Turkey’s campaign for full membership of the European Union may drag on longer than anticipated and the negotiations need a change of attitude from the 25-nation bloc, Finance Minister Kemal Unakitan said.
Despite renewed market optimism about progress following the decision of Greek and Turkish Cypriots to resume peace talks, Unakitan was cautious on the speed at which political obstacles can be overcome.
“With a somewhat fairer approach from the EU and the existing constructive approach of Turkey this issue will inevitably be resolved; it may be that it takes longer than currently expected,” he told journalists.
Renewed scepticism over Turkey’s prospects for accomplishing its goal of full EU membership have contributed to the pummelling endured by the lira in financial markets since May. Unakitan visited London on a Citigroup-facilitated tour aimed at wooing back asset managers who have deserted the country as a rash of negative economic data coincided with a global retrenchment of risk appetite.
The finance minister ruled out scaling back borrowing or cutting taxes despite accumulating a higher than expected primary budget surplus. He insisted that he won’t be pushed into populist measures by forthcoming elections and promised continuing fiscal austerity.
“Turkey will not compromise on the economic policies that it’s adopted so far,” Unakitan told journalists. “We will not make any increases on the expenditure side of the budget and should we have any increases on the revenue front that incremental amount will be used for savings.”
He said that the government will introduce more flexible labour laws, as urged by the IMF, but that “those measures will be implemented according to the reality in Turkey.”
The minister was careful to repeatedly back the independence of the central bank, after the maladroit appointment process endured by new governor Durmus Yilmaz, raised concerns about political involvement. The new governor’s actions including 600 basis points of interest-rate hikes in June alone were “swift and effective”, Unakitan said.
Despite higher borrowing costs the economy will grow 5% this year, the he predicted, reiterating inflation goals for 2007 and 2008. He declined to be drawn on the rate of price-growth this year.
The Treasury “will continue with it’s funding program taking market conditions into account, as instructed by the government,” Unakitan said, standing by Turkey’s $5.5billion 2006 borrowing target.