ANKARA (Reuters) - Former Turkish deputy prime minister Ali Babacan said on Monday he was resigning from President Tayyip Erdogan’s AK Party over “deep differences” with the party’s direction and said that Turkey needed a new vision.

FILE PHOTO: Turkey's Deputy Prime Minister for the Economy Ali Babacan answers a question at a news conference during the IMF spring meetings in Washington April 17, 2015. REUTERS/Gary Cameron/File Photo

Babacan, along with former president Abdullah Gul, plans to launch a rival political party this year, according to people familiar with the matter, in a move that could further erode support for Erdogan following a stinging electoral defeat in Istanbul last month.

In a statement that appeared to hint at the formation of the rival party, Babacan said it had become impossible to remain a member of the AK Party (AKP).

“Under the current conditions, Turkey needs a brand new vision for its future. There is a need for correct analyses in every area, newly developed strategies, plans and programs for our country,” Babacan said.

“It has become inevitable to start a new effort for Turkey’s present and future. Many of my colleagues and I feel a great and historic responsibility towards this effort,” he said, adding that he had submitted his resignation to the party.

Babacan served as economy and foreign minister in the first years of AKP government before becoming deputy prime minister, a role he held from 2009 to 2015. Gul was president from 2007 until 2014, when then-prime minister Erdogan moved to the presidency.

With economic recession, unemployment and inflation hurting Turkish voters and eating into the Erdogan’s support base, any further erosion - even just a few percentage points – could be deeply damaging for his party, which already has to rely on an alliance with nationalists for its parliamentary majority.

A re-run mayoral election in Istanbul on June 23 handed Erdogan the biggest electoral loss of his political career. The defeat in Turkey’s largest city also emboldened critics within the AKP who have for years hinted at plans to form a new party.

MOUNTING CRITICISM

Erdogan has so far dismissed reports that members of his AKP may be forming a new political party, saying no “active member” in the party was carrying out efforts for a new political group.

However, criticism towards the AKP and its recent policies has gained momentum after the June 23 defeat, which saw the AKP lose control of the country’s commercial hub to the main opposition party by more than 800,000 votes.

Gul, who has long been mildly critical of Erdogan and the AKP, broke ranks with the party in May to signal his discontent at a decision to annul the initial Istanbul vote and order the June 23 re-run after repeated appeals by the AKP.

A week after the Istanbul vote, former prime minister Ahmet Davutoglu, who fell out with Erdogan in 2016 and has previously criticized AKP policies, slammed the party’s rhetoric and economic management.

Davutoglu had been rumored to be considering joining Babacan and Gul’s breakaway party, but a source close to him said he was not joining Gul and Babacan for now, although he was planning a “new step”.

On Monday, Babacan said he believed Turkey’s problems could only be solved with the efforts of a widely represented team.

“Everyone’s aim is to improve our country’s reputation, increase our people’s prosperity and happiness, and get Turkey to the beautiful future it deserves,” Babacan said.

“Human rights, advanced democracy and the rule of law are our indispensable principles. I have worked relentlessly for these since the first day I entered politics. God willing, I will continue to do so from now on too,” he added.