While Turkey‘s markets and related exchange traded fund (ETF) are turning around, the country’s economy is still struggling. That has some wondering what it’s going to take to land Turkey a spot in the European Union.

Negotiations between Turkey and the EU regarding possible membership have stalled at a time when the EU is suffering from “enlargement fatigue,” internal divisions, strengthening nationalist sentiments and ineffective policies, reports Benjamin Katcher for World Politics Review. Europeans are also concerned about the costs of including a large and relatively poor country into their union.

Membership negotiations began in 2005, but talks have slowed because of Turkey’s lack of reform programs and popular opposition to Turkey’s bid. The EU claims that Turkey falls short of EU standards in judicial reform, civil-military relations, human rights and press freedoms.

However, Turkey can offer some benefits such as its army, which is the second-largest in NATO, and the incorporation of a Muslim country could help integrate the growing Muslim minority in Europe.

The Istanbul stock market has reached an 11-month high and bond yields are at a historic low of 1.05% after the Central Bank hinted at more interest rate cuts, writes Sujata Rao for Forbes. Five-year yields are down to 0.6%.

Turkey’s economy is likely to contract 5.2% in 2009, reports China View. GDP dropped 8.4% in the second quarter after falling 13.8% in the first quarter. In the fourth quarter, GDP will likely grow at an annual rate of 3.7%. Inflation could reach 5.5% at the end of the year.

  • iShares MSCI Turkey Invest Mkt Index (TUR): up 58.6% year-to-date


For more information on Turkey, visit our Turkey category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.