EMU, EURO and EU-Membership: An Evaluation from the Turkish Macroeconomic Perspective

Abstract

The monetary union between most of the EU countries started on January 1, 1999 as a result of a macroeconomic convergence process in the light of the Maastricht Treaty of 1991. Meanwhile, ten formerly eastern block countries and the Southern Section of Cyprus are preparing their economy for a full-membership to the EU while Turkey, as an associate-member of the Union since 1963 and as a part of customs union between Turkey and the EU since 1996, seems to be excluded from the next EU enlargement process. This paper has mainly two interrelated discussion topics. First, Turkey, 11 membership candidate countries, 15 EU countries and selected four reference countries (US, Japan, South Korea and PR China) are compared in terms of the ten selected macroeconomic indicators for the period of 1993-1997 where relevant data are available. By doing that, it is purposed to answer the question whether Turkey or membership candidates have more macroeconomic similarity with the EU countries only in terms of the considered indicators. At the same time, it has been discussed whether Turkey's macroeconomic framework is worse than that of the 11 membership candidates. If the Turkish fundamental indicators are really worse than the other countries', from the point of view of the EU member countries, this can be a good reason for exclusion from the next enlargement process. Second, after both presenting an overview of the main international transmission channels for the effects of the euro and summarizing the official economic preparations in the country, the possible effects of the creation of the euro on the balance-of-payments and foreign exchange rates in Turkey are discussed.