Kurdish party thwarts Erdogan's ambitions with Turkish election advance

ANKARA (Reuters) - Turkish President Tayyip Erdogan's hopes of assuming greater powers suffered a serious blow on Sunday when the ruling AK Party failed to win an outright majority in a parliamentary election, preliminary results showed.

With 97 percent of ballots counted, the AKP had taken 40.8 percent of the vote, according to broadcaster CNN Turk, a result which will leave it struggling to form a stable government for the first time since it came to power more than a decade ago.

"We expect a minority government and an early election," a senior AKP official told Reuters on condition of anonymity.

The lira currency hit a record low against the dollar in thin out-of-hours dealing as investors, fearing further political uncertainty, positioned themselves for the start of trade on Monday.

The atmosphere outside the AKP's headquarters in Ankara was muted. Several hundred supporters chanted for Erdogan, the party's founder, but there was little sign of the massive crowds that gathered under its balcony after past election victories.

The pro-Kurdish Peoples' Democratic Party (HDP) was on track to take almost 13 percent of the vote, according to CNN Turk. Thousands of jubilant Kurds flooded the streets of the southeastern city of Diyarbakir, setting off fireworks and waving flags at the prospect of it clearing the threshold to enter parliament for the first time.

HDP co-leader Selahattin Demirtas ruled out a coalition with the AKP and said election results had put an end to talk of the stronger presidential powers championed by Erdogan.

"The discussion of an executive presidency and dictatorship have come to an end in Turkey," he told a news conference in Istanbul, describing the outcome as a victory "for those who want a pluralist and civil new constitution".

Erdogan, Turkey's most popular modern leader but also its most divisive, had hoped for a crushing victory for the AKP, to allow it to change the constitution and create a more powerful U.S.-style presidency. To do that, it would have needed to win two-thirds of the seats in parliament.

Its failure to win an overall majority marks an end to 12 years of uninterrupted, stable single-party rule and is a setback for both Erdogan and Prime Minister Ahmet Davutoglu.

While constitutionally required as president to stay above party politics, Erdogan had held rallies throughout a confrontational campaign.

The two men portrayed the election as a choice between a "new Turkey" and a return to a history marked by short-lived coalition governments, economic instability and coups by a military whose influence Erdogan has now reined in.

MINORITY RULE

The partial results indicated that the HDP, with its roots in Kurdish nationalism, had succeeded in widening its appeal beyond its Kurdish core vote to centre-left and secularist elements disillusioned with Erdogan.

It is now likely to play a significant role in parliament, particularly trying to advance a two-year-old peace process between the Turkish state and the Kurdistan Workers Party (PKK) militant group, which first took up arms in 1984.

Demirtas said earlier that the campaign had not been fair or just. A bombing on Friday killed two people and wounded at least 200 at one of its rallies in Diyarbakir.

The results broadcast by CNN showed the secularist Republican People's Party (CHP) would again be the second biggest group in parliament, with around a quarter of the vote.

Murat Karayalcin, the party's Istanbul chairman, said the outcome was a "clear no" to the executive presidential system championed by Erdogan, while party spokesman Haluk Koc ruled out a coalition with the AKP.

The right-wing Nationalist Movement Party (MHP), long seen as the AKP's most likely partner if it tried to form a coalition government, took close to 17 percent of the vote.

But the senior AKP official said a coalition with the MHP was unlikely, and that the ruling party would rather go it alone and try to build support back up ahead of a new, early election.

"If there is an AKP-MHP coalition, then we will not be able to achieve even this level of votes at the next election," the official said.

The lira has fallen more than 15 percent against the dollar this year on uncertainty about the election outcome, making it one of the worst-performing emerging market currencies.

Many investors had hoped for a weakened single-party AKP government, avoiding the uncertainty of a coalition but without handing Erdogan greater power.

(Additional reporting by Daren Butler, Ayla Jean Yackley and Dasha Afanasieva in Istanbul, Humeyra Pamuk in Diyarbakir, Tuvan Gumrukcu, Gulsen Solaker and Ece Toksabay in Ankara; Writing by Nick Tattersall and David Dolan; Editing by Kevin Liffey and Mark Trevelyan)