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Turkey and the EU-Turkey Relations
by Georg Erber and Burcu Erdogan
Presentation for the delegation of the European Union to Turkey
in partnership with hosting partner organizations
12. February 2010
Some basic facts of the Turkish Economy
Turk is h re al GDP grow th
annual pe r ce ntage rate s
12
9.30
10
8.39
8
6.90
6.78
6.09
5.22
6
4.68
3.4
4
2
0.89
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
-2
-4
-6
-5.65
-6.5
-8
2010
Inflation
Turk is h inflation
annual pe r ce ntage rate s
60
54.92
54.40
50
44.96
40
30
21.60
20
8.60
10
8.18
9.60
8.76
10.44
6.25
6.7
2009
2010
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
Exchange rate
Exchange rate
Turk is h lira pe r US dollar
1.80
1.66
1.54
1.60
1.45
1.40
1.40
1.50
1.49
2009
2010
1.42
1.35
1.35
1.17
1.20
1.00
0.80
0.67
0.60
0.40
0.20
0.00
2000
2001
2002
2003
2004
2005
2006
2007
2008
Fiscal deficit
Turk is h public fis cal de ficit
pe r ce ntage s hare of GDP
0
2000
2001
2002
2003
2004
2005
-1.25
-2
2006
-0.61
2007
2008
-1.63
-1.80
2009
2010
-4
-5.15
-5.42
-6
-6.61
-8
-7.71
-8.84
-10
-12
-14
-11.89
-11.44
Interest rates
Turk is h inte re s t rate s
80
74.70
70
60
50.49
50
47.16
37.68
40
30
24.26
20.40
21.65
22.56
22.91
17.60
20
14.32
10
0
2000
2001
2002
2003
2004
2005
short-run
2006
long-run
2007
2008
2009
2010
Summing up
• High growth in real GDP, but some sharp recessions
• Relatively strong recovery expected in 2010 with 3.4%
• Inflation decreased significantly since 2000, but still high with
regard to the 2% Eurozone target rate with expected 6.7% in
2010
• Small spread in the short-run and long-run interest rate (flat
yield curve)
• Long-term interest rate of 17% to 15% indicate that a further
decline in inflation below the 6% rate is quite unlikely, currently
inflation will increase again beyond 7%
• Fiscal deficit is significantly above 3% (Maastricht criterium)
with -6.6% (2009) and -5.2% (2010)
• Public debt to GDP-Ratio still low with 40% (2008) and 48.5
(2009)
• Turkish lira relatively stable to the US Dollar, but less so to the
Euro (Why more a US Dollar crawling peg than a Euro peg?)
Structure of the Turkish economy
• Turkey's dynamic economy is a complex mix of modern
industry and commerce along with a traditional
agriculture sector that still accounts for about 30% of
employment.
• It has a strong and rapidly growing private sector, yet the
state remains a major participant in basic industry,
banking, transport, and communication.
• The largest industrial sector is textiles and clothing,
which accounts for one-third of industrial employment; it
faces stiff competition in international markets with the
end of the global quota system.
• However, other sectors, notably the automotive and
electronics industries, are rising in importance within
Turkey's export mix.
Challenges of the Turkish economy
• Political: In 2007 and 2008, Turkish financial markets weathered
significant domestic political turmoil, including turbulence sparked by
controversy over the selection of former Foreign Minister Abdullah
GUL as Turkey's 11th president and the possible closure of the
Justice and Development Party (AKP).
• Financial: Turkey's financial markets and banking system also
weathered the 2009 global financial crisis and did not suffer
signifcant declines due to banking reforms implemented during the
country's own financial crisis in 2001.
• International trade: Economic fundamentals are sound, but the
Turkish economy may be faced with more negative economic
indicators in 2010 as the global economic slowdown continues to
curb demand for Turkish exports. BoT will become negative in 2010.
• Foreign investors confidence is fragile: Turkey's high current account
deficit leaves the economy vulnerable to destabilizing shifts in
investor confidence.
EU accession
• The earliest date that Turkey could enter the EU is 2013, the
date when the next financial perspectives (the EU's six year
budgetary perspectives) will come into force.
• Ankara is currently aiming to comply with EU law by this date,
but Brussels has refused to back 2013 as a deadline
• In 2006 European Commission President José Manuel
Barroso said that the accession process will take at least until
2021.
• Question: What is the current assessment of you?
Pros
• Proponents of Turkey's membership argue that it is a key
regional power with a large economy and the second largest
military force of NATO.
• That might enhance the EU's position as a global geostrategic
player; given Turkey's geographic location and economic,
political, cultural and historic ties in regions with large natural
resources that are at the immediate vicinity of the EU's
geopolitical sphere of influence; such as the East
Mediterranean and Black Sea coasts, the Middle East, the
Caspian Sea basin and Central Asia.
• Question: What is your view on these considerations?
Cons
•
•
•
•
•
Censorship and Article 301
Women rights
Treatment of ethnic minorities (Kurds, etc.)
Unsolved conflicts with Greece over Cyprus
Azerbaijan issue
• Question: What is your view on these considerations?
Cons
• Upon joining the EU, Turkey's 71 million inhabitants would
bestow the second largest number of Member of the
European Parliament.
• Demographic projections indicate that Turkey would surpass
Germany in the number of seats by 2020.
• This would change the nature of the EU fundamentally, i.e. in
religion Christian-Islamic-Mix and culturally with regard to
values.
• Question: What is your view on these considerations?
Vanishing enthusiasm in Turkey:
The opening of membership talks with the EU in December
2004 was celebrated by Turkey with much fanfare, but the
Turkish populace has become increasingly skeptical as
negotiations are delayed based on what it views as lukewarm
support for its accession to the EU and alleged double
standards in its negotiations particularly with regard to the
French and Austrian referendums.
A mid-2006 Eurobarometer survey revealed that 43% of Turkish
citizens view the EU positively; just 35% trust the EU, 45%
support enlargement and just 29% support an EU constitution.
Thank you for your attention