By Sudip Roy
Turkey's government will submit details of a new three-year economic programme to the EU authorities in the next few weeks, as the decision on whether the country will be given the green light to join Europe's top table draws closer, according to Economy Minister Ali Babacan.
That decision will be made in December, and Babacan has no doubt which way the verdict will go: ?It is impossible that the EU will says ?No',? he says. As part of the country's preparation, Babacan says the government has drawn up a pre-accession programme that will be sent to Brussels sometime between October 1 and December 1.
The programme covers the years 2005-07 and outlines Turkey's commitment to long-term structural reform as well as to macroeconomic stability. In addition, the programme will form the basis of a new standby arrangement with the IMF, according to Babacan.
?This [pre-accession programme] is our own programme,? says Babacan. ?We have been working on it, we are going to deliver it to the EU authorities and we are going to implement it. But we wanted the endorsement of international institutions. The new standby arrangement will be based on the pre-accession programme ? it's not going to be something else.?
Ownership
Ownership of the programme will be the key to its success, says the minister, who took charge of Turkey's economic affairs in November 2002. ?No matter how technically perfect an economic programme is, no matter how much financing is available through the programme, if there is no confidence in the authorities that are supposed to implement the programme, it will not work,? he says.
The EU's decision on whether Turkey will be allowed to join is crucial to the Islamic nation's future. Indeed, many leading figures have warned of potentially devastating repercussions if Turkey's bid is rejected.
?If you tell 80 million Turks they can't come in because they're Muslim and too numerous, the potential for disaster is quite large,? said Kemal Dervis, Babacan's predecessor as economy minister, in an interview with Emerging Markets earlier this year.
?What's at stake is the security of Europe, if not the world,? he added, suggesting that an outright denial would set up barriers on religious lines, which would act as a ?new iron curtain? founded on populist politics and religious discrimination.
Present strength
Babacan reckons Turkey's economic standing is at its best for a number of years. Inflation is in single figures, the country's debt-to-GNP ratio is falling as is the budget deficit, and growth is robust. Since coming to power, Babacan says that the Justice and Development Party government has delivered on all of its electoral promises. ?Economic development has been significant,? he says.
He points out, for instance, that in 2001 Turkey's debt-to-GNP ratio was 91%; last year it was 71%. Three years ago, the country's budget deficit as a proportion of GNP was 17%; this year it's expected to be about 11% ?and by 2007 a budget deficit of 3% is not a dream for Turkey.?
This is one of the criteria of the Maastricht Treaty to sign up to the euro. Babacan says that Turkey has no intention of adopting the single currency then, ?but we are taking the Maastricht criteria as our guidelines.?
?We are doing everything to be as predictable as possible,? he adds. ?It's the only way to generate confidence.? The IMF has recognized Turkey's progress. After it concluded its Article IV consultation at the end of July, the Fund said that since the floating of the lira in February 2001, ?strong fiscal consolidation and disinflation efforts have laid the basis for a rapid and powerful recovery.?
Dangers
The Fund, though, also warned that the economy faces a number of risks. ?Domestic demand has started to increase rapidly, and the current account deficit is widening as a result. The high size of the government debt, its short maturity, and its currency composition are also major sources of vulnerability.?
Babacan, though, remains confident. He expects growth to be well above 5% this year, stimulated by private-sector activity. ?We are observing a very strong crowding-in effect ? the public sector is dominating more and more the internal debt market so that more financing is available for the private sector.?
Whether this feel-good factor lasts for long will depend on the EU decision. Babacan will be cheered by the comments of Gunter Verheugen, the EU's enlargement commissioner, who will present a report on Turkey's bid to other European leaders. Speaking after a visit to Turkey last month, he said Turkey had made ?impressive progress? on social, constitutional and human rights reforms in the last 18 months, but had to ensure that they were implemented.