Anchors aweighA special report on Turkey l October 23rd 2010

TurkeyCOV.indd 1 12/10/2010 15:26

The Economist October 23rd 2010 A special report on Turkey 1

Turkey has made astonishing progress in the past decade, says JohnPeet. But how will it fare if the IMF and the EU are not there to keep iton the straight and narrow?

ment­grade credit rating, in�ation is in sin­gle �gures and the government has beenable to dump the IMF.

The political situation has also greatlyimproved. After nearly eight years of sin­gle­party rule by Recep Tayyip Erdogan’sJustice and Development (AK) party, thearmy has been largely tamed. With exqui­site timing, Mr Erdogan won a referendumon constitutional changes to increase hiscontrol of the army and judiciary on Sep­tember 12th, the anniversary of a 1980 mil­itary coup. The AK government haspushed through an impressive array of po­litical and economic reforms. One rewardwas the formal opening in October 2005 ofnegotiations for EU membership.

Pillar of the international communityThese changes have not gone unnoticed.Turkey is now a vocal member of the G20

club of important economies. It held a tem­porary seat on the United Nations SecurityCouncil in 2009­10. It is knocking on thedoor of the BRICs club of emerging giants.Some forecasts suggest that during the nextdecade it will grow faster than any countrybar India and China. Others predict itcould become the world’s tenth­biggesteconomy by 2050.

That is partly because of Turkey’s fa­vourable demographic outlook. The aver­age age of its 72m people is only 29, againstover 40 in the EU. By 2050 its populationwill have risen to almost 100m. If by thenTurkey has managed to get into the EU, it

Anchors aweigh

IT CAN take decades to change the imageof a country. Yet Turkey has managed the

trick in less than one. Ten years ago it was abasket­case. Its economy was both sclerot­ic and erratic, its banks were bust, and in­�ation was dizzyingly high. It was forevercalling in the International Monetary Fundfor help (Turkey has run up some 18 IMF

programmes, a near­record). Politics wasalso worryingly unstable. Even though thecountry was an established democracy, astring of weak and short­lived coalitiongovernments alternated with the occa­sional coup staged by a powerful army.

As a member of NATO that was formany years on the front­line of the coldwar, Turkey was at least a reliable ally ofthe West. But its regional in�uence in 2000was almost as feeble as its economy. TheTurks insisted that they wanted to join theEuropean Union, but they had made al­most no progress. Just over a decade agothey were humiliatingly overtaken in therace to be EU candidates by the ex­commu­nist countries of eastern Europe.

Yet ten years on Turkey stands trans­formed. The economy su�ered badly inthe global recession of 2009, but over theprevious �ve years it had been unusuallyvigorous, and it has bounced back soquickly that this year it is likely to growfaster than those of almost all other Euro­pean countries. Turkey has largely escapedthe Mediterranean sickness that has takenhold in Greece, Spain, Portugal and even It­aly. It is on the verge of acquiring an invest­

An audio interview with the author is at

Economist.com/audiovideo/specialreports

A list of sources is at

Economist.com/specialreports

Doing it by the bookThe economy has had a big boost from muchsounder management. Page 3

The Davutoglu e�ectAll change for foreign policy. Page 4

A fading European dreamWill Turkey ever join the EU? Page 6

Immovable objectCyprus remains a stumbling­block. Page 8

Balance of powerA mildly Islamist government �ghts it outwith the generals. Page 9

All Turks together?Turkey is overcentralised and treats minor­ities badly. Page 11

Silk road to richesGaziantep’s rise and rise. Page 12

In it for the long haulBut a liberal democracy ready to join the EUis still the best bet. Page 14

Also in this section

AcknowledgmentsThis special report draws on the insights and opinions ofpeople more knowledgeable than its author, many ofwhom are not quoted by name in the text. The authorwould like to thank, in particular: in London, AhmetAkarli; in Istanbul, Mensur Akgun, Cengiz Aktar, IbrahimBetil, Mehmet Ali Birand, Umit Boyner, Cengiz Candar,Suzan Sabanci Dincer, Aydin Dogan, Tayyibe Gulek, AyhanKaya, Joost Langedijk, John McCarthy, Fatma Melek, SoliOzel and Lord John Scott; in Ankara, Ali Babacan, EgemenBagis, Utku Cakirozer, Semih Idiz, Kemal Kilicdaroglu,Davide Lombardo, Diego Mellado, Murat Mercan, DavidReddaway, Lale Sariibrahimoglu and Mehmet Simsek; inBatman, Diyarbakir and Gaziantep, SahismailBedirhanoglu, Serif Camci, Serkan Duzelli, Asim Guzelbey,Diren Keser, Taner Nakiboglu, Sezgin Tanrikulu and AhmetTurhan.

1

2 A special report on Turkey The Economist October 23rd 2010

2 will be its most populous member, farahead of Germany, which will have a mere70m people.

But there is more to Turkey than a �our­ishing economy and a young population.Whereas ten years ago it seemed a periph­eral country, now it has become a pivotalone. Its geographical position, wedged be­tween the European landmass, Russia andthe Middle East, has given it a new strategicimportance, especially in the energy­pipe­line business. And its newly assertive for­eign policy is making it count not just inneighbouring countries but as far a�eld asChina and Africa.

Turkey has an especially signi�cantplace in the Muslim world. Thanks to thelegacy of Ataturk, it is a rare exampleamong Muslim countries of a functioningsecular democracy. Compared with muchof the Arab world, it has been hugely suc­cessful in economic, diplomatic and mili­tary terms. A Turk currently serves as secre­tary­general of the Organisation of theIslamic Conference. And since his coun­try’s diplomatic spat with Israel earlier thisyear Mr Erdogan has become a hero to theArab street. Many Arabs compare him fa­vourably with their own gerontocratic(and undemocratic) rulers.

Trouble spotsIn short, Turkey matters today in a way thatfew would have thought possible a decadeago. Indeed, in some ways it counts formore than when the Ottoman empire wascrumbling a century ago and Turkey waswidely known as the �sick man of Eu­rope�. And yet there are persistent blem­ishes on its seemingly bright prospects.

One is the Kurdish question, of whichmore later. As it happens, the AK govern­ment has done more than almost any of itspredecessors to give a better deal to Tur­key’s Kurds, who make up 14% of the pop­ulation, most of them living in the coun­try’s poor south­east. But Kurdish PKK

guerrillas stepped up their terrorist cam­paign earlier this year and the precariouscease�re that is now in force may not last.

A second is that the economy, for all itsrecent strength, is still a work in progress.In�ation is not wholly defeated, the cur­rent­account de�cit is large and Turkey’scompetitiveness in manufacturing is amatter for concern. Worst of all, unem­ployment is distressingly high, especiallyin the east and south­east and amongwomen and the young. These failings willbe analysed in more detail in the next sec­tion of this report.

A rapidly growing country inevitably

has social problems to contend with aswell. On the UN Development Pro­gramme’s human­development index, ageneral measure of wellbeing, Turkeycomes below Russia, Albania and Roma­nia. Despite some excellent universitiesand hospitals, the quality of education andhealth care is patchy and uneven. More­over, corruption is a huge problem. Thecorruption rankings of Transparency Inter­national, a Berlin­based lobby group, putTurkey behind South Africa and on a parwith Cuba.

And then there is Turkish politics. TheAK government has done well since it tooko�ce in 2002. The party dislikes labels, yetthe term �mildly Islamist� suits it, as does�conservative�. Mr Erdogan himself likensAK to a European Christian Democraticparty. There is no longer a serious dangerof a military coup. But despite his victoryin September’s referendum, Mr Erdoganfaces a tricky election next summer. His au­thoritarian streak has attracted much criti­cism, and the main opposition party hasbegun to revitalise itself under a newleader. The AK party may yet win anothermajority, but there is also a chance that itwill fall short and Turkey could �nd itselfwith a coalition government for the �rsttime since 2002.

Turkey’s experience of the past few de­cades suggests that the country needs �rmexternal anchors to stop it drifting intodangerous waters. It has depended on twoin particular. The �rst is the IMF: wheneverthe economy has veered o� course, theIMF has been called in to drag it back. Themost dramatic instance came after the cri­sis of 2001, when Kemal Dervis took overas �nance minister and, with the help ofthe IMF, devised the �scal and monetaryframework that was largely responsible forthe country’s subsequent success.

The second and even weightier anchorhas been the lure of EU membership.Whereas the IMF has steered only Turkey’smacroeconomic policy, the EU has been

the catalyst for an entire programme of so­cial and economic reforms. Even beforemembership talks began in October 2005,the EU was able to persuade Turkey toadopt a wide­ranging liberal, free­marketand democratic agenda.

The problem with both anchors is thatover the past �ve years their pull has gotmuch weaker. A healthier economy andstronger public �nances have enabled Tur­key to jettison its IMF programme (thoughsome ministers tried to keep it). In therun­up to a possibly tight election nextyear, this may make it easy for the govern­ment to o�er irresponsible �scal induce­ments that could jeopardise the long­termhealth of the public �nances.

Even more disturbing is the loss of EU

in�uence. Few people, either in Brussels orin Ankara, any longer believe that Turkishmembership will come about in the fore­seeable future. The negotiations have pro­gressed agonisingly slowly. Over half thechapters in the accession talks are nowblocked, many because of an unresolveddispute over Cyprus. Political leaders aswell as voters in France, Germany, Austriaand the Netherlands have made it clearthat they do not want Turkey in the EU.

So it is not surprising that many Turksconsider that the EU anchor has lost its pur­chase. The country’s political leaders thesedays speak less and less about their EU as­pirations. Why should Turkey implementdi�cult reforms to meet European stan­dards, some ask plaintively, if EU member­ship will not be forthcoming in return? In­deed, why continue on the path offree­market liberal democracy at all?

That is the kernel of Turkey’s di�cultiestoday. So long as it could rely on the IMF’stutelage and had a real hope of EU mem­bership, its course was �xed. But with theIMF gone and the EU receding over the ho­rizon, Turkey needs new anchors. The bestplace to start looking is the economy�forwithout continuing economic success, notmuch else will go right. 7

The Economist October 23rd 2010 A special report on Turkey 3

1

CONTRARY to popular belief, countriesdo learn from �nancial crises. After a

wretched 1990s Turkey su�ered an eco­nomic meltdown in 2000­01. GDP shrankby almost 6%, the lira collapsed, most ofthe banks had to be rescued and the IMF

was called in (again). Since the cost of res­cuing the banks amounted to almost one­third of GDP, the public debt shot up fromaround 38% to 74% of national income. Theexperience was painful, but at least it leftTurkey better prepared than other coun­tries when the next crisis struck sevenyears later.

That was largely thanks to Mr Dervis, aWorld Bank economist who became Tur­key’s �nance minister in March 2001. Be­sides rescuing the banks, he devised a newframework for Turkish monetary and �scalpolicy. When the AK party came to powerin November 2002, much of the hard workof repairing Turkey’s battered economyhad already been done. Sensibly enough,the new �nance minister, Ali Babacan,continued with these policies.

The results have been spectacular. Inthe 1990s Turkey’s GDP grew by an annualaverage of just 4%. In 2002­08 that rose toan average of about 6% before the reces­sion hit in 2009 (see chart 1). In�ation, run­ning at an average of 75% a year in the1990s, is down to 9% today. The public debtis back below 50% of GDP. The banks havebeen transformed. Suzan Sabanci Dincer,chairman of the biggest, Akbank, notesthat tough regulation after the 2000­01 cri­sis lifted the capital ratio to a dizzying 19%and pushed down the loan­leverage ratioto below the EU’s or America’s. The num­ber of banks has fallen from 79 to 49.

When the OECD published a report onthe Turkish economy in September, its sec­retary­general, Ángel Gurría, said that Tur­key would be the organisation’s fastest­growing member this year and likened itsperformance to that of the emerging­mar­ket BRICs. Some economists suggest thatover the next seven years Turkey’s growthwill match or exceed that of any other bigcountry except China and India.

The markets have taken note of Tur­key’s rapid growth and prudent economicand �nancial management. When the lat­est crisis hit Europe, credit­default swap

spreads rose sharply for countries such asGreece, Hungary, Portugal and Spain, yetthey barely budged for Turkey. Indeed, thissummer Turkey was able to boast a CDS

spread below that of Italy, a G7 economy(see chart 2). Turkey is now on the verge ofachieving an investment­grade rating forthe �rst time. Foreign investors have begunto see it as a good thing. In the 1990s foreigndirect investment was running at less than$1 billion a year, but ten years later, beforethe crisis brie�y sent it back down again, itwas closer to $20 billion.

Anatolian tigersTurkish entrepreneurs have respondedsplendidly to the new opportunitiescreated by a stronger economy. Curiouslyfor a place that has such industrious peo­ple, Turkey does not have an especiallygood record in business. In Ottoman timesthe Armenians, Greeks and Jews were re­sponsible for most of the country’s com­merce. Proud Turks either served in thearmy or farmed. But that has changed.

These days Turkish �rms are leadinglights in many manufacturing industries,notably in construction, furniture, textiles,food­processing and carmaking. Unlike �­nance, which has largely stayed in Istan­bul, such businesses have tended to devel­op most in fast­growing Anatolian citiessuch as Bursa, Kayseri and Konya. Theirbosses help to form a backbone of supportfor the AK party.

Umit Boyner, head of TUSIAD, theTurkish employers’ federation, stresses the

country’s strong �nancial sector and its bigexporters of textiles, cars and in agribusi­ness. John McCarthy at ING, a Dutch bank,suggests that foreign investment has madeall of Turkish business more competitive.Turkey is now the world’s biggest cementexporter and second­biggest jewellery ex­porter. Its construction order book is sur­passed only by China’s. It is Europe’s lead­ing maker of televisions and DVD playersand its third­biggest maker of motor vehi­cles. English­speakers may laugh at �rmswith names such as Koc and Arcelik, butTurkish multinationals like Enka construc­tion, Turkcell, Calik Holding and, yes, Kocare growing fast. So is Turkish Airlines.Find a building site anywhere in the for­mer Soviet Union or across the MiddleEast, and you will �nd Turkish suppliersand companies�and Turkish workers, too.

Yet not everything is blooming in Tur­key’s economic garden. The dumping ofthe IMF programme in 2009 left �scal poli­cy adrift. Mehmet Simsek, the �nance min­ister, wanted to retain the IMF at the time,but Mr Babacan, who is now deputy primeminister, points out that none of Turkey’sprevious IMF programmes was ever com­pleted (even Mr Dervis’s was interruptedby the 2002 election). He suggests that it isbetter for Turkey to be directly responsiblefor its own �scal strategy. Mr Simsek hasdrawn up medium­term �scal rules thataim to bring the budget de�cit back below3% of GDP within the next two years, butthe �nance ministry has delayed their im­

Doing it by the book

The economy has had a big boost from much sounder management

1Downs and ups

Source: OECD *Forecast

GDP and consumer prices% change on previous year

6

3

0

3

6

9

12

0

20

40

60

80

100

120

+

–

1990 95 2000 05 10*

GDP Consumer prices

2Confidence limits

Source: Bloomberg *Credit-default swap

Five-year CDS* spreads, percentage points

2009 20100

2

4

6

8

10

12

Greece Ireland Hungary

Italy Turkey

4 A special report on Turkey The Economist October 23rd 2010

2

1

plementation until some time next year�after the election.

Turkey su�ers from two other bug­bears: in�ation and a large current­accountde�cit. Mr Simsek claims that today’s 9%in�ation rate is in large part due to tempo­rary factors that will fall away next year.The current­account de�cit is more worry­ing because it suggests that competitive­ness is steadily eroding. Mr Simsek ac­knowledges a shortfall in domesticsavings that will be hard to correct. But onTurkey’s bond rating he remains bullish:�Turkey is the largest convergence story inthis time­zone, and maybe in the world.�

Even so the government needs to getmore serious about deregulation andstructural reform. As the OECD report says,�higher employment and productivitygrowth will not be possible without pro­found regulatory reform.� In 2010 Turkeycame 73rd out of 183 countries in the WorldBank’s annual �ease of doing business�rankings. Within the OECD, it comes last orsecond­last for restrictive product­marketregulation, excessive state control and bar­riers to entrepreneurship.

All this shows up in perhaps Turkey’smost serious economic problem: chronicunemployment (see chart 3). Mr Babacantalks up the creation of 1.5m new jobs in theshadow of the world recession during2009­10. Unemployment has fallen sharp­ly this year, but it still stands above 10%,and among the young, the unskilled and inthe east it is much higher. Women are vast­ly underused: among those of working ageonly 26% are in employment, down from34% in the late 1980s, leaving a large gap be­tween male and female employmentrates. This cannot be entirely explained bycultural factors in a mainly Muslim coun­

try. After all, Turkey has quite a few womenin senior positions in business�such asTUSIAD’s Ms Boyner.

Polls show that unemployment is a bigworry for Turks. A Eurobarometer poll inOctober 2009 found 63% saying it was themost important issue facing the country.Mr Babacan and Mr Simsek have respond­ed with a new employment strategy. Butthe labour market is too rigid: minimumwages are too high and do not allowenough regional variation, and temporarylabour contracts are discouraged. One con­sequence is a large black economy, whichalso keeps the tax take low.

Cheap isn’t cheerfulFurther ahead loom potentially troublingstructural weaknesses. Much of Turkey’srecent success has rested on relatively lowlabour costs, compared with a higher­costEuropean market. Yet as the country has al­ready found with textiles, there is almostalways another source that can o�er evenlower labour costs. China and India have

become big threats to much of Turkey’slow­skilled industry.

Both government and industry recog­nise that the best way forward is to moveupmarket. Strenuous e�orts have beenmade to improve schools and universitiesand promote high technology. The resultsare already in evidence. In 1990 only 15% ofTurkey’s exports were in medium­ or high­tech sectors, according to Fatma Melek,chief economist at Akbank. Today, the �g­ure is almost 40%. Yet Turkey spends only0.7% of its GDP on research and develop­ment, compared with an OECD average of2.3%. And with almost a quarter of theworkforce in agriculture, overall produc­tivity remains low.

Another challenge is to �nd fresh mar­kets. Traditionally Turkey has relied mainlyon the West, especially Germany and therest of Europe. But although the EU is stillTurkey’s biggest market by far, its share isfalling. In 2002 it took 56% of Turkish ex­ports; this year the �gure will drop below50%. At the same time the share of exportsgoing to the Middle East has doubled, from9% to 18%. Exports to Iran and Syria togeth­er are now worth more than exports to theUnited States.

The importance of this shift goes far be­yond the economic gains of access to morediversi�ed markets. As Turkish business­men fan out across the Middle East and re­new contacts in the old Turkic world(which stretches from Turkey throughAzerbaijan, Turkmenistan and as far asXinjiang in China), they are helping to un­derpin a stronger presence in a region thatTurkey largely ignored for many years.That re�ects a signi�cant shift in Turkishforeign policy�one with which some inthe West are far from comfortable. 7

3Too little work

Source: Turkstat *June 2010

Unemployment rates, %

5

7

9

11

13

15

1990 95 2000 05 10*

Men

Women

TURKISH foreign policy used to be sim­ple. Ever since Ataturk dragged the

country into the modern world by drivingout the sultan, adopting the Latin alphabetand abolishing the Muslim caliphate, thecountry has leant westwards. Since thesecond world war that has meant joiningNATO (in 1952), backing the West againstthe Soviet Union and aspiring to join theEuropean project. Like America, Turkeywas also consistently pro­Israel.

It largely ignored the rest of its region,which includes most of the countries thatwere once part of the Ottoman empire. Inhis book �The New Turkish Republic�, Gra­ham Fuller, a former CIA analyst and aca­demic, recalls telling a Turkish friend thathe was a Middle East expert, only to beasked, �so why are you in Turkey?� In simi­lar vein, Turkish diplomats would tell theirWestern friends that �we live in a badneighbourhood� and that �the Turk’s only

friend is another Turk.�Over the past few years all this has

changed. Rather than feeling sorry for it­self over its rough surroundings and lackof friends, Turkey has a new policy of �zeroproblems with the neighbours�. It is nolonger carping at Armenia over its allega­tions of genocide in 1915 or reproaching theArab world for its British­supported �stabin the back� in 1917­18. Instead it is cultivat­ing new friendships in the region, o�ering

The Davutoglu e�ect

All change for foreign policy

The Economist October 23rd 2010 A special report on Turkey 5

2

1

trade, aid and visa­free travel. And far frombacking Israel militarily and diplomati­cally, Turkey has become a leading critic.

The man largely responsible for engi­neering this dramatic shift is Ahmet Davu­toglu, Turkey’s foreign minister since 2009.Before that he was an international­rela­tions adviser to Mr Erdogan. In 2001, beforethe AK government came to power, Mr Da­vutoglu published a book, �StrategicDepth�, that set out a new policy of en­gagement with the region. He rejects accu­sations that he is �neo­Ottoman�, yet hisdoctrine certainly involves rebuilding tiesround the former Ottoman empire.

Mr Davutoglu is an engaging, bookishcharacter with a formidable knowledge ofhistory. He thinks that Turkey made a mis­take by ignoring its backyard for so long,and he is convinced that its new strategy ofasserting its interests, both in the regionand in the world, makes his country more,not less, attractive to the West. Nothing in­furiates him more than articles in Westernpublications suggesting that Turkey hastilted east, or even claiming that �we havelost Turkey.� �Who is we?� he asks. Afterall, Turkey maintains NATO’s biggest armyafter America’s; it is committed in Afghani­stan and other trouble spots; and it is nego­tiating to join the EU. As Mr Davutogluputs it, �Turkey is not an issue; it is an ac­tor.� His country now matters more thanever to Europe and the West, he claims.

Certainly Mr Davutoglu’s new policy inthe region is paying dividends. In Iraq, forinstance, Turkey has strong commercialand diplomatic interests. At one time theKurdish region of northern Iraq was a bigheadache, but now Turkey is playing a leadrole in stabilising the place�and winningco­operation from both the region andBaghdad against the PKK. Its relations withSyria, for many years a problem countryfor the West, are �ourishing as never be­fore. It has even sought to forge closer dip­lomatic ties with the still more proble­matic Islamic republic of Iran, much toAmerica’s annoyance.

Turkey is also active again in its oldstamping­ground in the Balkans, especial­ly in Bosnia and Kosovo. Greek­Turkish re­lations, which improved markedly evenbefore the AK party came to power in2002, remain broadly harmonious, al­though Cyprus is still a point of friction.The country is also paying more attentionto Africa; it has opened or is planning toopen 12 new embassies there.

The Turks have even made a partial at­tempt at reconciliation with Armenia, aprocess begun when President Abdullah

Gul visited Yerevan in late 2008 to attend afootball match. After the visit the two sidessigned bilateral protocols to normalise re­lations and reopen the land border, closedduring Armenia’s war with Azerbaijanover Nagorno­Karabakh in the early 1990s.But thanks mainly to Mr Erdogan’s insis­tence on linking the protocols to progresson the Nagorno­Karabakh dispute, the pro­tocols have yet to be rati�ed.

Turkey has also made the most of beingan energy corridor between east and west.As a substantial energy importer with afast­growing commercial relationshipwith Russia, it has a direct interest in thematter. But a decade of confrontation over

oil and, especially, gas between Russia andthe West has taught all sides to value Tur­key as a bu�er. Oil and gas pipelines al­ready snake across Turkey from Azerbaijanvia Georgia. And the Turks have signed upto the ambitious Nabucco gas­pipelineproject, intended to bypass Russia�thoughplenty of Russians ask where the gas forNabucco will come from. Energy diplo­macy often comes to naught, but it will behard to ignore Turkey in any future deals.

Mr Babacan, the deputy prime minis­ter, says it is right for Turkey to have a senseof global responsibility. He and Mr Davu­toglu also like to tell their European coun­terparts that, by playing a more active rolein its region, including in the Balkans, Tur­key is demonstrating how valuable itwould be as a member of the EU.

Yet Mr Davutoglu and Mr Babacan arebeing somewhat disingenuous. Certainly

Turkey’s in�uence in its region allows it tolay claim to being an interesting and poten­tially useful partner. But as it has alsofound, the Middle East is such a complexplace that its policy of zero problems withthe neighbours cannot be sustained all ofthe time. Nor is it easy to maintain a friend­ly dialogue both with the West and withthe West’s enemies.

Freelance diplomacyIran is a prime example. Since it is a neigh­bour, a big oil and gas producer and an in­creasingly signi�cant trade partner, theTurks have strong reasons to seek better re­lations with it. That is one reason why,along with the Brazilians, the Turks triedtheir own freelance nuclear diplomacywith Iran earlier this year. It is also whythey are naturally averse to tougher tradesanctions against Iran, let alone any sug­gestion of war.

Yet Iranian nuclear diplomacy is bothdelicate and �endishly complicated. TheTurkish­Brazilian plan, when it emerged,seemed softer on Iran than any put for­ward by Western negotiators. When, soonafterwards, a resolution to tighten sanc­tions came before the UN Security Councilin June, Turkey decided to vote against it tokeep its dialogue with Iran going (thoughMr Davutoglu claims to have used his dip­lomatic in�uence to persuade Lebanon toabstain and Bosnia to vote in favour). Notsurprisingly, the Americans were furious.

Israel is an even better illustration ofthe problems inherent in Turkey’s new for­eign policy. In May a Turkish­led civilian�otilla led by the Mavi Marmara attempt­ed to break the Israeli blockade of Gaza.Gaza has been an especially sore point inTurkey ever since Israel’s invasion in Janu­ary 2009�not least because the Turks weredeep into shuttle diplomacy to open peacetalks between Syria and Israel just whenthe attack on Gaza began. Shortly after­wards Mr Erdogan walked o� a platformhe was sharing with the Israeli president,Shimon Peres, at the World Economic Fo­rum in Davos, shouting that Israel certain­ly knew how to kill people.

When the Israeli army intercepted theTurkish �otilla in international waters, itssoldiers were surprised to be physically at­tacked on the Mavi Marmara. They retaliat­ed by opening �re, killing eight Turkish citi­zens and one man who held joint Turkishand American citizenship. The Turks wereoutraged. Mr Davutoglu says this is the �rsttime in the history of Ataturk’s republicthat unarmed civilians have been killed bythe armed forces of another country. Mr Er­

Love thy neighbour, says Davutoglu

6 A special report on Turkey The Economist October 23rd 2010

2

1

dogan and Mr Davutoglu demanded a UN­led inquiry and an Israeli apology. In Sep­tember the UN human­rights council dulycriticised Israel, but the Israelis rejected its�ndings and have refused to apologise. MrDavutoglu insists that relations with Israelcan never be the same again.

Yet this will come at a cost. The Israelisare not popular with many people thesedays, but they still have friends in Wash­ington, DC. By making Gaza a centrepieceof its foreign policy and even more byopenly sympathising with Hamas, whichruns Gaza, Turkey has gained new friendsin the Arab world but alienated allies inthe West. Indeed, it was the Mavi Marmaraincident and the Turkish response to it thatled to an outpouring of comments that theWest was losing Turkey. There could bemore serious consequences. For instance,America’s Congress is now more likely toadopt a resolution condemning the Arme­nian genocide of 1915 which is put forwardevery year but which the Turks have so farmanaged to prevent going through.

The mercurial Mr Erdogan does not

make it any easier for Turkey to conduct acoherent foreign policy, as demonstratedby the Davos incident and by his torpedo­ing of the Armenian deal. In 2004­05 hetwice came close to jeopardising Turkey’schances of opening membership negotia­tions with the EU. Semih Idiz, a journalistwith Milliyet newspaper, jokes of Turkishforeign policy: �Davutoglu makes, Erdoganbreaks and Gul picks up the pieces.�

Turkish public opinion adds anotherlayer of complication. Ordinary Turks nowhave a strikingly low opinion of America.In 2000, according to the Pew Global Atti­tudes Project, some 52% of Turks thoughtwell of America, a smaller share than inGermany and Britain but about the sameas in Spain. The Iraq war changed this, es­pecially after the Turkish parliament votedin March 2003 not to let the Americansmove troops across Turkey for a possiblesecond front. By 2007, thanks mainly to thewar, less than 10% of Turks had a favour­able opinion of America. That �gure hasticked up since Barack Obama becamepresident, but it is still lower than in the rest

of Europe. A recent survey by the GermanMarshall Fund found that approval ratingsfor Mr Obama too have fallen sharply,from 50% in 2009 to 28% this year.

In Europe, Turkey’s new foreign policyhas often gone down no better than inAmerica. Mr Davutoglu and his colleaguesargue that Turkey’s diplomatic ventures inits region and elsewhere, like its crucialrole in energy and its military prowess, un­derline how useful Turkey could be as amember of the EU. But that is not how op­ponents of Turkish membership see it.

Those opponents were cheered both byTurkey’s bungling in Iran and by the MaviMarmara incident. In their view, theseevents prove that Turkey is too ready towander o� the West’s reservation andpander to Islamist extremists�and not atall ready for solidarity with the EU’s com­mon foreign policy. The EU, they argue,cannot accommodate an aspiring globalplayer with interests so di�erent from Eu­rope’s, especially one so big. That argu­ment has grown more resonant as Turkey’smembership negotiations have stalled. 7

TURKEY’S involvement with the Euro­pean project has a long and chequered

history. The country expressed interest in alink with the original six­strong EuropeanEconomic Community as far back as 1959,the �rst non­member to do so. In 1963 itsigned an association agreement with theEEC. Walter Hallstein, a German ChristianDemocrat who was the �rst president ofthe European Commission, hailed this asexplicit recognition that �Turkey is a part ofEurope.� Sadly that view is not shared bymany in his party today.

The Turks did not formally seek mem­bership until 1987, when the ebullient Tur­gut Ozal, a modernising prime ministerand European enthusiast, submitted an ap­plication even though he had beenwarned o� doing so. The European Com­mission advised against it in 1989. Turkey’sdreadful 1990s put paid to any idea of re­viving it quickly. Instead a later prime min­ister, Tansu Ciller, negotiated a customs un­ion with the EU that took e�ect in 1996,securing unfettered access to the Europeansingle market for the �rst time.

By then the newly liberated countries

of eastern Europe were also queuing up tojoin. At an EU summit in December 1997European leaders decided to invite no few­er than ten countries from eastern Europe,plus Cyprus and Malta, to open member­ship negotiations. Turkey was left out.Turkish generals started to mutter that theymight have done better in Brussels if theyhad joined the Warsaw Pact, not NATO.

European leaders made amends twoyears later by declaring that �Turkey is acandidate state destined to join the unionon the basis of the same criteria as appliedto other candidate states.� When the AK

government took power in 2002 it pro­claimed its goal of EU accession, just as itspredecessor had done. And it passedenough reforms to persuade EU leadersunanimously to agree to begin member­ship talks in October 2005.

Keep your promisesSadly, despite diplomats’ doctrine of pactasunt servanda (treaties and promisesshould be kept), that has proved the highpoint of Turkey’s European dream. In Ger­many the Christian Democrat Angela Mer­

kel was about to replace the Social Demo­crat Gerhard Schröder as chancellor. Lessthan two years later Nicolas Sarkozy tookover from Jacques Chirac as French presi­dent. Mrs Merkel has long opposed TurkishEU membership, advocating a �privilegedpartnership� instead. Mr Sarkozy has con­sistently opposed Turkish entry on princi­ple. Public opinion in Austria, the Nether­lands and some other countries hasbecome more hostile.

Three things have made matters worsefor Turkey’s EU aspirations. The �rst is Cy­prus, which joined the EU along with theeast Europeans in May 2004. As a prelude,the then UN secretary­general, Ko� Annan,tried one last time to reach a deal on unify­ing the divided island. But although theTurkish­Cypriots overwhelmingly said yesto the deal in a referendum, the Greek­Cyp­riots even more overwhelmingly said no.As a consequence the (Greek­Cypriot) re­public joined the EU as the legitimate gov­ernment with the acquis communautaireof EU legislation, suspended for the (Turk­ish­Cypriot) north. Cyprus is now the big­gest single obstacle to Turkey’s EU hopes.

A fading European dream

Will Turkey ever join the EU?

The Economist October 23rd 2010 A special report on Turkey 7

2

1

The second problem has been domesticpolitical upheaval as the secular establish­ment and military top brass have battledagainst the AK government. A series ofcoup threats, conspiracies and constitu­tional court cases have created the impres­sion of a country in political turmoil, help­ing to stoke European opposition to Turk­ish membership.

Third was the economic crisis that be­gan in 2008 and hit Europe especially hardin 2009. Recession and rising unemploy­ment have put paid to most thoughts offurther EU enlargement. As it is, the deteri­orating economy, the recent troubles of theeuro zone and a backlash against immigra­tion from the east have all lent force towidespread complaints that the centraland eastern European countries were letinto the EU too early.

Chapters of accidentsTurkey’s membership negotiations haveall but ground to a halt. Of the 35 �chap­ters� into which the talks are divided, asmany as 18 are blocked by the EU as awhole, by Cyprus or by France. They in­clude areas where Turkey might be expect­ed to have a lot to o�er, such as external re­lations and energy. Only one chapter, onscience, has been closed. So far this yearjust one new chapter, on food­safety stan­dards, has been opened. Next year it mayprove impossible to open any at all.

Not surprisingly, the Turks are gettingfed up. According to the Pew Global Atti­tudes Survey, back in 2005 some 68% ofTurks favoured joining the EU, with 27%against. Now the numbers are 54% in fa­vour and 40% against. Eurobarometerpolls show similar results. In September aGerman Marshall Fund survey found that,whereas in 2004 some 73% of Turksthought joining the EU would be a good

thing, in 2010 only 38% did (see chart 4). Both Egemen Bagis, the Turks’ chief

European negotiator, and Stefan Fule, theenlargement commissioner in Brussels,gamely insist that the talks are proceedingnormally. Mr Bagis trots out two lines thathave become familiar to observers. The�rst is that �the process is more importantthan the end­result.� The AK governmentsays it is making reforms for their ownsake, not just to satisfy Brussels.

That is sensible. Most things a countryhas to do to qualify to open membershiptalks and then to join are desirable in them­selves (it would be a sad comment on theEU if they were not). When the new mem­bers from central and eastern Europejoined, the biggest reforms were those in­troduced before accession. Afterwards theEU loses much of its leverage.

Yet even if the journey is the most im­portant thing, it is harder to persuade theTurks to undertake it if they believe theywill never reach their destination. Whyshould businessmen welcome the open­ing up of Turkey’s public­procurementmarket to more competition from Euro­pean companies, for example, if they arenot sure that they will one day be reward­ed with membership?

Mr Bagis’s second line is that �everyday that passes Europe needs Turkey moreand Turkey needs Europe less.� In the samevein, Mr Davutoglu likes to argue that hisvisionary foreign policy is making Turkeyever more valuable to the EU. Once again,there is something in this. A rapidly grow­ing Turkey that acquires greater economic,military and diplomatic clout ought to be abigger prize for the Europeans to catch. Butthe argument can still be taken too far, intwo respects.

The �rst is that, despite the rhetoric,joining the EU does not really involve any

negotiation at all. An applicant country issimply required to adopt and implementall 160,000­odd pages of the European ac­quis. To assert that the EU needs Turkeymore than the other way round sets thewrong tone, making it sound as though thesupplicant is Brussels, not Ankara.

Second, an enterprising foreign policyof the sort that Mr Davutoglu is pursuingcan jar with the EU’s own policy. This is notjust a matter of saying no to sanctionsagainst Iran or uttering tirades against Isra­el. The Turkish goal of visa­free access foralmost all its neighbours could easily con­tradict the EU’s own plans for tighter bor­der controls. No wonder some in Berlin,Paris and even Brussels maintain that Tur­key is too wilful and unreliable ever to sitcomfortably inside the EU.

Can anything be done to get Turkey’sEU aspirations back on track? No countryhas ever begun entry negotiations withouteventually being o�ered full membership,but plenty have encountered big problemson the way. Britain’s application was twicevetoed by France’s Charles de Gaulle in the1960s. Spain took nine years to get in. Nor­way was twice o�ered membership, onlyfor voters to turn it down in referendums.

The best way to promote Turkey’smembership now would be to resolve theCyprus problem, but the prospects of thatlook shaky (see box on next page). It is alsopossible that, after the Turkish electionnext June, a new constitution and a re­newed enthusiasm for reform may injectfresh life into the negotiations. The risingpossibility that Mr Sarkozy will lose thepresidential election in France in 2012 isalso a good omen for Turkey.

But it may not be enough just to sit andwait. Hence another idea, suggested byHeather Grabbe of the Open Society Insti­tute in Brussels, among others: to incorpo­rate Turkey into the EU’s foreign and securi­

Erdogan in search of ever closer union

4Falling out of love

Source: German Marshall Fund/Transatlantic Trends

*EU7 to 2006,EU11 from 2007

Do you agree that Turkey joiningthe EU would be a good thing? %

0

20

40

60

80

2004 05 06 07 08 09 10

Turkey

EU*

8 A special report on Turkey The Economist October 23rd 2010

2 ty policy now, without waiting for it to be­come a full member. This would make thecountry more familiar with the give­and­take of �nding a common position andbolster the EU’s security. Turkey has a pres­ence in places like Iran and Syria where theEU’s in�uence is weak. Mr Davutoglumight be reluctant to trammel his dream ofan independent foreign policy. But theTurks might accept a strategic dialogue solong as it supplemented rather than sup­planted its membership talks.

Another idea, promoted by Cengiz Ak­tar, a seasoned Turkish foreign­policy com­mentator, is to set a target date by whichthe negotiations should be wrapped upand membership achieved. He has sug­gested 2023, the centenary year of the

founding of Ataturk’s republic. It is su�­ciently far o� to be tolerable to opponentsof early Turkish accession, but closeenough to encourage doubters within Tur­key. Yet setting a date would make a di�er­ence only if people really believed in it,and the precedents are not encouraging.The EU guaranteed entry in 2007 on a �xedtimetable to Bulgaria and Romania. Bothcountries joined before they were reallyready, and the results have been messy.

Other suggestions include agreeingnow that Turkey will never enjoy freemovement of labour in the EU, to reassureEuropean workers fearful of hordes ofTurks stealing their jobs; or limiting Tur­key’s voting weight in the EU’s institutionsto stop it becoming the most powerful sin­

gle country. But all of these would look likea form of second­class membership,which would be hard for the Turks to ac­cept. In the end there may be no alternativeto plodding on with the membership ne­gotiations and just hoping for a change inthe climate on both sides. Nobody has anyreason to stop the talks now.

Yet this poses problems of its own. Oneis how to keep the negotiators on bothsides busy. When they run out of chaptersto open and discuss, what will they do?And even if something can be found to oc­cupy them, there is a second and biggerproblem: how to sustain the Turks’ interestin joining. Much will depend on what hap­pens next in Turkish politics, now at anunusually critical moment. 7

CYPRUS bedevils Turkey’s hopes ofjoining the European Union. The pro­

blem dates almost as far back as the leas­ing of the island to Britain after the 1878Congress of Berlin. In 1960 Cyprus won itsindependence and became a federal statethat, in theory, respected the rights of bothGreek­ and Turkish­Cypriots (respectively80% and 20% of Cyprus’s 1m­odd people).But as early as 1964 the Turkish­Cypriotswere driven into enclaves by the majorityGreek­Cypriots.

In July 1974 a coup against the Greek­Cypriot leader, Archbishop Makarios,brought in a regime set on enosis, or unionwith Greece. Turkey invaded northern Cy­prus in the same month. After a brief cam­paign the Turks captured over a third ofthe island, driving out or killing the Greek­Cypriots. A cease�re line turned into aUN­patrolled green line. Nicosia is Eu­rope’s last divided capital.

There have since been six rounds ofUN­sponsored talks on unifying the is­land. Until 2003 they foundered on theopposition of the obdurate Turkish­Cypri­ot leader, Rauf Denktash, who openly pre­ferred the idea of an independent northand in 1983 proclaimed the Turkish Repub­lic of North Cyprus, which was recog­nised only by Turkey. The most serious ef­fort at a settlement came in 2003­04.Partly because the obstacle to unity hadalways been Mr Denktash, but mainly be­

cause Greece threatened to block EU en­largement to eastern Europe, the EU decid­ed in 2000 that it would admit Cyprus as amember even if the island remained di­vided. With Mr Denktash sidelined and anew government in Ankara, the timeseemed ripe for a new e�ort by the UN

secretary­general, Ko� Annan. But the e�ort was doomed by the un­

conditional promise to the Greek­Cypri­ots of EU membership. When the Annanplan for uni�cation was set out in early2004, that promise allowed the Greek­Cypriot leader, Tassos Papadopoulos, tourge voters to reject it. In April 2004 some65% of Turkish­Cypriots, lobbied from An­kara, voted in favour, but 76% of Greek­Cypriots said no. A week later Cyprusjoined the EU, with the acquis communau­taire suspended in the north.

When Turkey opened its membershiptalks with the EU in 2005, Cyprus

promptly became a big issue. As mem­bers, both Greece and Cyprus have a veto.Also, Turkey’s customs union with the EU

was due to be extended to all new EU

members, including Cyprus. But the Turkshave refused to allow Cypriot vessels ac­cess to their ports and airports becausethe Greek­Cypriots are blocking an EU

promise, made after the referendums in2004, to allow direct trade with the north.

In 2008 Mr Papadopoulos was oustedby a more moderate president, DemetrisChristo�as. By chance Mr Christo�as wasan old trade­union comrade of the Turk­ish­Cypriot leader, Mehmet Ali Talat.Their friendship encouraged anotherround of talks. But Turkish­Cypriot votersfailed to re­elect Mr Talat in April 2010. In­stead they chose Dervish Eroglu, an oppo­nent of the Annan plan for uni�cationwho barely knows Mr Christo�as.

The settlement talks might yet get apush from the European Parliament,which hopes to revive a regulation thatwould allow direct trade with the north.Under the Lisbon treaty, this can be adopt­ed by majorities that circumvent a Cypri­ot veto. Yet it has only a small chance ofpassing. The odds on a settlement seemequally slim, even though Mr Eroglu andMr Christo�as are still meeting. There isnow talk of permanent partition. But ifthe Cyprus problem remains unsolvedTurkey has little hope of joining the EU.

Cyprus remains a stumbling­blockImmovable object

The Economist October 23rd 2010 A special report on Turkey 9

1

TURKEY’S politics used to be as quirkyand colourful as the country itself. Par­

ties would be formed and as quickly disap­pear, politicians would suddenly bebanned, coalitions of all shapes and sizeswould be tried�and every so often thearmy would kick out an errant govern­ment. But all this changed after Turkey’seconomic crisis of 2001.

In the election of November 2002 justtwo parties were returned to Turkey’sgrand assembly, or parliament; all othersfailed to reach the 10% threshold belowwhich they win no seats. Mr Erdogan’smildly Islamist Justice and Development(AK) party got 34% of the vote and Ata­turk’s old Republican People’s Party (CHP),led by Deniz Baykal, took 19%. It wasenough for AK to form a single­party gov­ernment that has been in power ever since.

Mr Erdogan has been the dominant ac­tor on the Turkish political stage for almosta decade. Once an aspiring professionalfootballer, he became a highly successfulmayor of Istanbul in 1994. He was then amember of Necmettin Erbakan’s WelfareParty, an avowedly Islamist out�t. Mr Erb­akan’s government was pushed out by thearmy after the so­called �soft coup� of 1997.Mr Erdogan himself was brie�y jailed in1999 for the o�ence of reading an Islamistpart of a poem in public. This conviction at�rst stopped him taking up his parliamen­tary seat in 2002, so Abdullah Gul servedas prime minister until March 2003.

There is thus little doubt about Mr Erdo­gan’s Islamist credentials. His democraticones are less clear. He once called democ­racy a train from which to disembark onreaching one’s destination. In o�ce asprime minister he has displayed an au­thoritarian streak. He dislikes oppositionand is intolerant of criticism. He has a rep­utation for keeping lists and rememberingthe names of his enemies, especially in themedia�and of harassing them.

Yet he and his colleagues learnt fromtheir experience with Mr Erbakan and thearmy in the 1990s. They broke with Wel­fare and set up the AK party in 2001, inmany ways more of a moderate conserva­tive party than a religious one. True, it hasroots in earlier Islamist parties and alsolinks with the powerful Fethullah Gulen

movement, led by a Muslim cleric nowbased in America. But AK still came topower on a moderate platform, promisingto press for EU accession and to pushthrough liberalising constitutional andeconomic reforms.

This was not enough to reconcile thesecularist opposition or the army to Mr Er­dogan’s government. Both have treated AK

with deep suspicion from the outset. Theywere not impressed when the governmentcompleted the economic turnaround be­gun by its predecessor. Nor did they softenwhen it enacted enough reforms to winthe much­coveted opening of EU member­ship talks in October 2005. Nor yet werethey interested in the �rst serious e�ort byany government to talk to the Kurds. To theAK’s opponents, what really mattered wasto safeguard the secularist tradition of Ata­

turk from Islamic fundamentalism.One early �ashpoint was the treatment

of graduates of imam hatip religiousschools. Another was a proposal by thegovernment to make adultery a crime,which was dropped soon after being putforward in order to appease the EU. But themost explosive�and symbolic�issue of allhas been the Muslim veil or headscarf,worn by the wives of both Mr Erdogan andMr Gul, who became foreign minister inMarch 2003. The row over the veil came toa head, as it were, in 2007.

Veils of ignoranceAs in �ercely secular France, the headscarfis banned in state institutions, which inTurkey’s case may include universities.The AK party’s supporters were (and re­main) keen to lift this ban as the numbersof women sporting the veil in public goesup (although there is some evidence thatthe total number wearing it is declining).Yet the government has been hesitant,mindful of opposition from both the armyand the constitutional court.

What brought the issue to a crunch wasthe end of the term of o�ce of the Turkishpresident, Ahmet Sezer, who was a strong­ly secular former judge. In the spring of2007 Mr Erdogan announced that his can­didate to succeed Mr Sezer was none otherthan Mr Gul. The army, under a newishchief of sta�, reacted forcefully. In April2007, in what became known as the e­coup, it posted a message on its websitethreatening to step in to prevent the ap­pointment of a president whose wife worethe headscarf. Soon afterwards, at the urg­ing of Mr Baykal’s CHP, the constitutionalcourt issued a thoroughly dubious rulinginvalidating a parliamentary vote in fa­vour of Mr Gul’s candidacy.

Mr Erdogan responded by calling anearly election in July 2007. AK won a con­vincing victory, with almost 47% of thevote against the CHP’s 21% (although itsparliamentary majority shrank becauseDevlet Bahceli’s far­right Nationalist Ac­tion Party, or MHP, also jumped the 10%hurdle). Armed with his new majority, MrErdogan got his way. Mr Gul became presi­dent in late August. The government alsopromised to change the rules so that in fu­

Balance of power

A mildly Islamist government �ghts it out with the generals

Veiled up and ready to go

10 A special report on Turkey The Economist October 23rd 2010

2

1

ture the president would be elected by thevoters, not by parliament. That has ledmany to predict that Mr Erdogan himselfmight run for the job in 2012.

But though the army was chastened,the government’s troubles were not overonce Mr Gul was installed in the Cankayapalace. An act to permit the headscarf inuniversities was overturned by the consti­tutional court. Next, prosecutors called onthe same court to ban the AK party andseveral named political leaders, includingMr Erdogan and Mr Gul, for pursuingovertly �anti­secular activities�. In late July2008 the court ruled against a ban, but byonly a single vote. (In December 2009 itbanned the main Kurdish political party.)

And still the argument went on. Earlierthis year the AK government drew upmore constitutional reforms, includingprovisions to subject the army to greater ci­vilian control and give parliament moresay in judicial appointments. After failingto win enough support in parliament, thegovernment dropped some plans, notablythose to make it harder to ban political par­ties. But it put those curbing the army, in­cluding provisions allowing leaders of mil­itary coups to be put on trial and allowingthe government to appoint constitutionalcourt judges, to a referendum on Septem­ber 12th this year, which it won by a major­ity of 58% to 42%.

The AK government has thus won mostof its battles with the secularist establish­ment and the army. But its long­drawn­outwar has still had two highly damaging con­sequences. One was to distract the govern­ment. The pace of reform was much quick­er between 2002 and 2005, when Turkey’sEU membership negotiations began, thansince, which is one reason why the talkshave dragged. Worse, the lack of progressin the talks has led many Turks to give upon the EU dream altogether.

The second e�ect was to increase Mr Er­dogan’s autocratic instincts. One mighthave hoped he would soften after almost adecade in o�ce, but he has not. Many jour­nalists complain that the political atmo­sphere makes it unwise to criticise the AK

party in general and Mr Erdogan in partic­ular. Some practise self­censorship. Beforethe September referendum Mr Erdoganthreatened to destroy TUSIAD, the em­ployers’ federation, for not advocating ayes vote. It has become especially hard totry to expose or even discuss the corrup­tion to be found within the AK party.

A prime example concerns the coun­try’s biggest media conglomerate, the Do­gan group. Until 2006 Dogan, which con­

trols two big newspapers, Milliyet andHurriyet, as well as several television sta­tions, had few di�culties with the AK gov­ernment. But in 2007 it fell out with Mr Er­dogan over stories linking party bigwigs tothe diversion of money from a German­based charity. After more unfavourable ar­ticles appeared, the group suddenly founditself the object of an unusually vigoroustax inspection, involving as many as 16­18tax audits in one year, says an insider.

The Dogan a�air is too complex for out­siders to grasp in detail. Tax demands havebeen made and negotiated down, but theamounts have risen. At one point in 2009the group faced a bill as big as $4 billion,reminiscent of Russia’s treatment of theYukos oil company. Dogan has since mend­ed some fences with the government, shutdown a TV programme and sacked a fewcolumnists, so a truce may prevail. The �­nance minister, Mehmet Simsek, insiststhat the tax authorities have acted inde­pendently. Aydin Dogan, the main owner,notes that his media interests, a small partof the group, have proved the most trou­blesome. In its 2009 progress report, theEuropean Commission heavily criticisedthe government over Dogan.

Turkey’s second big political­conspira­cy theory is juicier still. It comes under thelabel Ergenekon, the name for a series ofcharges levelled by prosecutors against va­rious generals and other high­ranking o�­cers. These brass hats are alleged to haveplotted several coups, including one code­named �Sledgehammer�, complete withdetailed plans for the deployment of jet

�ghters and tanks. Many alleged leaderslanguish in prison awaiting trial.

Nobody familiar with Turkey’s post­war history would lightly dismiss allega­tions that a coup was in the making. In 1960the army overthrew the government ofAdnan Menderes, whom the generals pro­ceeded to hang. There was another coup in1971, and yet another in 1980. After that thearmy rewrote the constitution, which witha few amendments remains in force. Themost recent �soft coup� was in 1997.

There is some evidence of a conspiracyin the Ergenekon case. Yet there is also rea­son to believe that over­zealous prosecu­tors have pushed things too far. Some ofthe charges have been dropped and somesuspects released. Dani Rodrik, a Harvardeconomist whose father­in­law is one ofthe generals involved, is not alone in be­lieving that many of the charges are fabri­cated and that the Gulenists and the AK

party have exploited the case to settle oldscores. The truth about Ergenekon may (ormay not) emerge in court but it leaves a badsmell all round.

Enter GandhiWhat of the opposition? The news ismixed. In May the charismatic but ine�ec­tual Mr Baykal was dumped as the CHP

leader after a sex scandal, to be replaced byKemal Kilicdaroglu, known as Gandhi forhis ascetic lifestyle. Mr Kilicdaroglu haspromised to revitalise Ataturk’s party. Sev­eral defectors from the CHP who were fedup with Mr Baykal and in some cases hadeven started new parties have since re­

Kilicdaroglu to the rescue?

The Economist October 23rd 2010 A special report on Turkey 11

2

1

MOST Turkish schoolchildren take partin a weekly �ag ceremony during

which they recite a patriotic chant ending,�Happy is he who calls himself a Turk.�The old Ottoman empire was a patchworkquilt of di�erent nationalities and reli­gions, but Ataturk’s Turkey was intolerantof non­Turks, even though the Lausannetreaty of 1923 recognised the existence ofArmenians, Greeks and Jews. In his bookon eastern Turkey, �Rebel Land�, Christo­pher de Bellaigue recalls going with a Kurd­ish friend to meet a local governor. Whenhe tentatively tries to ask about the treat­ment of minorities, the governor brusque­ly interrupts to say that �we have no mi­norities in Turkey.�

In reality Turkey today is a multi­ethnic,multifaith society. Some 99% of the popu­lation are Muslim, most of them Sunni. Buta minority, perhaps 10­15%, are Alevi, a hu­manist branch of Shia Islam. Turkey alsohas deep regional divides and exceptionalinequality among regions (income perhead around Istanbul is almost ten timesas high as in the poorest eastern prov­inces). It also has some 14m Kurds, who are

Sunni Muslims but ethnically and linguis­tically distinct from Turks. Perhaps 3m ofthem live in Istanbul, which in that sense isthe world’s biggest Kurdish city. But mostare in the poor south­east, where theymake up 85­90% of the population.

I see no KurdsThe Kurdish question is a festering sore inTurkey. That is in part because successiveTurkish governments, egged on by thearmy, have refused to recognise the Kurds’existence. Article 166 of the constitution,which remains in force, declares baldlythat the inhabitants of Turkey are Turks.For many years Kurds went under the de­rogatory label �mountain Turks�. Not onlywas Kurdish culture suppressed, but sowas the language. It was banned in educa­tion, in broadcasting and even in parlia­ment. In the 1990s, Leyla Zana, a newlyelected Kurdish member, was tried andjailed after uttering a few words of Kurdishin parliament.

As in so many countries that have sup­pressed their minorities, a backlash was in­evitable. It came in the form of the Kurdis­

tan Workers’ Party (PKK), founded by thecharismatic Abdullah Ocalan in 1978.Helped for many years by Syria, the PKK

has since 1984 waged a long and violentcampaign against the Turkish army andstate. It has also committed terrorist atroc­ities, especially but not only in the south­east. The PKK is classi�ed as a terrorist orga­nisation in both Europe and America.

The army’s crackdown in response hasbeen even more violent. Troops and tankshave spread out across the region. Fighteraircraft have bombed suspected guerrillabases, including some in northern Iraq andSyria. Thousands of suspects have beenkilled or jailed. A system of village guardswas set up, supposedly to �ght the PKK butas often to intimidate the locals. At theheight of the campaign entire villageswere depopulated and 1m people herdedinto cities.

The grisly details of human­rightsabuses, torture and extra­judicial killingsin Diyarbakir, Batman, Van and elsewherehave been extensively documented bybrave human­rights lawyers and cam­paigners. The death toll over the PKK’s 26­

All Turks together?

Turkey is overcentralised and treats minorities badly

turned to the fold. But the new leader stillneeds more political experience, and be­cause he fought hard for a no vote in thereferendum he has lost some face.

It is a plus that Mr Kilicdaroglu is anAlevi, a member of a liberal Shia Muslimsect. He also has both Kurdish and Arme­nian forebears. Much to his credit, and un­like rather too many AK members, hestands above the usual corruption of Turk­ish politics. His political instincts seemsound. He is strongly pro­EU, calling it a�civilisational project�. He also insists that�we are completely opposed to military in­tervention in politics: the soldiers shouldremain in their barracks.�

Mr Kilicdaroglu expresses proper con­cerns about the autocratic rule of Mr Erdo­gan’s AK party. He accuses the governmentof �limiting freedom� and criticises thetreatment of Dogan and the Ergenekoncase. He claims that the AK party disguisesits religious agenda by switching the focusto secularism as a problem in itself. In for­eign policy he frets about the risk of Turkeymoving away from the West.

The trouble is that his party (over whichhe may not have total control) remains toohostile to reform. Its decision to �ght for ano vote in September’s referendum provedto be a mistake, not so much because theproposals being put to the vote have in­creased democratic control over the armyand the higher judiciary but more becausethe AK won by such a convincing margin.The CHP �ercely resists political conces­sions to the Kurds. Mr Kilicdaroglu insists,not entirely persuasively, that the roots ofthe Kurdish problem are economic, not cul­tural or political (though he is open to theidea of negotiations with the PKK). Hisparty’s vote is very low in the south­east.

Next year’s permutationsWhat will next summer’s election bring?The polls suggest that AK will once againbe the biggest party, with at least 38­40%.But that is down from 2007, and despite thereferendum debacle the CHP could go upto 30%. The main Kurdish Peace and De­mocracy Party (BDP) seems certain to winseats. Much will then depend on whether

the nationalist MHP can again get abovethe 10% threshold (which Mr Kilicdaroglu,among others, would like to see lowered).After the referendum, when many of itssupporters backed the AK, this looked lesslikely. But it could still happen, especially ifPKK violence is resumed�and that mightdeny the AK a majority.

That would make the task of amendingthe 1982 constitution trickier, although itmight at least force the AK party to do it ona bipartisan basis. Mr Kilicdaroglu insiststhat he would never go into coalition withAK. It would be hard, though perhaps notimpossible, for any party to work with theMHP, which espouses disturbingly nation­alist views. A more intriguing possibility isa pact between AK and the BDP, which hastaken over from its banned predecessorand which successfully led a campaign inthe south­east to boycott the Septemberreferendum. Whether such a link couldever work depends mainly on how muchprogress can be made towards solving theKurdish problem. Sadly at the momentthere is not enough. 7

12 A special report on Turkey The Economist October 23rd 2010

2

1

ANATOLIA’S success stories are usuallyabout such places as Kayseri and Ko­

nya. Ankara too has mushroomed out ofnothing, to a point where its population isbigger than that of any other Europeancapital except London, Moscow and Paris.But there are also unsung heroes in thesouth and east. One such is Gaziantep,which with a population of some 1.35m isthe country’s sixth­largest city. Its proud(AK) mayor, Asim Guzelbey, likes to call it�the rising star of Turkey�.

Until recently, Gaziantep (Antep forshort) was a sleepy, poor provincial town.A smattering of tourists were drawn by itsfortress, its ancient history, the Romanmosaics of Zeugma, the Euphrates river, afew old Armenian churches and houses�and its traditional produce of pistachios,hazelnuts and what it claims to be theworld’s best baklava (a sticky pastry). Ap­propriately enough, Antep was the hometown one of Turkey’s earliest tourismministers, the CHP’s Ali Ilsan Gogus, whobegan the development of Turkey’s Medi­terranean coastline in the 1960s.

But in the past few years Antep hasblossomed. Dotted around the city arefactories making carpets, shoes, plasticpackaging, white goods and much else.Mr Guzelbey says the region now pro­duces $4 billion­worth of annual exportswhich he claims support 100,000 newjobs in four big industrial estates. Unem­ployment is down to 9­10%, less than thenational average and far below the levelin the more predominantly Kurdishsouth­eastern region of Turkey.

Mr Guzelbey naturally attributesmuch of Antep’s success to his ownparty’s e�orts. When he took o�ce in2004 the city was heavily indebted, tran­

sport links were poor and there was al­most no foreign investment. All that haschanged. The airport is heaving with visi­tors from abroad and the roads are vastlyimproved. Managers at Royal Carpets, abig local producer, concede that the AK

government has been helpful, o�ering taxcuts, trade promotion�and, perhaps mostimportantly, visa liberalisation.

The secret of the region’s new strengthlies in its ancient links with Syria and Iraq.Antep is on the old silk road that leads toAleppo. Partly thanks to the abolition ofvisa requirements for Syrians, cross­bor­der trade is booming. According to Mr Gu­zelbey, over half the region’s exports now

go to Iraq, Syria or elsewhere in the Mid­dle East and only a quarter to Europe. Thathelped exports from Antep rise by 6% invalue in 2009, whereas those from Turkeyas a whole fell by 20%.

Antep’s new links with the Arab worldrecall its own history. Besides being on thesilk road, it is famous mainly for its heroicten­month resistance against a siege byFrench forces in 1921. Although the cityeventually capitulated, the nascent Turk­ish parliament awarded it the honori�cpre�x Gazi, �warrior of the faith�. In itsmix of Muslim piety and hard­headedbusiness nous, Gaziantep speaks volumesabout modern Anatolia�and Turkey.

Gaziantep’s rise and riseSilk road to riches

Now where are those baklavas?

year­old insurgency has reached 40,000,most of them Kurds. That is more than tentimes the number killed during the IRA

campaign in Northern Ireland.Even government o�cials concede that

the Kurdish problem cannot be solved byforce alone. The PKK was weakened by thecapture and imprisonment of Mr Ocalanin 1999 (he is now held on an island near Is­tanbul). The level of violence has declined

somewhat, and the PKK has periodicallydeclared cease�res (one is in force now).Yet the organisation is not defeated, andthe autonomy won by the Kurdish regionof northern Iraq will inevitably give it sus­tenance. The Kurds’ grievances which thePKK has exploited remain unsettled.

That is not entirely for want of trying.Successive governments have poured re­sources into the region, believing that the

problem is caused partly by the south­east’s backwardness and poverty. Thesouth­eastern Anatolia project (GAP) is themost ambitious and expensive infrastruc­ture project Turkey has ever undertaken; inthe 1990s it represented some 5­8% of all in­vestment in the country. It aimed to im­prove agriculture and provide water andelectricity to poor south­eastern villagesaround the Tigris and Euphrates rivers. Its

The Economist October 23rd 2010 A special report on Turkey 13

2 network of dams has boosted farm pro­ductivity and raised living standardsacross the region.

Some parts of the east and south­easthave also joined in the wider Anatolianeconomic boom of the past two decades.The city of Gaziantep, in particular, has fol­lowed the better­known example of Kay­seri into manufacturing. In recent yearsGaziantep and much of the surroundingregion have also bene�ted greatly fromgrowing trade with Syria and Iraq (see box,previous page). Yet poor education and in­frastructure, a deeply conservative Muslimculture and the violence of the PKK contin­ue to discourage investment.

The AK government has tried harderthan any predecessor to make amends.Soon after it came to power, it allowed the�rst ever Kurdish­language televisionbroadcasts. Mr Erdogan has paid severalvisits to Diyarbakir, the Kurds’ uno�cialcapital. In 2005 he went so far as to admitto past mistakes, apologise for Turkey’smistreatment of the Kurds and recognisetheir legitimate aspirations. He was re­warded with a strong showing for the AK

party in the 2007 election, when it wonmore votes in the region than the mainKurdish party. More recently the govern­ment has worked hard to reach an accom­modation with the Kurds of northern Iraq.

Yet any Turkish government, no matterhow strong, is constrained by two power­ful forces: the army and the nationalists.The army resists concessions to the Kurdsbecause it does not want to seem soft onterrorism. Conspiracy theorists also pointto evidence of a �deep state� that prolongsthe �ght against the PKK by staging terroristacts itself. Nationalists, meanwhile, fretthat gestures to meet demands for greater

autonomy will inevitably lead to thebreak­up of Turkey. Both opposition par­ties, especially the far­right MHP, have�ercely resisted openings towards theKurds, which is one reason why they winso few votes in the south­east.

Yet in �ts and starts, and under pressurefrom the EU, Mr Erdogan has persistedwith his overtures. In mid­2009 his gov­ernment launched an initiative it calledthe Kurdish opening, later renamed thedemocratic opening (and labelled by a lo­cal AK o�cial as the �national unity andbrotherhood project�). The same year sawthe start of the �rst state­owned 24­hourKurdish­language TV station. And in ablaze of publicity, the government gave anamnesty to a clutch of disarmed PKK �ght­ers based in northern Iraq, allowing themto return home unmolested.

Sadly, this particular move back�red.Instead of returning quietly home, the PKK

men triumphantly paraded in uniformthrough the streets of Diyarbakir. Turkishnationalists and the army were indignant.The government withdrew a promise to letmore �ghters return�and the PKK resumedbattle. It was widely noted that, on thesame day that the nine Turkish civilianskilled aboard the Mavi Marmara were giv­en huge media coverage, six soldiers losttheir lives to the PKK in the south.

Devolution, devolutionHard as it may be, more will have to bedone to assuage Kurdish feelings. Turkeyneeds to stop the common practice in thesouth­east of arresting and jailing electedmayors for allegedly expressing PKK sym­pathies. As part of a new constitutionpromised by Mr Erdogan after the nextelection, article 166 about the inhabitants

of Turkey being Turks could be dropped.Allowing Kurdish­language teaching inschools would also be a good idea, but it iscontroversial. The governor of Batman, forexample, expresses cautious support for it,but the governor of Diyarbakir is against.Yet steps like these will be needed if Turkeyis ever to get into the EU. And the 1923 Lau­sanne treaty states clearly that �no restric­tions shall be imposed on the free useðofany language.�

Turkey’s regional problems go beyondthe Kurdish question. Thanks to Ataturk,the country is excessively centralised. Thegovernors of all 81 Turkish provinces areappointed by the government in Ankara.Over time most have become AK men.Education is still largely run from the cen­tre, on the traditional French model. Giventhe country’s size and diversity, that maynot be the most sensible approach. Turkeynow badly needs a debate on more devo­lution of power to democratically electedlocal bodies.

What about the army and the national­ists? Mr Erdogan and the AK may now bewell placed to call their blu�. By winningthe referendum on constitutional changesin mid­September by such a wide margin,the AK government has shown the weak­ness of the nationalist opposition, espe­cially the MHP. This, and the promise of anew constitution next year, may create anopportunity for imaginative gestures. Thatthe main Kurdish party, the BDP, persuad­ed so many Kurds to boycott the referen­dum serves to show again that neither it,nor the PKK, can be ignored.

BDP o�cials in Diyarbakir dismiss theso­called Kurdish opening as rubbish. Theparty is wary in part because its predeces­sor, the DTP, was banned by the constitu­tional court in 2009. But its success overthe referendum boycott re�ects its continu­ing appeal to Kurdish voters. It will win itsusual clutch of seats in next year’s election.If AK fails to get a majority, it could doworse than seek a deal (if not a formal co­alition) in exchange for BDP support.

That would, however, require conces­sions such as Kurdish­language education,more power for local mayors and reiningin the army. British experience in NorthernIreland also suggests that the AK govern­ment may yet have to talk to Mr Ocalan di­rect. Sezgin Tanrikulu, a lawyer with theHuman Rights Foundation in Diyarbakir,declares portentously that Turkey is nearthe �last exit� with the Kurds. But if Mr Er­dogan is bold enough to seize the moment,he could yet crown his premiership with apeace settlement in the south­east. 7

Ready to bring out the guns again?

14 A special report on Turkey The Economist October 23rd 2010

Previous special reports and a list offorthcoming ones can be found online

Economist.com/specialreports

Future special reportsSmart systems November 6th 2010Japan November 20th 2010Security in Asia December 4th 2010Global leaders January 22nd 2011Property February 12th 2011

IT HAS become a joke for The Economist tosay that a country is at a crossroads, yet

for Turkey it happens to be spot on. Thenext year or two will be critical to wherethe country is going.

The economy is in better shape than atany time since the second world war. At itscurrent breathtaking growth rate Turkey iscatching up fast with the poorer countriesof continental Europe. The political judg­ment is less straightforward. The AK gov­ernment under Mr Erdogan has done morethan any since Ataturk to reform Turkey. Ithas pushed through many political and le­gal reforms. It has taken big steps towardsresolving the Kurdish question. If it is re­elected next year, AK will make an overduestart on rewriting the constitution drawnup after the 1980 military coup.

Yet this is also where the doubts start tocreep in. The secular establishment’s con­cern about Mr Erdogan and the AK partyhas always been that behind the reassur­ing �mildly Islamist� label lie deeper fun­damentalist ambitions. People in the cafésof Istanbul fret that, if the veil were al­lowed in state institutions, the next stopwould be Iran. Yet although many in AK,including Mr Erdogan, are doubtless pious,Turkey is surely too democratic, pluralistand, well, modern for this to be a seriousdanger. The lesson of the past decade isthat the secularists have cried wolf too of­ten�and as a result have lost most of theirbattles with AK.

It is the condition of Turkey’s democra­cy that is more worrying. The AK leader­ship, especially Mr Erdogan, has provedhighly partisan and intolerant of criticism.That has turned Turkey into a deeply divid­ed country. The results of the Septemberreferendum were revealing: a big yes inmost of Anatolia (save in the Kurdish re­gion) but a �rm no in large parts of Istan­bul, Izmir and the west. To overcome suchdivisions when it comes to drawing up anew constitution, Mr Erdogan needs to�nd a way of working with the opposition,but he shows no signs of doing this. Turkeyhas long lacked a credible opposition, butthe new CHP leader, Mr Kilicdaroglu, couldyet come to �ll that gap.

A longish period of one­party rule hasalso fostered a culture that tolerates cor­

ruption at the heart of the government.The party’s leaders may be clean, butmany of those around them are not. An­other problem is Mr Erdogan’s autocraticmanner, which risks trammelling free de­bate in the media. Critics who sometimesliken him to Russia’s Vladimir Putin havegot it wrong, but many journalists in Istan­

bul and Ankara now feel that they cannotsay or write what they think.

Turkey is not the only European coun­try to su�er from corruption, autocraticleadership or fears about a free press. Butbecause there are already so many vocalopponents of its aspirations to join the EU,its membership hopes are damaged everytime that there is a fresh outburst of criti­cism from Brussels of another bout of po­litical turmoil at home.

Keep perseveringPlenty of Turks, including some in AK, arestarting to say that it does not matter. TheEU is not going to admit Turkey anyway,they argue, so why should they care whatthe Europeans think? Yet in truth, althoughTurkey has developed new relationshipsin the Middle East and even with Russia, asa liberal market democracy it has no realalternative to Europe. Its hopes of joiningthe EU may not be realised for many years,but Turkey will not be the �rst country thathas had trouble getting in: Britain took 12years and Spain nine.

Besides, Turkey needs to keep on mo­dernising for its own sake, not just toplease the Brussels bureaucracy. So long asit keeps on track, it will continue both tothrive and to matter�and an EU that wantsto remain relevant will �nd it increasinglyhard to keep Turkey out. 7

In it for the long haul

But a liberal democracy ready to join the EU is still the best bet

What would Ataturk say?

Economist.com/rights

O�er to readersReprints of this special report are available fromthe Rights and Syndication Department. A minimum order of �ve copies is required.

Corporate o�erCustomisation options on corporate orders of 100or more are available. Please contact us to discussyour requirements.

For more information on how to order specialreports, reprints or any queries you may haveplease contact:

The Rights and Syndication Department26 Red Lion SquareLondon WC1R 4HQ

Tel +44 (0)20 7576 8148Fax +44 (0)20 7576 8492e­mail: rights@economist.comwww.economist.com.rights