The latest political developments in Turkey are casting shadows on the ambitious Greek-Turkish business rapprochement of recent years. The serious problems which the neighboring country is facing on the way to becoming a full EU member, the Kurdish issue and the general tense political situation have significantly changed the mood. Greek businesspeople and bank officials who often travel to Istanbul are noting the change. It is not a coincidence, they argue, that National Bank of Greece, which acquired Turkey’s Finansbank earlier this year, and EFG Eurobank, which bought out Tekfenbank, a small Turkish bank, appears to have adopted a cautious attitude to publicity in Turkey. The key point according to bank officials is Turkey’s European prospects. The change of mood in Europe and the swing against Turkey’s accession to the EU are worrying the Turkish government and business community, which respond rather arrogantly. The mood today in Istanbul is entirely different to what it was a year ago; bank officials visiting the city regularly note that optimism has all but vanished, enthusiasm for Greek-Turkish business moves has evaporated and the businesspeople see the European dream becoming more distant. The same sources note that the main issue now, should accession fail, is how the process is going to end: If done in a way that safeguards Turkish pride, the negative response will be modest; yet if the end comes in a way that Turkey sees as a national humiliation, things will be much more complex. Many people worry that a Turkey humiliated by the EU, under strong pressure from developments in the Kurdish issue and regional instability, could create a situation Greece does not want. Of course, not being admitted to the EU will not mean the end of the world for Turkey, or for Greek investments in that country. The NBG business plan for Finansbank does not factor in Turkey’s entry to the EU, but is structured on the basis that Turkey will, in the worst-case scenario, be associated with the EU through a special, privileged relationship with the bloc, which is deemed certain. It is no coincidence that, despite all the negative developments, Alpha Bank is very close to acquiring a small Turkish bank, while EFG Eurobank has just strengthened its presence across the Aegean. After all, Greek investment in Turkey is virtually limited to the banking sector, which is the most internationalized domain of modern economy. With a mostly young population of 70 million, Turkey is a large market with huge prospects, hence the great interest from abroad. Foreign direct investment in Turkey exceeds $20 billion per year, when in Greece it does not even reach $1 billion. A considerable portion of the Turkish banking system has been acquired by foreign groups, so very few Turkish banks remain to be sold. Local bank officials note that you cannot consider yourself a regional player being absent from the Turkish market, and say that this market is now in the process of transformation, so those who do not position themselves early enough risk being sidelined forever. The Greek banks’ moves should not be judged by short-term criteria, e.g. what will be the profits from the move this year or that the Turkish currency has been unstable in recent months. Instead, the banks’ next steps should be examined as a strategic move to be judged in the long term, sources say. Eurobank details plans in Eastern Europe Eurobank CEO Nikos Nanopoulos yesterday unveiled in Istanbul the bank’s plans for expansion in Southeastern Europe, after the acquisition of Tekfenbank. «Our visit here signals Eurobank group’s interest in Turkey, where we are expanding our activities with careful but steady steps,» he said, adding that Tekfenbank, which today has 30 branches and 600 staff, will focus on corporate and private banking and the stock market. Nanopoulos noted that European-origin direct investment in Turkey is 5.5 times greater than that from the US, and that reforms in the country have led to a marked improvement in most economic indicators, such as the growth rate, inflation, external trade, interest rates and public debt. Nanopoulos said that by the end of the year, Eurobank will have invested about 1 billion euros in Eastern Europe (Bulgaria, Romania, Serbia, Poland, Ukraine and Turkey), developing a network comprising more than 700 branches and employing about 10,000 staff. The group aims at earning about 30 percent of revenue and 20 percent of profits from these countries by 2009. On average, loans were up 85.1 percent in the first half, deposits 65.2 percent and assets 81.5 percent. The growth potential of banks in these countries is excellent, Nanopoulos said, noting that total household debt is on average less than 10 percent, against 57 percent in the EU.