Turkey decides

Wrong-footed by President Recep Tayyip Erdogan’s stronger-than-expected showing in the first round of Turkey’s elections, investors are brac [View in browser]( [Bloomberg]( Wrong-footed by President Recep Tayyip Erdogan’s stronger-than-expected showing in the first round of Turkey’s elections, investors are bracing for the likelihood that his unconventional economic policies are here to stay. Erdogan took 49.5% of the vote in the May 14 ballot, just shy of the 50% required to secure an outright extension to his 20-year rule. Key Reading: [Erdogan Challenger Wins Support of Nationalist Party in Runoff]( [Turkey’s Erdogan Wins Support of Eliminated Rival in Runoff]( [Turkey Holds Rate Again With Lira Feeling Heat Before Runoff]( [Why Turkey’s Erdogan Faces His First-Ever Runoff Vote]( But his parliamentary alliance won a majority, giving Turkey’s longest-serving leader clear momentum going into Sunday’s runoff despite his vows to stick to a low interest-rate policy critics blame for the country’s cost-of-living crisis. Campaigning on a promise to return to economic orthodoxy, challenger Kemal Kilicdaroglu attracted 45% of the vote. That’s respectable by any measure, but may not be enough to engineer the kind of electoral upset the opposition coalition had hoped for. Markets have accordingly tempered expectations of an early end to measures that have hit the lira, fueled record inflation and deterred foreign investors. The cost of insuring against a sovereign default over the next five years rose to its highest level in over six months after a nationalist candidate endorsed Erdogan this week, bolstering his potential support. But Kilicdaroglu is also playing for nationalist swing voters in the second round. He’s won the backing of an anti-immigration party and is heading into the vote with a renewed focus not on the economic chaos but on a promise to send home immigrants, particularly those welcomed by Erdogan from neighboring Syria. It will soon be clear if that’s enough for the challenger to turn the electoral tide. [— Lin Noueihed]( A street vendor sells Turkish national flags decorated with the image of Kemal Ataturk, founder of the republic, in Bursa on May 18. Photographer: Moe Zoyari/Bloomberg Check out the latest [Washington Edition newsletter](. You can [sign up]( now to get it in your inbox every weekday. And if you are enjoying this newsletter, sign up [here](. Global Headlines A deal to avoid a US default that Republican and White House negotiators are considering would raise the debt limit and [cap federal spending]( for two years, sources say. While details are tentative, defense spending could rise 3% next year in line with President Joe Biden’s budget request, and other measures would both boost renewable energy infrastructure and accelerate permits for pipelines and other fossil fuel projects. - The possible spending limits could [hurt the economy]( during Biden’s bid for reelection next year. Top commerce officials from the US and China agreed [to strengthen]( lines of communication even as they traded complaints about each other’s policies, a sign Beijing and Washington are trying to prevent their relations from worsening further. The pair had “candid and substantive” talks about issues relating to the US-China commercial relationship, according to the Commerce Department. It’s not just Brexit that’s dried up the flow of European Union workers the UK used to depend on. From Poland to Portugal, EU economies are generating [more jobs]( and better wages than Britain. The absence of EU workers is exacerbating inflation and widespread staff shortages in the UK economy, denting the popularity of Prime Minister Rishi Sunak’s government. Ukraine said air defenses shot down 10 Russian missiles and 25 drones overnight. An [explosion]( damaged buildings in the southern Russian city of Krasnodar, while air defenses downed a missile over the neighboring Rostov region, according to local officials. China’s special envoy Li Hui meets with Russian Foreign Minister Sergei Lavrov in Moscow today at the end of a European tour aimed at brokering peace. Best of Bloomberg Opinion - [Should Ukraine Take the War Into Russia?: Andreas Kluth]( - [Erdogan Won’t Change and Neither Should Biden: Bobby Ghosh]( - [Republicans Need to Dump Trump If They Want to Win: Editorial]( Holed up at his fortified home in Lahore’s upmarket Zaman Park, Imran Khan is looking increasingly [besieged](. Behind the scenes there’s a recognition among Pakistan’s military that the former prime minster’s popularity is unmatched and his party must be cut down to size ahead of elections this year, sources say. As [Chris Kay](, [Faseeh Mangi]( and [Muneeza Naqvi]( report, that means Khan risks meeting a similar fate as previous premiers who have been jailed, exiled or executed following power struggles with Pakistan’s generals. Explainers You Can Use - [Europe’s Economic Engine Is Breaking Down]( - [Why Israel’s Internal Splits Are Exploding Into View]( - [Why Covid’s Aftermath Will Be Felt for a Long Time]( North Korea is ramping up efforts to deploy information-technology workers overseas as it increasingly relies on [online crimes]( to fund its weapons programs, US and South Korean officials said. The programmers can make as much as $300,000 a year working abroad — often remotely through freelance platforms with falsified or stolen identification — and can assist in enabling cyberattacks and cryptocurrency thefts that helped Pyongyang earn an estimated $1.7 billion in 2022. Tune in to Bloomberg TV’s Balance of Power at 5pm to 6pm ET weekdays with Washington correspondents [Annmarie Hordern]( and [Joe Mathieu](. You can watch and listen on Bloomberg channels and online [here](. News to Note - Japan’s cabinet is set to approve a plan that outlines measures to combat the rising number of [heatstroke deaths](. - Hungarian Prime Minister Viktor Orban’s government is [pushing back]( against growing criticism over fiscal management that investors say may push the recession-hit economy into a negative spiral. - Mexican President Andres Manuel Lopez Obrador is the latest leftist leader to be declared [persona non grata]( in Peru, amid a conservative tilt in the Andean nation. - South Africa’s president insisted his country [won’t be drawn]( into taking sides in the conflict between Russia and Ukraine, even as it faces pressure from the US and other key trading partners to change course. - The UK government is planning to [deport]( 3,000 asylum seekers per month from next year, a source says, as Sunak comes under rising pressure over his failure to reduce migration. Pop quiz (no cheating!) In which country did a speeding ticket cause a temporary cabinet crisis this week? Send your answers to balancepower@bloomberg.net. And finally … To cope with increasingly brutal temperatures, India has to keep its power grid standing — and for now that means [digging up]( ever expanding quantities of coal, the single largest contributor to climate change. Extreme temperatures are increasingly frequent in the world’s most populous country. That’s driving surges in electricity consumption and in turn pushing up demand at vast pits like Gevra, soon to become the largest coal mine in the world. A canopy made of umbrellas to shelter from the sun in New Delhi on May 19. Photographer: Anindito Mukherjee/Bloomberg Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Want to sponsor this newsletter? [Get in touch here](. 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