The major challenge facing Erdogan after re-election president

Financial markets reacted with little enthusiasm to Mr. Erdogan's victory and his AKP party, also preserving control of parliament, though with an electoral partner, the MHP party. The initial power of the lira and the triple akisons didn't last long.

Analysts suggest there is a sense of relief that the presidency and the parliamentary majority did not pass on to a rival party, as envisioned by some polls. Economist Inan Demir of the organisation Nomura International said the political stalemate would have been a problem.

“For markets is important to the stability of political configuration so that the president has space to function, without having to block an opposing parliamentary majority at any step, thus avoiding the possibility of early elections”, said Mr. Demir.

He adds that for markets, the most important is the president's ability to face urgent economic challenges.

In the past two years, Mr. Erdogan has used massive spending programs to consolidate the economy, bringing growth rate to over 7 percent annually. Prior to the June elections, expenses rose even more with payments totalling billions of dollars for pnesionists, as well as other expensive polls.

International agencies giving recognitions to the financial situation, and the IMF has repeatedly warned that the Turkish economy is becoming irritated, increasing inflation and jeopardising a collapse. These concerns caused a drastic decline in the value of freedom last month, while investors weighed down the Turkish market. The normality was returned only by the urgent increase in interest rates, among the highest levels in the world.

After the elections, pressure on Mr. Erdogan to rebalancing the economy has increased. “Policy in this direction will be key to restore confidence in the economy and increase guarantees to Turkey's ability to secure funds needed for the deep deficit and meet high debt obligations”, the credit monitoring agency Moody wrote.

Turkey borrows over $15 billion each month from global markets to meet financial obligations.

“Erdogan faces a dilemma: The Turkish economy's external balance calls for conventional policies, strict economic packages, structural reforms. But internal balance requires policy on increasing spending. Erdogan is in a difficult position”, says political analyst Atilla Yesilada of the group “Global Source Partners”.

Mr Erdogan may not take strict economic measures and continue at expense, fearing that the Turkish economy could move towards recession.

The area for maneuvering could be further limited because his AKP party needs MHP party support to secure the majority. Although the Turkish president now has expanded competencies with his re-election, parliament must ratify the budget. The MHP has strongly voiced itself against austerity measures.

Analysts predict the recession could occur in autumn with the end of the tourism season.

Analysts also predict that reform is vital to gaining financial markets' trust in its ability to direct the economy. / VoA