Turkish media reported fresh arrests of military officers today, reviving investor concerns over a potential showdown between government and the armed forces and denting a recovery in stocks and the lira.
A day after prosecutors released three retired generals suspected of plotting a coup, markets began to recover on hopes that risks of a confrontation between the Islamist-rooted government and the secularist military were receding.
But when the CNN Turk news channel reported that police had detained 17 more serving military officers and one retired officer in an operation in cities across Turkey, both the main Istanbul share index and the lira eased again.
Earlier today, Prime Minister Tayyip Erdogan had blamed the media for fanning alarm among investors, who were unnerved by the detention on Monday of some 50 officers suspected of participating in an alleged plot to oust the government in 2003.
"I am talking to the media bosses," Mr Erdogan told an AK Party function in a televised speech. "No one has the right to turn a country's economy on its head, we won't allow it because it's clear the state to which the economy has come." His party is banking on an economic recovery after last year's deep recession to win over voters ahead of an election due early next year.
By late afternoon the share index stood just 0.9 per cent higher than yesterday's close, a fractionally lower gain than the MSCI Emerging Markets index, while the lira traded at 1.5460 to the dollar compared with 1.5520 on Thursday.
The military has overthrown four governments in Turkey in the past 50 years and with many of its officers still in detention, and more than 30 charged with crimes, tensions remain high and markets nervous.
Investigations of the three released commanders were also continuing.
Despite Turkey's history of military coups, most people believe the generals would not dare challenge the popular AK party and destroy newfound confidence in democracy. Turkey is both a Nato member and a candidate to join the European Union, and its Western allies want to see it mature as a democracy.
Analysts fear that politics appear increasingly polarised between the secular, conservative nationalists who represent the old guard and the AK Party, which has won over investors with market-friendly reforms despite its roots in political Islam.
Reuters