Turkey faces fractious interim rule as PM gives up on forming new govt

By Orhan Coskun and Ercan Gurses ANKARA (Reuters) - Turkish Prime Minister Ahmet Davutoglu formally ended attempts to form the next government on Tuesday after weeks of coalition talks failed, raising the prospect of a fractious interim administration leading the country to a new election. Davutoglu had been trying to find a junior coalition partner since the AK Party lost its parliamentary majority in an election in June, leaving it unable to govern alone for the first time since it came to power in 2002. Davutoglu officially handed the mandate back to President Tayyip Erdogan at an evening meeting in the capital Ankara, Erdogan's office said in a statement. AKP spokesman Besir Atalay said the party would hold a congress on Sept. 12. That meeting could be crucial for the its strategy going into a fresh election. NATO member Turkey has not seen this level of political uncertainty since the fragile coalition governments of the 1990s - turmoil it could do without as it takes on a frontline role in the U.S.-led campaign against Islamic State insurgents in Syria and battles Kurdish militants at home. Davutoglu met the leader of the right-wing opposition Nationalist Movement Party (MHP) on Monday in a last-ditch effort to agree a working government, but the nationalist leader refused all the options he presented. Erdogan could theoretically now hand the mandate to form the next government to the Republican People's Party (CHP), Turkey's second biggest, although it is also highly unlikely to be able to agree a working coalition before an Aug. 23 deadline. Under the terms of the constitution, if no government is formed by Aug. 23, Erdogan must dissolve Davutoglu's caretaker cabinet and call on an interim power-sharing government to lead Turkey to a new election in the autumn. PARALYSIS LOOMS Such a temporary arrangement would theoretically hand cabinet positions to four parties with deep ideological divisions, paralyzing policy-making and deepening the instability that has sent the lira currency to a series of record lows. But even forming such an interim "election cabinet" is likely to be difficult. The pro-Kurdish Peoples' Democratic Party (HDP) said it would offer representatives to take part, but the nationalist MHP has made clear it would not countenance doing so. Senior AKP officials had been betting that the nationalists, virulently opposed to greater Kurdish political power, would do anything possible to avoid a scenario in which the HDP held cabinet seats, and that they might support a short-lived minority AKP government in return for a new election. But nationalist leader Devlet Bahceli has ruled that out, leaving an interim power-sharing cabinet as virtually the only option. He is apparently calculating that the prospect of Kurdish politicians in ministerial positions will so enrage those on Turkey's political right that they will flock to support his party at the next election. Parliament could in theory also vote to allow the current cabinet to continue working until a new election, but the MHP has already said it would vote against such a move and other opposition parties have little incentive to do any different. (Additional reporting by Gulsen Solaker in Ankara; Writing by Nick Tattersall, Editing Angus MacSwan and Robin Pomeroy)