New Turkish cabinet includes opposition, but little policy change seen

By Gulsen Solaker and Orhan Coskun ANKARA (Reuters) - Turkish Prime Minister Ahmet Davutoglu appointed nationalist and pro-Kurdish opposition politicians to an interim power-sharing cabinet on Friday, but left his finance and economy ministers unchanged in a team dominated by ruling party loyalists. Davutoglu was forced to form the temporary cabinet after his AK Party failed to find a junior coalition partner following the loss of its parliamentary majority in a June election which ended more than a decade of single-party rule. The uncertainty has unnerved investors in Turkey's $870 billion economy and comes as it battles Kurdish militants at home and Islamic State fighters on its borders, helping send the lira currency to a series of record lows. The interim cabinet will now lead the NATO member and aspiring European Union candidate to a new election on Nov. 1. Feridun Sinirlioglu, undersecretary at the foreign ministry since 2009, was named as the new foreign minister, a critical post as Turkish fighter jets prepare to ramp up air strikes with U.S.-led coalition forces against Islamic State in Syria. Government sources said former development minister Cevdet Yilmaz would meanwhile take over as deputy prime minister in charge of the economy, replacing the highly-regarded Ali Babacan, who leaves office because of a ruling AK Party limit on the number of terms its members can serve in parliament. Finance Minister Mehmet Simsek and Economy Minister Nihat Zeybekci both retained their existing roles. Reading the list of appointments without commenting further, Davutoglu named Tugrul Turkes, son of the founder of the nationalist MHP, as one of four deputy prime ministers. The MHP had said it would not join the interim cabinet and Turkes could face expulsion from the party as a result. Ali Haydar Konca and Muslum Dogan, members of the pro-Kurdish HDP, were named EU minister and development minister respectively. The presence of Kurdish opposition politicians in cabinet posts, particularly as clashes between the army and Kurdish militants intensify, could stir nationalist anger. Istanbul police chief Selami Altinok, who has overseen heavy security measures in Turkey's biggest city in a bid to prevent a repeat of widespread anti-government demonstrations in 2013, was named as the new interior minister. LITTLE SHIFT IN POLICY Speaking earlier on Friday before President Tayyip Erdogan approved the appointments, Davutoglu dismissed the notion that his new team would simply be a caretaker cabinet ahead of the new election. "On our way to Nov. 1, we will act like a government elected for four years. Our nation should be at ease about this. We will not be working in the mood of an interim government," he said. But the cabinet is likely to meet only a few times before November and its primary task will be overseeing the election rather than formulating new policy, meaning there is little chance of a shift in direction in key areas such as foreign affairs or the economy, senior officials say. Two polls this week have suggested the AKP is unlikely to win back its majority in November, raising the prospect of another round of coalition efforts later in the year. A third survey, by pollster ORC, which has overestimated ruling party support in the past, suggested the AKP would win 43.7 percent of the vote, up from 40.7 in June. But that would still not necessarily be enough to govern alone. "Although polls vary, no single party currently appears able to win a simple majority in the upcoming elections, suggesting another round of fractious coalition negotiations resulting in a minority government or a multi-party coalition," ratings agency Moody's said in a commentary on Thursday. "Such a government would likely be inherently unstable, and we would expect a high likelihood of additional elections before the nominal end of the parliamentary term in 2019." Davutoglu had invited opposition members to take up 11 posts in the 26-member interim cabinet, in line with a constitutional requirement to share power in proportion to the seats political parties hold in parliament. But most declined. Seats not taken up by opposition parties were given to "independent" candidates from outside parliament, many of them, like Sinirlioglu and Altinok, senior officials who have already worked under an AKP government for several years. (Writing by Nick Tattersall; Editing by Ece Toksabay and Dasha Afanasieva)