Economic and financial dialogue between the EU and the Western Balkans and Türkiye
Brussels, 16 May 2023
In the margins of Ecofin, representatives of the EU Member States, the Western Balkans and Türkiye, the European Commission and the European Central Bank, as well as representatives of the central banks of the Western Balkans and Türkiye met for their annual economic policy dialogue. The dialogue aims to prepare the future participation in the European Semester of the Western Balkans and Türkiye (Montenegro, the Republic of Serbia, North Macedonia, the Republic of Albania, Bosnia and Herzegovina, and the Republic of Türkiye are candidate countries for EU accession, while Kosovo* is a potential candidate).
The participants endorsed joint conclusions in which they highlighted their shared interest to define appropriate policy responses to recent adverse shocks including the economic impact of Russia’s war of aggression against Ukraine. Participants emphasised the common position by the EU and the Western Balkans and Türkiye in deploring in the strongest terms the continued military aggression by the Russian Federation against Ukraine.
* This designation is without prejudice to positions on status, and is in line with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of independence.
Participants hereby invite Türkiye to:
1. Keep an appropriately tight fiscal stance in 2023 to help disinflation, including by reducing budget support to state-owned enterprises in the energy sector in view of the prevailing international energy prices, while providing timely and transparent support to alleviating the consequences of the February earthquakes. Present a credible medium-term strategy to support the envisaged gradual return to a primary surplus of at least 1% of GDP. Expand the tax base by streamlining tax exemptions and reductions.
2. Reduce fiscal risks by – inter alia – gradually phasing out the FX value guarantees on lira time deposits. Revise public procurement legislation to further align it with the 2014 EU Directives on public procurement, including utilities, concessions and public private partnerships and reduce the number of exemptions that are incompatible with the EU acquis. Prepare an options paper for the possible adoption of a fiscal rule and the setting up of an independent body to monitor its implementation.
3. Use all tools of the central bank, including interest rates, more decisively in order to accelerate the disinflation process and bring financial conditions in line with achieving price stability over the medium term and central bank independence. Provide more guidance and efficient communication with regards to policy tools as well as the evaluations of their potential effects, and increase the efficiency of the operational framework. Improve the transparency and predictability of the financial sector regulatory framework by aligning it with international and EU standards, and enhance confidence by conducting transparent asset quality reviews and publish its methodology and outcomes.
4. With the aim to improving business environment, further strengthen the rule of law and, improve the regulatory environment and consultation mechanisms with business organisations and social partners on relevant new legislation. Implement legislation and enhance transparency regarding State aid to maximise the benefit of the EU-Türkiye economic and trade relationship, as well as to achieve a meaningful level-playing field. Increase the number and improve the efficiency of specialised courts for business, with a view of streamlining commercial disputes.
5. Take further steps to implement the ETS carbon pricing mechanism. Continue to ensure the steady growth of renewables (both traditional and hydrogen-based) in Türkiye’s energy mix and reflect this objective in the country’s subsidies policy. Prioritise energy efficiency for new and existing buildings in order to adapt to climate change, especially in light of the reconstruction efforts that will follow the devastating earthquakes of 6 February 2023.
6. Support the school-to-work transitions and the activation of young people who are not in education, employment or training (NEET) and incentivise female labour market participation through legislative and fiscal measures, as well as through strengthened efforts on the provision of appropriate and affordable childcare infrastructure beyond the big urban centres of Türkiye. Support investments in the care economy in the provinces affected by the Earthquakes in order to provide victims with health and care services and create employment intensive opportunities, in particular for women. Continue increasing the participation of adults in lifelong learning, in particular to reinforce green and digital skills, in order to ensure just transition.
For more information: https://www.consilium.europa.eu/en/meetings/ecofin/2023/05/16/