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NATO

Erdogan links Swedish Nato approval to Turkish EU membership

Turkish President Recep Tayyip Erdogan said Monday he would back Sweden's Nato candidacy if the European Union resumes long-stalled membership talks with Ankara.

Erdogan links Swedish Nato approval to Turkish EU membership
Turkish President Recep Tayyip Erdogan addresses the parliament to mark the opening of the new legislative year, at the Grand National Assembly of Turkey in Ankara, on October 1, 2022. Photo: Adem ALTAN/AFP

“First, open the way to Turkey’s membership of the European Union, and then we will open it for Sweden, just as we had opened it for Finland,” Erdogan told a televised media appearance, before departing for the NATO summit in Lithuania.

Erdogan said “this is what I told” US President Joe Biden when the two leaders spoke by phone on Sunday.

Turkey first applied to be a member of the European Economic Community — a predecessor to the EU — in 1987. It became an EU candidate country in 1999 and formally launched membership negotiations with the bloc in 2005.

The talks stalled in 2016 over European concerns about Turkish human rights violations.

“I would like to underline one reality. Turkey has been waiting at the EU’s front door for 50 years,” Erdogan said. “Almost all the NATO members are EU members. I now am addressing these countries, which are making Turkey wait for more than 50 years, and I will address them again in Vilnius.”

Sweden’s prime minister, Ulf Kristersson, is due to meet Erdogan at 5pm on Monday in a last ditch attempt to win approval for the country’s Nato bid ahead of Nato’s summit in Vilnius on July 11th and 12th. 

Turkey has previously explained its refusal to back Swedish membership as motivated by the country’s harbouring of people connected to the PKK, a Kurdish terrorist group, and the Gülen movement, who Erdogan blames for an attempted coup in 2016. 

More recently, he has criticised Sweden’s willingness to allow pro-Kurdish groups to protest in Swedish cities and allow anti-Islamic protesters to burn copies of the Quran, the holy book of Islam.

In a sign of the likely reaction of counties which are members both of Nato and the EU, German Chancellor Olaf Scholz said that the two issues should not be connected. 

“Sweden meets all the requirements for Nato membership,” Scholz told reporters in Berlin. “The other question is one that is not connected with it and that is why I do not think it should be seen as a connected issue.”

Malena Britz, Associate Professor in Political Science at the Swedish Defence University, told public broadcaster SVT that Erdogan’s new gambit will have caught Sweden’s negotiators, the EU, and even Nato Secretary-General Jens Stoltenberg off guard. 

“I think both the member states and Stoltenberg had expected this to be about Nato and not about what the EU is getting up to,” she said. “That’s not something Nato even has any control over. If Erdogan sticks to the idea that Turkey isn’t going to let Sweden into Nato until Turkey’s EU membership talks start again, then Sweden and Nato will need to think about another solution.” 

Aras Lindh, a Turkey expert at the Swedish Institute of Foreign Affairs, agreed that the move had taken Nato by surprise. 

“This came suddenly. I find it hard to believe that anything like this will become reality, although there could possibly be some sort of joint statement from the EU countries. I don’t think that any of the EU countries which are also Nato members were prepared for this issue.”

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MONEY

Swedish central bank lowers interest rate for first time in eight years

Sweden's Riksbank central bank has lowered the country's main interest rate by 0.25 percentage points to 3.75 percent, down from 4 percent. This is the first time the bank has lowered the rate since 2016.

Swedish central bank lowers interest rate for first time in eight years

The decision to lower the so-called policy rate was widely expected, as the central bank itself indicated in a policy rate prognosis from March that it could lower rates between five and six times before the end of 2025, starting in either May or June this year.

“Monetary policy and diminishing supply shocks have contributed to inflation falling, and now it’s nearing the target,” the bank wrote in a press statement.

The bank’s inflation target is 2 percent. In March, inflation was just 2.2 percent.

“If the inflation outlook remains the same, the policy rate could be lowered at least two more times in the second half of the year,” the bank wrote, adding that new information since its most recent monetary policy report was published in March “strengthens the picture of inflation also being closer to the target in the slightly longer term”.

This effectively rules out the possibility of a further rate cut in June.

It also warned that the outlooks for inflation are “uncertain”, highlighting the strong American economy, geopolitical unrest and the krona’s exchange rate as risk factors which could cause inflation to rise again.

“Changes to monetary policy should therefore be taken carefully, with gradual cuts to the policy rate.”

Thursday’s announcement is crucial, as the policy rate is the bank’s main monetary policy tool. It decides which rates Swedish banks can deposit in and borrow money from the Riksbank, which in turn affects the banks’ own interest rates on savings, loans and mortgages.

If bank interest rates are high, it’s expensive to borrow money, which means people spend less and as a result inflation drops.

This cut to the policy rate won’t immediately lower the cost of your mortgage, but it’s likely to have a knock-on effect.

At its last meeting before the cut, the bank chose to keep rates the same at 4 percent, where they stood since September last year – the highest policy rate seen in Sweden since 2008, and the end of almost a year and a half of interest rate hikes.

The bank predicted in March that the policy rate could drop to as low as 2.75 percent, a drop of 1.25 percentage points, by the end of 2025. If mortgage rates also drop by the same amount, it would reduce the cost of a 3 million kronor mortgage by around 3,000 kronor a month.

The new rate will come into effect on May 15th.

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