(Bloomberg) --

Turkish President Recep Tayyip Erdogan’s failure to convince former economy czar Mehmet Simsek to rejoin his administration represents a fresh setback as he strives to beef up support ahead of what could be a nail-biting election in May.

After a meeting at Erdogan’s party headquarters on Monday in Ankara lasting more than an hour, Simsek said on Twitter he isn’t planning to return to active politics due to his work for financial institutions abroad — though he is prepared to help out in his area of expertise if needed. 

Simsek’s decision came just hours after an emerging Islamist party leader opted not to join the president’s alliance with some conservative and nationalist parties, preferring to run against him instead. Erdogan’s party did manage to secure the backing of another fringe party, which was formed by members of the outlawed militant group of Hezbollah. 

Read More: Erdogan Looks to Islamist Fringe to Bolster Electoral Alliance

Yet Kemal Kilicdaroglu, selected by main opposition leaders as their joint candidate after lengthy wrangling, has won the support of the country’s largest non-aligned political group, according to people familiar with the matter. The pro-Kurdish Peoples’ Democratic Party, which commands more than 10% of the electorate, will announce its backing at a meeting with other leftist parties in Ankara on Wednesday.

The president “would not feel the need to seek the support of marginal circles if he saw his chances of winning as high,” Ilter Turan, a professor of political science at Istanbul’s Bilgi University, said on Tuesday. “It is too early to reach conclusions but for the first time the president is facing a serious possibility of losing — if the elections are held according to the rules.”

Read More: Why Turkey’s Next Election Is a Real Test for Erdogan

A defeat for Erdogan would have seismic implications for the Middle East and indeed the wider world. The 69-year-old has spent the past two decades building a system of one-man authoritarian rule, and plays a key role in relationships between the region and China, Russia, the US and others.

“The electorate is highly polarized and the elections are the last exit before the bridge,” said Nihat Ali Ozcan, a strategist at the Economic Policy Research Foundation in Ankara. “If the voters decide to put an end to Erdogan’s rule that could change Turkey’s course toward its traditional US-led allies and away from Russia.”

Unorthodox Policies

While Erdogan’s AK Party downplayed the refusal of Simsek to rejoin the ranks of the government, the outcome suggests the ex-finance minister had little faith the president can be persuaded to reverse his unorthodox economic policies. Since Simsek left the government in 2018, Turkey has burnt through much of its official reserves, seen the lira drop to record lows and inflation spiral out of control. 

Simsek, a former strategist at Merrill Lynch, was largely viewed by investors as a market-friendly face in Erdogan governments since he first assumed office in 2007. During the last few years of his political career, he was seen as a counterweight to Erdogan’s unconventional preference for low interest rates and turbo-charged growth at the expense of low inflation and financial stability. 

“Erdogan likely refused to give Simsek the mandate to hike policy rates as required,” Tim Ash, emerging markets strategist at BlueBay Asset Management, said in a note on Tuesday. “What we learned I think again is that Erdogan is not for turning. He is not willing to compromise his monetary-policy views.”

--With assistance from Thomas Hall and Beril Akman.

(Updates with pro-Kurdish party’s expected support for opposition bloc in fourth paragraph.)

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