Alternative may emerge to full Turkish accession to EU

Significance

Erdogan has not softened his line towards the EU, but there has been some vacillation in the EU's approach. While EU signals on Turkey have been becoming sharper, at the informal April 28-29 foreign ministers' meeting in Malta attended by ministers from the candidate countries, the Union stepped back from a confrontation with Turkey.

Impacts

• The lira could weaken again despite its recovery in early 2017.
• The business climate will be very subdued, with medium-term investment becoming more unstable.
• Turkey will seek trade agreements with Asian countries such as India to try to reduce the EU's role in its economy.
• Middle Eastern investment will continue to be welcome in Turkey, while conditions for EU investors could worsen.