A state prosecutor has asked Turkey's highest court to shutdown the ruling AK Party for anti-secular activities.
Turkish television channels quoted Abdurrahman Yalcinkaya, the court of appeals chief prosecutor, as saying he wanted senior party members, including the president and prime minister, banned from politics for five years.
Yalcinkaya said a government move to lift a ban on women students wearing the Muslim headscarf at universities amounted to anti-secular actions.
Turkey, which is seeking European Union membership, is predominantly Muslim but an officially secular system.
'Bad news'
Speaking from Dakar, Senegal, Abdullah Gul, Turkey's president, said: "With a political party with this much of a majority in parliament, we must think what Turkey will win and what it will lose from a demand like this."
The AK Party has been locked in a battle with Turkey's secularist establishment, including judges and army generals, since it first came to power in 2002.
Secularists say the AK Party is seeking to undermine separation of state and religion.
The AK Party denies it has any Islamist agenda.
It was not immediately clear whether the move would hurt Turkish financial markets which were closed when the announcement was made.
Ozgur Altug, an analyst at Raymond James Securities, said: "We think that the application is really bad news, as it will increase political risk factors in the country.
"The court case has even the potential to slow down the reform process, privatization and foreign direct investment inflows."
Emergency meeting
Recep Tayyip Erdogan, Turkey's prime minister, has called an emergency meeting of AK Party leaders to discuss the matter.
Ten years ago Turkey's constitutional court closed down the ruling Welfare Party on the grounds that it was considered too Islamist.
However, Wolfango Piccoli, an analyst at Eurasia Group, said: "Recent changes to Turkey's constitution have made it much more difficult to close down political parties in Turkey.
"Even if the AK Party is not closed down, the case could last anything from six months to a year, raising the possibility of increased uncertainty and political instability."
The AK Party was obliged to present its preliminary defense to the prosecutors accusations within one month, the state Anatolian news agency said.
AK Party members expressed shock at the move.
Speaking to the private television channel NTV, Zafer Uskul, an AK Party deputy, said: "It is a really shocking development. There is no proof that the AK Party is against secularism.
"The party, the prime minister have said at every opportunity that they adhere to secularism. I don't find it likely that AK Party will be closed, but even opening such a case is unfortunate."
The constitutional court is already reviewing an appeal by the nationalist-minded opposition Republican People's Party on the validity of parliament's constitutional amendments last month to partially lift the headscarf ban.
PHOTO CAPTION
Pro-Islamic university students, wearing white t-shirts with slogans criticize the head scarf ban, and chant slogans outside their campus in Istanbul, Turkey, Tuesday, March 11, 2008.
Al-Jazeera