ECONOMY

French row impact on Turk economy seen to be limited

ANKARA (Reuters) – The damage to economic ties between France and Turkey after the French parliament voted to make it a crime to deny Armenians suffered a genocide by Ottoman Turks during World War I is expected to be limited. The French parliament voted for the bill, despite warnings from French firms that it would create repercussions for their business in Turkey, a fast-growing market which imported 4.7 billion euros worth of French goods in 2005. But the Turkish lira strengthened 1 percent yesterday after the news, and economists said they did not expect the bill to hit French direct investment in Turkey or trade between the two countries. «I believe it is exaggerated. French firms may hesitate in the short term and want to see the extent of a boycott, but no mark will be left on trade or investment in the medium or long term,» said JP Morgan’s Yarkin Cebeci. Hundreds of French firms such as Renault and Carrefour have large investments in Turkey, employing thousands of Turkish workers while this week Turkish consumer groups and some trade unions called for boycotts of French products. But economists questioned the effectiveness of a boycott on France, which is one of biggest economies of the world, as Turkey accounts for only 1.3 percent of France’s exports. «Now we are coming to an understanding that this is not very logical. It has been understood that a boycott of French firms would hurt our citizens,» said Fortis Bank chief economist Haluk Burumcekci. Past Turkish boycott calls against other countries had an effect only for a short time. French firms which could be targeted in a boycott include Carrefour, Total, Air France, Club Med, Danone, Michelin, Renault, Peugeot, L’Oreal and Lacoste. Ankara has already signaled it would contain its reaction, giving no support to a bill in parliament which would have made it illegal to deny a French genocide in Algeria. Economy Minister Ali Babacan also said that the government was not encouraging a boycott, but said it was up to the people to decide. «Time will show. But I cannot say it will not have any consequences,» said Babacan. And the man on the street may heed boycott calls as nationalist emotions and anti-EU sentiment run high in the country. «We would not be surprised to see nationalists locally in Turkey pushing grassroots action against France, perhaps a boycott of French products,» said Timothy Ash of Bear, Stearns & Co. The Turkish government could bar French firms from state tenders such as a $5 billion nuclear power project and lucrative arms purchase deals. «It looks that the reaction will be limited to barring French firms from state tenders. This is a method which has always been in use,» said Burumcekci. The Turkish stock market also shrugged off the French vote as investors had already priced in the bill’s passage and expect it to fail when it reaches the Senate or President Jacques Chirac. «The markets believe that its legislation will be difficult and that will limit the reaction,» said TEB deputy general manager Umit Leblebici. The Istanbul stock exchange rose 1.1 percent to 38,061 points.