Gunmen opened fire on Turkish police outside an Istanbul palace and eight soldiers were killed in a bomb attack in the southeast yesterday, heightening a sense of crisis as the country’s political leaders struggle to form a new government.

The Istanbul governor’s office said two members of a “terrorist group” armed with hand grenades and an automatic rifle were caught after attacking the Dolmabahce palace, popular with tourists and home to the Prime Minister’s Istanbul offices.There were no reports of casualties.

Militants from the Kurdistan Workers Party (PKK) meanwhile killed eight soldiers with a roadside bomb in the southeastern province of Siirt, the military said, intensifying a conflict there after the breakdown of a two-year ceasefire last month.

The unrest in the Nato member state comes weeks after it declared a “war on terror”, opening up its air bases to the US-led coalition against Islamic State, launching air strikes on Kurdish militants, and detaining more than 2,500 suspected members of radical Kurdish, far-leftist and Islamist groups.

The latest attacks also come a day after Prime Minister Ahmet Davutoglu gave up on efforts to form a new government after weeks of coalition talks with the opposition failed, paving the way for a new election.

“Because of the failure to form a government, we have to seek a solution with the will of the people... so we are heading rapidly towards an election again,” President Tayyip Erdogan said in a televised speech.

There was no immediate claim of responsibility for the attack at Dolmabahce palace, where the assailants opened fire on police guarding the entrance. The building has been targeted before by leftist militants.

Turkey has been on heightened state alert since launching what Davutoglu described a “synchronised war on terror” in July, exposing it to reprisals from Islamic State sympathisers, Kurdish militants and leftist radicals alike. A fighter proclaiming allegiance to Islamic State appeared in a video this week urging Turks to rebel against “infidel” Erdogan and help conquer Istanbul.

Dolmabahce palace is popular with tourists, houses Prime Minister’s Istanbul offices

The leftist Revolutionary People’s Liberation Army-Front (DHKP-C) meanwhile claimed responsibility earlier this month for an attack on the US consulate in Istanbul, in which two women shot at the building. One of the attackers was hurt in an exchange of fire but there were no other casualties.

The ruling AK Party, which Erdogan founded, in June suffered its biggest election setback since coming to power in 2002, failing to win a single-party majority for the first time, plunging Turkey into uncertainty . The failure of Davutoglu’s efforts to find a junior coalition partner led him to hand the mandate to form the next government back to Erdogan late on Tuesday. He could now give the mandate to the main opposition Republican People’s Party (CHP), although he has appeared reluctant to do so, and the CHP would in any case be unlikely to be able to form a working coalition by an Aug. 23 deadline.

Erdogan said yesterday he favoured forming an interim “election Cabinet” before new polls in the autumn. Such an arrangement would see power temporarily shared between four political parties with deep ideological divides, potentially paralysing policy-making and further unravelling investor confidence.The CHP said yesterday it was “unthinkable” that it would take part in such a government. Parliament could in theory vote to allow the current Cabinet to continue working until a new election, but at least one of the Opposition parties, the nationalist MHP, has already said it would vote against such a move.

Erdogan, who won Turkey’s first popular presidential election in August 2014 and has since stretched the powers of a largely ceremonial post to their limits, has championed a full presidential system akin to the US or France.

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