Silver lining seen in halt to Turkey-EU talks

By bne IntelliNews November 30, 2006

Nicholas Birch in Istanbul -

Amid the anger and dismay that greeted Brussels' recommendation to partially suspend Turkey's accession talks as punishment for Ankara's failure to open its ports to Cypriot vessels, was optimism that this is actually good news for the country's drive to join the EU.

While British Prime Minister Tony Blair called the European Commission's proposal to freeze eight of 35 negotiating chapters a "serious mistake" and there was wild talk in the European media of a devastating blow to Turkey's hopes, Istanbul's stock exchange, which had dropped 6% since tensions over Europe began to peak at the beginning of November, closed up 2.5% at the news.

Inside and outside Turkey, supporters of Turkey's EU bid could barely hide their glee.

"This is the best possible decision we could have got, a victory for Europe's pro-Turks," crowed Cengiz Aktar, a Turkish expert on EU relations.

"Crisis, what crisis?" asked Bahadir Kaleagasi, Brussels representative of TUSIAD, Turkey's powerful big business association.

Bizarre though it may sound, such optimism stems largely from the fact that the Commission could have been a lot harsher than it was.

Joined by a new German government frank in its preference for a "privileged partnership" with Turkey, Europe's veteran anti-Turkish coalition of Cyprus, Austria and France was calling for anything from the suspension of 17 chapters to an outright freeze in talks.

They will have their chance to push their hard line on December 14, when 25 EU leaders meet to rule on today's proposal. But analysts say the likelihood of their success has been weakened by the Commission's adoption of a stance harsher than many had expected.

"It's a very clever game the commissioners have played," reckons Kirsty Hughes, a London-based EU specialist, arguing that France and Germany will now be persuaded to tone down their criticisms. "On their own, Austria and Cyprus will find it more difficult to take things further."

These countries were alone at last December's summit too, and their opposition then was insufficient to stop Turkey's accession bid going ahead.

Hughes points to the potentially positive side of another apparently negative Commission recommendation – that chapters already opened should not be closed until Turkey's Cyprus obligation is met. Negotiations have been blocked de facto for the past six months by Cyprus' use of its veto, she notes, but "this effectively takes that card out of its hands."

All this is true enough. But in the longer term it's difficult to see what good a partial suspension will do Turkey.

Falling support

Domestically, 2007 looks set to be a very tough year here, with a potentially explosive presidential election in April and parliamentary elections due in November.

In elections four years ago, parties competed to be seen as the most pro-European. The common denominator this time round looks set to be inward-looking nationalism: around 80% in 2003, Turkish public support for Europe is now under 40%, according to recent opinion polls.

It's not an atmosphere conducive to much forward progress on accession. In Turkey, analysts are describing 2007 as "a holiday from Brussels." In an investors' note released in response to the Commission's recommendations on Wednesday, Bear Stearns analyst Timothy Ash was sounding negative.

"This is a missed opportunity for Turkey… just as the mood within the EU is turning sour on the whole accession project," he wrote.

Is this the beginning of the end for Turkey's 40-year dream of accession then? Judging by Turkish PM Erdogan's conciliatory tone Wednesday evening the answer would be "no."

"The process could have speeded up, now it will slow down slightly", he said, shortly after calling the proposals "unacceptable."

"But our road is the same road, the EU road. We will continue with the same decisiveness," he said.

This is a strong contrast to a controversial recent call by four former Turkish foreign ministers for Turkey to suspend negotiations with the EU and his words will be a balm to analysts who fear Turkey will never be able to come back to the negotiating table if it walks away now.

"We believe transformation will continue as a strong anchor, which is what counts for Turkish politics and economics in our opinion," says Mehmet Besimoglu, chief economist at OYAK Securities.

Nobody doubts the EU's importance as an anchor for political change. Recently, though, an increasing number of economists in Turkey have been questioning its effect on economic change.

"Where is the Turkish miracle?" asked former Treasury undersecretary Mahfi Egilmez in his influential column in daily Radikal this Wednesday. The 7% annual growth for the past five years may put it at the top of OECD rankings, he went on, but its performance compared with other developing markets is poor.

In terms of economic convergence, Turkey simply has not been behaving like other EU candidate countries, agrees Mahmut Kaya, senior economist for Garanti Securities. "Turkey is an anomaly."

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