we stop enlargement or shut out its natural consequences, it wouldn't, in the end, save one job, keep one firm in business, prevent one delocalisation. for a time it might, but not for long. and in the meantime europe will become more narrow, more introspective and those who garner support will be those no in the traditions of european idealism but in those of outdated nationalism and xenophobia. but i tell you in all frankness : it is a contradiction to be in favour of liberalizing europe's membership but against opening up its economy. " 3 since its foundation in 1957, the eu has continuously been engaged in a process of enlargement. the process, having begun with the inclusion of the uk, ireland and denmark in 1973, has proceeded for the time being with the challenging accession of the ten central and eastern european countries on may 1st, 2004. thus, enlargement has become an important aspect of the eu policy. distinguished guests, almost in every meeting on the eu and the turkish economy, i am faced with questions such as " what can turkey contribute to the eu, in other words, what will be the advantages of the eu from turkey's membership? " or " what does turkey expect from being a full member of the union? ". but, there are no easy and quick answers to these questions. therefore, my answer will rather be a long one. apparently, there are very strong arguments in favour of turkish membership such that turkey will bring the islamic world and the western world together or a larger eu with turkey will certainly be a much bigger power playing an important role in the world. apart from political aspects, it is clear that the debate on the turkish membership is very much related to the economic structure of turkey. hence, i want to make one thing clear : although membership is a political decision in essence, my answers to the questions i mentioned will focus mainly on economic aspects. having this in mind, now i ’ d like to start with the notion of competitiveness on a global level and its implications for both turkey and the eu. the 20th century has been a new era in terms of diminishing borders in trade and means of production and led to increasing competition all around the world. as we all know, europe and the united states ( us ) had been the engines of world development in the last few centuries. however, emergence of new actors into the picture in recent decades has changed

the improvements in the turkish economy, it is obvious that at the present stage turkey has lower income per capita compared to the new members and acceding countries. however, we know that income per capita of the new members and acceding countries when they started negotiations was similar to that of turkey. actually, decomposing the equation of income per capita, we see that it is a product of productivity, employment rate, inverse of the dependency ratio7 and participation rate. 8 in other words, increase in income per capita can be accelerated by productivity growth, increase in employment and labour participation rate and decelerated by increase in the dependency ratio. i will sak, g. ( 2005 ). " eu - turkey relations : time for contemplation? time for reality check? ” berlin. dependency ratio is described as the ratio of total population to working population i. e. aged between 15 and 64. gerald, j. f. ( 23 april 2004 ). " lessons from 20 years of cohesion ". the economic and social institute, paper presented at the brussels economic forum. 4 / 8 use this basic equation as a tool to highlight the areas to be improved in turkey and turkey s possible contributions to the eu in terms of productivity, demographic developments and the repercussions of all these in the labour market. first of all, as ben bernanke indicated, " productivity growth is the principal source of improvements in living standards ". 9 and then, we observe that during the last decades, the eu has lagged behind in productivity growth compared with other industrialized economies. in particular, labour productivity growth has been weak since the mid - 1990 s. 10 thus, while growth in hourly productivity in the 1980s stood at 2. 4 percent on average in the euro area and at 1. 3 percent in the us, that trend has been reversed between 1996 and 2004, with an annual average in the euro area and in the us of 1. 3 percent and of 2. 5 percent respectively. in the us, productivity growth has even picked up to 4 percent per annum since 2001, despite adverse factors such as september 11 terrorist attacks, the 2001 recession and the recent rise in energy prices. 11 of course, there are several reasons of the eu s lagging behind in the productivity growth. however, they are beyond the scope of my speech today. when the productivity comparison is made between turkey and the new eu member states, it is seen that the average gross value added per