Crucially, Mr Davutoglu gave only half-hearted support to a powerful presidential system, which Mr Erdogan wanted to see “rapidly” introduced.
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The president has launched almost 2,000 legal cases against people accused of insulting him.
He also told Turkish TV the country and its economy would stabilise further “when a prime minister more closely aligned with President Erdogan takes office”. But allies knew well that there were clear limits to his power.
Davutoglu is believed to have fallen from favour because he disapproved of Erdogan’s plans to move Turkey to a presidential system of government.
The shake-up will likely have a greater impact on Turkish-EU relations.
Erdogan, frequently critical of the European Union, has at times appeared to belittle Davutoglu’s progress, most notably efforts to win visa-free travel to Europe by June, the main prize in the eyes of many Turks.
“Davutoglu’s end goal is to consolidate his own power and be a successful prime minister”, said Ulgen, head of the EDAM think-tank in Istanbul.
Erdogan’s supporters have criticized Davutoglu for not doing enough to push for the presidential system, although Davutoglu is on record as saying he supports such a change.
The meeting sparked additional interest as it came after an address by Davutoglu to his party deputies on May 3 in parliament that lasted just 26 minutes – the shortest he has ever delivered as leader of the AKP.
However, the resignation comes after what analysts called a “barrage of criticism” of Davutoglu in pro-government media and expectations were high that Erdogan was about to replace him as both prime minister and chairman of the ruling Justice and Development (AK) party.
Erdogan has shown no hesitation to eliminate rivals in the past.
He has been a member of Turkey’s ruling Justice and Development (AK) Party since 2002 and has led it since August 2014.
Following an executive board meeting, party officials announced on Thursday that they agreed on the date of the congress, which will be held days before the first day of the Muslim holy month of Ramadan.
However, the political uncertainty has unsettled financial markets.
The tumult at the top of Turkish politics unnerved financial markets, with the lira losing nearly 4% in value against the dollar on Wednesday. “A key area of concern is the economic policy portfolio”, said O’Daly.
The former professor, foreign minister and adviser to Mr Erdogan tried to act independently on a range of issues and often proved to be a more moderating force to Mr Erdogan, who has adopted an increasingly authoritarian style of government.
Divisions between Davutoglu and Erdogan began over the conflict with Kurdish militants in the country’s southeast. Many journalists and members of opposition parties have been arrested. Erdogan spurned his premier and even suggested that anyone deemed to be supportive of extremists should be stripped of citizenship.
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The fiercely ambitious Mr Erdogan is intent on changing that to a presidential system, which he says would make Turkey function more effectively, but which would also significantly increase his powers.
