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October 24, 2012, Wednesday

Reshaping EU presents new opportunity for Turkey

Kemal Derviş, vice president of the Brookings Institution and Turkey's former economy minister who headed the critical economic reforms of 2001, in a recent interview with a Turkish newspaper, which was widely quoted by the Turkish press, defended a new approach for Turkey regarding its tiring and maybe hopeless membership adventure to join the European Union.

Derviş thinks that the EU cannot continue with its current structure. "Eurozone members use a common currency; however, at the same time they refuse to have a common fiscal policy. It has become clear that this is impossible. There are two options: Either the eurozone breaks down or accedes to a more advanced level of sovereignty sharing. I think the second option will prevail. … At that time we will face a new Europe,” he said. According to Derviş, in this new EU there will be an integrated part with a common currency, the euro, while some other members “like Great Britain or Sweden will not participate in this integration. So, two categories of countries will continue to be members of the EU.”

Derviş asserts that this reshaping, giving way to a “multiple speed Europe,” as it was called before the euro came into the picture, presents an opportunity for Turkey to achieve EU membership. I agree. When the euro was launched, European leaders hoped that all members would join the eurozone sooner or later -- even though Great Britain, Sweden and Denmark have remained out. This hope and determination appeared when European leaders agreed to expand the union eastwards. Indeed, the new members could be accepted into the eurozone as long as they met the popular Maastricht criteria. Due to this requirement, only a few of them, small countries like Slovakia, Cyprus and Malta, were able to join the eurozone. Then the crisis occurred. It became evident that a divergence, both in public debt and competitiveness, prevailed in the eurozone instead of the convergence that had been implicitly assumed.

Nowadays, given the pitiful state of the southern members of the eurozone and the difficulties they face to restore their competitiveness, the Eastern countries that have not entered the eurozone are hesitating as to whether they should adopt the single currency. I believe that most of them, like Hungary, Romania and Bulgaria, which are undergoing great economic difficulties today, will remain outside of the euro for as long as possible. The Czech Republic, along with Great Britain, rejected the new rules on fiscal supervision from Brussels. Once the actual crisis is over, Europe will be obliged to recognize the simple reality: One size does not fit all. Clearly, the EU should be reformed into an inner circle of economically strong members and an outer circle with the remaining members.

This flexibility, as defended by Derviş, can facilitate the membership of Turkey. He said: “I do not think that in the foreseeable future Turkey will or want to be part of the eurozone where sovereignty will be shared at a high level. But we can be a member participating fully in some decision processes like Great Britain and Sweden. We can be a member that has deputies in the European Parliament and commissioners in the European Commission. … But we will not be participating in the European Central Bank, and we will not be in the sharing of sovereignty regarding fiscal policy.” Remaining outside the currency union eurozone as an EU member would certainly be preferable for Turkey.

Even assuming an average growth rate of 5 percent per year, which is not guaranteed as I constantly try to explain in this column, Turkey's per capita income will at most probably be 65 percent of Europe's per capita income in 2023. So, Turkey will continue to have a development and competitiveness gap with the new eurozone countries. Therefore, it would be wise to keep monetary and fiscal policies independent. That said, what about the European side? Right-wing European parties opposing Turkish membership today will definitely continue to oppose it in the future since their opposition is based on cultural factors in the broad sense. However, in a two-speed Europe, the European defenders of Turkish membership would have additional arguments to convince the majority of the reticent.

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