Euro-dominoes

1 May 2007 By Martin Hutchinson

Under its Islamist government, the country has been modernising. But with a trade deficit of 7% of GDP, it needs the support of foreigners. Threats of a secular coup could scare them away. If investors start worrying, other fragile European economies could suffer.

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Turkey suffered a constitutional crisis when the opposition, backed by the army, called for the election of Abdullah Gul as President by the Turkish parliament to be nullified on the grounds of a lack of a quorum. Gul, currently foreign minister, is a member of Tayyip Erdogan's mildly Islamist AKP party; the opposition is secular and the army regards itself as the protector of Turkey's secular constitution.

Turkey has enjoyed 30% growth in Gross Domestic Product since an economic crisis in 2002. Inflation was 10.9% in the year to March. Its budget deficit is 2.6% of GDP on public spending of 34% of GDP and its payments deficit 7% of GDP in the year to February 2007. External debt was $194bn in June 2006, 63% of GDP.

Iceland has a current account deficit of 21.1% of GDP, Bulgaria of 18.3%, Romania of 15.7%, Latvia of 15.7%, Estonia of 14.1%, Spain of 8.8%, Lithuania of 8.5%, Slovakia of 8.0%, Greece of 7.8% and Croatia of 7.8% of GDP. Thailand's current account deficit in 1996 was 8% of GDP and external debt was 60% of GDP.

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