A bridge on the BosphorusUnderstanding EU-Turkey relations in 2015

FOREWORD 3

POLITICAL SITUATION 4

DOMESTIC SITUATION 4

THE EUROPEAN PERSPECTIVE 6

ECONOMIC SITUATION 8

SUMMARY 10

RECOMMENDATIONS 11

TABLE OF CONTENTS

2

Author: Giovanni Collot; additional reporting by Mareike Trull

Sources:

Eurochambres, EU-Turkey Relations: perspective by the European Business Community, 2013European Commission, Turkey Progress Report, October 2015European Parliament, Joint motion for a resolution on freedom of expression in Turkey, 14 January 2015Fitch, Ratings 2015, fitchratings.comISPI, The Uncertain Path of the ‘new Turkey’, available online at ispionline.creatavist.com/turkeyPierini M., Ülgen S., A moment of opportunity in the EU-Turkey relationship, Carnegie Europe, 14 December 2014Reporters without borders, Press Freedom Index 2015, index.rsf.orgTransparency International, Corruption perception index 2014Ucer M., Turkey’s economy: now for the hard part, in Foreign Policy, August 12, 2014, http://goo.gl/0HFj4BWorld Bank, Doing Business Index 2015, doingbusiness.org/rankingsVarious articles from the online, English-language editions of Zaman (todayszaman.com) and Hurriyet (hurriyetdailynews.com) newspapers

Plus, original research based on contributions by the following stakeholders:

Alfio Anzalone, Bilateral Trade Relations with Turkey, DG Trade, European CommissionDavid Borrelli, MEPJean Cristophe Filori, Head of Turkey Unit, DG Neighborhood and Enlargement Negotiations, European CommissionGiles Portman, Turkey Advisor, EEASDirk Vantyghem, Director of International Affairs Department, EurochambresSerdar Yesilyurt, Brussels Representative for Tuskon

Edited by UNITEE, The New European Busines Confederation, 2015

The information contained in this publication does not necessarily reflect the position or opinion of the stakeholders involved.

FOREWORD

I am delighted to present UNITEE’s 2015 position paper ‘A bridge on the Bosphorus: under-standing EU-Turkey relations in 2015’. It is the second yearly report published by UNITEE on the ever important issue of Turkey-EU relations and their effects on the economy. It is based on research, several inter-views and meetings with stakeholders and provides crucial guidance and insights for our members and pol-icy makers involved in EU-Turkey business and trade. In the last two years the political situation in Turkey has changed drastically, leaving many investors and entre-preneurs puzzled about how to handle increasingly diffi-cult circumstances. UNITEE, together with many other European stakeholders, is worried about the erosion of the rule of law in Turkey. and believes it to have a negative influence on the business and investment climate in the country. The attacks on freedom of speech, the inadequate response to the corruption scandal, in combination with the growing political polarisation, are key signs that the Turkish government is still moving in the wrong direction. As a consequence, the relationship with the European Union, Turkey’s first economic part-ner, has quickly deteriorated.

So far, the current instability has had so far clear eco-nomic consequences. The once sustained growth now has gone; international and domestic companies alike have stopped considering Turkey an ideal market to invest into. But to what extent has and will it influence the real economy? What should be done in order to pre-vent further damage to trade and business?

As a business confederation representing only SMEs and business professionals with a migrant background, most of them being of Turkish descent, it is our mis-sion to promote European foreign trade and in-ternational relations, especially with Turkey. As a key market for European business, as a European Un-ion accession candidate and due to its important geostrategic position as the bridge to Asia and the Middle East, Turkey is of the utmost importance to the European Union and European businesses.

Our members have a key interest in the develop-ments currently taking place in the country, both on a personal and professional level, and expressed the wish to learn more about the possible implications on business and trade. This position paper wants to shed light on the complex chain of events unfolding in Turkey, analysing the politi-cal as well as the economic situation in the country and offering concrete recommendations to overcome the recent challenges. In doing so, we hope to an-swer our members’ concerns and support their entre-preneurial engagement in the region. Finally, we are very grateful to all involved stakeholders that supported our research and analysis, providing us with the basis of this objective and fact-based position paper.

Dr. Adem Kumcu President of UNITEENew European Business Confederation

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OPENING OF ACCESSION NEGOTATIONSThe EU leaders agree to begin the accession process with Turkey. But the negotiations, once started, have immediately stalled.

TIMELINE

REFERENDUM ON PROPOSED CONSTITUTIONAL REFORM

The results showed the majority supported the proposed constitutional amendments, with 58% in favour and 42% against.

03 OCTOBER 2005

28 MAY 2013

START OF GEZI PARK PROTESTSStarting as a manifestation against the government-backed building of a mall in Istanbul’s Gezi Park, the protest quickly expanded to become the largest movement ever against the AKP’s rule, to whom the government answered with increasing severity.

30 SEPTEMBER 2013

DEMOCRATISATION PACKAGEPrime Minister Erdogan unveils a series of measures widely praised for their opening towards a more democratic and liberal society. Special focus is put on the Kurdish issue.

07 JANUARY 2014

AS A CONSEQUENCE TO A GOVERNMENT’SDECREE, 350 POLICE OFFICERS ARE REMOVED FROM THEIR POSITIONSWith a government’s decree, 350 police officers are dismissed, as an answer to the continuing corruption probe.

INTERNET LAW 5651/2007

18 FEBRUARY 2014

The new law, signed by President Gul,

tightens governmental control of the internet, sparking accuses of censorship.

JUDICIARY REFORMS

26 FEBRUARY 2014

President Gul signs a second bill boosting government control judges and prosecutors.

12 SEPTEMBER 2010

16 DECEMBER 2013

EU-TURKEY VISA LIBERALISATIONDIALOGUE LAUNCHED

Ankara and Brussels signed an agreement exchanging more control on clandestine immigration from Turkey with talks for Visa-free travel for Turkish citizens.

17 DECEMBER 2013

TURKEY POLICE STRIKE AGAINST BRIBERY ANDCORRUPTION CIRCLEThe corruption scandal explodes with the arrest by the police of 47 suspects of bribery, among whom the sons of three Ministers and many officials, shaking the government.

TIMELINE

JUDICIARY REFORMS

26 FEBRUARY 2014

President Gul signs a second bill boosting rnment control over the appointment of

judges and prosecutors.

30 MARCH 2014

LOCAL ELECTIONSThe local elections see a victory of theAK Party with 42,87% of the votes,showing continuing support of thegovernment among the population.

21 APRIL 2014

JUDICIARY LAW INCOSTITUTIONALTurkey’s Supreme Court overturns the law on the judiciary on the basis that it goes against the separation of powers.

13 MAY 2014

SOMA COALMINEDISASTERTurkey's worst ever mine disaster in Soma claims at least 282 lives.

PRESIDENTIAL ELECTIONS

10 AUGUST 2014

Prime Minister Erdogan wins the first direct popular election for president with 51,79% of the vote; Foreign Minister Davutoglu becomes the new Prime Minister.

3 OCTOBER 2014

YES TO OPERATIONSAGAINST ISLAMIC STATEThe Parliament approves a motion authorising possible Turkish military operations against militants in Iraq and Syria who threaten Turkey.

EU PROGRESS REPORT 2014

14 OCTOBER 2014

The EU-published progress report criticises negative developments of the previous year and calls for reform, but it also acknowledgesthat progress has been made.

14 DECEMBER 2014

OPPOSITION MEMBERSARRESTEDPolice raids opposition media outlets and arrest 24 journalists on suspicion of plotting to seize power.

EUROPEAN PARLIAMENTPROGRESS REPORT

16 JANUARY 2015

The European Parliament warns that Turkey does not meet the EU's expectations for a candidate country due to issues related to freedom of speech and lack of transparency.

POLITICAL SITUATION

After the Gezi Protest in late 2013 and the subsequent bribery allegations that even

touched upon some ministers and then Prime Minister Recep Tayyip Er-doğan, 2014 began with a lot of pressure on Ankara. The political instability threatened to grow as the country headed towards two impor-tant elections: first, the local elections on 30th March; and even more impor-tantly, August’s presidential elections, a consequence of 2007’s constitution-al reform, for the first time introducing popular election of the President.

The importance of such electoral ap-pointments went beyond their dem-ocratic value: they represented a trial for government party AKP and its leader Erdoğan after the turmoil. Would the party lose ground after its takedown of opposition during the previous months? In this respect, the

polls’ outcome was clear: Erdoğan’s AK party managed to secure the ma-jority of 42.89% in the local elections. In what has to be seen as an even more important victory, and as such has been celebrated by the leader itself, on the 10th August 2014 Er-doğan was elected as the new President with 51.8% of the votes in his favour. Following his change of office, since-then Minister of Foreign Affairs Ahmet Davutoğlu became the new Prime Minister on the 28th August 2014, establishing a new government. The results show clearly that since 2002, the AKP re-mained the strongest party in Turkey, with no serious opposition. The gen-eral elections, scheduled for the 7th June 2015, will likely not modify this situation.

The victories in the polls though did not invert AKP’s perceived slide to-

wards autocracy, as denounced by many inside and outside the coun-try: on the contrary, worrying events have multiplied, casting more than a couple of shadows on the long-terms development of the Turkish democra-cy. An example of this approach is the government’s response to alle-gations of corruption targeting high-level personalities, includ-ing members of the government and their families: this response consisted in particular in amendments to the Law on the High Council of Judges and Prosecutors and subsequent nu-merous reassignments and dismissals of judges and prosecutors, as well as reassignments, dismissals, or even detention, of a large number of police officers, thus limiting the judiciary’s independence and transparency. The unconstitutionality of such measures has been pointed out also by the Con-stitutional Court. As a consequence,

DOMESTIC SITUATION

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51,8%percentage of VOTES

in ERDOĞAN’S FAVOUR

in August’s PRESIDENTIAL

ELECTIONS

DOMESTIC SITUATION the parliament amended the legislation and brought back previous provisions.

Another sector of particular concern in the past year has been freedom of ex-pression, as is represented by Turkey’s 154th position in the World Press Free-dom Index Amendments to the Internet Law restricted freedom of expression on the internet. Bans on YouTube and Twit-ter were met with raging protests, to be then repelled by the Constitutional Court that as a consequence fell victim to an in-dictment by Erdoğan: “We have to obey the Constitutional Court’s decision, but we don’t have to respect it,” he said. “While the court sided with an American compa-ny in this decision, it denigrated our na-tional values.”

State officials continued making state-ments having an intimidating effect on the media. This, together with the ownership structure of the Turkish media sector, led to widespread self-censorship of the press, as well as resignations and dis-missals of journalists. The most disturbing event on this respect consisted of the arrest of 23 people, among whom the editor-in-chief of Zaman newspaper, Ekrem Dukanli, in a raid against members of the opposition on 14th December, on

suspicions of plotting to seize power.

All the above can be understood as part of the ongoing fight against the so-called ‘parallel state’, as Erdogan calls those organised groups loosely connected by their inspiration to Hizmet movement and its leader, exiled cleric Fethullah Gülen, a long-time supporter now turned critic. In the last years those movements, well present in the Turkish society, have gone through repression by the government, which accuses them with harsh tones of being parts of a foreign conspiracy.

The developments, broadly outlined above, bear witness to a more general tendency of Turkish politics, which has been evident in the last years: an in-creased polarisation. Also thanks to AKP’s overwhelming majority, sever-al pieces of legislation proposed by the government were adopted without prop-er parliamentary and civil society debate. In the midst of these worrying events, it has to be pointed out there have also been some positive initiatives that par-tially counterbalance them, at least in the shorter term: several measures an-nounced in the democratisation pack-age presented in September 2013 were

adopted and implemented. These measures, amongst others, decreased the limits for budget support to political parties, allowed the conduct of political activity in languages and dialects other than Turkish, and provided for private education in languages and dialects other than Turkish. In the same spirit, in June, the Turkish parliament adopt-ed a law aiming at a solution of the Kurdish issue.

A last point of interest is foreign poli-cy: after a period of ambiguity, 2014 has seen a stronger presence of Turkey in neighboring war-torn Syria and Iraq. The new Davutoğ-lu’s government has started to give sig-nals of a change in its position towards the conflict, with a more active role in strongly condemning the Islamic State (IS) and providing vital human-itarian assistance to more than 1 million Syrians fleeing their country. Some improvements in cooperation with the European Union have taken place in the energy field: solid foun-dations were laid for greater Europe-an energy security with the adoption of the final investment decisions for the realisation of the three Southern Gas Corridor projects.

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The rule of law and the respect for fundamental freedoms form the core of the EU negotiation process. In this respect, Turkey currently does not meet the ex-

pectations that we have for an EU candidate country.

KATI PIRI, EP Rapporteur on Turkey

6

The above mentioned facts have been closely followed by the dif-ferent institutions of the Europe-

an Union with interest and mounting concern. The EU-Turkey relationship is a long and tormented one; the negotia-tions for Ankara’s accession to the EU, started in 2005 by the AKP government with a lot of expectations, now looks grim and at an historic low. Turkey’s new government’s renewed interest towards an EU membership, mani-fested by the appointment of the more conciliatory Volkan Bozkir as Minister of European Affairs, does not seem to be a decisive aspect in changing the general perspective. A huge part of these disagreements comes from An-kara government’s controversial behaviour in the past two years.

One of the starkest criticisms has come from the European Parliament. In their

unusually harsh Progress Report 2015, MEPs show their concern for the ’backsliding of democratic re-forms’, warning that Turkey currently does not meet the EU’s expectations for a candidate country. Kati Piri, the special rapporteur on Turkey at the Parliament has in particular pointed out: “The rule of law and the respect for fundamental freedoms form the core of the EU negotiation process. In this re-spect, Turkey currently does not meet the expectations that we have for an EU candidate coun-try. The concerns of the European Par-liament focus on the freedom of speech and the independence of the judiciary - both essential components of an open democracy”.

The attacks on freedom of speech in particular are perceived as the most serious issue. To clarify the point, on

15th January 2015 the European Par-liament approved a resolution on freedom of expression in the country, as a response to Decem-ber’s police raids and the detention of a number of journalists and media, stressing that “these actions call into question the respect for the rule of law and freedom of the media.” “Freedom of expression and the freedom of the media remain fundamental to the func-tioning of a democratic and open soci-ety,” the resolution added.

The European Commission echoed these concerns, by pointing out how “the government’s response to allega-tions of corruption targeting high-lev-el personalities, including members of the government and their families, raised serious concerns over the inde-pendence of judiciary and the rule of law.”

EUROPEAN COMMISSION, Turkey Progress Report, October 2014

THE EUROPEAN PERSPECTIVE

The government’s response to allega-tions of corruption targeting high-level personalities, including members of the government and their families, raised

serious concerns over the independence of judiciary and the rule of law.

THE EUROPEAN PERSPECTIVE

7

These disagreements are having a negative effect on the accession nego-tiations, which are currently on hold. The recent events, having depleted the EU’s optimism on the topic, have also pushed the Turkish public opinion fur-ther away from the accession process, which they see as “seriously biased”. President Erdoğan has even accused Brussels of ‘Islamophobia’ due to the criticism. To further complicate things, the Cyprus dispute is far from re-solved: despite its pledge to respect the current obligations, Turkey contin-ues not to recognize Cyprus the access to its ports and to challenge its rights on hydrocarbon resources in the Mediter-ranean.

Notwithstanding the bad relationship, EU institutions recognise the fun-damental importance of Turkey as a partner: “even if Member States are cautious about opening new nego-tiation chapters now, they agree on An-kara’s key strategic role”, argues Jean Christoph Filori, from DG Neighborhood and Negotiations Agreement at the EU Commission. There is still room for a lot of important progress to be made.

Indeed, the current approach by the

EU is to keep the collaboration open where possible, by not only focusing on the accession process but trying to sustain progress in other ar-eas, even looking for support in those parts of the government and the soci-ety which might be supportive. This in the long-term, in the eyes of the EU, will help foster better relations and fos-ter the accession process to restart in better conditions. “Mrs Mogherini (the Special Representative of the EU) has introduced a broader approach, look-ing at all sides of the cooperation with Turkey”, commented EEAS’ Giles Port-man.

The signature of the EU-Turkey read-mission agreement on 16th December 2013 in parallel with the start of the visa liberalisation dialogue has proven that successful cooperation is still possible on vital issue. The read-mission agreement has entered into force on 1 October 2014. In the same way, the EU institutions have met with satisfaction Turkey’s enhanced role in the Middle East: “the EU and Turkey are strategic partners that need each other in the fight against terrorism and in finding solutions to the very serious developments in the region surround-

ing Europe, especially in Syria and Iraq”, Kati Piri commented. “There are still many possibilities to further develop economic relations and the EU also has a moral duty to help Tur-key with the reception of 1.6 million Syrian refugees”.

Turkey also informed the Commission of its interest to contribute to the EU Investment Plan, notably within en-ergy projects. The energy aspect has gained importance since the out-break of the Ukraine crisis and the tense situation with Russia. Now the ‘South Stream’ project has officially been put on hold, Europe is eager to secure its energy supplies though oth-er channels.

“The EU cannot afford los-ing Turkey”, Serdar Yesilyurt from Tuskon adds. “It should rather devel-op a clever strategy involving a clear stance against threats to basic free-doms and the separation of powers, while cooperating on economic, mili-tary and foreign policy issues”.

Even if Member States are cautious about opening new

negotiation chapters now, they agree on Ankara’s key

strategic role.

JEAN CRISTOPHE FILORI, Head of Turkey UnitDG Neighborhood and Enlargement Negotiations

8

The domestic and external polit-ical turmoil, now in its second year, has been accompanied

by a slow-down in the Turkish economy. After a decade of high growth that brought the country to become the 17th economy in the world, today it is experiencing signif-icant problems due to the decelera-tion of growth rates. The last quarter of 2014 saw a GDP growth of just 1,7%, much lower than expected. At the same time, inflation is still high, at 8,17%, with the Lira at a record low of 2,45 per dollar. It is worth to remind that the Lira’s plunge has endangered the Turkish economy as, when the Lira loses value, it becomes more ex-pensive for Turkish companies to re-pay their loans in foreign currencies.

The lackluster situation of the Turkish economy is confirmed by a general

worsening of its position in in-ternational ratings. According to the World Bank’s Doing Business In-dex, Turkey is number 55 in 189 coun-tries, thus losing four positions from 2014. Fitch, for their part, confirmed also for 2015 its rating of BBB-.

Such an overview shows how the Turkish business environment is be-coming less and less favourable, both for domestic business and external companies. According to many observers, there are three main causes to explain the current difficul-ties. The first one is structural, due its growth based on an unsustaina-ble construction boom in the past. “Turkey is now approaching a new economic turning point in the sense that GDP per capita in current pric-es has now passed the 10,000-dollar threshold, placing itself among the

middle-income economies”, argues Mustafa Kutlay, TOBB University. “Turkey’s economy is still based on mid-tech manufactured goods, show-ing that Turkey is far from being a suc-cessful country in term of high tech value exports”.

The second set of causes is the in-ternational environment. The current instability in the MENA (Mid-dle East and North Africa) region has endangered markets crucial for Turkey, such as Iraq or Egypt; the economic crisis still engulfing Europe does not help, since the EU is Ankara biggest trade partner, as the source of 71% of all FDIs.

And thirdly, domestic turmoil is a serious brake on Turkey’s growth and must not be underestimated. As Serdar Yesilyurt points out, the gov-

DIRK VANTYGHEM, Director of International Relations, Eurochambres

European companies have a big interest in Turkey being a stable and safe destination for investments. The reshaping of the Customs Union, to-gether with an increase in transpar-ency, would certainly be welcome.

ECONOMIC SITUATION

9

ernment’s lack of transparency and intrusion in business is dangerous and harms business. President Erdoğan’s continuous attacks on the Turkish Cen-tral Bank, an independent institution, for its refusal to lower interest rates have been seen with worries by international markets. Another event that casts a long shadow on Turkey’s economic freedom is February’s take-over by the govern-ment of Bank Asya. Further worries are added by Citibank and HSBC, two of the biggest international banks, selling their stakes in Turkish banks.

The outlined situation is clearly worry-ing for Turkish companies and European partners alike. Nevertheless, the long-term interest of European companies in investing in Turkey is still alive, as confirmed by a report by Eurocham-bres. Turkey remains a country with important stakes for business. For this interest to stay sustained and for the country to regain its position as a top in-vestment destination in the world, swift reforms need to be taken.

As a first solution, and in the shorter term, more transparency is need-ed. Corruption, and more in general, autocratic tendencies in the public sec-tor have been pointed out by all main observers as some the main reasons for distrust in Turkey. According to Eu-rochambres’ Dirk Vantyghem, there is

a lack of information on both sides that makes it difficult for European compa-nies to do business in Turkey. These concerns should be rightly addressed. In this sense, Prime Minister’s Davutoğ-lu’s pledge to fight against corruption is a good start, but more has to be done if trust wants to be restored.

Together with short-term approaches, Turkey should undergo compre-hensive reforms to foster its eco-nomic growth in a sustainable way, consisting of improving productiv-ity. In the words of Hurryiet’s Emre De-liveli, “Turkey needs a new growth mod-el”, based on tighter fiscal policies and structural reforms. Some of the meas-ures undertaken should consist of im-proving higher education, increasing the flexibility of labor and product markets, addressing the segmentation in the busi-ness sector, broadening the tax base, making the budget more flexible, and tackling the informal economy. These are all politically unfriendly reforms, but they should be undertaken: should AKP be confirmed as the leading party in the general elections next June, it might use the deriving political consensus to imple-ment them.

Particular attention has to be given to changes to the EU-Turkey Cus-toms Union. Indeed, it holds opportu-nities not only for the growth of Turkey’s

economy, but also for closer relations with the EU. While the Customs Un-ion was, as the highest trade integra-tion, an ambitious project the back in the days, it seems rather outdated compared to newer agreements. For example, public procurement and ser-vices are excluded from it. Part of this modernisation would also mean to al-low Turkey to take part in the di-alogue about the TTIP, the Trans-atlantic Trade Agreement After some difficult years in 2011 and 2012, now both sides have asked for a Union’s modernisation. As a response, during a meeting on 9th January 2015 between Commissioners Johannes Hahn, Cecil-ia Malmström and Turkish Minister of Economy Nihat Zeybekçi, the Com-mission put forward a proposal for a new ‘EU-Turkey Business Roundtable’, a ‘Mission for Growth (M4G)’ to Turkey as well as an enhanced EU-Turkey high-level macro-economic dialogue. Indeed, according to some observers the negotiations on the Customs Union will help an agreement between the EU and Turkey, and should therefore proceed. Nevertheless, more econom-ic integration should not be seen as an end in itself, but it should serve as part of a comprehensive effort by the EU to foster democratic devel-opments and, in the end, reboost the accession negotiations.

#55in the DOING

BUSINESS INDEX among 189 COUNTRIES

thus losing 4 POSITIONS since 2014

1,7%GDP GROWTH in the last quarter

of 2014

10

SUMMARY

The current political situation is showing worrying tendencies away from the basic values of rule of law and democracy and towards an increasingly autocratic rule.

The electoral victories for ruling party AKP have been followed by actions against the opposition, with the jailing of journalists and the removal of judges deemed connected to the ‘parallel state’. Further-more, an increased political polarisation is evident in the country.

Such a situation has had a lasting effect on Turkey’s relations with the EU. In particular the European Commission and Parliament have criticised the behaviour of the Turkish government by making it clear that Turkey is drifting away from European values and its obligations as a candidate to accession.

Nevertheless, EU institutions recognise the fundamental importance of Turkey as a partner. For this reason, the strategy is to keep open the cooperation wherever possible: the EU will not focus only on the accession progress, but it will foster progresses in other areas. With this approach, an improvement in relations will follow.

The current economic environment is characterised by a sustained drop in the Lira’s value and a slower GDP growth than expected. There are three factors to explain the current issues: external, since the MENA region is in turmoil; structural, since Turkey’s growth mod-el needs modernisation. And political, given the government’s erratic behaviour.

To overcome its difficulties, Turkey needs comprehensive reforms on both the short and the long term. Fight against corruption, increased transparency and measures aimed at improving productivity are nec-essary if Turkey wants to start attracting investments again.

A very important role in the country’s economic recovery has to be played by the modernisation of the Customs Union with the EU and Turkey’s subsequent participation to TTIP. Not only it will improve Turkey’s position in the international trade, but it could be a gateway for better political relations with the EU.

In the pages above we have tried to sum up the developments currently taking place in Turkey and to analyse what their consequences will be for the Turkish economic environment for foreign investors. These are the main points:

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RECOMMENDATIONSWith regard to the analysis presented in the previous pages, UNITEE has the following policy recommendations for the Turkish government:

A clear commitment to European values. A meaningful political and economic cooperation can be possible only in presence of a clear and long-term commitment to European values. For this reason, Turkey should follow-up on its recently adopted EU strategy, meeting the requirements due to its position as an accession candidate.

Decise implementation of the rule of law and respect for the institutions. The uncertainty of law hinders private initiative and frighten investors, who fear to lose their money due to a dysfunctional legal system. The recent interferences on public in-stitutions, such as the Central Bank and the Supreme Court, by President Erdogan are harming Turkey’s stability and should therefore stop. Reforms assessing the independ-ence of the judiciary are necessary. Furthermore, the government should take practical steps to fullfil its pledge to fight corruption.

Restoration of freedom of speech and recognition of the opposition. The government should give its adversaries recognition by negotiating with them and recog-nising their role in a modern democracy. If Turkey wants to become an open, modern and advanced country it has to embrace the diversity of its society and give all its members the voice they deserve.

Normalisation of relations with neighborhood countries. An unwavering com-mitment to respect international agreements is vital for good relationship and economic exchange with the EU. It is urgent that Turkey implements the Additional Protocol and follows up its intentions towards Cyprus with concrete actions. On the other hand, the EU should recognise Turkey’s legitimate claims and fairly work towards a normalisation.

Comprehensive long-term economic reforms. The current state of the Turkish economy is in part due to unbalances in its structure. If those problems persist, this might scare away investors. The government should proceed with necessary, bold reforms, aiming at sustaining Turkey’s growth as a middle-income economy. Those reforms should aim at improving productivity, and will require a series of politically unfriendly steps. But if AKP wins the next elections, it should use the political consensus to advance such measures.

Continuing co-operation with the EU, regardless of the accession negotia-tions. Even if accession talks are currently on hold, Ankara and Brussels still share many strategic interests, ranging from foreign policy to trade. Therefore, Turkey should con-tinue its cooperation wherever possible, respecting its pacts with the EU. Collaboration exists, and should be increased, on fields such as energy, counterterrorism operations and economic relations. In particular, a subject of promising developments is the Cus-toms Union’s modernisation: Turkey should keep the dialogue open, while the EU should be open to discuss Ankara’s participation to the TTIP negotiations. Expectations are that stronger economic integration will lead to a revamping of political integration.

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