Barring a last-minute crisis, the Council of Ministers of the European Union appears likely to invite Turkey to begin membership negotiations in 2005 after its summit meeting this December. The European Commission's explicit positive recommendation and the acknowledgement in an annual progress report that Turkey has achieved the required threshold to meet the 1993 Copenhagen political criteria reduces the ability of the more reluctant EU members to base their opposition to the launch of talks on technical grounds.
There should be no illusions, however. Turkey's accession negotiations are expected to be long, nonlinear and open-ended, due to continued fears across Europe about admitting a poor, populous, Muslim country. This process will nonetheless provide an anchor for Turkey to stabilize its economy and attract much-needed foreign investment.
The development of a robust and modern banking sector is essential for Turkey to ensure capital formation to create the basis for sustainable financial stability and long-term economic growth--all necessary preconditions for Turkish membership in the EU. This will help reduce systemic risks in the financial sector and prevent a repeat of the 2001 financial crisis, the trigger of which was the fragility of the banking system. The 2001 crisis resulted in a 7.5 percent contraction of the economy, the worst economic crisis in the nation's history. A robust banking sector will also improve access to a wide range of modern financial products and services, including supply capital and credit, for the manufacturing sector as well as small and medium enterprises and low-income earners.