Second EU Draft Upsets Markets

Although it was also affected by parity, the dollar increased in value by 25,000 Turkish Lira (TL) to TL 1,425,000. The stock market index regressed to 22,625 points, a 1.95 percent drop, while bond compound interest rates increased by about half a point.

At the start of the week, the dollar had regressed to TL1, 394,000, the lowest level since last April, due to optimism that the euro/dollar parity would reach a new record and that new stand-by agreements would be signed with the European Union (EU) and the International Monetary Fund (IMF). However, the second resolution draft prepared by the EU Term President, the Netherlands, was especially unsettling to foreign investors. The subject of torture was mentioned for the first time in the draft and there was new content added that said the European Commission might have a say in directing a suspension of negotiations "through its own initiative or that of any member state’s will" though no minimum numbers were set. The situation troubled Ankara and an announcement made after a meeting chaired by Turkish President Ahmet Necdet Sezer on Tuesday (December 7) said an unconditional decision regarding the start of Turkey’s membership negotiations for the EU in 2005 without delay is expected at the December 17th EU leaders’ summit.

In response to recent developments, foreigners afraid of the possible risk of a negative decision on Turkey have started to sell their bonds and shares in order to close their exchange positions. Closing at TL 1,418,500 in the inter bank markets, the dollar reached about TL 1,421,000 in value transactions. The compound interest for bonds saw the most transaction volume as it was below 23 percent at the beginning of the week and rose to 23.4 percent in value transactions.