June 27, 2007	Wednesday	Jamadi-us-Sani 11, 1428

ISTANBUL: France’s move to block European Union negotiations with Turkey on economic and monetary policy could spell the beginning of the end for Turkey’s hopes of full membership.

French President Nicolas Sarkozy has long said Muslim Turkey does not belong in the EU, but Turkish diplomats had hoped he would prove more pragmatic after taking power in May, just as German Chancellor Angela Merkel, another Ankara foe, has done.

Financial markets took the French move calmly and investors show no sign of losing their appetite for Turkish assets. But analysts say Turkey is economically and politically vulnerable if a perception grows that Turkey’s EU bid is ultimately doomed.

“This is a crisis. We cannot pretend that it is business as usual. France is giving a clear signal it wants to redirect Turkey’s EU talks, probably with Germany’s complicity,” said Cengiz Aktar, an EU expert at Istanbul’s Bahcesehir University.

“By doing this now, when Turkey is in a difficult election period, France is also showing it does not care what might happen in Turkey to the EU’s image or to the pro-EU government.”

Turkey elects a new parliament on July 22. The centre-right, Islamist-rooted AK Party, which secured the historic launch of EU membership talks in October 2005, is expected to remain the biggest party, but nationalists are also seen performing well.The EU extended talks to two new minor policy areas on Tuesday — statistics and financial control — but economic and monetary policy is politically much more significant.

Turkish Economy Minister Ali Babacan, who is also his country’s chief EU negotiator, criticised the decision, reiterating Ankara’s view it is technically ready for the talks.

Analysts predict further blocking of negotiations by France and other sceptics, which will boost nationalists in Turkey and erode already declining Turkish public support for the EU.

RISKS AND ANCHORS: “The December EU summit, when Sarkozy wants to review Turkey’s candidacy, and 2008 look like being very difficult,” said Ahmet Akarli, an economist at Goldman Sachs in London.

“The markets are not pricing in the risks.”

Turkey’s opponents say the country of 74 million people is too big, too poor and too culturally different to join the bloc.

Prime Minister Tayyip Erdogan told the news agency last week he would speed up EU-linked reforms if re-elected next month.

“But it takes two to tango. It will not be enough for one side to kick-start the process,” said Aktar.

Turkey has always had a rocky, off-on relationship with the EU and has been at odds over many issues, including human rights, the role of the army and the divided island of Cyprus.

But now two of the EU’s biggest members, France and Germany, have leaders publicly opposed to Turkish membership. Many others from Austria to the Netherlands are hostile or sceptical.

In another setback for Ankara, its strongest advocate in the EU, Britain’s Tony Blair, will step down as prime minister on Wednesday. His successor, Gordon Brown, has other priorities and is not expected to plead Turkey’s case as vigorously.

Few expect a complete suspension of Turkey’s EU bid — this would need unanimity among 27 member states — but obstruction by just one country can trigger an effective freeze of talks.

Analysts say they expect a re-elected AK Party to press on with monetary and fiscal policies that should help Turkey weather political turbulence sparked by its EU disputes.

“But the EU anchor does matter,” said Wolfango Piccoli, a Turkey expert at Eurasia Group, a risk consultancy.

“The incentive for reforms comes only from the EU. The EU’s importance is all the greater now that Turkey’s ($10 billion standby) deal with the IMF is due to expire next May.”

“My concern is that inertia will end up prevailing. And Turkey is a country that cannot afford this. It needs annually to create one million jobs and to achieve seven per cent growth (because of its rising population),” Piccoli said.

Some analysts saw the risks as more political than economic.

Akarli said the EU accession process was driving the democratisation of Turkish society, helping it to better manage deep-seated tensions over religion and ethnicity.

The AK Party needs the EU to keep at bay powerful critics in the secular establishment, including the army, who accuse it of using the EU reforms as a screen to boost the role of religion.—Reuters