Sensing a Turkish upswing

I'd like to make a bet that Türkiye – the official name for Turkey since 2021 – is about to make a comeback after years of disastrous economic policies, fear-mongering leadership and regional turmoil.

Being invited this week by the Bruegel think-tank in Brussels for a discussion with Turkish Treasury & Finance Minister Mehmet ?im?ek felt like reliving the start of a memorable upswing back in the late 1990s. Back then, against the odds, Ankara quelled years of political chaos, conquered runaway inflation and successfully wooed the EU for an invitation to join the club.

If we believe Minister ?im?ek, President Erdo?an has abandoned an economic ideology that kept interest rates artificially low and drained foreign currency reserves. ?im?ek says he is getting a grip on inflation, promising it will decline after peaking at 70% this month. His past year running the budget has already brought an improved balance of payments, inflows of cash and a lower cost of borrowing. Similarly to the self-imposed stabilization package of the late 1990s, he seemed to have a good economic outlook to talk about.

When I asked him whether any political reforms would follow his recent budgetary measures, he talked up the long-moribund Turkish candidacy to join the EU. He? invoked a longing for a “European anchor”,? the EU's “rules-based system” and an “engine” to bring the country back into a “virtuous circle.” His numbers showed how close the two sides remain in economic terms: for instance, the EU accounts for two-thirds of inbound Turkish investment, 41% of Turkish export sales, and 41% of tourists to the country.

The Turks have had?a rough decade, going through the crushing of the country's Kurdish movement, alarming wars close by, the inflow of 3.6 million Syrian refugees, a terrible earthquake in February last year and (as ever) financial crisis. But already during my most recent visit in April, I had the impression of change in the air. It isn’t just that the opposition swept to power in key municipal elections in March and – despite much Islamification of public spaces over the past two decades – Islamic sloganeering is not such a central fixture. From digital government, to a lack of power cuts, to better roads, to how people talk, things just seemed to be working a bit better.

In Brussels, ?im?ek answered questions openly and showed a gentler side of the country long missing from the public stage. “We’d like to mend fences,” he offered.

I asked ?im?ek if anyone he met officially in Brussels or other European capitals had responded favourably to his message that “Türkiye is ready”. The minister demurred. Such European encouragement as he received, he said, was more personal than institutional. But “they seem constructive”, he added, and “markets are coming round.”

Just as in the 1990s, a good portion of ?im?ek’s Q&A discussed the question of whether Turkish leaders really wanted to join the EU at all – and vice versa. The minister himself preferred, like many Turkish leaders in the past, to plea to focus on “the process”, not the end goal, to see what happened if and when convergence worked.

European participants in the audience seemed sceptical that EU leaders would go that far. When it came to re-embracing the goal of Turkish membership of the EU, "Europe is not ready," said economist André Sapir, a Bruegel Senior Fellow and my fellow panelist.?Former top EU official and ambassador to Ankara, Stefano Manservisi, noted from the audience that even the unique 1995 customs union with the EU was invented to keep the country out.

Indeed, Türkiye’s EU progress report for 2023 points out that accession talks are “at a standstill” since at least 2018. The report is stiff with phrases like “no progress”, “backsliding,” and “serious deficiencies.” As in the 1990s, issues of human rights and rule of law stand out as big obstacles to any normalization.

At the same time, much has changed. One of ?im?ek’s slides showed how the old unspoken European prejudice that the country was “too big, too poor and too Muslim” is now at least partly wrong. While purchasing power per capita was just 40% of the European average in 2001, it’s now reached 74%.

Indeed, when I started living in Istanbul in the 1980s, there were just 30 often ageing planes in the Turkish Airlines fleet. That’s about the number of planes I saw last month from one window of Istanbul’s vast new airport. Turkish Airlines says it's the biggest in Europe, and that today's fleet of over 440 planes serves 272 destinations in more countries than any other carrier in the world.

That's not all. An economy whose leading exports were hazlenuts and figs in the 1980s now sells drones that change the course of foreign wars. Compared to the 1990s, little armed conflict now happens inside the country. And the 3m-4m people of Turkish origin in EU states are now far better integrated and rising in European societies, changing perceptions of their mother country.

It may be that if technocrats like Minister ?im?ek can get Türkiye's act together, European leaders may accept his revival of Ankara's old argument that collaboration with a country of its size and growth could be an advantage. He pointed out that the EU's combined GDP has now fallen to 17.5% of the global total from 28.6% in 1980. It's possible too that Europeans can learn to look with new eyes at a richer, potentially better-run, and, dare I say, still relatively secular country.

I remember the December 1999 moment that the EU issued its invitation to join, an amazingly proud and happy day for many Turks. It kick-started years of real progress. Perhaps a more constructive approach from both sides could be an opportunity to bring back those happier days again.