The political situation in Turkey has become increasingly polarized in recent years. While Erdogan's AKP party maintained power through local and presidential elections in 2014, the government has faced growing criticism over its crackdown on opposition and perceived erosion of democratic norms. Key issues include restrictions on freedom of expression, lack of judicial independence, and polarization of Turkish society. The European Union has expressed mounting concern over these developments and doubts whether Turkey still meets the basic requirements to be a candidate country for EU membership.

1. A bridge
on the Bosphorus
Understanding EU-Turkey relations in 2015

2. FOREWORD 3
POLITICAL SITUATION 4
DOMESTIC SITUATION 4
THE EUROPEAN PERSPECTIVE 6
ECONOMIC SITUATION 8
SUMMARY 10
RECOMMENDATIONS 11
TABLE OF CONTENTS
2
Author: Giovanni Collot; additional reporting by Mareike Trull
Sources:
Eurochambres, EU-Turkey Relations: perspective by the European Business Community, 2013
European Commission, Turkey Progress Report, October 2015
European Parliament, Joint motion for a resolution on freedom of expression in Turkey, 14 January 2015
Fitch, Ratings 2015, fitchratings.com
ISPI, The Uncertain Path of the ‘new Turkey’, available online at ispionline.creatavist.com/turkey
Pierini M., Ülgen S., A moment of opportunity in the EU-Turkey relationship, Carnegie Europe, 14 December 2014
Reporters without borders, Press Freedom Index 2015, index.rsf.org
Transparency International, Corruption perception index 2014
Ucer M., Turkey’s economy: now for the hard part, in Foreign Policy, August 12, 2014, http://goo.gl/0HFj4B
World Bank, Doing Business Index 2015, doingbusiness.org/rankings
Various articles from the online, English-language editions of Zaman (todayszaman.com) and Hurriyet (hurriyetdailynews.com)
newspapers
Plus, original research based on contributions by the following stakeholders:
Alfio Anzalone, Bilateral Trade Relations with Turkey, DG Trade, European Commission
David Borrelli, MEP
Jean Cristophe Filori, Head of Turkey Unit, DG Neighborhood and Enlargement Negotiations, European Commission
Giles Portman, Turkey Advisor, EEAS
Dirk Vantyghem, Director of International Affairs Department, Eurochambres
Serdar Yesilyurt, Brussels Representative for Tuskon
Edited by UNITEE, The New European Busines Confederation, 2015
The information contained in this publication does not necessarily reflect the position or opinion of the stakeholders
involved.

3. FOREWORD
I am delighted to present UNITEE’s 2015 position
paper ‘A bridge on the Bosphorus: under-
standing EU-Turkey relations in 2015’. It is the
second yearly report published by UNITEE on the ever
important issue of Turkey-EU relations and their effects
on the economy. It is based on research, several inter-
views and meetings with stakeholders and provides
crucial guidance and insights for our members and pol-
icy makers involved in EU-Turkey business and trade.
In the last two years the political situation in Turkey has
changed drastically, leaving many investors and entre-
preneurs puzzled about how to handle increasingly diffi-
cult circumstances. UNITEE, together with many other
European stakeholders, is worried about the erosion
of the rule of law in Turkey. and believes it to
have a negative influence on the business and
investment climate in the country.
The attacks on freedom of speech, the inadequate
response to the corruption scandal, in combination with
the growing political polarisation, are key signs that
the Turkish government is still moving in the
wrong direction. As a consequence, the relationship
with the European Union, Turkey’s first economic part-
ner, has quickly deteriorated.
So far, the current instability has had so far clear eco-
nomic consequences. The once sustained growth
now has gone; international and domestic companies
alike have stopped considering Turkey an ideal market
to invest into. But to what extent has and will it influence
the real economy? What should be done in order to pre-
vent further damage to trade and business?
As a business confederation representing only SMEs
and business professionals with a migrant background,
most of them being of Turkish descent, it is our mis-
sion to promote European foreign trade and in-
ternational relations, especially with Turkey. As a key
market for European business, as a European Un-
ion accession candidate and due to its important
geostrategic position as the bridge to Asia and the
Middle East, Turkey is of the utmost importance to the
European Union and European businesses.
Our members have a key interest in the develop-
ments currently taking place in the country, both on a
personal and professional level, and expressed the wish
to learn more about the possible implications on
business and trade.
This position paper wants to shed light on the complex
chain of events unfolding in Turkey, analysing the politi-
cal as well as the economic situation in the country and
offering concrete recommendations to overcome
the recent challenges. In doing so, we hope to an-
swer our members’ concerns and support their entre-
preneurial engagement in the region.
Finally, we are very grateful to all involved stakeholders
that supported our research and analysis, providing us
with the basis of this objective and fact-based position
paper.
Dr. Adem Kumcu
President of UNITEE
New European Business Confederation
3

4. OPENING OF ACCESSION
NEGOTATIONS
The EU leaders agree to
begin the accession
process with Turkey. But
the negotiations, once
started, have
immediately stalled.
TIME
REFERENDUM ON PROPOSED
CONSTITUTIONAL REFORM
The results showed the
majority supported the
proposed constitutional
amendments, with 58% in
favour and 42% against.
03 OCTOBER 2005
28 MAY 2013
START OF GEZI PARK
PROTESTS
Starting as a manifestation against the govern
ment-backed building of a mall in Istanbul’s
Gezi Park, the protest quickly expanded to
become the largest movement ever against
the AKP’s rule, to whom the government
answered with increasing severity.
30 SEPTEMBER 2013
DEMOCRATISATION
PACKAGE
Prime Minister Erdogan unveils a series of
measures widely praised for their opening
towards a more democratic and liberal
society. Special focus is put on the Kurdish
issue.
07 JANUARY 2014
AS A CONSEQUENCE
TO A GOVERNMENT’S
DECREE, 350 POLICE
OFFICERS ARE REMOVED
FROM THEIR POSITIONS
With a government’s decree, 350 police
officers are dismissed, as an answer to the
continuing corruption probe.
INTERNET LAW 5651/2007
18 FEBRUARY 2014
The new law, signed by President Gul,
tightens governmental control of the internet,
sparking accuses of censorship.
JUDICIARY R
26 FEBRUA
President Gul sign
government contr
judges and prosec
12 SEPTEMBER 2010
16 DECEMBER 2013
EU-TURKEY VISA LIBERALISATION
DIALOGUE LAUNCHED
Ankara and Brussels signed an agreement
exchanging more control on clandestine im
migration from Turkey with talks for Visa-free
travel for Turkish citizens.
17 DECEMBER 2013
TURKEY POLICE STRIKE
AGAINST BRIBERY AND
CORRUPTION CIRCLE
The corruption scandal explodes with the
arrest by the police of 47 suspects of bribery,
among whom the sons of three Ministers and
many officials, shaking the government.

5. ELINE
REFORMS
ARY 2014
ns a second bill boosting
rol over the appointment of
cutors.
30 MARCH 2014
LOCAL ELECTIONS
The local elections see a victory of the
AK Party with 42,87% of the votes,
showing continuing support of the
government among the population.
21 APRIL 2014
JUDICIARY LAW
INCOSTITUTIONAL
Turkey’s Supreme Court
overturns the law on the judiciary
on the basis that it goes against
the separation of powers.
13 MAY 2014
SOMA COALMINE
DISASTER
Turkey's worst ever mine disaster
in Soma claims at least 282 lives.
PRESIDENTIAL ELECTIONS
10 AUGUST 2014
Prime Minister Erdogan wins the first direct
popular election for president with 51,79%
of the vote; Foreign Minister Davutoglu
becomes the new Prime Minister.
3 OCTOBER 2014
YES TO OPERATIONS
AGAINST ISLAMIC STATE
The Parliament approves a motion authorising
possible Turkish military operations against
militants in Iraq and Syria who threaten Turkey.
EU PROGRESS REPORT 2014
14 OCTOBER 2014
The EU-published progress report criticises
negative developments of the previous year
and calls for reform, but it also acknowledges
that progress has been made.
14 DECEMBER 2014
OPPOSITION MEMBERS
ARRESTED
Police raids opposition media outlets
and arrest 24 journalists on suspicion
of plotting to seize power.
EUROPEAN PARLIAMENT
PROGRESS REPORT
16 JANUARY 2015
The European Parliament warns that Turkey
does not meet the EU's expectations for a
candidate country due to issues related to
freedom of speech and lack of transparency.

6. POLITICAL SITUATION
A
fter the Gezi Protest in late
2013 and the subsequent
bribery allegations that even
touched upon some ministers and
then Prime Minister Recep Tayyip Er-
doğan, 2014 began with a lot of
pressure on Ankara. The political
instability threatened to grow as the
country headed towards two impor-
tant elections: first, the local elections
on 30th March; and even more impor-
tantly, August’s presidential elections,
a consequence of 2007’s constitution-
al reform, for the first time introducing
popular election of the President.
The importance of such electoral ap-
pointments went beyond their dem-
ocratic value: they represented a
trial for government party AKP and
its leader Erdoğan after the turmoil.
Would the party lose ground after its
takedown of opposition during the
previous months? In this respect, the
polls’ outcome was clear: Erdoğan’s
AK party managed to secure the ma-
jority of 42.89% in the local elections.
In what has to be seen as an even
more important victory, and as such
has been celebrated by the leader
itself, on the 10th August 2014 Er-
doğan was elected as the new
President with 51.8% of the
votes in his favour. Following his
change of office, since-then Minister
of Foreign Affairs Ahmet Davutoğlu
became the new Prime Minister on
the 28th August 2014, establishing a
new government. The results show
clearly that since 2002, the AKP re-
mained the strongest party in Turkey,
with no serious opposition. The gen-
eral elections, scheduled for the 7th
June 2015, will likely not modify this
situation.
The victories in the polls though did
not invert AKP’s perceived slide to-
wards autocracy, as denounced by
many inside and outside the coun-
try: on the contrary, worrying events
have multiplied, casting more than a
couple of shadows on the long-terms
development of the Turkish democra-
cy. An example of this approach is the
government’s response to alle-
gations of corruption targeting
high-level personalities, includ-
ing members of the government and
their families: this response consisted
in particular in amendments to the
Law on the High Council of Judges
and Prosecutors and subsequent nu-
merous reassignments and dismissals
of judges and prosecutors, as well as
reassignments, dismissals, or even
detention, of a large number of police
officers, thus limiting the judiciary’s
independence and transparency. The
unconstitutionality of such measures
has been pointed out also by the Con-
stitutional Court. As a consequence,
DOMESTIC SITUATION
4
51,8%percentage of VOTES
in ERDOĞAN’S FAVOUR
in August’s PRESIDENTIAL
ELECTIONS

7. the parliament amended the legislation
and brought back previous provisions.
Another sector of particular concern in
the past year has been freedom of ex-
pression, as is represented by Turkey’s
154th position in the World Press Free-
dom Index Amendments to the Internet
Law restricted freedom of expression on
the internet. Bans on YouTube and Twit-
ter were met with raging protests, to be
then repelled by the Constitutional Court
that as a consequence fell victim to an in-
dictment by Erdoğan: “We have to obey
the Constitutional Court’s decision, but we
don’t have to respect it,” he said. “While
the court sided with an American compa-
ny in this decision, it denigrated our na-
tional values.”
State officials continued making state-
ments having an intimidating effect on the
media. This, together with the ownership
structure of the Turkish media sector,
led to widespread self-censorship of the
press, as well as resignations and dis-
missals of journalists. The most disturbing
event on this respect consisted of the
arrest of 23 people, among whom
the editor-in-chief of Zaman newspaper,
Ekrem Dukanli, in a raid against members
of the opposition on 14th December, on
suspicions of plotting to seize power.
All the above can be understood as part
of the ongoing fight against the so-called
‘parallel state’, as Erdogan calls those
organised groups loosely connected by
their inspiration to Hizmet movement and
its leader, exiled cleric Fethullah Gülen, a
long-time supporter now turned critic.
In the last years those movements, well
present in the Turkish society, have gone
through repression by the government,
which accuses them with harsh tones of
being parts of a foreign conspiracy.
The developments, broadly outlined
above, bear witness to a more general
tendency of Turkish politics, which has
been evident in the last years: an in-
creased polarisation. Also thanks to
AKP’s overwhelming majority, sever-
al pieces of legislation proposed by the
government were adopted without prop-
er parliamentary and civil society debate.
In the midst of these worrying events,
it has to be pointed out there have also
been some positive initiatives that par-
tially counterbalance them, at least in
the shorter term: several measures an-
nounced in the democratisation pack-
age presented in September 2013 were
adopted and implemented. These
measures, amongst others, decreased
the limits for budget support to political
parties, allowed the conduct of political
activity in languages and dialects other
than Turkish, and provided for private
education in languages and dialects
other than Turkish. In the same spirit,
in June, the Turkish parliament adopt-
ed a law aiming at a solution of the
Kurdish issue.
A last point of interest is foreign poli-
cy: after a period of ambiguity, 2014
has seen a stronger presence of
Turkey in neighboring war-torn
Syria and Iraq. The new Davutoğ-
lu’s government has started to give sig-
nals of a change in its position towards
the conflict, with a more active role
in strongly condemning the Islamic
State (IS) and providing vital human-
itarian assistance to more than 1
million Syrians fleeing their country.
Some improvements in cooperation
with the European Union have taken
place in the energy field: solid foun-
dations were laid for greater Europe-
an energy security with the adoption
of the final investment decisions for
the realisation of the three Southern
Gas Corridor projects.
5
The rule of law and the respect
for fundamental freedoms form
the core of the EU negotiation
process. In this respect, Turkey
currently does not meet the ex-
pectations that we have for an EU
candidate country.
KATI PIRI, EP Rapporteur
on Turkey

8. 6
T
he above mentioned facts have
been closely followed by the dif-
ferent institutions of the Europe-
an Union with interest and mounting
concern. The EU-Turkey relationship is
a long and tormented one; the negotia-
tions for Ankara’s accession to the EU,
started in 2005 by the AKP government
with a lot of expectations, now looks
grim and at an historic low. Turkey’s
new government’s renewed interest
towards an EU membership, mani-
fested by the appointment of the more
conciliatory Volkan Bozkir as Minister
of European Affairs, does not seem to
be a decisive aspect in changing the
general perspective. A huge part of
these disagreements comes from An-
kara government’s controversial
behaviour in the past two years.
One of the starkest criticisms has come
from the European Parliament. In their
unusually harsh Progress Report 2015,
MEPs show their concern for the
’backsliding of democratic re-
forms’, warning that Turkey currently
does not meet the EU’s expectations
for a candidate country. Kati Piri, the
special rapporteur on Turkey at the
Parliament has in particular pointed
out: “The rule of law and the respect for
fundamental freedoms form the core of
the EU negotiation process. In this re-
spect, Turkey currently does not
meet the expectations that we
have for an EU candidate coun-
try. The concerns of the European Par-
liament focus on the freedom of speech
and the independence of the judiciary
- both essential components of an open
democracy”.
The attacks on freedom of speech in
particular are perceived as the most
serious issue. To clarify the point, on
15th January 2015 the European Par-
liament approved a resolution on
freedom of expression in the
country, as a response to Decem-
ber’s police raids and the detention
of a number of journalists and media,
stressing that “these actions call into
question the respect for the rule of law
and freedom of the media.” “Freedom
of expression and the freedom of the
media remain fundamental to the func-
tioning of a democratic and open soci-
ety,” the resolution added.
The European Commission echoed
these concerns, by pointing out how
“the government’s response to allega-
tions of corruption targeting high-lev-
el personalities, including members
of the government and their families,
raised serious concerns over the inde-
pendence of judiciary and the rule of
law.”
EUROPEAN COMMISSION, Turkey Progress Report,
October 2014
THE EUROPEAN PERSPECTIVE
The government’s response to allega-
tions of corruption targeting high-level
personalities, including members of the
government and their families, raised
serious concerns over the independence
of judiciary and the rule of law.

9. 7
These disagreements are having a
negative effect on the accession nego-
tiations, which are currently on hold.
The recent events, having depleted the
EU’s optimism on the topic, have also
pushed the Turkish public opinion fur-
ther away from the accession process,
which they see as “seriously biased”.
President Erdoğan has even accused
Brussels of ‘Islamophobia’ due to the
criticism. To further complicate things,
the Cyprus dispute is far from re-
solved: despite its pledge to respect
the current obligations, Turkey contin-
ues not to recognize Cyprus the access
to its ports and to challenge its rights on
hydrocarbon resources in the Mediter-
ranean.
Notwithstanding the bad relationship,
EU institutions recognise the fun-
damental importance of Turkey
as a partner: “even if Member States
are cautious about opening new nego-
tiation chapters now, they agree on An-
kara’s key strategic role”, argues Jean
Christoph Filori, from DG Neighborhood
and Negotiations Agreement at the EU
Commission. There is still room for a lot
of important progress to be made.
Indeed, the current approach by the
EU is to keep the collaboration
open where possible, by not only
focusing on the accession process but
trying to sustain progress in other ar-
eas, even looking for support in those
parts of the government and the soci-
ety which might be supportive. This in
the long-term, in the eyes of the EU,
will help foster better relations and fos-
ter the accession process to restart in
better conditions. “Mrs Mogherini (the
Special Representative of the EU) has
introduced a broader approach, look-
ing at all sides of the cooperation with
Turkey”, commented EEAS’ Giles Port-
man.
The signature of the EU-Turkey read-
mission agreement on 16th December
2013 in parallel with the start of the
visa liberalisation dialogue has
proven that successful cooperation is
still possible on vital issue. The read-
mission agreement has entered into
force on 1 October 2014. In the same
way, the EU institutions have met with
satisfaction Turkey’s enhanced role in
the Middle East: “the EU and Turkey
are strategic partners that need each
other in the fight against terrorism and
in finding solutions to the very serious
developments in the region surround-
ing Europe, especially in Syria and
Iraq”, Kati Piri commented. “There
are still many possibilities to further
develop economic relations and the
EU also has a moral duty to help Tur-
key with the reception of 1.6 million
Syrian refugees”.
Turkey also informed the Commission
of its interest to contribute to the EU
Investment Plan, notably within en-
ergy projects. The energy aspect
has gained importance since the out-
break of the Ukraine crisis and the
tense situation with Russia. Now the
‘South Stream’ project has officially
been put on hold, Europe is eager to
secure its energy supplies though oth-
er channels.
“The EU cannot afford los-
ing Turkey”, Serdar Yesilyurt from
Tuskon adds. “It should rather devel-
op a clever strategy involving a clear
stance against threats to basic free-
doms and the separation of powers,
while cooperating on economic, mili-
tary and foreign policy issues”.
Even if Member States are
cautious about opening new
negotiation chapters now, they
agree on Ankara’s key
strategic role.
JEAN CRISTOPHE FILORI, Head of Turkey Unit
DG Neighborhood and Enlargement Negotiations

10. 8
T
he domestic and external polit-
ical turmoil, now in its second
year, has been accompanied
by a slow-down in the Turkish
economy. After a decade of high
growth that brought the country to
become the 17th economy in the
world, today it is experiencing signif-
icant problems due to the decelera-
tion of growth rates. The last quarter
of 2014 saw a GDP growth of just
1,7%, much lower than expected. At
the same time, inflation is still high, at
8,17%, with the Lira at a record low of
2,45 per dollar. It is worth to remind
that the Lira’s plunge has endangered
the Turkish economy as, when the
Lira loses value, it becomes more ex-
pensive for Turkish companies to re-
pay their loans in foreign currencies.
The lackluster situation of the Turkish
economy is confirmed by a general
worsening of its position in in-
ternational ratings. According to
the World Bank’s Doing Business In-
dex, Turkey is number 55 in 189 coun-
tries, thus losing four positions from
2014. Fitch, for their part, confirmed
also for 2015 its rating of BBB-.
Such an overview shows how the
Turkish business environment is be-
coming less and less favourable,
both for domestic business and
external companies. According to
many observers, there are three main
causes to explain the current difficul-
ties. The first one is structural, due
its growth based on an unsustaina-
ble construction boom in the past.
“Turkey is now approaching a new
economic turning point in the sense
that GDP per capita in current pric-
es has now passed the 10,000-dollar
threshold, placing itself among the
middle-income economies”, argues
Mustafa Kutlay, TOBB University.
“Turkey’s economy is still based on
mid-tech manufactured goods, show-
ing that Turkey is far from being a suc-
cessful country in term of high tech
value exports”.
The second set of causes is the in-
ternational environment. The
current instability in the MENA (Mid-
dle East and North Africa) region
has endangered markets crucial for
Turkey, such as Iraq or Egypt; the
economic crisis still engulfing Europe
does not help, since the EU is Ankara
biggest trade partner, as the source of
71% of all FDIs.
And thirdly, domestic turmoil is
a serious brake on Turkey’s growth
and must not be underestimated. As
Serdar Yesilyurt points out, the gov-
DIRK VANTYGHEM, Director of
International Relations, Eurochambres
European companies have a big
interest in Turkey being a stable and
safe destination for investments. The
reshaping of the Customs Union, to-
gether with an increase in transpar-
ency, would certainly be welcome.
ECONOMIC SITUATION

11. 9
ernment’s lack of transparency and
intrusion in business is dangerous and
harms business. President Erdoğan’s
continuous attacks on the Turkish Cen-
tral Bank, an independent institution, for
its refusal to lower interest rates have
been seen with worries by international
markets. Another event that casts a long
shadow on Turkey’s economic freedom
is February’s take-over by the govern-
ment of Bank Asya. Further worries are
added by Citibank and HSBC, two of the
biggest international banks, selling their
stakes in Turkish banks.
The outlined situation is clearly worry-
ing for Turkish companies and European
partners alike. Nevertheless, the long-
term interest of European companies
in investing in Turkey is still alive, as
confirmed by a report by Eurocham-
bres. Turkey remains a country with
important stakes for business. For
this interest to stay sustained and for the
country to regain its position as a top in-
vestment destination in the world, swift
reforms need to be taken.
As a first solution, and in the shorter
term, more transparency is need-
ed. Corruption, and more in general,
autocratic tendencies in the public sec-
tor have been pointed out by all main
observers as some the main reasons
for distrust in Turkey. According to Eu-
rochambres’ Dirk Vantyghem, there is
a lack of information on both sides that
makes it difficult for European compa-
nies to do business in Turkey. These
concerns should be rightly addressed.
In this sense, Prime Minister’s Davutoğ-
lu’s pledge to fight against corruption is
a good start, but more has to be done if
trust wants to be restored.
Together with short-term approaches,
Turkey should undergo compre-
hensive reforms to foster its eco-
nomic growth in a sustainable
way, consisting of improving productiv-
ity. In the words of Hurryiet’s Emre De-
liveli, “Turkey needs a new growth mod-
el”, based on tighter fiscal policies and
structural reforms. Some of the meas-
ures undertaken should consist of im-
proving higher education, increasing the
flexibility of labor and product markets,
addressing the segmentation in the busi-
ness sector, broadening the tax base,
making the budget more flexible, and
tackling the informal economy. These
are all politically unfriendly reforms, but
they should be undertaken: should AKP
be confirmed as the leading party in the
general elections next June, it might use
the deriving political consensus to imple-
ment them.
Particular attention has to be given to
changes to the EU-Turkey Cus-
toms Union. Indeed, it holds opportu-
nities not only for the growth of Turkey’s
economy, but also for closer relations
with the EU. While the Customs Un-
ion was, as the highest trade integra-
tion, an ambitious project the back in
the days, it seems rather outdated
compared to newer agreements. For
example, public procurement and ser-
vices are excluded from it. Part of this
modernisation would also mean to al-
low Turkey to take part in the di-
alogue about the TTIP, the Trans-
atlantic Trade Agreement After some
difficult years in 2011 and 2012, now
both sides have asked for a Union’s
modernisation. As a response, during a
meeting on 9th January 2015 between
Commissioners Johannes Hahn, Cecil-
ia Malmström and Turkish Minister of
Economy Nihat Zeybekçi, the Com-
mission put forward a proposal for a
new ‘EU-Turkey Business Roundtable’,
a ‘Mission for Growth (M4G)’ to Turkey
as well as an enhanced EU-Turkey
high-level macro-economic dialogue.
Indeed, according to some observers
the negotiations on the Customs Union
will help an agreement between the
EU and Turkey, and should therefore
proceed. Nevertheless, more econom-
ic integration should not be seen as an
end in itself, but it should serve as part
of a comprehensive effort by the
EU to foster democratic devel-
opments and, in the end, reboost the
accession negotiations.
#55in the DOING
BUSINESS INDEX
among 189 COUNTRIES
thus losing 4 POSITIONS
since 2014
1,7%
GDP GROWTH
in the last quarter
of 2014

12. 10
SUMMARY
The current political situation is showing worrying tendencies away
from the basic values of rule of law and democracy and towards an
increasingly autocratic rule.
The electoral victories for ruling party AKP have been followed by
actions against the opposition, with the jailing of journalists and the
removal of judges deemed connected to the ‘parallel state’. Further-
more, an increased political polarisation is evident in the country.
Such a situation has had a lasting effect on Turkey’s relations with
the EU. In particular the European Commission and Parliament have
criticised the behaviour of the Turkish government by making it clear
that Turkey is drifting away from European values and its obligations
as a candidate to accession.
Nevertheless, EU institutions recognise the fundamental importance
of Turkey as a partner. For this reason, the strategy is to keep open
the cooperation wherever possible: the EU will not focus only on the
accession progress, but it will foster progresses in other areas. With
this approach, an improvement in relations will follow.
The current economic environment is characterised by a sustained
drop in the Lira’s value and a slower GDP growth than expected.
There are three factors to explain the current issues: external, since
the MENA region is in turmoil; structural, since Turkey’s growth mod-
el needs modernisation. And political, given the government’s erratic
behaviour.
To overcome its difficulties, Turkey needs comprehensive reforms on
both the short and the long term. Fight against corruption, increased
transparency and measures aimed at improving productivity are nec-
essary if Turkey wants to start attracting investments again.
A very important role in the country’s economic recovery has to be
played by the modernisation of the Customs Union with the EU and
Turkey’s subsequent participation to TTIP. Not only it will improve
Turkey’s position in the international trade, but it could be a gateway
for better political relations with the EU.
In the pages above we have tried to sum up the developments currently taking place in Turkey and to analyse what their consequences
will be for the Turkish economic environment for foreign investors. These are the main points:

13. 11
RECOMMENDATIONS
With regard to the analysis presented in the previous pages, UNITEE has the following policy recommendations for the Turkish
government:
A clear commitment to European values. A meaningful political and economic
cooperation can be possible only in presence of a clear and long-term commitment to
European values. For this reason, Turkey should follow-up on its recently adopted EU
strategy, meeting the requirements due to its position as an accession candidate.
Decise implementation of the rule of law and respect for the institutions.
The uncertainty of law hinders private initiative and frighten investors, who fear to lose
their money due to a dysfunctional legal system. The recent interferences on public in-
stitutions, such as the Central Bank and the Supreme Court, by President Erdogan are
harming Turkey’s stability and should therefore stop. Reforms assessing the independ-
ence of the judiciary are necessary. Furthermore, the government should take practical
steps to fullfil its pledge to fight corruption.
Restoration of freedom of speech and recognition of the opposition. The
government should give its adversaries recognition by negotiating with them and recog-
nising their role in a modern democracy. If Turkey wants to become an open, modern and
advanced country it has to embrace the diversity of its society and give all its members
the voice they deserve.
Normalisation of relations with neighborhood countries. An unwavering com-
mitment to respect international agreements is vital for good relationship and economic
exchange with the EU. It is urgent that Turkey implements the Additional Protocol and
follows up its intentions towards Cyprus with concrete actions. On the other hand, the
EU should recognise Turkey’s legitimate claims and fairly work towards a normalisation.
Comprehensive long-term economic reforms. The current state of the Turkish
economy is in part due to unbalances in its structure. If those problems persist, this might
scare away investors. The government should proceed with necessary, bold reforms,
aiming at sustaining Turkey’s growth as a middle-income economy. Those reforms
should aim at improving productivity, and will require a series of politically unfriendly
steps. But if AKP wins the next elections, it should use the political consensus to advance
such measures.
Continuing co-operation with the EU, regardless of the accession negotia-
tions. Even if accession talks are currently on hold, Ankara and Brussels still share many
strategic interests, ranging from foreign policy to trade. Therefore, Turkey should con-
tinue its cooperation wherever possible, respecting its pacts with the EU. Collaboration
exists, and should be increased, on fields such as energy, counterterrorism operations
and economic relations. In particular, a subject of promising developments is the Cus-
toms Union’s modernisation: Turkey should keep the dialogue open, while the EU should
be open to discuss Ankara’s participation to the TTIP negotiations. Expectations are that
stronger economic integration will lead to a revamping of political integration.
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