Turkey’s presidential candidate and AKP nominee, Abdullah Gul, failed to secure a two-thirds majority in the first round of voting in the country’s parliament. The foreign minister is expected to win the presidency during a third round of voting, scheduled on 28 August, where the support of a simple majority of parliament (at least 276 deputies) is needed. His previous presidential bid in May caused huge protests because of his Islamist roots and was opposed by the military, leading to an early general election. Although the position is largely ceremonial, the incumbent has the power to veto legislative bills and government appointments. Investors will be anxious about a renewed confrontation with the military (see “Funds poised for best-case Turkey election result”).
Czech Republic’s finance ministry and central bank have agreed that the general government deficit should drop below 1% of GDP by 2012, in an attempt re-energize the country’s convergence programme and euro adoption strategy. At current levels, the fiscal deficit this year is to reach 4% of GDP, breaking the 3% Maastricht ceiling. In 2008, the gap is to be reduced to 3% of GDP, to 2.6% in 2009 and 2.3% in 2010. However, an exact date for the introduction of the euro is yet to be decided. (For coverage on how reform fatigue is marring EU prospects amongst central European states, please click here)
There is growing political unrest in Slovakia over the 2009 euro adoption target. Government official, Igor Barat, stated that the government never considered this target as definite, responding to media reports that the cabinet has admitted that the country’s entry into the eurozone may be rejected over concern inflation will pick up and the budget gap will widen after 2009. At 3% in June, Slovakia’s 12-month inflation rate, was above the union’s ceiling of 2.8%. Barat explained that there should be no significant increase in inflation following euro adoption, citing the experience of other countries that suggests the impact should be around 0.1-0.3pps.
Lebanon’s Investment Development Authority (IDAL) head, Nabil Itani, said that political instability has undermined badly needed foreign direct investment. Itani said that given a stable policy and security environment, the country would have received $3 billion, funded mainly by oil-rich Arab states. Instead, investments in real estate and tourism projects this year amounted to only $24 million, and the value of completed projects has fallen to $56.6 million. In 2006, investment projects overseen by IDAL reached $510 million. (For an interview with the country’s central bank governor on how political unrest has affected the economy, please click here)