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Turkish Referendum and Dutch Spat

The tensions between Turkey and the Netherlands has heated up with threats of sanctions.  From an investment point of view, it is politically motivated on both sides due to the elections in the Netherlands and the Turkish Referendum.

The current Dutch government looking to stem the popularity of the far-right party took a hard stance by not allowing Turkish ministers from addressing their citizens living in the Netherlands.  From polls on Bloomberg this morning, this ploy seems mixed – it might have helped both parties by playing a nationalist card.

On the Turkish side, it has provided an opportunity for the current for President Erdogan to shift the debate from the details of the Turkish Referendum towards his personal leadership and the nationalist card.  CHP, the opposition party, had played strategically by trying to keep the debate on the Referendum and away from the personal leadership President Erdogan.  That is due to the huge popularity that President Erdogan enjoys among most of the population.

Recent polls in Germany had indicated a 50-50 split regarding the support for the Referendum.  In prior elections, President Erdogan had enjoyed leads in the mid 60s from the Turkish diaspora in Germany.

These events will probably energize more votes for the Referendum in the 3 million or so Turks living in Germany, Netherlands, etc.  Also expect spillover to voters in Turkey, especially more nationalist votes.

Therefore, for the time being the Netherlands spat and other moves to prevent Turkish politicians from campaigning for the Referendum will move the vote towards the yes side.  However, it it gets out of hand and the retaliation is from both sides then then it will be seen as negative for the vote.

On the Dutch side, even if the far-right candidate does not win outright the agenda will now shift towards the right and I expect Euro risk to rise in the short-term. The support The Party for Freedom led by Geert Wilders probably increased.  The bigger risk is that if his showing in the Dutch elections is strong, then other populist parties in Europe will gain.

Over the medium to long-term, this is bad news in general for Europe and Turkey. I would expect that after the Dutch elections and Turkish Referendum this relationship will be mended but this might not happen if the far-right party in the Netherlands wins or has more influence on policy.