Populism Gets a Setback and Erdogan a Rival

(Bloomberg) --

Recep Tayyip Erdogan’s grip on Turkey is loosening.

Voters in Istanbul delivered a stinging rebuke to Erdogan’s policies that pushed the economy into distress and his chipping away at democracy in the Middle East nation, with his candidate losing the race for mayor in a landslide.

The new mayor, Ekrem Imamoglu, a 49-year-old municipal politician who campaigned on a promise to stop wasting public resources, is set to become the most credible challenger to Erdogan's rule in the years ahead. He may also have shown there’s a way to defeat populists at the ballot box by rejecting partisanship and reaching out to their followers.

Investors will be glad, at least briefly, to see a major source of uncertainty removed with the vote. But Turkish assets aren’t out of the woods yet, and Erdogan isn’t the type to quietly accept defeat.

At the same time, Erdogan’s growing regional ambitions – from backing rebels in Syria to purchasing Russian missiles to gaining air supremacy in the eastern Mediterranean – are taking a toll on the economy.

All this comes as Erdogan tries to fend off painful U.S. sanctions over the Russian missile purchase – something he’ll try to sort out at a meeting with Donald Trump at the Group of 20 summit later this week.

And that may increase the odds of a major challenge to one of the region’s preeminent strongmen at the next presidential election, scheduled for 2023.

Global Headlines 

Gulf showdown | Trump is threatening Iran with additional sanctions as soon as today, but there’s not much left for the U.S. to target because the Islamic Republic’s economy is already crippled by financial restrictions. The U.S. president's warning Saturday that major new sanctions were imminent followed his decision to abruptly call off a plan for air strikes against Tehran in response to the shooting down of an unmanned U.S. Navy drone.

• Click here for a look at the challenges to getting Tehran and the U.S. talking to each other. 

Danger zone | Joe Biden kicks off the most high-stakes week of his U.S. presidential campaign so far as he heads into the first Democratic debate with the opportunity to solidify his front-runner status — or jeopardize it with a gaffe, an inappropriate joke or a tone-deaf comment. The televised debates on NBC, MSNBC and Telemundo feature 20 Democratic candidates split into groups of 10 on Wednesday and Thursday.

Ground rules | China says it won’t discuss recent protests in Hong Kong at this week's G-20 summit in Osaka. U.S. and Chinese trade teams are talking next steps after Trump and Chinese President Xi Jinping agreed to meet there. Hong Kong reopened its downtown government offices today as protesters resumed a small rally to demand the release of people arrested in prior demonstrations and set up an independent investigation into the use of force by police.

Perils of reform | The killing of Ethiopia’s army chief of staff and several top officials in an apparent attempted coup in the northern Amhara region over the weekend revealed the tensions stoked by Prime Minister Abiy Ahmed’s reform program in one of the world’s fast-growing economies. Authorities tightened security and canceled large public gatherings, while access to the internet was shut down following reports of the deaths in the putsch, which the government blamed on the region’s head of security.

Dirty politics | A power struggle, a sex scandal and slow progress to implement sweeping economic reforms: Despite a new government in Malaysia, some things haven’t changed. Little more than a year after Mahathir Mohamad came to power, problems that have long beset Malaysia are popping up again. At the center of it all is the question of when Mahathir will hand over power to former nemesis Anwar Ibrahim. The answer? Not yet.

What to Watch

• Boris Johnson faces renewed pressure in his bid to become U.K. prime minister amid calls for him to answer questions about an argument with his partner that brought the police to his London home.

• As the Supreme Court enters the homestretch of its term, potential decisions include whether to consider Trump’s bid to end a program that prevents deportation of immigrants brought to the U.S. illegally as children.

And finally...As many as 250,000 Czechs rallied in Prague yesterday in the biggest anti-government protest since the Velvet Revolution that ended communist rule. The country’s billionaire premier, Andrej Babis, is relying on a stable economy and generous state benefits to keep him in power despite allegations of conflicts of interest and concerns about possible judicial meddling. Chances are he'll survive a confidence vote in parliament this week.

--With assistance from Benjamin Harvey, Kathleen Hunter, Ruth Pollard and Zoltan Simon.

To contact the editor responsible for this story: Karl Maier at kmaier2@bloomberg.net

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