Europe’s elections impact Turkish economy

Turkey’s economy had entered a rough patch brought on by uncertainties over its
bid to become a member of the European Union.

These uncertainties have affected both the stock market and bond prices. Turkey’s stock index fell 4.5 percent on Monday after the announcement of early elections in Germany and fell a further .77 percent on Tuesday.

Prices on the benchmark bond, to mature in 2006, fell and yields went up from 17.67 percent to 17.88 percent. Additionally, a new auction on Tuesday an issue of 20-month bonds were sold to yield 17.71 percent, while similar bonds sold last month at a yield of 17.26 percent.

The reaction to the call for early elections in Germany is just one of the factors that is making it look less certain that Turkey will become a member of the EU, even as talks on the subject, which make take 10 years or more, are to open on October 3.

Another factor is the scheduled election this Sunday in France to determine acceptance or rejection of the European constitution. If the French voters reject the constitution, as seems likely from recent polls, it may signal a slowdown in the expansion of the EU.

And if the Christian Democratic Union returns to power in Germany, which also seems likely, Turkey’s chances could be damaged further.

The current chancellor of German, Gerhard Schröder, is a supporter of Turkey’s bid to join the EU, but the leader of the CDU opposes Turkey’s membership.

Since every member government in the EU must eventually approve Turkey’s membership application, a change in the government in Germany could hurt Turkey’s chances of gaining EU membership.

Story link: Europe’s elections impact Turkish economy