Turkey's drive to join the European Union took two major blows at the end of May and beginning of June, thanks to events in Germany, France and the Netherlands. The Turkish currency and stocks fell in response, underscoring the country's dependence on future membership of the European club.
The first blow came when German Chancellor Gerhard Schroeder said he would seek an early election after his party lost a regional vote in the North Rhine-Westphalia election. The second blow came when French voters rejected the proposed EU constitution in the referendum of May 29, and the third came June 1, when Dutch voters also came out against the same document.
These events sent the Turkish lira lower and accelerated a slide in Turkish stocks, which had been falling steadily from the record highs reached in February. Soothing statements from EU officials weren't enough to stop the losses, but Turkey vowed to continue its campaign to join the Union.
"Our fundamental aim in the coming period is to ensure a successful conclusion of the EU membership negotiation process, which starts on October 3," the Foreign Ministry said in a statement responding to the result of the Dutch vote. "We remain hopeful that European integration will continue to be carried forward, overcoming problems which emerge while drawing the necessary lessons from the democratic verdict of first the French and then the Dutch peoples."
Meanwhile in Germany, early polls show Schroeder's Social Democratic Party (SPD) trailing the Christian Democratic Union (CDU), the right-wing party led by Angela Merkel, who is one of Europe's most prominent critics of Turkey as a possible EU member.
Turkey's benchmark ISE National 100 Index dropped 4.5% to 24,329 on May 23, the biggest one-day loss in two months, Bloomberg News reported. The Turkish Lira fell 0.6% to 1.3855 per US dollar and 0.8% against the euro to 1.7440. Turkey's benchmark November 2006 domestic bond slid, pushing yields up 55 basis points to 17.93%. Shares of Koc, Turkey's largest company, and Akbank, the nation's second-biggest private lender, both were headed for drops of more than 5%.
"It wouldn't be good for Turkey if Schroeder left," Kerem Koz, who helps manage around $1bn of Turkish assets at Denizbank AS in Istanbul told the news agency. "A CDU government would bring big problems in terms of Turkish accession to the EU."
Even so, those problems may not crop up immediately. CDU leaders have admitted that they would be powerless to change the October 3 date set for the beginning of negotiations between the EU and Turkey. Merkel says she favours the creation of a form of privileged partnership with the EU for Turkey, instead of full membership.
In France, where there is also significant opposition to Turkish membership of the EU, on May 29 55% of voters rejected the proposed constitution for the Union, casting doubts on the strength of the EU in the future. French voters were thought in part to be voting against the constitution to protest Turkey's candidacy.
However, since negotiations for membership are expected to take at least a decade, the country's leaders are trying not to base decisions on political developments today.
"We are the audience in this process," Prime Minister Recep Tayyip Erdogan said recently, according to Turkey's Hurriyet newspaper. "Our job is to do our homework and come to the table without anything missing as far as full membership needs are concerned. Who knows whether the EU will even be around by the time we might become members."
Elsewhere, the euro fell to an eight-month low against the US dollar after the Dutch referendum, in which 62% of voters rejected the EU constitution.
The controversial position of Turkey in the EU constitutional debate has also drawn messages of continued support, however. US Secretary of State Condoleezza Rice told reporters June 2 that an EU decision to keep Turkey out would have "dire consequences".
"We believe that the EU has been a source of stability and hope that it can continue its efforts toward integration and unification," Rice told the press after meeting European leaders. "What we can't afford to have is a divide between Turkey and the rest of Europe."
However, there are plenty of question marks once again now hovering over Turkey's EU path - a route that has never been the easiest to traverse.