FFrraannccoo--TTuurrkkiisshh PPaappeerr NNoo.. 88 ______________________________________________________________________ Crisis and Decline in Southern Europe: Implications for Turkey __________________________________________________________________ Eduard Soler i Lecha July 2013 Contemporary Turkey Programme Ifri is a research center and a forum for debate on major international political and economic issues. Headed by Thierry de Montbrial since its founding in 1979, Ifri is a non-governmental and a non-profit organization. As an independent think tank, Ifri sets its own research agenda, publishing its findings regularly for a global audience. With offices in Paris and Brussels, Ifri stands out as one of the rare French think tanks to have positioned itself at the very heart of European debate. Using an interdisciplinary approach, Ifri brings together political and economic decision-makers, researchers and internationally renowned experts to animate its debates and research activities. The opinions expressed in this article are the authors’ alone and do not reflect the official views of their institutions. ISBN : 978-2-86592-875-0 © Ifri – 2013 – Tous droits réservés Ifri Ifri-Bruxelles 27 rue de la Procession Rue Marie-Thérèse, 21 75740 Paris Cedex 15 – FRANCE 1000 – Bruxelles – BELGIQUE Tél. : +33 (0)1 40 61 60 00 Tél. : +32 (0)2 238 51 10 Fax : +33 (0)1 40 61 60 60 Fax : +32 (0)2 238 51 15 Email : [email protected] Email : [email protected] Site Internet : Ifri.org Franco-Turkish Papers Ifri’s Turkey programme aims to encourage dialogue between France and Turkey on areas of common interest. As part of the programme, ifri publishes a series of ‘Notes on Franco-Turkish relations’, which are written by experts from France, Turkey or elsewhere. The aim of these notes is to shed light on the key factors of the relationship between the two countries, but also on the major changes in modern-day Turkey and on regional issues. The notes conform to Ifri’s usual quality standards (peer review and full editing). Editing: Dorothée Schmid 1 © Ifri E. Soler / Turkey and southern Europe About the author Eduard Soler i Lecha has a PhD in International Relations from the Autonomous University of Barcelona (UAB). He is research coordinator at the Barcelona Centre for International Affairs (CIDOB) and a lecturer at UAB and the Barcelona Institute of International Studies (IBEI). Dr Soler i Lecha is an expert on Turkey's foreign policy and Turkey-EU relations, as well as on Euro-Mediterranean relations and security issues in the Mediterranean region. He works regularly with the Spanish media and has had many articles published in magazines such as Mediterranean Politics, Insight Turkey and Europe’s World1. 1 The author thanks Pelin Gönül Sahin and Olivier Milland, research assistants at CIDOB, for their support and suggestions. 2 © Ifri E. Soler / Turkey and southern Europe Contents OVERVIEW 4 INTRODUCTION 5 ECONOMIC INTERESTS AND TURKEY'S PERCEPTION OF A CRISIS HIT EUROPE 7 ALLIES IN CRISIS 10 THE EASTERN MEDITERRANEAN: MIXED MESSAGES 16 OUTLOOK 21 3 © Ifri E. Soler / Turkey and southern Europe Overview The twists and turns of the economic and political crisis in southern Europe are now an important parameter for relations between Europe and Turkey. This crisis and the way it is being managed are detrimental to Turkey's economic interests and tarnish the image of European integration in the eyes of Turkey's leaders and its general public. Moreover, the economic and political decline of allies such as Italy and Spain weakens the argument of supporters of a renewed accession effort. The situation in the eastern Mediterranean is particularly delicate because of the mixed effects of the crisis on Greco-Turkish relations and the Cyprus issue. As a result, there is a wide range of different scenarios for the future. 4 © Ifri E. Soler / Turkey and southern Europe Introduction The crisis in southern Europe is clearly important to Turkey. Among the countries most affected by this multi-faceted crisis are Cyprus and Greece, nations with which Turkey remains in open dispute, but also Spain, Italy and Portugal, which are often considered allies and have traditionnally supported Turkey's desire to become a member of the European Union (EU). A crisis affecting some of Turkey's major economic partners is clearly bad news for Ankara, but the political decline of its traditional allies is even more problematic. 2013 should be a year of transition for southern European countries and for relations between Turkey and the EU. After five long years of crisis, 2013 may see the start of a slow economic recovery in Europe. However, it is also possible that the recession deepens and costs for countries in southern Europe continue to mount. At the same time, half century after the signing of the Ankara Agreement, the Euro- Turkish relations are at an impasse. Following the June protests in Turkey and the subsequent repression by the Turkish government, the Europeans have decided to delay the discussions about opening new negotiating chapters, until autumn of 2013. This decision is the result of a compromise between the German position, supported by the Netherlands and Austria, who advocated for freezing the negotiation process; and the positions of other Member States, including those of Southern Europe , who felt this was the right time for the EU to further engage with Turkey. Thus, in October 2013, there could still be a reactivation of the accession negotiations. However, if that does not happen, frustration could take hold within the Turkish government and society, increasing the sense of detachment between Turkey and the European integration process. The development of the economic and political crisis in southern Europe is one of the factors for consideration when trying to predict scenarios of improved Euro-Turkish relations, against a current background that seems more favourable in view of political changes in France and Cyprus. But, the situation is still more complicated given that some European countries are putting forward Turkey’s internal difficulties, in order to oppose to its EU accession. Clearly, the crisis in southern Europe is not the only factor, nor indeed the most important one, but the chances of turning the page and leaving behind the seven years of deadlock in negotiations would be considerably greater if Europe showed it were capable of successfully resolving the most serious crisis since the EU was created. This would require: (i) the expansion of the Union to be seen as an effective response to the crisis; (ii) countries such as Italy and 5 © Ifri E. Soler / Turkey and southern Europe Spain to re-establish themselves as participants in, rather than the subject of, debate; and (iii) the Turks to stop thinking that had their country been a member of the EU, they too could be suffering like Greece. It would also require the crisis to kick-start Cypriot reunification and to resolve the many disagreements between Greece and Turkey. This article focuses on three factors: (i) the impact of the crisis on the Turkish economy and on Turkey's perception of the European Union; (ii) the economic and political weakening of allies such as Italy and Spain, and the consequences of this for Euro-Turkish relations; and (iii) the effects of the crisis on disputes in the eastern Mediterranean. Lastly, we will set out three possible scenarios for future Euro-Turkish relations. 6 © Ifri E. Soler / Turkey and southern Europe Economic Interests and Turkey's Perception of a Crisis Hit Europe The first important thing to note is that Turkey has recovered far more quickly than most European countries from the effects of the global economic and financial crisis (see Table 1). During the first phase of the crisis, between 2008 and 2009, the fall in Turkish GDP was among the sharpest of all OECD countries, owing mainly to less external demand and to fewer investments. However, unlike the majority of EU countries, Turkey embarked on a surprising economic recovery. After an initial slump of 4.8% in 2009, the country's GDP grew by 9.2% in 2010 and 8.5% in 2011, putting it back among the best performers in the G202. Table 1: GDP growth in Turkey and southern Europe (2008-2011) 2008 2009 2010 2011 Greece -0.16 -3.25 -3.52 -6.91 Italy -1.16 -5.49 1.80 0.43 Portugal -0.01 -2.91 1.4 -1.67 Spain 0.89 -3.74 -0.32 0.41 Turkey 0.66 -4.83 9.2 8.5 Source: author's use of data from the International Monetary Fund's World Economic Outlook Database, October 2012 Turkish growth stabilises at 3% in 2012, and forecasts remain fairly prudent for 2013 (around 3.5%). Three things have slowed growth since 2011: (i) the prolonged crisis affecting most European countries; (ii) geopolitical instability in the Middle East; and (iii) the measures taken by the Turkish central bank to prevent economic overheating. Turkey is affected by stagnation and the threat of a recession in countries such as Italy and Spain, which are among its top 10 trading partners, particularly if such a downturn threatens to worsen one of the major structural problems of the Turkish economy: the trade deficit. Turkey's trade deficit with the EU has risen sharply since the start of the crisis, and southern Europe is partly responsible for this. Since 2 International Monetary Fund, “IMF Executive Board Concludes 2012 Article IV Consultation with Turkey”, 20 November 2012. 7 © Ifri E. Soler / Turkey and southern Europe 2008, Turkey's trade deficit with these southern European countries, which account for nearly 10% of Turkey's external trade and a quarter of its trade with the EU, has multiplied by six (see Table 2).