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Turkey's autocratic slide links a fund scandal, a seized TV channel, exclusion from a European car scheme and a Libyan sea deal, a Carnegie Europe paper argued on November 4.
"Turkey's Four Headaches Are Also Europe's", by Marc Pierini, a senior fellow at Carnegie Europe and former EU career diplomat with 14 years as a Turkey analyst at the think tank, sets out four fronts on which Ankara and the EU face "an uncertain future": money and trade, security, the rule of law and Europe's own shifting politics.
Money comes first because it is the first with a deadline and a forced seller attached. MSCI wants credible enforcement against coordinated trading and free-float data outsiders can verify, a rule-of-law test written in market language, so the investor's problem and the one European courts and diplomats have raised for years have become the same problem.
A deadline and a forced seller
It took 1.6 lira to buy a euro when Turkey opened EU accession talks in late 2005. On November 4 it took 56.36 [1], which leaves the lira with about 3% of its 2005 value against the euro.
More than 130 funds worth about $20bn and affecting about half a million citizens had promised outsized returns before regulators stepped in, according to Pierini. The regulator's order covered 131 funds with more than $19bn in estimated assets and about 456,000 individual investors, and Borsa Istanbul lost 23.3% of its market value in September alone.
Vice President Cevdet Yilmaz has ruled out Treasury money for the losses and told parliament the financial system faces no systemic risk. S&P Global Ratings found no wider loss of confidence in the lira, with money leaving the funds mostly moving into lira bank deposits. The affair has still kept spreading: Korkmaz Enes Ergun, general manager of Borsa Istanbul, was detained on October 31 on suspicion of bribery.
MSCI froze some Turkey index changes on October 15 and said it would consider a consultation on moving Turkey from emerging market to frontier or standalone status if there is not enough progress by June 2027. A downgrade could trigger selling by funds that track the MSCI Emerging Markets Index. S&P Dow Jones Indices gave a similar warning in July, while foreign direct investment fell 35% y/y to $6.85bn in the first eight months of the year, according to the International Investors Association (YASED).
Left out of Made in Europe
Paris and Berlin proposed on October 16 that cars qualifying for public contracts and support under the EU's planned Made in Europe scheme could come from the European Economic Area, with possible side deals for Switzerland and the UK. Japan, South Korea and Turkey would stay out. The test is single-market membership on January 1, 2020, which Turkey fails despite its 1995 customs union with the bloc, Hurriyet Daily News reported on October 17.
Turkey's automotive exports came to $41.5bn in 2025, of which $30.1bn or 72.5% went to the EU, according to the Uludag Automotive Industry Exporters' Association. Trade Minister Omer Bolat says European firms account for nearly 75% of Turkish car production, and Bosch, Fiat, Renault and Siemens all run large lines in the country. Ford of Europe's president warned in February that shutting out Turkey and the UK would weaken production inside the EU itself. The text still needs other member states and the European Parliament, and Ankara and Brussels agreed in February to work on modernising the customs union.
Whether the exclusion was a bureaucratic oversight or a lack of confidence in Turkey's governance is an open question, according to Pierini. The roots lie in an accession process Ankara never seriously pursued, because aligning with EU norms clashed with opaque procurement, a superpresidential system and political control of the courts, media and civil society. The EU's restrictions over Cyprus and French and German opposition from 2007 did the rest, leaving a debate the bloc never held on whether accession was the right vehicle for Turkey at all.
Indispensable but not invited
"A Europe that excludes Turkey from its security architecture cannot possibly be stronger or safer," President Recep Tayyip Erdogan told the UN General Assembly in September.
Turkey's defence industry has won sales, joint ventures and acquisitions in Europe but no formal seat in Western European security talks beyond the coalition of the willing for Ukraine. The Nato summit in Ankara in July showcased its arms makers without delivering the political recognition Erdogan expected, according to Pierini. Three things stand in the way, in the same account: Ankara's close ties to Moscow, its equally close ties to the Trump administration and, above all, the degradation of the rule of law.
Libya's eastern-based parliament voted unanimously on October 20 to ratify a 2019 maritime memorandum with Turkey, reversing its earlier opposition. Egypt's foreign ministry rejected it as legally invalid and the EU also opposed the vote, and Bahrain, Cyprus, Israel and the UAE objected too, according to Pierini. On the Black Sea the picture is kinder: Turkey's navy, its role under the Montreux Convention and a planned grain corridor with Kyiv give allies something to value, though Moscow could press Ankara to limit any operation that helps Ukraine.
The Mecca Pact, signed with Saudi Arabia and Pakistan on August 7, carries a mutual-defence clause largely like Nato's Article 5 and surprised Turkey's allies. Turkish involvement against the Houthis has moved past the hypothetical: the three members activated the pact on October 6 and promised rapid deployment to Saudi Arabia, though a Turkish official said Ankara planned no large force and no direct intervention in Yemen. Saudi, Pakistani and Turkish officials then flew to Tehran for talks in late October.
A bet on Europe's collapse
Domestic polls show Erdogan would not win a third term, assuming he can legally run, even with the Nationalist Movement Party (MHP) alongside him, according to Pierini. Istanbul Mayor Ekrem Imamoglu, who led those polls, has been jailed since March 2025 and prosecutors have demanded up to 2,352 years in prison. He denies the charges.
An Ankara appeals court removed Ozgur Ozel as leader of the Republican People's Party (CHP) on May 21 and restored his predecessor, Kemal Kilicdaroglu. Critics call it a move to crush the opposition, while the presidency insists the courts are independent. Ozel then launched the New Party, and around 90 lawmakers and Imamoglu himself have followed him.
Police raided pro-opposition Halk TV in Istanbul on October 14, cut its broadcasts and installed a state trustee. The trigger was its reporting on the fund scandal, according to Pierini. Prosecutors allege bid rigging, bribery and money laundering by its chairman, Cafer Mahiroglu, Hurriyet Daily News reported, and he rejects the claims. They had already sought his arrest in June 2025. Bolat was in Brussels the same day, pressing Turkey's case on trade and investment.
Philanthropist Osman Kavala marked nine years in jail on October 18, serving an aggravated life sentence. The European Court of Human Rights again ordered his release in August, and Ankara has not complied. Turkey has become "a textbook case of autocratic governance", according to Pierini.
"It is a strategy that is hard to understand unless the underlying bet is a total collapse of democratic Europe," said Pierini.
Europe moves right
National or regional votes fall in Estonia, Finland, France, Germany, Greece, Italy, Poland, Slovenia and Spain by the end of 2027, a map drawn by Carnegie's Stefan Lehne, and hard-right parties with a shared anti-immigration streak are likely to make strong gains and could take power in some of them, according to Pierini. Turkey's best European partners for 20 years have been on the centre-left, and a more fractured continent may be less inclined to heed its security advice or trade requests.
Ankara's stance of equal distance from China, Europe, Russia and the US is its sovereign choice but cannot coexist with EU accession or membership of the Council of Europe, according to Pierini. EU leaders share the problem: criticising Turkey's courts while taking no action "sends a signal that fundamental divergences on core issues are acceptable".
The calendar
MSCI's June 2027 deadline lands first, with the car rules still to clear EU negotiations and European voters going to the polls through the same months. The presidential vote is scheduled for May 2028, but Erdogan's chief adviser, Mehmet Ucum, has said it would be held on April 16, 2028 if 360 lawmakers back an early election, which would let Erdogan sidestep the two-term limit. His Justice and Development Party (AKP) and the MHP hold 326 seats, leaving them 34 short.
That sequence sets Turkey's two demands against each other. Meeting MSCI means pursuing politically connected market players and publishing ownership data in the same months Erdogan needs 34 votes outside his coalition, and S&P has already said the election run-up will test the central bank's discipline. If the government chooses the ballot over the index, the bill goes to Turkish savers and foreign funds first and to Europe's car plants and security planners after that.
Sources
[1] European Central Bank, euro foreign exchange reference rates, Turkish lira per euro, rate for November 4, 2026, released November 4, 2026.
This article was produced with the help of the IntelliNews Lambda analytical tool
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