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From His Refuge in the Poconos, Reclusive Imam Fethullah Gulen Roils Turkey Religious Leader Lashes Out at Prime Minister Erdogan, a One-Time Ally

The reclusive imam whose crumbling political marriage of convenience with Turkish Prime Minister Recep Tayyip Erdogan has threatened the stability of the West's biggest ally in a turbulent region lashed out Monday at his one-time partner, the strongest sign yet of an irreparable split. In comments he made to The Wall Street Journal, Fethullah Gulen, a charismatic cleric who preaches a message of tolerance to his millions of followers from his self-imposed exile in Pennsylvania's Pocono Mountains, accused Mr. Erdogan of abandoning the path of reform after more than a decade in power. "Turkish people…are upset that in the last two years democratic progress is now being reversed," Mr. Gulen said in emailed answers to questions—his first such exchange since a corruption probe plunged Mr. Erdogan's government into crisis last month. "Purges based on ideology, sympathy or world views was a practice of the past that the present ruling party promised to stop," he wrote. Mr. Gulen hinted that his movement—known internally as Hizmet, which means service, and externally as Cemaat, which means congregation—would like to see a challenge to Mr. Erdogan's Islamist-leaning Justice and Development Party, or AKP. He didn't rule out members of his flock shifting their support to the opposition Republican People's Party—Mr. Erdogan's secularist nemesis, which was established by modern Turkey's founder, Mustafa Kemal Atatürk. Delegations from the two sides met in New York in early December, but no announcements resulted. "When the opportunities come, Cemaat participants, just like any other citizen will make their choices based on their values," the cleric said in the interview. "It is possible that people who share core values will make choices along the same lines." Mr. Gulen's move appears to represent an unraveling of the broad, Islamist-rooted coalition that has governed Turkey since 2002—a decade during which the economy boomed, living standards rose and Ankara's international influence grew. Mr. Erdogan ushered in a rare period of stability for Turkey, reining in the military and pursuing membership in the European Union. The country was often cited as a model of how Western-style democracy could flourish in the Muslim world. As the only majority Muslim member of the North Atlantic Treaty Organization, with the largest land force after the U.S., Turkey also has acted as a bridgehead for Washington to retain influence as it scales back the U.S. military presence. Now as Turkey approaches a series of elections, starting in March, that could set its political direction for the next decade, Mr. Erdogan has suddenly found himself in the midst of a corruption scandal that has ensnared dozens of his political allies. He accuses Gulenists in the police and judiciary of trying to force him from power and creating what he calls a "parallel state" within the bureaucracy. "This conspiracy eclipses all other coup attempts in Turkey. It is a virus bent on taking power," Mr. Erdogan said to AKP lawmakers in Ankara last week. "Fortunately our body is healthy. We will triumph." Mr. Erdogan's spokesman didn't respond to messages left for comment Monday night. The disarray is spooking investors and aggravating a glut of economic problems, threatening to undermine the premier's chief political achievement: years of steady growth. With the U.S. Federal Reserve winding down its stimulus efforts at the same time, the Turkish currency has sunk to record lows, borrowing costs have surged and stocks have slumped. Private savings, foreign investment and exports are shrinking, meaning local businesses that prospered under Mr. Erdogan are taking a hit. The central bank—politically constrained by a prime minister who has decried raising interest rates as "un-Islamic"—has little room to stem the declines. For years Cemaat was a crucial partner underpinning the AKP, even though the movement is officially nonaligned. "We have never formed an alliance or partnership with a political party or candidate," Mr. Gulen said in the interview. The outcome of their clash could dictate both Mr. Erdogan's political future and the shape of political Islam in Turkey. "Mr. Gulen's statements confirm that this turf war has gone beyond the point of no return, and we are looking at the battleground which could shape the next generation of Turkish politics," said Sinan Ulgen, chairman of the Center for the Study of Democracy, an Istanbul-based think tank. Mr. Gulen, 72 years old, leads his flock from a leafy, 25-acre estate in the Poconos, where he landed more than a decade ago after seeking medical treatment in the U.S. Known to cry during sermons, he preaches a Calvinist-style work ethic and has built a world-wide movement that operates charter schools in 160 countries, including the U.S., where Cemaat has forged ties with local and national political leaders, paying for congressional trips to Turkey. Referred to as Hodjaefendi, or "honorable teacher," Mr. Gulen has an estimated two million disciples and a further two million sympathizers at home and abroad. Many of them occupy senior jobs in government and law enforcement in Turkey. His followers also run one of the biggest Turkish business organizations, Tuskon, which represents more than 55,000 companies, and publish Zaman, the largest-circulation daily. Private rifts between Messrs. Gulen and Erdogan exploded into public view in December after the government announced a plan to shutter private schools that help students prepare for college exams. Many of the schools are owned by the Gulen movement, generating revenue and new members. Less than two weeks later, authorities unveiled the corruption investigation, arresting dozens of people. The prime minister responded by shuffling his cabinet and shaking up the police and the judiciary. Mr. Gulen has complained that his followers were targeted in the purges, and denies involvement in any conspiracy. "We will never be a part of any plot against those who are governing our country," the imam said. One of the biggest mysteries about Mr. Gulen is how much sway he holds over his followers and how his influence is transmitted through the movement's nebulous hierarchy. Members of Cemaat deny that they are seeking to take over state institutions, insisting that the structure is informal and they are merely "inspired" by Mr. Gulen's teachings. The imam gained a broad following for his moderate sermons in the 1960s and '70s. He benefited from Turkey's economic liberalization in the 1980s, which allowed his followers to found companies that have become among the country's largest. In 2000, a video surfaced showing Mr. Gulen saying: "You must move into the arteries of the system, without anyone noticing, until you reach all the power centers." The military-backed government charged him with threatening the integrity of the Turkish state. Mr. Gulen denied the charges and claimed the video had been tampered with. The following year, he left for the U.S., opting to convalesce on a sprawling Amishcountry estate in the town of Saylorsburg, Pa. In 2001 he secured a green card and remains on U.S. soil despite being acquitted in Turkey in 2006. By then, the secular elites that had long dominated Turkish politics were being elbowed aside by the popular Mr. Erdogan. The Gulenists joined him, supplying his AKP with well-educated cadres to manage state institutions as well as a supportive media. The government gave Gulenist schools, charities and companies access to opportunities at home and abroad. The army, a once-invincible secularist force and instigator of four coups since 1960, was brought to heel through a series of cases known as Sledgehammer and Ergenekon, spearheaded by Gulenist prosecutors and backed by the government. Proponents of the trials saw them as the definitive break with military influence; opponents said they were selective justice based on weak or trumped-up evidence. The confirmation of the split between the two men comes as the premier has appeared to gain the upper hand. Last week he blocked a new corruption probe implicating his son by reassigning more than 2,000 police commanders and seeking to seize control of judicial appointments. "It is ironic that members of the police force and judiciary who were applauded as heroes a few months ago are now being shuffled in the middle of winter without any investigation," Mr. Gulen said. According to Mr. Gulen, government attacks on his business interests, including Bank Asya, a lender with some $20 billion in assets, are "already a reality." Senior AKP politicians say that forming an alliance with the Gulenists was a mistake that Mr. Erdogan is determined to correct. "These purges should continue, because Cemaat members do not conform with the state hierarchy but take orders from the movement. They run their own political system inside the institutions within the state," said Osman Can, a member of AKP's executive board. Mr. Gulen said it was Mr. Erdogan's government that has changed. "Our values or stance have not changed," he said. "Whether the stance or actions of the political actors are consistent with their earlier record should be decided by the Turkish people and unbiased observers."

Next Cut in Fed Bond Buys Looms Reduction to $65 Billion Could be announced By JON HILSENRATH The Federal Reserve is on track to trim its bond-buying program for the second time in six weeks as a lackluster December jobs report failed to diminish the central bank's expectations for solid U.S. economic growth this year, according to interviews with officials and their public comments. A reduction in the program to $65 billion a month from the current $75 billion could be announced at the end of the Jan. 28-29 meeting, which would be the last meeting for outgoing Chairman Ben Bernanke. The Fed has been buying Treasurys and mortgage bonds in an effort to drive down long-term interest rates and spur spending, hiring and investment. Last year the Fed spent $85 billion a month buying bonds. Mr. Bernanke suggested at a December news conference that officials were inclined to continue cutting purchases in $10 billion increments at subsequent meetings as long as the economy keeps strengthening. "We're likely to continue on a path of gradual, measured reductions in the pace of purchases, assuming the economy tracks as we expect it to," San Francisco Fed President John Williams said in an interview early in the month. Bond buying is one of two prongs in the Fed's strategy to boost the economy. The other is low interest rates, and Fed officials are once again debating how best to describe their plans for when they eventually begin raising short-term rates. In December, the Fed said rates would remain near zero "well past" the time when the unemployment rate falls to 6.5%. The Fed is in no hurry to raise interest rates. But because officials have tied their plans to movements in the jobless rate, they see a need to better explain their plans as the jobless rate drops. The Labor Department reported employers added just 74,000 jobs in December, a slowdown from average gains of 214,000 during the four previous months. Many Fed officials doubt the economy is as weak as the December report suggested. The data may have been distorted by bad weather or normal statistical variation. Many other indicators suggest the recovery picked up strength during the second half of 2013, driven in part by stronger consumer spending and improved trade. "True, the December jobs report was disappointing," Chicago Fed President Charles Evans said last week in a speech in Iowa. But "the recent data on economic activity generally have been encouraging" and "importantly, the labor market has improved," he said, adding it will likely get better this year. After struggling for months last year to produce an exit strategy from the bond buying in the face of pronounced investor anxiety, Fed officials say they are reluctant to shift plans abruptly or without convincing evidence. Many Fed officials are pleased with how their plan to wind down the program has played out, despite last year's market volatility. Stocks are up, the economy and job market are stronger and signs of froth in some corners of the bond market have diminished. Mr. Bernanke signaled his rosier outlook in a speech in Philadelphia earlier this month, when he said headwinds to economic growth "may now be abating." Fed officials are especially heartened by developments in interest-rate futures markets, where investors are betting rate increases won't begin until 2015, in line with what policy makers are currently expecting. The Fed spent months last year trying to convince investors the end of the bond-buying program didn't presage an imminent Fed campaign to raise short-term interest rates. Still, challenges loom for the Fed, and they could dominate discussions at coming policy meetings. The jobless rate is declining much faster than the Fed expected—hitting 6.7% in December. It is falling in part because people are leaving the labor force, reducing the ranks of those counted as unemployed. Yet this could be interpreted in different ways. The decline in the share of adults participating in the labor force might reflect weakness in the economy—a reason for Fed officials not to rush into raising interest rates. It could also signal that slack in the economy—in this case, people searching for jobs—is diminishing, which could cause inflationary pressure that would merit higher rates. With inflation and wage pressures low, many officials doubt the drop in the jobless rate is a sign of sharply reduced economic slack or inflationary pressures. They first declared in December 2012 that they would need to see a 6.5% unemployment rate before they would consider interest rate hikes. But they have taken steps since then to distance themselves from that unemployment marker because they have doubts about it as a reliable indicator of economic health. In addition to saying in December that rates would stay low "well past" a 6.5% jobless rate, they have said they are comfortable keeping rates near zero "especially" if inflation remains below 2%. They have also said rates would stay near zero for a "considerable" period after the bond-buying program ends, which at its current pace won't happen until late this year. The Fed's debate about again revising its rate guidance will be one of the first challenges faced by incoming Fed Chairwoman Janet Yellen, who takes over Feb. 1. Different options are on the table. Under one scenario, the Fed could lower the 6.5% threshold to some lower number, such as 6%. But that idea hasn't garnered much support among officials to date. Another would create an interest-rate buffer zone of sorts, in which rates would go no higher than, say, 0.5% as long as the jobless rate is above 5.5%. Fed officials have been leaning toward a different, less specific approach of giving general guidance about what other measures they will be looking at when considering rate increases. Mr. Bernanke, for instance, noted in a recent speech that "after the unemployment threshold is crossed, many other indicators become relevant to a comprehensive judgment of the health of the labor market, including such measures as payroll employment, labor force participation, and the rates of hiring and separation." The stakes will be high for Ms. Yellen. A miscommunication about the Fed's plans could roil markets and create doubts among investors about its commitment to follow through on past pronouncements. Moreover, officials risk making a policy error if they misread the perplexing trend behind the jobless rate drop. If officials raise interest rates too soon, they risk choking off the recovery—but raising them too late could send inflation too high or fuel financial market bubbles.