Turkey Imposing Economic Sanctions against France Could Risk its EU Bid

The Turkish Central Bank could withdraw its nearly 23 billion euros of reserves from France after the EU member’s recent move to fine any denial of the Armenian Genocide in 1915, economists say. However, such a sharp move could risk Turkey’s EU bid, they add.

“The Central Bank could withdraw its reserves from France as part of its economic sanctions in the future,” Erol Katırcıoğlu, professor of the economics department of Istanbul Bilgi University, said yesterday, the Hürriyet Daily News reports.

“Looking at the steps taken by the Turkish government and the tone of the political rhetoric, we can expect such a move,” Katırcıoğlu told the Hürriyet Daily News in a phone interview yesterday. However, such a move would strengthen opponents to Turkey’s EU membership bid and denounce Turkey as an “unreliable partner.”

It is the right of Turkey to withdraw its reserves from France, according to Kerem Alkin of Istanbul Commerce University. “This might not hurt the French economy but will prove Turkey is serious about sanctions,” Alkin said.

Turkey’s Central Bank has its second highest reserves in France with 28.8 billion liras, following the United States with 48.6 billion liras, reports the Daily News.

“The French economy might face serious difficulties if the Turkish Central Bank withdraws reserves, as most of it is in French government bonds,” said Mehmet Usta, deputy chair at Bank Aktif, who also served as general manager at Banque de Bosphore in France between 1994 and 2007.

Noting the rising need for liquidity in France due to the ongoing European debt crisis, “Turkey’s investment in the country would still play an important role economically if France could not compensate the amount from any other source immediately,” he said.

Yet, responding to Daily News questions, Yücel Yazar, press counselor of the Central Bank, declined to comment on the issue. “Our data is open for everyone and clear enough, unfortunately we cannot comment on this issue now,” Yazar said.

Turkey might impose additional economic sanctions against France if the country insists on accepting the bill punishing any denial of the Armenian Genocide at the French Senate, on Dec. 23 said Ali Babacan, Turkey’s deputy prime minister.