The majority Muslim country, the region’s only member in the North Atlantic Treaty Organization, shares borders with Syria, Iraq and Iran.

Erdogan is slated to address his supporters in the western city of Manisa later today.

Last night, on his return to Istanbul, Erdogan was greeted by supporters at the airport. They chanted “traitor Bayraktar,” in reference to former Environment Minister Erdogan Bayraktar, who this week urged Erdogan to step down. One woman, her head covered with a scarf, kissed Erdogan’s hand after he addressed flag-waving supporters from on top of a bus.

Coverup Alleged

“There is an effort to cover up corruption allegations and the public is aware of this,” Haluk Ozdalga, a lawmaker who quit the ruling party yesterday, said in a press conference in Ankara. “Turkey must immediately turn away from this wrong path.”

Erdogan spoke after a top judicial body blocked his order requiring the government to be notified of probes, deepening a standoff that has sent markets tumbling. That ruling was unconstitutional, Erdogan said.

The currency weakened as much as 2.3 percent to 2.1764 against the dollar on Dec. 27, before trading at 2.1549 in Istanbul. The Borsa Istanbul 100 Index (XU100) fell 1 percent at the close to 63,885.22, the lowest level since August 2012. Two-year bond yields climbed above 10 percent for the first time since August.

U.S.-Based Imam

The corruption investigation has become the battleground in a struggle between the government and followers of a U.S.-based imam, Fethullah Gulen, who is blamed by Erdogan’s supporters for instigating the crackdown. The cleric broke with Erdogan recently, ending a partnership that has helped sustain the single-party government since 2002.

“They brought the issue this far,” Erdogan said. “These incidents are a continuation of the prep school process,” he said in a reference to tensions with the movement over a government decision to shut down prep schools, a major source of influence and income for Gulen’s followers.

Erdogan said no one had the right to put innocent people, including himself, under a cloud of suspicion and vowed to hold accountable anyone found guilty of stealing from the state.

As police moved in on demonstrations overnight, onlookers in Istanbul chanted “government resign.” Police also clashed with hundreds of anti-government demonstrators in the Turkish capital, Ankara.

“They are attacking for the last time,” Erdogan said of those pushing for the investigations. “God willing, and with the support of our nation, we will destroy this resistance and repel these attacks.”

Spreading Fallout

The fallout spread, with former Culture Minister Ertugrul Gunay and Ozdalga quitting Erdogan’s ruling party yesterday, a day after the resignation of lawmaker Erdal Kalkan. All three faced expulsion for their criticism of the party’s response to graft allegations.

“Security forces can’t collaborate with the government,” Gunay told reporters in Ankara. “I’m warning civil servants who are following unlawful orders not to carry them out — you will be held accountable tomorrow, for today’s violation of the rule of law.”

European Union Enlargement Commissioner Stefan Fule said he was concerned by “the removal of a large number of police officers from their duties” and urged Turkey to “take all the necessary measures to ensure that allegations of wrongdoing are addressed without discrimination.”

Police Dismissals

Turkish police have been caught in the power struggle between Erdogan and Gulen. About 500 police chiefs were dismissed after the sons of three cabinet ministers were among dozens detained. Sons of former interior and economy ministers were charged and jailed so far, while the son of Bayraktar was released pending trial. All three ministers were replaced by Erdogan this week.

“The government seized the judiciary in a government coup,” Faik Oztrak, deputy chairman of the main opposition Republican People’s Party, said in a statement. “The prime minister must resign to be held accountable as soon as possible.”

Turkey’s military, which as recently as 1997 pressured the country’s first Islamist prime minister to step down, has stayed clear of the fray.

“The Turkish Armed Forces in no way wants to be involved in political debates,” the military said in a statement.

Selling Bonds

Foreign investors have dumped Turkish bonds at the fastest pace in two years amid the growing scandal. Investors pared their holdings by $532 million to a three-month low of $53.8 billion in the week through Dec. 20, after selling a net $1.38 billion the week before, the central bank said this week. They’ve cut their holdings from a record $72 billion in May.

“The government’s response to corruption allegations grew into the question of the rule of law,” Mahmut Akpinar, a professor of political science at Ankara’s Turgut Ozal University, said by phone. “This may have consequences in the ballot box, especially if people begin to feel the worsening in economy in their pocketbooks.”

The outflows are a reversal of the investment that helped finance Turkey’s growth during Erdogan’s more than 10-year stint, a period in which nominal gross domestic product more than tripled and the country’s dollar bonds posted an average 9.7 percent annual gain.

 

Clashes erupt after Turkey trial verdicts – Europe – Al Jazeera English

Clashes erupt after Turkey trial verdicts – Europe – Al Jazeera English.

 

Turkish police fire tear gas at protesters – Europe – Al Jazeera English

Turkish police fire tear gas at protesters – Europe – Al Jazeera English.

 

Turkish police evacuate Taksim Square – Europe – Al Jazeera English

Turkish police evacuate Taksim Square – Europe – Al Jazeera English.

Turkish protesters accused of terror links – Europe – Al Jazeera English

Turkish protesters accused of terror links – Europe – Al Jazeera English.

 

Scores detained in Turkey police swoop – Europe – Al Jazeera English

Scores detained in Turkey police swoop – Europe – Al Jazeera English.

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