ECONOMY

Turkish economy upbeat

BRUSSELS (Reuters) – The European Commission will declare Turkey to be a «functioning market economy» next month in a fresh boost for its European Union membership bid, a senior EU source said yesterday. Having a functioning market economy is one of the conditions for joining the EU and the Commission’s award of the coveted status in its next annual progress report on Nov. 9 could help accelerate accession negotiations on economic topics. «The regular report is going to say for the first time that Turkey can be considered a functioning market economy. That helps for the opening of economic (negotiating) chapters and should support economic stability and foreign investment,» the source told Reuters on condition of anonymity. The EU opened entry talks with Ankara last week after lengthy wrangling among its 25 member states on the conditions. The source said granting the status was largely symbolic but it will be a landmark in the normalization of the Turkish economy and could boost market confidence, buoyed by the start of the negotiations and the broad success of Turkey’s IMF-led stabilization program. «It removes uncertainty going forward and also removes fears that the EU is not backtracking. These kind of headlines are always good news for Turkey,» said London-based Richard Segal, chief strategist at Argo Capital Management. Turkey’s benchmark sovereign bond due 2030 erased half of its losses this session after the news, but the lira languished, buffeted by a general sell-off on emerging markets. «I remain bullish and in my opinion it’s an indication Turkey is moving out of the emerging category, though, of course, there is a long way to go yet,» said Lars Christensen, senior analyst at Danske Bank in Copenhagen. The gesture could also help offset political sensitivity at the EU executive’s expected criticism of Turkey’s performance on human rights and the rule of law over the last year. Some of the formerly communist Eastern European countries which joined the bloc last year struggled to achieve market economy status because of issues such as state control of loss-making industries and the absence of proper regulatory bodies. Romania, due to join the Union in 2007 or 2008, only achieved the vital label last year, a few weeks before EU leaders decided to conclude an accession treaty. Turkey has got its economy back on track under an International Monetary Fund-sponsored reform program following a 2001 financial crisis that saw the lira heavily devalued.