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Thursday, 28 June 2007


EU risks Islamic backlash if it shuns Turkey – Rehn

Olli Rehn, the European commissioner for enlargement, has warned against creating another “nationalist or Islamist problem” on Europe’s doorstep if Turkey is blocked from joining the EU.

He said that while taking into account the opposition of French President Nicolas Sarkozy to Turkey’s membership of the EU, “the Commission’s view is that we have to keep our word and respect our existing commitments”.

“If you look at the current political situation in the Middle East, in Palestine, in Lebanon, not to speak of Iraq, we don’t need another nationalist or Islamist problem in the neighbourhood of Europe,” he said, in an interview with European Voice. Read more...

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What is the idea of ‘Union of the Mediterranean’?

President Sarkhozy’s proposal for a Union of the Mediterranean has attracted some interest, but as independent observers, CEPS researcher Michael Emerson and Nathalie Tocci are somewhat puzzled as to what he has in mind. A basic question they raise in this CEPS Commentary is how this Union would relate to the EU’s present policies in the region, which is based on the 12-year old Barcelona process, onto which has been rather clumsily grafted the Southern branch of the two-year old European Neighbourhood Policy. Here is a quote :
"Two other interpretations have been offered in the press. One is that Sarkhozy’s proposal is just a Turkey gambit. “Dear Turkey, I do not want you in the European Union, but why not instead join us as a major player in the Mediterranean Union?” Another is that the proposal was just an intuitive remark about wanting to do something ‘better than Barcelona’ in the Mediterranean. While the second motive could lead to the prospect of a constructive development of the idea, the first would most likely lead to a vanishing of the grand idea of the Union of the Mediterranean as quickly as it was born, given Turkey’s resounding ‘no’ to the new role it would be offered."

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Analysis: Turkey's energy future

Turkey is a crucial transit country for the world's oil and natural gas market, and a top foreign ministry official says that its role will increase as the industry brings more sources to market and demand continues to rise. Read more...

Wednesday, 27 June 2007


Turk army chief reaffirms need for N.Iraq incursion

Reuters reports that the head of Turkey's powerful armed forces reaffirmed on Wednesday his view that a cross-border operation into northern Iraq was needed to crush Kurdish rebels based there.

His comments pile more pressure on Turkey's government to allow a military operation, just weeks before parliamentary polls in which security and terrorism issues will loom large.

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An overview of EU-Turkey progress reports

The Commission prepares every year Progress Reports on each country. These reports describe the political and economic developments in the candidate and potential candidate countries. They assess the ability of the candidate countries to transpose and implement EU legislation and the progress of the potential candidate countries in adopting EU standards and in fulfilling other specific conditions. The next report is expected in November 2007. Here are Commission's progress reports on Turkey:

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Turkey and the EU: Together for a European Energy Policy

On 5 June, a high-level conference organized jointly by the EU and Turkey under the title, “Turkey and the EU: Together for a European Energy Policy” will take place in Istanbul, with the participation of Commissioner for Enlargement, Olli Rehn, Commissioner for Energy and Transport, Andris Piebalgs, the Turkish Minister for Foreign Affairs, Abdullah Gül, and the Permanent Delegate of Turkey to the EC, Ambassador Volkan Bozkir, among other personalities

Securing sustainable, reliable and affordable energy supplies is a major challenge for Europe today. There is an urgent need for diversification and investment. Turkey has a key role to play in the diversification of energy-supply routes to Europe. Gas and oil pipeline projects from the Middle East, Central Asia, the Caspian and also Northern Africa can significantly increase fuel supplies to both Turkey and the EU. To mobilize the necessary investments, it's necessary to create the right conditions and work closely together.

In January, the European Commission tabled a comprehensive package of ambitious proposals for a "New Energy Policy for Europe", the importance of which was underlined by the Heads of State and Government at the recent European Council. Developing a common external energy policy is one of the main components of the package. Turkey is an important partner for the EU in the shaping of its external energy policy. Turkey and the EU will benefit from a close dialogue on its implementation.

Turkey has already taken great strides in aligning its energy market with EU internal-market rules. The full liberalisation of Turkey's rapidly growing market of 72 million people will create a strong domestic energy market for the benefit of Turkish consumers, and will also bring significant further investment opportunities for business. The EU has a strong interest in supporting this process. The ongoing negotiations on Turkey's accession to the EU play a central role in this context.

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Tuesday, 26 June 2007


Nabucco: just a dream?

The Nabucco pipeline is a proposed natural gas pipeline that is planned to transport natural gas from Turkey to Austria, via Bulgaria, Romania, and Hungary. Some consider the pipeline as a diversion from the current methods of importing natural gas solely from Russia. Judy Dempsey, Herald Tribune comments on the state of the project:

"The consortium attempting to build a natural gas pipeline that would reduce the European Union's dependence on Russian natural gas has failed to agree on financing or finding another partner to make the project viable.

Interviews with members of the Nabucco consortium Tuesday disclosed that the pipeline - proposed in 2002 by the European Commission as the bloc's first attempt at forging a common energy security policy - may be threatened by another project with similar intent.

On Saturday, Gazprom, Russia's state-owned giant natural gas monopoly, and Eni, the Italian natural gas company, announced an agreement to build a competing pipeline to the EU, a move that exposed the lack of unity inside the 27-member bloc over forging a long-term energy security policy."

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Turkey sour over EU refusal to open talks

Turkey has criticised France for giving insufficient reasons for blocking its EU talks, saying the bloc's ability to make other countries undertake democratic reform will be undermined if Ankara is pushed off the EU path.

Speaking a day after it became clear that Paris was making good on a threat to obstruct Ankara's EU talks, the country's chief negotiator, Ali Babacan, said "we are not satisfied with the technical justifications that were given to us."

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Turkey’s membership, Portugal’s presidency


Nadin Dumani writes on Turkish Weekly: "there are serious obstacles to Turkey’s accession to the EU, but with the rotating presidencies these obstacles may smooth out as Turkey also has some supporters. At this point, the EU started to cognize the pros of Turkey’s membership instead of only perceiving the cons. Portugal’s presidency -as a supporter of Turkey’s membership- may be a great opportunity for Turkey. It is apparent that Portugal supports Turkey’s membership and during its presidency, we may expect that it would do its best to launch negotiations on new topics with Turkey if we follow the indicators. That may not mean that Portugal’s presidency will lead and therefore change all the prejudices about Turkey’s membership but at least having a supportive president country may serve for the benefit of Turkey as it surely won’t serve for the opposite. Turkey’s entry negotiations may not be moving as fast as Croatia’s, and this may not change in the short-term but moving is always better than standing still and Turkey may move faster with the Portuguese presidency. These bit by bit steps may be followed by rapid ones. There is no need to rush, right?"

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Monday, 25 June 2007


Black Sea Cooperation




France blocks start of Turkey eurozone talks

Short before the July elections in Turkey, the European Union is to start membership talks with Turkey this week in only two new areas instead of three, because of France's opposition. Despite earlier plans by the German EU presidency to open talks on three EU integration areas with Turkey by the end of June, European diplomats have given the red light to talks with Ankara on the eurozone rules chapter.

EUObserver reports that the European Commission earlier presented its reports on three Turkey chapters - statistics, financial control and economic and monetary union - but the euro package was dropped from the agenda of the diplomats' meeting on Monday.

"The French delegation asked for more time to study the EU's position," one EU diplomat said, adding that Paris generally takes more time for detailed evaluation of enlargement reports.

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Leaders in Turkey for the Black Sea Economy Cooperation


The leaders of 12 countries in the Black Sea region, among them Russian President Vladimir Putin, will gather here Monday to discuss projects aimed at boosting trade and economic cooperation.

The summit of the Organisation of the Black Sea Economic Cooperation (BSEC) marks the 15th anniversary of the body, founded in 1992 following the collapse of the Communist bloc to promote stability and economic ties between nations who belonged to opposite camps during the Cold War.

The members of the group are the six Black Sea littoral states -- Bulgaria, Georgia, Romania, Russia, Turkey and Ukraine -- as well as Albania, Armenia, Azerbaijan, Greece, Moldova and Serbia.

The host country Turkey, which currently chairs the group, says it wants to give a new impetus to the organisation and is calling for increased efforts in the areas of transport, energy, trade, environmental protection and combatting organised crime.

One of the major objectives on the BSEC agenda is upgrading transport infrastructure as a means of boosting trade and tourism, including projects for a 7,500-kilometre (4,660-mile) ring road along the Black Sea coast and regular maritime links between the ports of member states.

Removing legal barriers to trade is another priority, with a special meeting on the issue scheduled for September.

The group is also seeking to develop closer cooperation with the European Union, and the vice president of the European Commission, Guenter Verheugen, is expected to attend the summit in Istanbul.

The BSEC covers an area of nearly 20 million square kilometres (7.7 million square miles) with a population of some 350 million people. Its member states have a total foreign trade capacity of about 300 billion dollars (223.5 billion euros) annually.

The region is the second-largest source of oil and natural gas, after the Persian Gulf region.

All member countries except Armenia are expected to be represented by their presidents or prime ministers in Istanbul, Turkish officials said.

Armenia, which has no diplomatic ties with Turkey, will be represented by Foreign Minister Vardan Oskanian.

Ahead of the summit meeting, the foreign ministers of member states will hold a separate round of talks Monday morning.

A senior Turkish diplomat said Turkish Foreign Minister Abdullah Gul would hold bilateral meetings with counterparts on the sidelines of the summit, without ruling out the possibility of him meeting also with Oskanian.

Turkish and Armenian officials have held talks in the fringes of international gatherings in the past.

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Nationalist Movement Party's election manifesto

The Nationalist Movement Party (MHP) has announced a long-term strategy pertaining to the 100th anniversary of the establishment of the republic and is aiming to “become a ‘leader country’” -- one of the top 10 countries of the world in terms of economic development, contemporary values and is globally influential by 2023.

* Five basic projects: In the election manifesto, titled “National Stance and Determination Document,” announced by MHP leader Devlet Bahçeli, it is stated that the following five basic projects would immediately be implemented during the MHP government: The State and Administration Reform in Social Rehabilitation and Transformation; The Productive Economy Program; The Anti-corruption Project; The Anti-unemployment Project; and The Restitution of Social Ethics and Quality Project.

* Counterterrorism: Political determination to uproot terrorism will be shown; legal measures needed for the struggle against terrorism will be promptly taken; state authority will be established in the areas where terrorism itself nests; the people of the region will be saved from threats and pressures; the sources of terrorism will be uprooted; socio-economic problems which nurture terrorism will be radically and permanently solved; a comprehensive economic and social development project will be implemented with necessary financial supports and resources; effective measures will be taken with respect to international dimensions, political, logistic, and financial supports of terrorism; the country’s rights arising from international law will be employed with determination against the executives and militants of the terrorist organization hiding in northern Iraq; security of Turkey will not be left to permissions or initiatives from third countries, and political and military measures will be taken without hesitation; terrorism crimes will never be provided clemency; an all-out fight against city criminality, illegality, and offense; the police will be favored, and close cooperation between units fighting against crimes will be ensured.

* Legislation: Clean politics and clean government will be swiftly established; parliamentary immunity except pertaining to acts committed in an official capacity as a deputy will be abolished; unfair income from corruption will be confiscated irrespective of lapse of time; the political ethics law will be promptly enacted; the number of ministries will be decreased to 21.

* Economy: An economy ministry will be established; a fair wage system will be implemented in state institutions; an unemployment grant amounting to half of minimum wage (about YTL 200) will be paid to unemployed family heads; the tax burden of the poor will be lowered, the minimum wage will not be taxed; retirees will be paid one extra salary in September annually; employment will be encouraged; loans of farmers will be restructured; Provincial Investment and Development Offices will be established for the strengthening of private sector; more financing opportunities will be provided for small and medium-scale enterprises (SMEs); and the agricultural sector will be modernized.

* Education: Compulsory basic education period will be increased to 12 years and will also include pre-school education; education in a foreign language will not be allowed in any level of education; the ÖSS will be abolished and will be replaced with a Maturation Exam

* EU: The relations with the EU will not be regarded as a matter of identity or fate for Turkey; Turkey is not obliged to be dragged behind the EU.

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Sunday, 24 June 2007


Republican People's Party's (CHP) election manifesto

Here are a few of the Republican People's Party's (CHP) promises ahead of the July 22 elections made by Deniz Baykal, leader of the party (in the picture), as reported by TDN:

Security on the top of the agenda

Baykal declared that his party will actively fight to eliminate terrorism.

No consumption tax (ÖTV) on diesel

On agriculture, we'll subsidize our farmers at double the rate of today's levels. This backing will be useful for raising competition levels. We will provide diesel without charging consumption tax(ÖTV). This means the price for diesel will decrease by 50 percent.

Zero hunger guaranteed

We will attain �zero hunger� in Turkey. We will help the very poor families by contribution of several institutions and the women in those families will be supported directly by the state. We will teach them to fish instead of providing food aid.

Youth will be given loans

We will solve the dormitory problems faced by our youth. We will start building dormitories and shelter for university students. We will increase the amount of loans. Each year we will give over YTL 250 million to one million young people in 10 months. They will not have to start return payments until they find a job.

Education reform

We will carry out comprehensive educational reform. Our main target is the high schools. We will make education compulsory education till the 10th grade. After the first two years of high school, it will be determined which students will be directed to vocational education and which ones to an academic career.

Relations with the European Union

Baykal also answered questions on various issues. When asked about relations with the European Union Baykal said, "When Turkey sees the potential of full membership in the EU, its relations with the union will normalize. But, when there is no concrete perspective on this issue and just opposite conditions are seen, the demands from Brussels are not sensible and conceivable"

Compromise required for seat in Çankaya

Upon another question, Baykal said the president can't be elected without compromise and the Justice and Development Party (AKP) managed this process so unsuccessfully. "Even if we constitute a quorum of more than 367, we will maintain the same understanding of compromise. We will ask all the parties. You are choosing a president for 70 million people. Compromise is required".

Relations with IMF to tread same path

On the relations with the International Monetary Fund (IMF), Baykal tried to give assurances that there wont' be any deviation from current policies. �There is no need to be in a state of absolute conflict with international financial institutes. Turkey is a confident country that is loyal to its commitments and relations. Changing this understanding is out of the question".

Sale of banks to foreigners

Regarding the sale of Oyak bank to foreigners, the CHP's leader criticized the decision saying, "The transfer of all Turkish banks to foreign capital is not a right preference and approach".

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AKP's election manifesto

The Justice and Development Party (AKP) announced its manifesto. Here are AKP's main election promises: Turkey will have a new constitution.

. The economy will be administered from a single center.

. Tax regulations will be simplified.

. The law on the duties and the responsibilities of the Constitutional Court will be amended. Individuals will be able to apply to the court.

. The independence of the judiciary independence will be safeguarded.

. The Higher Education Board (YÖK) will be restructured.

. The universities will be autonomous

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Towards a new treaty to govern the EU

European Union leaders have reached agreement on proposals for a new treaty to govern the 27-member bloc. Heads of the governments signed a mandate. Here are some points on enlargement of the EU:

At Netherlands' insistence, a reference to criteria for new EU members was added. So part of the conditions for entry will be a commitment to promoting EU values and an obligation to notify the European Parliament and national parliaments of an application for accession to the EU.


Gazprom, Eni plan big gas pipeline bypassing Turkey

Reuters report that Gazprom and Italian oil firm Eni unveiled a plan on Saturday for a big new pipeline to take Russian gas under the Black Sea to Europe, undermining an earlier plan to extend a Turkish route. The South Stream pipeline will cross the Black Sea into Bulgaria and then split, one arm going to Austria and the other to Greece, and then on to Otranto in the south of Italy.

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Switzerland - EU: a model for EU-Turkey relations?

Columnist Chantal Tauxe (Switzerland - L'Hebdo) writes "with the bilateral agreements, Switzerland has got itself a non declared status as a passive EU member. We stick to the EU's rights when it suits us, which is nearly always since the economy is our only compass. We register what the EU decides in our laws, as if it were the fruit of our own genius, feigning to be unaware of its origins. Granted, the dues we pay are less high than if we were members. But we don't decide on anything. We don't propose anything. We are happy to position ourselves like gnomes in the political garden. All this while claiming to have much to teach the EU and the world about democracy, the respect of minorities and human rights..."

Turkey is part of the EU customs union with no decision rights and is adopting many parts of the EU law, although it is still not clear if Turkey ever becomes an EU member. Could Turkey be considered as a passive EU member?

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Croatia to leap ahead of Turkey

While EU-Turkey negotiations are slow-going and problematic, Croatia is set to widen further the gap with Turkey in its progress towards EU membership next week (26 June) when it opens talks on six new areas of EU law. It is still unclear, whether the German presidency of the EU will win support to open talks with Turkey on three new chapters. Croatia has already closed negotiations on two chapters (science and research, and education and culture) and opened talks on four others (intellectual property law, economic and monetary policy, enterprise and industrial policy, and customs union).

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Friday, 22 June 2007


Ruling AKP Still Strongest in Turkey

Angus Reid Global Monitor reports that Turkey’s ruling Justice and Development Party (AKP) is clearly the most popular political force in the country, according to a poll by Konda released by Raymond James Securities. 42 per cent of respondents would back the AKP in this year’s parliamentary election.

Polling Data

What party would you support in the next parliamentary election?

Justice and Development Party (AKP)

42%

Republican People’s Party (CHP) and
Democratic Left Party (DSP)

15%

National Action Party (MHP)

12%

Source: Konda / Raymond James Securities
Methodology: Interviews with 3,605 Turk adults in 32 provinces, conducted from Jun. 9 and Jun. 10, 2007. No margin of error was provided.


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Thursday, 21 June 2007


Analysis: Turkey turns eastward?

In a recent article on Middle East Times Claude Salhani points out that "Turkey in recent years has shifted away from one of the basic tenets established by Mustafa Kemal, better known as Ataturk, the founder of the modern Turkish state, by becoming more and more involved in Middle Eastern politics". However, at the end of his article he writes: "if managed properly, Turkey's flirtation with its neighbors to the east "could be an opportunity for Washington and its Western allies to use Turkey as a bridge to the Middle East."

Salhani neglegts the fact that Turkey has always been involved in Middle East politics starting with the Central Treaty Organisation, so called
Baghdad Pact, in 1955. Friendly relations with neighbour countires have been a continuity of Turkish foreign policy. Due to PKK violence, Turkey needs to focus on Middle East politics. On the other hand, Turkey does not give up her aim of joining in the EU and taking actively part in the EU. Hence, one could say Turkey has strong links to both West and East and can act beyond the existing divisions.

Wednesday, 20 June 2007


Turkey joins FP7

Croatia, Serbia and the former Yugoslav Republic of Macedonia are now eligible to compete on an equal footing with EU Member States in the Seventh Framework Programme (FP7), following the signature of Memoranda of Understanding with the European Commission. A similar agreement was also recently signed between Turkey and the Commission.

In gaining 'associated status', the signatory countries will now be able to participate in all the FP7 calls for proposals, including those opened since the beginning of the year. The agreement offers researchers form these countries the same rights for participation as EU Member States in all the research cooperation and supported actions funded under FP7.

Acting as signatory on behalf of the European Commission, Science and Research Commissioner Janez Potocnik said he was pleased to see 'the doors of the European Research Area (ERA) open wide to the Western Balkan countries'.

The Commissioner also noted the importance of the agreement in view of these countries' application to join the EU. 'Research cooperation with Europe's scientific community is a tool which can smooth the way for the integration process of candidate and potential candidate countries into the European Union,' he said.

This is not the first time that some of these countries have been associated with the EU research framework programme. In 2006, Croatia gained associated status, enabling them to participate in the last year of FP6.

Montenegro has also requested to become associated with FP7 and it is expected that a decision will be taking once Stabilisation and Association Agreement (SAA) negotiations have come to a head. Albania, Bosnia-Herzegovina, Israel and Switzerland are also expected to join soon.


3 or 2? France says EU can open two new chapters with Turkey

Germany expects to open 3 chapters before the conclusion of the German Presidency. However, France says EU can open two new chapters with Turkey. Asked whether France will allow all three chapters proposed by the German EU presidency to go ahead with Turkey on June 26, Kouchner (in the picture) told a news conference: "We have said two. We shall see."

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Tuesday, 19 June 2007


Turkey Plans First Recon Satellite

Defencenews.com reports that Turkey is poised to award a reconnaissance satellite contract. Turkey’s military and government planners are preparing to award the satellite contract, estimated at about $250 million, in the weeks ahead. The procurement official said the top panel that oversees procurement decisions would likely convene after June 20 to finalize an international competition to build and launch Turkey’s military satellite, dubbed GOKTURK.

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Public opposition to Turkey's entry in the EU

A recently conducted poll revealed widespread opposition to Turkey's European Union membership among European citizens; also indicated was strong opposition to European leaders' plans to push a reworked EU constitution onto the statute book without further referenda, as reported by Today's Zaman.

The exclusive Financial Times/Harris opinion poll, published over the weekend in the UK daily, was conducted online by Harris Interactive among a total of 6,169 adults in Britain, France, Germany, Italy, Spain and the US. According to the results strong opposition to Turkish membership in the EU was evident with 71 percent of French citizens and 66 percent of Germans answering "No" to a question asking: "Do you think that Turkey should be invited to join the EU?"

Among three other EU members -- Britain, Italy and Spain -- the support for Turkey stood between 20 and 40 percent.

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ING enters Turkey with $2.7bn Oyak deal

New development concerning FDI in Turkey: ING, the Dutch banking and insurance group, on Tuesday moved into the Turkish banking sector with the $2.67bn cash acquisition of Oyak Bank and said it would invest to rapidly extend market share by opening branches, improving marketing and expanding internet banking.

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Monday, 18 June 2007


Sino- Turkish relations

Chinese Minister of Commerce Bo Xilai visited Turkey and had talks with Turkish State Minister Kursad Tuzmen. The two ministers told government officials and representatives of business people attending the Turkey-China Business Forum that Chinese and Turkish governments are ready to enhance bilateral economic and trade cooperation. Turkish exports to China have increased by 50 percent in the last eight months, said Minister for Foreign Trade Kürşad Tüzmen, adding that exports may exceed $1 billion at the end of 2007 if the trend continues.

According to official statistics, trade relations between the two countries have been developing smoothly in recent years. Sino- Turkish trade, which was 1.2 billion dollars in 2000, reached 8.1 billion dollars last year.

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Turkey withdrew its military support to the EU under the European security and defence policy

Turkey has been a solid supporter of EU’s several military operations. However, frustrated with its frozen status as a candidate member country, Turkey is withdrawing its participation from the European Union’s nascent pool of rapid-reaction forces to be used for future European security and defense policy (ESDP) initiatives. Turkey’s decision to withdraw its pledge “is a reflection of our dissatisfaction in our relations with the EU,” a Turkish official said.

Sources in Brussels said that Turkey, on numerous occasions, expressed its uneasiness over its exclusion from decision-making and command mechanisms in the European security and defence policy operations.

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Sunday, 17 June 2007


Towards a referendum on direct presidential elections

Lack of clarity on election of the next Turkish President goes on. President Ahmet Necdet Sezer refused Friday to approve a bill that would allow for direct presidential elections, a move that will result in a national referendum on the measure. President Ahmet Necdet Sezer refused Friday to approve a bill that would allow for direct presidential elections, a move that will result in a national referendum on the measure. The AKP is trying hard to hold a referendum simultaneously with the general elections on July 22, but a law reducing the time period for holding a referendum from the current 120 days to 45 days is still under investigation by Sezer. If the AKP cannot change the timetable for the referendum, it will take place on Oct. 21.

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Friday, 15 June 2007


Towards a nuclear shield for Turkey?

Turkish Daily News reports that Talks in Vienna and Brussels this week could lead to the establishment of a nuclear missile shield to protect Turkey, if Iran acquires a nuclear bomb within its uranium enrichment activities as the Western powers suspect. Turkey supports the plan, as TDN reports.

A missle defence system was proposed by Nato chiefs yesterday to protect European countries not covered by the one America aims to set up.

US anti-nuclear missile installations in Europe would shield most of the continent from attacks by Iran or elsewhere in the Middle East.

But they would not help targets in Turkey, Greece, Bulgaria and Romania.

The article writes:

"NATO officials hope the alliance can agree by a summit next April to start work on a so-called "bolt-on" system that will deploy complementary interceptors to cover southeast Europe."

Russia favours Turkey or Iraq: Recently, Russian President Putin stated that the United States could place interceptors in Turkey, Iraq or on the sea instead of setting up a missile defense shield out of eastern Europe.

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Thursday, 14 June 2007


IMF is happy with Turkey and underlines a number of macroeconomic challenges

On May 18, 2007, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Turkey. Here is a quote from the final document of the consultation:

"Turkey has experienced an impressive economic revival in recent years. Sound economic policies anchored to Fund arrangements, as well as political stability and favorable external conditions, have resulted in average annual growth of 7½ percent since 2002. Private consumption and investment have been the main drivers, fueled by declining real interest rates, surging capital inflows, rapid credit expansion, and rising productivity. Meanwhile, inflation has dropped dramatically over the past five years.

The real economy has undergone significant modernization, becoming less reliant on traditional sectors and more open to trade and foreign investment. Exports have continued to gain market shares, as the effects of an appreciating currency have been largely offset by productivity gains. Slack in the labor market has kept labor costs in check.

Balance sheets have also strengthened. Public debt ratios have come down considerably, and the composition of debt has improved. Bank balance sheets have also become more robust.

These positive outcomes have been driven, in large part, by disciplined policies and advances in structural reforms. On the macroeconomic side, adherence to the 6.5 percent of GNP primary surplus target combined with monetary policy restraint by an independent central bank have helped bring down inflation, strengthen confidence, and ease real interest rates. The floating exchange rate has been an effective shock absorber and has provided good incentives for managing currency risks. On the structural side, bank recapitalization and enhanced supervision, tax reforms, and privatization have restarted private credit growth, promoted foreign direct investment, and spurred competitiveness.

Still, the Turkish economy faces a number of macroeconomic challenges. In particular, the economy's dependence on large capital inflows exposes Turkey to swings in investor sentiment (as witnessed during recent periods of market turbulence). Also, inflation well above target (due to a series of supply shocks, currency depreciation, and inertia in expectations) continues to require tight monetary policy. And, in order to sustain and build on recent improvements in growth, a number of structural challenges need to be tackled. These include a low employment rate, still limited financial intermediation, a large informal sector, and potential bottlenecks in electricity supply."

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Wednesday, 13 June 2007


Turkish-Italian relations

Good relations between Italy and Turkey continue after the leaving of Silvio Berlusconi, a personal friend of the Turkish PM Erdogan. According to the new Italian foreign minister Massimo D'Alema his country is a "vigilant" but if necessary "critical" ally of Turkey in its attempts to join the European Union during a recent visit in Turkey. Italy is Turkey's fifth largest trading partner. In 2006, Turkey exported to Italy some 6.75 billion US dollars worth of goods while Italy’s exports to Turkey amounted to 8.59 billion dollars. Some 450 Italian companies operate in Turkey. In January, Prodi visited Turkey and joined the inauguration ceremony for the Bolu Tunnel, an important mountain pass connecting Istanbul to the capita, Ankara, which was built by the Italian construction company, Astaldi.

Energy remains the most strategic sector of cooperation between the two countries, with the Blue Stream gas pipeline the most high profile joint venture. Initially an Italian-Russian driven project, it was announced following Prodi's January visit that the completion of Blue Stream, would involve Italy's energy giant ENI.

Turkey might expect more support from Italy in the EU and hope that UK, Spain and Italy could provide a counterpoint Sarkozy’s exclusionist rhetoric and force France to soften its stance on Turkey.

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Bad move at wrong time: France preparing moves against Turkish EU membership

Short before the elections in Turkey on 22 July France is preparing to move against Turkish membership of the European Union by indicating it will block preliminary talks with Ankara on economic and monetary union. EUObserver reports that French officials have expressed specific concern about Turkey being allowed to open negotiations in this area - a step in the direction of eventually becoming a member of the euro. Just to recall: While visiting Brussels last month, Sarkozy said "I believe that Turkey does not have a place in the European Union." Although French opposition to Turkish membership in the EU is known, this new move might support the anti-European movements in Turkey before the elections.

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Portuguese presidency priorities

Portugal will take six-month EU Presidency from 1 July 2007. Speaking at the latest Friends of Europe Policy Spotlight event on 15 May, Portuguese Foreign Minster Luís Amado spelled out his country’s comprehensive plans for the next EU Presidency. Concerning the Turkey issue: Amado stated that he is in favour of Turkey joining the Union, as there is an existing commitment, and because the EU needs a strategic vision to deal with the Mediterranean region. Turkey can play a role if it meets all the criteria for accession. The Minister concluded that the situation has to be monitored, together with the evolution of certain Member States.

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Tuesday, 12 June 2007


PM Erdogan says fight against PKK is in Turkey, not Iraq

Reuters reports that Prime Minister Tayyip Erdogan signaled on Tuesday Turkey should focus on battling Kurdish guerrillas at home rather than in northern Iraq. Visit or Iraq dossier for more news and information.

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FDI in Turkey

During a recent meeting with foreign investors and World Bank officials, so called Investment Advisory Council meeting 2007, PM Erdogan stated that "Turkey is growing and developing on the basis of economic and political trust. It is also transforming its opportunities to new and rich advantages." The meeting concluded that Turkey made significant achievements in foreign direct investment, which include:
  • Unprecedented success in implementing the privatization program, resulting in recordhigh levels of revenues
  • Acceleration of comprehensive tax policy reforms
  • Passage of landmark social security reform legislation
  • Reduced administrative barriers to investment, particularly the streamlining of work permit procedures for foreign investors
  • Progress in establishing an investment promotion agency
Anne Krueger, First Deputy Managing Director of the International Monetary Fund, underscored the importance of strong fiscal and monetary policies, continuing the flexible exchange rate regime, combined with ongoing structural reforms, to ensure continued macroeconomic stability as a base for sustained growth. Shigeo Katsu, Vice President of the World Bank, spoke of the importance of improving education, strengthening innovation and use of quality standards, and removing administrative and infrastructure bottlenecks to increase investment, productivity, economic growth and job creation. Philippe Maystadt, President of the European Investment Bank, emphasized that continued progress on policy, regulatory and sectoral reforms in line with the EU accession process are critical for maintaining and enhancing investor confidence. Click here to download the meeting report.

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Rehn vs. Sarkozy

The rhetoric of a clash of civilizations is a commonly used in debates Turkey's EU membership. Following the remarks by Sarkozy against Turkey's membership, the European enlargement commissioner, Olli Rehn, said that a clash of civilizations between the West and Islam would be the "consequence" if French President Nicolas Sarkozy succeeds in blocking Turkey's EU membership. Read on...

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Monday, 11 June 2007


Political risks facing Turkey

Turkishdailynews reports that according to Eurasia Group analyst Wolfango Piccoli, “the outlook for a continued Justice and Development Party (AKP) majority government is uncertain." Piccolli adds: "The approaching snap election could result in a fragmented, multi-party legislature and a difficult cabinet building process.”

Eurasia Group thinks that exacerbating the AKP's troubles, opposition parties have taken steps toward consolidation that increase the probability of a fractious electoral outcome. Fragmented governments commonly result in larger budget deficits and reduced macroeconomic stability. Thus, this foreshadows potential problems for Turkey's political environment and budget deficit, as well as for monetary and economic reform policies. The falling government score hints at future budget problems. The political fight that precipitated this election was over the parliament's selection of a president, in which intrusion by the army, a boycott by the opposition of the parliamentary vote and a questionable supreme court ruling that invalidated the ruling AKP's selection of its own Deputy Prime Minister and Foreign Minister Abdullah Gül as the candidate for president.

According to Eurasia Group together these actions raise concerns about the equal and systematic application of the law and the supremacy of civilian government. In the near term, the AKP may indeed weather this storm and prevail in the July 22 election, but the potential for three or more parties winning parliamentary representation but no single party winning a clear majority is high enough to warrant close monitoring of the campaign.Risks in these political and economic areas could emerge if the election returns a disparate multi-party outcome, forcing investors to question the future of the progress the AKP has. As a result of these developments, Turkey's aggregate government stability rating dropped significantly in the June index from 74 to 67.

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European Public Opinion and Turkey’s Accession

European public opinion is seen as a key factor determining the perspective of Turkish EU membership. Turkey’s accession to the European Union is one of the most controversial and divisive topics the EU faces. A recent paper by CEPS looks at European citizens’ attitudes towards Turkey’s accession to the EU and explains which elements are key in determining support for or opposition to Turkish membership. The paper concludes the following: first, support for Turkey’s membership is mostly based on post-national arguments; second, opposition to Turkey’s accession is mainly connected with identity-related arguments; and third, instrumental reasons (costs/benefits) play a less relevant role. Turkey’s future membership in the EU, the paper concludes, will thus not be won or lost at the public opinion level on the material plane (costs/benefits) but on the relative weight of post-national visions of the EU vis-à-vis more essentialist visions of Europe. The key to Turkish EU membership, we suggest, may well lie in the way accession is argued and justified, and not wholly in the way it is negotiated.

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Sarkozy, secularism and Turkey’s European future

The current turmoil in Turkey may well be the vital test of its democracy that the EU has long been calling for, states Katinka Barysch – chief economist at the Centre for European Reform (CER). In a new article, she claims that if Prime Minister Recep Tayyip Erdogan succeeds in facing down the generals now, then future coups will become almost impossible. She concludes:
"The current crisis has added an extra degree of realism and caution to the often overly emotional debate about Turkey's accession. This is good. Now Turkey needs to concentrate on resolving disagreements about the presidency while respecting democratic rules. The early parliamentary election could be a plus, if the new government got on with reforms soon afterwards. In this case, the EU should not be shy to praise Turkey in its annual progress report in the autumn. And it should redouble its efforts to resolve the Cyprus issue so that it can lift the part-suspension of the talks."

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