This assessment considers Turkey's ability to meet the so-called Copenhagen political and economic criteria as well as its ability to meet the obligations of membership in terms of the acquis communautaire, the EU's cumulative body of law. The EU Commission's annual progress reports on Turkey not only inform the EU Parliament and the EU Council on the implementation of the EU's enlargement strategy but also provide the Turkish government and public a critical review of the important issues and developments that are often the subject of ongoing heated domestic policy debates.
Last Wednesday the EU Commission released its “Turkey 2009 Progress Report,” which assesses Turkey's progress toward membership during the past 12 months. On the same day, the commission released “Enlargement Strategy and Main Challenges 2009-2010,” its annual strategy report on the EU enlargement policy, including summaries of the progress of each of the three candidates (Croatia, Macedonia and Turkey) as well as the five potential candidates (Albania, Bosnia and Herzegovina, Montenegro, Serbia and Kosovo) over the last 12 months. The progress of each of these eight countries was reviewed in detail in their separate individual progress reports. The commission recommended opening accession negotiations with Macedonia. Soon the commission will be considering Iceland's application for membership. As for Turkey, the commission declared that “accession negotiations with Turkey have reached a more demanding stage requiring a new impetus for reform.”
The assessment of the “Turkey 2009 Progress Report” covers in addition to economic issues legal, diplomatic, political and social issues, which have attracted relatively more attention in the Turkish media than the economic ones. All of these issues, following a discussion of the Copenhagen criteria, are addressed in terms of the 33 acquis communautaire chapters. Thus far negotiations on 11 of the 33 chapters have been opened; one chapter has been provisionally closed and benchmarks have been set for starting negotiations on 13 chapters.
I will focus in this column on the economic issues which the report addresses within the framework of the European Council's Copenhagen economic criteria, dating to June 1993, which require a candidate country to have “a functioning market economy and the capacity to cope with competitive pressure and market forces” in the EU. Under “The Existence of a Market Economy,” the report assesses the macro and microeconomic developments in terms of: (1) “Economic policy essentials”; (2) “Macroeconomic stability”; (3) “Interplay of market forces”; (4) “Market entry and exit”; (5) “Legal system”; and (6) “Financial sector development.” In most of these six areas, the report stresses Turkey's various deficiencies. At the macroeconomic level, the report expresses concern about the fiscal imbalances and lack of transparency arising from the government's deficit spending to fight the severe effects of the global economic crisis, warning that “macroeconomic stability remains vulnerable in the absence of stronger fiscal anchors.” It notes that although the current account deficit and inflation have fallen during the crisis, unemployment has risen. At the microeconomic level, the report criticizes the lack of rapid progress in privatization, the remaining market entry and exit barriers, including restrictions on foreign direct investment in certain sectors, and the obstacles in the legal system against a better business climate. The report is the most positive in its assessment of the financial sector, whose resiliency during the global financial crisis it attributes to the major reforms that Turkey undertook after its 2000-2001 banking crisis. Overall, the report leaves the impression that Turkey's progress toward a more open market economy has slowed down with the slowing down of economic, especially structural, reforms, and that most of the deficiencies have persisted from earlier years criticized in previous reports.
Under “The Capacity to Cope with Competitive Pressure and Market Forces Within the Union,” the report assesses the primarily microeconomic developments in terms of: (1) “Existence of a functioning market economy”; (2) “Human and physical capital”; (3) “Sectoral and enterprise structure”; (4) “State influence on competitiveness”; and (5) “Economic integration with the EU.” Although the report acknowledges that Turkey has a functioning market economy, it argues that the country's economic development is hindered by problems in education and training, resulting in a lack of adequate human capital, as well as by deficiencies in infrastructure. It draws attention to how the economic crisis has restricted the access of small and medium-sized enterprises to finance, which has slowed down the economy's structural transformation. It is critical of the lack of transparency in state intervention in the economy, with negative consequences for competition and competitiveness. The report's assessment is the most positive regarding Turkey's economic integration with the EU, praising the country's exceptional flexibility and trade diversification in the midst of the global crisis, and the gains made in cost and price competitiveness.
The EU Commission progress reports, whether they advance Turkey's EU membership prospects or not, provide an in-depth, occasionally controversial analysis of the country's evolution toward a more open and democratic system, politically and economically. Given the entrenched political opposition within the EU, especially in France and Germany, to Turkey's membership, even if these reports depict a country progressively closer to satisfying the membership criteria, they might not open the gates to the EU. Ultimately, it is not technical reports written by technocrats applying specific criteria to determine eligibility for membership but rather political calculations and diplomatic negotiations at the highest level that will determine the outcome of Turkey's decades-long quest for EU membership. This quest still faces formidable obstacles in the years ahead.
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