EU wields economic weapon against Turkey

The European Union has cut funding to help Turkey with its accession to the bloc by $59 million and made another $35 million conditional on improving its human rights record, a possible taste of things yet to come.

The European Parliament confirmed the decision which was pushed by German Chancellor Angela Merkel. The decision will likely be signed off by EU states soon.

But other indicators suggest this may only be the EU’s first foray into leveraging Turkey’s dependence on the bloc’s economic might.

Turkey’s decades-old bid to join the bloc has stalled in recent years and EU leaders have become increasingly vocal in their criticism of the Turkish crackdown on dissent, while politicians in Ankara accuse the EU of rejecting Turkey due to its largely Muslim population.

On Wednesday evening, the Turkish lira went into free fall after a Bloomberg article suggested the German government was putting pressure on banks not to lend to their Turkish counterparts.

The article said:

The German government is wielding its influence with international development institutions to restrict financing to Turkey over an escalating political dispute between the two countries, people familiar with the matter said.

Germany is actively working to cut funding to Turkey from the country’s state-owned KfW bank, the European Investment Bank and the European Bank for Reconstruction and Development, according to more than a dozen government and banking officials, who asked not to be identified discussing the behind-the-scenes efforts. Some German commercial banks are also reviewing their exposure to Turkey, the officials said.


Later, the European Bank for Reconstruction and Development issued a statement in which it said it “remains committed” to Turkey, calming financial markets to some degree.

The news came immediately before the release pending trial of eight human rights activists, including German rights consultant Peter Steudtner.

However, there have been media claims that Germany negotiated to have Steudtner released.

Whilst there are no official suggestions that the German economic measures were linked to this particular case, it is another sign that Europe may be abandoning traditional forms of diplomacy in its dealings with Turkey.

One other sign of this came from Turkish Customs and Trade Minister Bülent Tüfenkci, who made some cutting remarks to the state Anadolu Agency on Thursday:

It is immoral for [Germany and the EU] to achieve what they cannot in a political sense by turning economic channels into a vehicle of blackmail to bring [us] to heel.