The Unripe Fruits of Rapprochement

Abstract

3 April 2006 was not an ordinary day in the history of the National Bank of Greece. Greece's biggest and oldest bank announced the acquisition of Turkey's eighth-largest bank, Finansbank. This was by far the biggest foreign investment ever realized by a Greek company. It was also the biggest foreign direct investment deal for that year in Turkey. Nonetheless, not everyone was happy on either coast of the Aegean. On the Turkish side, many opinionmakers were weary about the prospects of foreign - let alone Greek - domination in the country's financial sector. Greek columnists, in contrast, raised concerns about the enormous risk entailed in investing billions of euros in a country that is volatile and inimical to Greece. What made this previously unthinkable deal possible - and ultimately successful - was what had transpired in Greek-Turkish relations since 1999.The December 1999 decision of the European Council in Helsinki is normally considered to be the beginning of a new era in Greek-Turkish relations, yet it did not come out of the blue. A slow change in bilateral relations could be observed since the mid-1990s, despite adversity and setbacks. The first signals of a new approach became evident in 1994. Yannos Rranidiotis was a key figure as the deputy and alternate foreign minister who succeeded in changing the agenda of Greek-Turkish relations. In March 1995, Greece lifted its veto against the EU-Turkey customs union and the disbursement of the fourth additional protocol funds under the condition that accession negotiations between Cyprus and the European Union begin within six months from the end of the EU intergovernmental conference - i.e., within 1998. The customs union between Turkey and the European Union came into force on 1 January 1996. The decision of the Greek government to lift its veto marked a significant shift in Greek views of EU-Turkey relations. Nonetheless, in the view of most experts and public opinion, it was still seen as a sacrifice made to promote a major national goal, namely Cyprus' EU membership prospects. Relations remained frosty, and in fact deteriorated when the Turkish national assembly issued a declaration that an extension of Greek territorial waters in the Aegean to 12 miles would amount to a casus belli. The succession of Prime Minister Andreas Papandreou by the moderate Konstantinos Simitis coincided with the Imia-Kardak crisis which brought Greece and Turkey to the brink of armed conflict over the sovereignty of an islet in the Aegean.1 Greece's development of a joint defence doctrine with Cyprus, and its support for Cyprus' decision to install a unit of 8-300 antiaircraft ballistic missiles in 1998, only worsened relations. An all-time low was reached in February 1999 when it was revealed that Abdullah ocalan, the leader of the Kurdistan Workers' Party and at the top of Turkey's mostwanted list, had found refuge in the Greek embassy in Nairobi before he was captured by Turkish security forces.The Ocalan crisis proved an opportunity for the Simitis administration to reorient its foreign policy towards Turkey and take a more moderate stance. The agreement to host the controversial 8-300 missiles in Crete instead of Cyprus was a first signal of this change. The appointment of George Papandreou - a known moderate - as foreign minister in the aftermath of the ocalan crisis catalyzed Greek-Turkish relations. Interestingly, the Greek academic community remained aloof and this shift remained limited to the political elite.2 Shortly after the Ocalan affair, foreign ministers George Papandreou and Ismail Gem instituted careful steps towards the normalization of Greek-Turkish relations. A first opportunity for dialogue emerged with the outbreak of the Kosovo War, a major regional crisis involving both countries.3 In May 1999 Papandreou and Gem launched a dialogue. Avoiding explosive high-politics disputes, both ministers prioritized collaborating in low-profile bilateral issues, such as trade, tourism, and environment. …