Over a week into "Occupy Taksim", the Turkish situation is nowhere near resolution. In fact, judging by the capital markets response to news that hundreds of police stormed Taksim Square this morning using tear gas to disperse protesters, where the Turkish lira declined overnight to the weakest level since December 2011, bond yields dropped 29 bps, Turkish CDS rose wider than Russia, and where even the central bank has warned it may start engaging in tightening operations, things are going to get much worse. Finally, a big demonstration is due in a few hours: will Taksim Square June 2013 be the "Waddel and Reed/May 2010" Syntagma Square flash crash equivalent? Find out shortly.
More from Reuters:
Turkish riot police fired tear gas and water cannon at hundreds of protesters armed with rocks and fireworks on Tuesday as they tried to take back control of a central Istanbul square at the heart of fierce anti-government demonstrations.
Hundreds of riot police backed by armored vehicles surrounded Taksim Square as bulldozers began removing barricades of paving stones and corrugated iron built by the protesters. What began as a protest at redevelopment plans for the square has grown into an unprecedented challenge to Prime Minister Tayyip Erdogan's Islamist-rooted government and divided Turks.
The unrest has damaged investor confidence in Turkey, previously an emerging market success story. The central bank said it would intervene if needed to support the lira, after the currency fell to its weakest against its dollar/euro basket since October 2011. The cost of insuring Turkish debt against default rose to the highest in ten months, although it remained far from crisis levels.
The police move, shortly after dawn, came a day after Erdogan agreed to meet protest leaders, whose peaceful demonstrations two weeks ago spiraled into anti-government protests in cities across the country in which three people have been killed and about 5,000 hurt.
Police removed huge banners hung by protesters from a building overlooking Taksim but the local governor said they had no intention of breaking up a peaceful campaign against government redevelopment plans inside the adjoining Gezi Park, where the demonstrations first began.
"Our aim is to remove the signs and pictures on the Ataturk statue and the Ataturk Cultural Centre. We have no other aim," Istanbul Governor Huseyin Avni Mutlu wrote on Twitter.