By Ibon Villelabeitia ANKARA, Oct 8 (Reuters) - European Union applicant Turkey has achieved unprecedented political and economic stability under the AK Party government, but remains a volatile investment destination that offers several risks. Following is a summary of key Turkey risks to watch and the Reuters stories related to them. EARLY ELECTIONS IN 2O10? * Concern over Turkey's recession-hit economy is fuelling speculation that Prime Minister Tayyip Erdogan might call early elections in 2010, ahead of a scheduled vote the following year. [ID:nL67473] The key question for investors would be whether the AK Party, in power since it shot to single-party government in 2002, can garner enough support to allow Erdogan to push his reformist drive without a ruling partner. Coalition governments have a history of infighting in Turkey, and fiscal discipline and reforms may fall prey to political point-scoring. Erdogan has not publicly discussed the possibility of an early vote. Analysts say a snap election will depend on the pace of recovery from a deep recession. The International Monetary Fund expects Turkish GDP to shrink 6.5 percent this year, and return to growth at 3.7 percent next year. A fall in revenue is putting pressure on Ankara to tighten fiscal policy and rein in spending; unpopular measures that may cost voters' support. The hostility of mainstream opposition parties to government plans to expand minority Kurdish rights and help end a 25-year conflict and to other EU-inspired measures such as a new constitution are seen as factors which could lead the government toward an early vote to open the way for the reforms. MEDIA ROW WITH GOVERNMENT * A $3.3 billion tax fine on the country's largest media group Dogan Yayin <DYHOL.IS> has ignited concerns about press freedom and the investment climate in Turkey. Critics say the fine for unpaid taxes, which has shocked the business elite in Istanbul for its size and drawn criticism from the EU, is Ankara's latest assault on Dogan for its hostile coverage of the AK Party government, including graft allegations. [ID:nLP67336] The government denies the fine is politically motivated. The row has also raised issues of transparency in the country's ambiguous tax laws and of political influence over the corporate sector. [ID:nLE614238] Foreign investors have downplayed the fine's significance for now as an isolated event stemming from a feud between Erdogan and billionaire media mogul Aydin Dogan, who has been accused of using his media empire to curry political favour and advance his business interests. However, analysts say it would be worrying if the stance was indicative of a wider trend. The pro-business AK Party, in power since 2002, has been careful of treating foreign investors fairly, but the fine could cast a new light on the business climate. ARMENIA * Turkey expects to sign historic accords on Saturday to normalise ties with Armenia in a step towards ending a century of hostility.[ID:nL7593552] Such a deal would bolster Turkey's credentials as a moderniser in the West and highlight its clout in the South Caucasus, a key transit corridor for oil and gas supplies to the West. But hanging over the thaw is the decades-long dispute between Turkey's ally Azerbaijan and Christian Armenia. [ID:nL8199985] Even if Ankara and Yerevan ink the protocols, it is far from certain the accords will be implemented and their joint border opened soon. Once the protocols are signed they must be approved by the respective parliaments. There is strong nationalist opposition in Turkey to making concessions to Armenia, which has no diplomatic ties with Turkey and a history of hostility stemming from the mass killings of Armenians by Ottoman Turks during World War One. Analysts say Turkey is keen to see progress on Karabakh to move forward on normalising ties with Armenia in order not to be seen losing face by appearing to bow to international pressure. ROAD TO EU * Predominantly Muslim Turkey started EU entry talks in 2005, but negotiations have stalled, partly over Ankara's refusal to normalise relations with EU member Cyprus and the slow pace of reforms. The EU accession drive is an anchor for political and financial reform in a country prone to instability, and investors and financial markets are sensitive to any signs that Turkey's chances of joining the EU may be receding. On Thursday, a draft report by the bloc's executive arm showed Turkey should step up reforms in a number of areas, including freedom of expression, freedom of the press, freedom of religion, civilian oversight of the military and women's rights. Complicating things further, there is little appetite for further enlargement among EU member states during the economic crisis and following the bloc's costly expansion to take in 12 new states since 2004. The French government opposes Turkey's full membership and Germany has doubts. TURKEY'S MILITARY * Tension between the government and the staunchly secular military is undermining stability in Turkey. Turkey's Constitutional Court will rule in the coming months on a new law that gives civilian courts the power to prosecute military personnel during peacetime for the first time, a bill dubbed by many a "civilian revolution". Ties between the AK Party and the military are also under strain over an investigation into a shadowy, right-wing network in which retired and active officers have been detained. In the long term, the AK Party government has the upper hand, as EU-inspired reforms have cut the influence of the once-formidable army. [ID:nLT265498] Overall, risks of a military coup are very small given the AK Party has public opinion behind it and the military, traditionally one of Turkey's most respected institutions, has seen its reputation hurt as critics see the coup trial as evidence of the military's involvement in undemocratic actions. Nevertheless, any escalation could still damage markets. (Editing by Jon Hemming)
Armenian demonstrators gather at the location where Armenian President Serzh Sarksyan is meeting members of the Armenian community, at the Metropolitan hotel in Beirut October 6, 2009. Armenians in Lebanon are ...
