Economy
Euro’s ‘global moment’ risks slipping away amid political division
As alarm over U.S. President Donald Trump’s trade policy was pushing the dollar toward multi-year lows, European Central Bank chief Christine Lagarde in late May asked Europe’s leaders to put their money – or rather, their currency – where their mouths were.
Her argument, outlined in a speech in Berlin, was simple: alarm over Trump’s assault on the economic status quo was a chance for Europe to advance its goal of boosting the influence of its single currency.
Building on proposals last year by her predecessor Mario Draghi for sweeping reforms to Europe’s financial system, Lagarde coined a phrase to define the opportunity: the “global euro moment.”
Her rationale was simple, a source familiar with her thinking told Reuters. Convinced this could be a defining moment for Europe, Lagarde – a former French finance minister – was disappointed by the lack of political leadership. She thought at least one voice should fill the void.
Four months on – and a year since Draghi’s report – Lagarde’s calls to bolster the foundations of the single currency are being drowned out by national divisions and other priorities such as the Ukraine war, dealing with Trump, and coping with home-grown political turmoil.
A sense of policy inertia is the main takeaway from Reuters’ interviews with more than a dozen eurozone officials and central bankers, senior private bankers and veteran Brussels-watchers with a close view – often in the room – of discussions. Lagarde herself declined to comment.
Measures that would have strengthened the euro’s appeal for investors have fallen by the wayside, the sources said.
Proposals to jointly issue debt in euros to fund Europe’s defense encountered resistance from Berlin and Paris. Smaller nations with big financial sectors opposed centralizing supervisory powers in EU bodies. And plans to create a digital version of the euro have yet to take on a clear shape.
“Fundamentally, the EU struggles to concentrate on many crises at the same time,” Enrico Letta, the Italian ex-prime minister who last year presented his own report on reforms needed for the region’s single market, told Reuters.
“I see a Europe divided”.
‘Dollar is king’
The euro in the pockets of 350 million Europeans from Dublin to Lefkoşa (Nicosia) is among the EU’s most tangible achievements. Nearly wrecked by a sovereign debt crisis 15 years ago, it’s the fruit of a three-decade process of banking and monetary reforms that remains a work in progress.
But the dollar remains dominant globally. It accounts for three-fifths of central bank reserves and is the main transaction currency for commodities such as oil. Its status gives the U.S. government access to a ready pool of lenders and helps it wield outsized financial clout. As Trump said in July: “Dollar is king and we’re going to keep it that way.”
Yet the euro can claim to be the world’s second-most-favored currency. It accounts for some 20% of global central bank reserves and a similar amount of trade invoicing. Aside from the 20 eurozone countries, 60 nations or territories have directly or indirectly pegged their currencies to it.
The euro has risen around 13% against the dollar this year, taking it to a four-year high, with the investor consensus that further gains are likely as the U.S. Federal Reserve (Fed) embarks on a cycle of cutting its benchmark rate.
With the free trade era giving way to protectionism and growing economic tensions under Trump, European leaders acknowledge that bolstering the euro’s global status would help shield their export-driven economies.
The argument is that a greater presence of the euro in trade and global reserves would help insulate the area from swings in exchange rates and capital flows – even economic sanctions, if tensions worsen.
But European capitals are baulking at three steps that would underpin that goal: creating a big enough stock of safe euro assets for investors; making institutional changes to complete Europe’s economic and monetary union; and responding to the rising challenge of digital currencies.
More ‘safe’ assets needed
Step one remains among the most contentious – particularly for Europe’s largest economy, Germany.
At the equivalent of $13 trillion, the stock of outstanding euro area bonds issued by governments is dwarfed by the $30 trillion U.S. Treasury market. And while most investors regard the $2.3 trillion of German government paper as a safe bet, fewer would say the same of Italian bonds or politically troubled France’s.
“The EU doesn’t have a deep enough capital market,” Alfred Kammer, head of the International Monetary Fund’s (IMF) European department, told Reuters. “It’s fragmented along national lines and lacks a truly large, liquid safe asset.”
For some, this is where new types of debt secured by a collective guarantee of the 20 euro-area countries should come in.
As far back as 2010, one proposal to help Europe emerge from its sovereign debt crisis envisaged countries pooling up to 60% GDP of their national debt into synthetic “blue bonds” enjoying joint liability. Any national debt beyond that – dubbed “red” debt – would remain the liability of the EU member state alone.
Such ideas have hit the same roadblock: reluctance by frugal northern nations such as Germany or the Netherlands to share liability with southern European countries they see as spendthrift.
It took the COVID-19 pandemic for capitals in 2020 to agree for the first time to share debt in the shape of the 800-billion-euro Next Generation EU (NGEU) recovery fund: a one-off stimulus package some hoped would set a precedent.
Then, five years later, Trump’s questioning of NATO spurred hope for further action. Europe’s rush to upgrade its military muscle needed huge funding for the shared goal of European security – a move that could generate hundreds of billions in euro-denominated joint debt.
“Defense creates an opportunity for creating another safe asset that could bolster Europe’s financial architecture,” Olli Rehn, Finnish central bank chief and ECB rate-setter, said.
While defense bonds’ time may yet come, it’s not today.
After winning power in February this year, German Chancellor Friedrich Merz took a different tack: loosening Germany’s sacrosanct “debt brake.” That paves the way for major spending on defense and infrastructure, but all of it will remain firmly under Berlin’s control.
By the time EU finance ministers met in Warsaw in April to discuss a proposal to borrow jointly to fund arms procurement, the writing was on the wall.
“There was support from a number of member states, but Germany and France were not convinced,” said one participant, characterizing German arguments as being about money and French ones as related to national defense sovereignty.
Asked for comment on his stance at that meeting, Germany’s then-finance minister Joerg Kukies said Berlin was not categorically against joint debt for defense.
“We didn’t say no. We just said there has to be a specific project to be financed,” Kukies, who left office in May, told Reuters. “Then we can talk about the financing.”
French Finance Minister Eric Lombard did not respond to a request for comment. A finance ministry source said France was not against common schemes in principle but did not see them as a priority. “Right now, the important thing is to build up capacity and capability,” the source said.
It was no surprise when, at NATO’s June 25 summit, European capitals chose to keep defense fund-raising largely within national budgets that would be loosened to allow higher spending. A new EU loan program would act as a top-up.
Capital union qualms
A second stumbling block is the fragmentation of Europe’s capital and banking markets across 20-plus national jurisdictions – which then-European Commission President Jean-Claude Juncker had set as a priority to solve back in 2014.
A capital markets union would align national rules on bankruptcies, public offerings and tax treatment of capital gains, debt and equity, making it easier for investors to put money into assets in the currency zone.
But years of patchy progress on the project, recently rebranded as the Savings and Investments Union, underline how wary EU capitals and many bankers are of any move that would shift decision-making to EU agencies.
Take the idea of creating a European version of the U.S. Securities and Exchange Commission(SEC) with a mandate to monitor risks across the EU – something Lagarde suggested could be achieved by extending the powers of the European Securities and Markets Authority (ESMA), an EU body based in Paris.
When European leaders met in April last year to advance such plans, France and Germany pushed for joint financial supervision. But it was smaller states – among them Luxembourg, Malta and Ireland – that blocked.
In a speech later that year, Lagarde suggested a European SEC could “be organized as a network of offices in the member states” – an idea some agree had a better chance of sticking.
“You could, for example, reassure Luxembourg regional asset managers they will be treated by the Luxembourg office,” said Nicolas Veron, senior fellow at EU think tank Bruegel and author of a blueprint on how ESMA could be expanded into a network of national offices.
When EU leaders met in June, they agreed on the need for “advancing decisively” on efforts to raise the euro’s profile as a reserve and transaction currency.
Steps due by year-end include promoting financial literacy among Europeans and making it easier for them to invest in securities markets. But the bigger goal of centralizing markets and securities supervision faces headwinds, at least for now.
“My impression is that the tougher topic – that of giving more powers to ESMA – will likely be left till further down the line,” Letta told Reuters.
Euro goes digital: But when?
The euro’s jostling for global influence has been conducted as a fiat money backed by the might of the ECB. But the rise of crypto and the U.S. foray into stablecoins – digital money pegged to the dollar – is opening up a new front.
Here too, Europe faces obstacles.
A Commission proposal for legislation on a digital euro has sat idle for over two years, despite the ECB holding 14 hearings on the project in the European Parliament and Lagarde pleading for its approval.
Banks and lawmakers worry it will drain bank deposits and involve heavy set-up costs without achieving a clear purpose, arguing it is variously portrayed as a defence against the rise of cryptos or as a new tool for digital finance.
“The digital euro is presented as a Swiss Army knife, but lacks precision for any specific problem,” Fernando Navarrete, the Spanish lawmaker and ex-central banker who is parliament’s rapporteur on the legislation, wrote in a commentary this month.
After EU finance ministers managed last week to agree on a road map for its launch, the earliest timeline for its approval is mid-2026. And even then, it will need a further two and a half to three years to build the technology.
According to three participants at the Copenhagen meeting where the road map was agreed, Lagarde voiced disappointment at how slow the process had been and the fact that it would not be in place by the end of her term in 2027.
Yuan challenger
Amid entrenched resistance to the reforms required, no one sees the euro rivalling the dollar’s dominance soon – the question is more whether it can strengthen its claim to be the global number two.
Some suggest Europe need not do anything to enhance the euro’s appeal other than emphasize its respect for the rule of law and the independence of its central bank.
A survey of 75 central banks published in May by the Official Monetary and Financial Institutions Forum (OMFIF) showed 16% saying they plan to increase euro holdings over the next 12-24 months.
But the same survey concluded that the main beneficiary of moves to diversify out of the dollar was not a currency but gold. And, in the long term, China’s yuan was favored by more central banks.
“We believe that diversification to manage the foreign exchange is very important,” Central Bank of Mongolia board member Enke Enkhjargal Danzanbaljir told business and finance chiefs in France in July, praising China’s offer of standby currency swaps to other central banks.
“The ECB must create tools, swap arrangements for central banks like us in Asia, then it would be easy to invest more in Europe,” she said.
The ECB has liquidity lines with 16 central banks in mostly Western countries, in some cases for unlimited funding.
Three sources close to Lagarde’s thinking said she was determined to maintain her push.
In a Sept. 15 speech in Paris, Lagarde urged the region to address “chinks in the armor” of its geo-economic standing, concluding: “Europe is working on this, albeit possibly too laboriously and too slowly.”
Japan’s economy lost momentum in the second quarter and fell short of market forecasts, as subdued household and business spending highlighted the fragility of the recovery as the war in the Middle East darkens the outlook.
However, long-term bond yields hit a three-decade high as investors brushed aside the soft reading as reflecting one-off factors, and focused more on mounting inflationary risks that could prod the Bank of Japan (BOJ) to raise interest rates next month.
Gross domestic product (GDP) rose 1.1% in annualized terms, government data showed on Monday, missing a median market estimate of 2% and below an upwardly revised 1.9% expansion in the previous quarter.
While the data revealed some temporary soft patches in demand, analysts say robust underlying momentum and persistent price pressures are likely to keep the case for imminent interest rate hikes intact.
“Today’s GDP data was a bit weak but the economy is likely to continue recovering moderately,” said Naoki Hattori, chief Japan economist at Mizuho Research Institute. “Given risks of underlying inflation overshooting its target, the BOJ is likely to proceed with a rate hike next month.”
The BOJ is expected to raise rates as soon as September and is said to be considering hiking more aggressively thereafter to avoid being behind the curve on inflation.
The benchmark 10-year Japanese government bond (JGB) yield rose for a sixth straight session on Monday to hit a 30-year high of 2.925%, as investors continued to price in BOJ rate hikes sooner and faster than earlier expected.
Private consumption was the biggest disappointment in the GDP data, falling 0.02% versus market expectations for a 0.5% increase, the first drop in eight quarters.
Analysts said the weakness was due in part to lower school fees households paid thanks to subsidies, which pushed down headline private consumption but lifted government spending.
Capital spending, a key driver of private demand, fell 1.2% in the second quarter, confounding market forecasts for a 0.4% increase. However, capital expenditure, as well as overall preliminary GDP, tend to be revised higher with updated figures.
Exports remained resilient thanks to solid U.S. demand for Japanese hybrid vehicles and sustained global investment in artificial intelligence that supported shipments of semiconductor-related equipment and components.
Net external demand, or exports minus imports, added 0.5 percentage point to growth, largely because imports fell sharply after temporary disruptions to crude oil shipments through the Strait of Hormuz.
“I don’t think the BOJ would be too worried about today’s GDP data as the economy is showing remarkable resilience to headwinds from the Iran war,” said Yoshiki Shinke, senior executive economist at Daiichi Life Research Institute.
The government maintained its sanguine view on the economy.
“The economy remains on a moderate recovery path, with export-driven growth offsetting weakness in domestic demand,” Economy Minister Minoru Kiuchi said in a statement.
Outlook murky
Looking ahead, analysts cautioned that rising import costs and mounting upstream price pressures could eventually feed through to consumers, posing a risk to spending later this year.
Aside from rising fuel costs from the Middle East conflict, a weak yen has lifted import prices and broader cost-of-living for households, posing a headache for policymakers.
Such price pressures have led to a flurry of hawkish comments from BOJ policymakers that bolstered the case for an early rate hike.
The government has sought to cushion the blow to households from rising living costs with subsidies, though rising bond yields may prevent it from ramping up fiscal spending any further, some analysts say.
That spells trouble for consumption, which is mostly holding up so far as a tight job market prods firms to offer higher pay.
“Government subsidies have helped contain consumer inflation so far, but a weaker yen and higher crude oil import costs raise the likelihood of broader price hikes from the autumn onward,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
A survey this month by the Japan Center for Economic Research showed 37 economists forecast annualized GDP growth to slow to an average 0.05% in the July-September quarter.
“The boost to consumption from policy measures is already fading, and inflation will increase in H2 as firms will pass on increased costs, deteriorating consumers’ purchasing power,” Oxford Economics wrote in a research note.
“Although AI-related goods exports will continue to stay robust in the near term, sluggish non-AI related global economic activities will limit overall export gains.”
German companies’ investments in the U.S. have dropped to a three-year low in the first half of 2026, as Trump administration policies continue to raise uncertainty and pose risk for trade between the key trans-Atlantic partners, data shows.
First-half direct investments plunged by nearly two-thirds year-over-year to 4.3 billion euros ($5 billion), the lowest level since 2023, according to calculations by the German Economic Institute (IW), seen by Reuters.
Compared with the same period in 2024, that represents a drop of nearly 80%, said the report, which is based on data from Germany’s central bank.
“This continues the downward trend that has been evident since the start of Donald Trump’s second term in January 2025,” IW researcher Samina Sultan told Reuters.
Since returning to office, Trump has threatened most of the United States’ international trading partners with import tariffs in an attempt to secure concessions favourable to Washington.
In a bid to avoid heavy duties on its exports to the U.S., for example, the European Union agreed a deal last year that included a $600 billion investment pledge.
In the five years before the COVID-19 pandemic, first-half investments by German companies in the U.S. averaged 15.8 billion euros, the data showed, almost four times the 2026 level.
That said, the 2020 to 2023 period was shaped by the “exceptional circumstance” of the pandemic, Sultan said, with some years marked by net investment outflows.
The researchers also examined the composition of investment flows over 2025 and found that both direct-investment loans and reinvested earnings were exceptionally high, while equity capital in the narrower sense – the balance of new investments and liquidations – remained below average.
“Companies that are already active in the United States are therefore continuing to reinvest the profits they earn there in the country,” Sultan said.
“This suggests that the U.S. remains an attractive market overall.”
However, companies were hesitant to commit new capital, she said.
For more than a century, cafes in the Italian northern city of Padua have grown accustomed in welcoming customers for an early evening drink, or aperitivo, encouraging them to sit outside and socialize just at the time before dinner.
As Europe bakes under its fifth heat wave of the year, the traditional 6 p.m. to 7 p.m. slot has all but disappeared as people seek air-conditioning indoors, cutting sales for many hospitality businesses.
Adding to the pressure, extreme heat often falls outside traditional business interruption insurance, exposing a growing protection gap for companies across Europe.
Moody’s has published estimates that last summer’s European heat waves cost 43 billion euros ($50 billion) in lost economic output while generating only about 500 million euros of insured payouts.
In Padua, aperitivo often now starts later, “which means that the outdoor seating areas, the terraces, the spaces outside … are left unused and empty,” said Federica Luni, president of hospitality association APPE Padova.
According to a survey of about 600 hospitality businesses in the city and its province, more than 80% reported turnover declines of around 20% during the recent heatwave.
“A 20% decline wipes out your margin,” Luni said.
Toll on economy
Heat waves are increasingly taking a toll on Europe’s economy, reducing productivity, curbing consumer spending and raising operating costs.
For insurers, such losses can be difficult to cover because they often stem from indirect operational disruption rather than property damage.
“Heat in itself is not a traditionally insured risk,” said Swenja Surminski, managing director for climate and sustainability at Marsh.
“Extreme heat rarely causes catastrophic physical damage the way a flood or a storm does, but the financial operational disruption that it triggers can be just as severe.”
A 2023 survey of 9,000 small and medium-sized firms for Europe’s insurance regulator found 28% held business interruption cover as part of their property insurance, while 17% had non-damage business interruption protection covering events such as strike action.
The protection gap is widening as the economic costs of extreme heat mount. Trains are delayed, agricultural yields fall and factory cooling costs rise, while workers often struggle to maintain productivity during prolonged spells of extreme temperatures.
Companies that flagged a hit from hot weather or warned about its potential future impact when reporting second-quarter earnings included Swedish shop-fitting provider ITAB Group, Italian cement producer Buzzi and French payments firm Worldline.
Compound risk
Heat often acts as a compound risk, interacting with drought, wildfire and water shortages rather than triggering a single identifiable loss event. That makes it harder to model and insure than some other natural catastrophes.
The challenge is particularly acute in Europe, the fastest-warming continent. Reuters Climate Monitor showed the average temperature across Western Europe was nearly 10 degrees Celsius (18 degrees Fahrenheit) above the 1961 to 1990 average on Aug. 11.
Data compiled by environmental disclosure platform CDP showed 35% of companies it tracks identified heatwaves as a risk driver, led by businesses in manufacturing, services, infrastructure and food-related sectors.
While insurance may cover some physical losses linked to events such as power outages, businesses often say compensation does little to offset lost sales and reduced customer activity.
“The real loss is the revenue you don’t make and the business activity that never takes place because of the outage,” Luni said.
To bridge the gap, insurers are increasingly exploring parametric products that pay out automatically when temperatures exceed predefined thresholds. Unlike traditional indemnity-based insurance, such policies do not require a lengthy loss-adjustment process.
The European market for parametric insurance is expected to reach $7.93 billion by 2031, according to a report by KBV Research, with compound annual growth of 9.5% between 2025 and 2032.
Such policies are already being used in agriculture, where heat can reduce crop yields or livestock productivity, and industry experts see scope for expansion into sectors including transport and workforce protection.
“Parametric insurance can really play a role,” said Aidan Kerr, head of U.K. and Ireland public sector solutions at Swiss Re.
Even so, many companies will need to focus primarily on adapting their operations to withstand more frequent periods of extreme heat through measures such as investing in cooling technologies, redesigning workplaces and stress-testing supply chains, Marsh’s Surminski said.
“Take action to avoid the losses rather than address them once they’ve occurred.”
Over nearly a quarter-century, Türkiye’s defense sector has transformed from foreign-dependent licensed manufacturing into a high-capacity industry driven by high domestic content and robust global exports.
The transformation coincides with the 25-year period of the ruling Justice and Development Party (AK Party), which marked its anniversary on Friday.
Türkiye now develops a broad range of indigenous platforms and systems, invests in critical technologies and exports high-value-added products across the globe.
In 2002, Türkiye had only 56 defense firms and some 62 projects underway. Those figures today stand at more than 4,500 and 1,400, respectively.
The total project volume skyrocketed from $5.5 billion in 2002 to over $100 billion today.
Defense and aerospace exports surged from just $248 million to $10.05 billion in 2025.
Shipments hit $5.79 billion in the first seven months of 2026 and totaled $11.2 billion on an annualized basis as of July.
Türkiye is currently the world’s 11th-largest defense exporter and is close to breaking into the ranks of the top 10.
For much of the past two decades, Ankara has expressed frustration over its Western allies’ failure to provide adequate defense systems against missile threats despite Türkiye being a major NATO member.
That prompted it to invest billions of dollars to transform from a nation heavily reliant on equipment from abroad to one that is a major exporter and where homegrown systems now meet almost all of its defense industry needs.
Its research and development spending increased from $49 million in 2002 to over $3.5 billion, while the domestically produced content ratio increased from 20% to more than 85%.
Shift to domestic development
The Turkish defense sector provides direct employment to over 100,000 people, and the average age of a defense industry worker is 34.
Turkish defense was dominated by off-the-shelf purchases, licensed production and technology transfer in the early 2000s. This trend gradually shifted to promote domestic development, homegrown original design and the localization of critical subsystems.
The sector’s scope of operations expanded as project scales grew, with a broad range of products and technologies emerging, such as armored vehicles, conventional platforms, unmanned systems, warships, jet aircraft, air defense systems, radar and electronic warfare systems, smart munitions, engines, space technology and advanced electronics.
The Turkish defense and aerospace industry made around $1.1 billion in revenue in 2002, while this figure exceeded $20 billion by 2026.
Unmanned aerial vehicles
Unmanned aerial vehicles have been one of the most significant areas of transformation over the past 25 years.
Defense firm Baykar’s Bayraktar TB2 unmanned combat aerial vehicle became one of the most symbolic breakthroughs in Turkish defense.
The combat drones earned worldwide fame after proving their capabilities in several conflicts, including Syria, Libya, Karabakh and Ukraine.
Their success eventually helped Türkiye become one of the world’s top drone exporters.
Baykar’s multirole Bayraktar Akıncı platform further improved Türkiye’s drone capabilities with its high payload capacity, long range, advanced sensors and heavy munitions integration.
Baykar’s Bayraktar Kızılelma carried Türkiye’s drone expertise into the unmanned fighter jet area by combining high speed, air-to-air and air-to-ground capabilities and the ability to operate from short-runway ships.
Turkish Aerospace Industries’ Anka and Aksungur unmanned combat aerial vehicles contributed to the development of high-altitude, long-endurance and strategic reconnaissance and surveillance capabilities of Turkish drones by integrating satellite communications, homegrown electro-optical systems, munitions and engines.
Growing aviation industry
The Turkish Aerospace Industries’ under-development twin-engine stealth fighter Kaan and the Hürjet jet trainer also marked major milestones in Türkiye’s manned aviation.
The Kaan is one of the most technologically ambitious programs in Turkish aviation with its low observability, advanced avionics, mission computer, radar and system integration.
The Hürjet was developed to provide a homegrown trainer platform to advance the country’s capability to develop manned military aircraft.
The Turkish Aerospace Industries T129 Atak helicopter’s product and system integration experience translated into the homegrown T625 Gökbey helicopter, marking a giant leap in rotary-wing technologies.
State-of-the-art naval defense
Beyond aerial systems, Türkiye’s national ship project, called MILGEM, laid the foundation for domestic naval platform design, ranging from corvettes to frigates.
Advancements in combat management systems, sensors and weapon integration became key to ensuring independence and export capacity in naval defense.
The TF-2000 anti-air warfare guided-missile destroyer extended the Turkish Navy’s air defense capabilities to the high seas through its long-range air defense and advanced radar and weapon-sensor integration.
The unique naval engineering capabilities Türkiye gained through the MILGEM project enabled the development of the country’s domestic submarine project, called MILDEN, to develop underwater platforms.
The partnership between the TCG Anadolu drone carrier assault ship and the Bayraktar TB3 combat drone introduced a new sea-air operations concept to the Turkish defense industry, integrating amphibious capabilities with a UAV capable of operating from short runways.
Missile defense systems
Meanwhile, Türkiye’s air defense architecture also grew with Roketsan and Aselsan’s Hisar and Siper missile systems, which contributed to a layered air defense architecture combining integrated sensors, command-and-control systems and missile systems within a single domestic architecture against various threats at low, medium and high altitudes.
Türkiye’s multilayered air defense system, Steel Dome, has been developed by bringing together radars, electro-optical sensors, electronic warfare components, command-and-control infrastructure and air defense weapons of various ranges under a common network.
Roketsan’s Som, Atmaca and Kara Atmaca developed long-range precision strike capabilities for air, sea and land platforms, while the same firm’s Tayfun missile introduced the ability to engage long-range and precision land targets, boosting Türkiye’s strategic deterrence.
Turkish defense also evolved in surface vehicles, with the main battle tank Altay establishing a broad industrial ecosystem around critical technologies, such as armor, active protection, fire control and power packs, while also highlighting the strategic importance of reducing foreign dependence on engines and power packs.
Aselsan’s Koral electronic warfare system and other homegrown radar systems enhanced the effectiveness of air, land and sea platforms in modern warfare through radar detection, electronic jamming, early warning and sensor superiority.
Indigenous technologies
Meanwhile, the PD170, TF6000 and KTJ engine projects brought power system developments for UAV engines, turbofans, cruise missile engines and more.
These projects have been key to ensuring platform independence in defense through indigenous engine technologies.
At the same time, Turkish defense transformed its export model from direct product sales to a broader approach that includes training, maintenance and sustainment, system integration, co-production and technology cooperation.
Turkish defense products are exported to some 185 countries, and around 230 different product types are actively used worldwide.
The sector’s primary goal this year is to further independence efforts in critical technologies, establish high-volume mass production capacity and permanently expand its share in the global market.
Business partnerships should complement the strong political relations between Türkiye and Pakistan, Khawaja Khurram Naeem, the Consul General of Pakistan in Istanbul, said on Thursday, also pointing to the potential of the Pakistani economy and a push to encourage investment and growth.
“We strongly believe that government-to-government cooperation must be complemented by the robust business-to-business engagement,” Naeem said in an address to the “Global Excellence Award Ceremony,” organized by the Islamabad Chamber of Commerce and Industry (ICCI) in Istanbul.
Starting his speech, the consul general noted that the close relationship between Türkiye and Pakistan, two brotherly countries, is “based on a shared history, mutual trust, and a common vision for economic prosperity.”
He added that the business forum provided an important opportunity to further strengthen commercial and investment ties between the two nations.
Pointing to positive developments in Pakistan’s economy, Naeem said the Islamabad government has taken important steps to encourage investment and create a more business-friendly environment.
“The government’s commitment to gradually reducing the corporate tax rate to a more competitive level demonstrates the determination to encourage investment and economic growth,” he added.
He also went on to highlight the potential for regional cooperation involving Türkiye, Pakistan and Central Asia amid the changing geopolitical landscape.
Naeem said Pakistan has particularly significant potential in the textile and ready-made garment sectors, while also noting that the country has extensive production capacity and a young population.
“Sustainable economic growth can only be achieved through active cooperation between the private sectors of both countries, reciprocal visits, and the establishment of long-term partnerships,” he said.
Naeem invited business representatives to explore new opportunities, forge new connections, and develop mutually beneficial partnerships through the forum.
In his speech, Naeem also thanked all the institutions that contributed to organizing the event, particularly the Islamabad Chamber of Commerce and Industry and the Istanbul Chamber of Commerce (ITO), and other Turkish partners, and expressed hope that economic activities between Pakistan and Türkiye would continue to grow stronger.
At the event, the business leaders recalled that the current bilateral trade volume between Türkiye and Pakistan of around $1.2 billion is relatively modest and urged for more steps, including more B2B meetings and reciprocal visits, to elevate the cooperation.
South Korean automaker Hyundai on Friday started mass production of its new all-electric IONIQ 3 model at a factory in Türkiye’s northwestern Kocaeli province.
It makes Hyundai the first foreign automaker to manufacture battery-powered passenger cars in Türkiye and also marks the company’s first EV production in Europe.
The launch represents a significant step in Türkiye’s strategy to position itself as a regional production hub for electric vehicles and battery technologies while attracting new investments in next-generation mobility.
Industry and Technology Minister Mehmet Fatih Kacır said the investment demonstrates growing international confidence in Türkiye’s manufacturing capabilities and industrial ecosystem.
“The investment is one of the most concrete outcomes of our vision to make Türkiye one of the leading countries in next-generation mobility technologies,” Kacır told the start-of-production ceremony at Hyundai Motor Türkiye’s Izmit plant.
In June, Hyundai also announced it would build a new 55 million euros ($63.8 million) battery assembly facility that it says will strengthen the investment in the production of the IONIQ 3.
The facility will assemble battery packs using automated systems in cooperation with Hyundai Mobis.
“An international automaker is producing a fully electric passenger vehicle in our country for the first time,” said Kacır.
“The accompanying battery investment demonstrates that Türkiye has crossed an important threshold in its goal of becoming a global production hub for electric vehicles and battery technologies.”
Hyundai is investing approximately 250 million euros in the project and will initially produce 30,000 IONIQ 3 vehicles annually at the Izmit facility.
The plant has operated in Türkiye for nearly three decades and is Hyundai’s first and longest-running overseas manufacturing facility outside South Korea.
It has produced 13 different models and about 3.3 million vehicles since operations began in 1997. The Izmit plant currently produces the i20 and Bayon models.
Government investment incentives have helped expand the factory’s annual production capacity from 50,000 vehicles in 2002 to 230,000 today.
Hyundai Motor Group plans to invest $90 billion globally by 2030, launching 21 fully electric and 13 hybrid models.
Building on Türkiye’s automotive industry
Kacır said the automotive industry has become one of the main pillars of Turkish manufacturing, increasing annual production from 357,000 vehicles to 1.5 million over the past 23 years.
Automotive exports have risen to $41.5 billion from $4.8 billion in 2002.
The sector directly employs around 60,000 workers in vehicle manufacturing and nearly 250,000 in the supplier industry.
Kacır said the government views the global shift toward electrification, connected vehicles and autonomous driving technologies as an opportunity to strengthen Türkiye’s industrial competitiveness.
He reiterated that the domestically developed Togg electric vehicle project was conceived not only as a car brand but as the foundation of a broader mobility ecosystem encompassing battery technologies, software, power electronics and charging infrastructure.
“The success of our new mobility vision depends on expanding the transformation initiated by Togg across the entire automotive industry,” he said.
“It is therefore extremely important that global manufacturers already producing in Türkiye direct their next-generation mobility investments to our country.”
EV market expanding rapidly
Türkiye’s domestic electric vehicle market has also grown rapidly.
Kacır said more than 450,000 electric vehicles are currently on Turkish roads, while fully electric models account for more than 17% of local vehicle sales this year.
The government expects the number of electric vehicles in circulation to exceed 1.5 million by 2030.
Kacır said Türkiye offers international investors significant advantages, including a large domestic market of 86 million people, a $1.6 trillion economy, an extensive supplier network and logistics infrastructure, as well as preferential access to around one billion consumers through the customs union with the European Union and free trade agreements.
Kacır said Hyundai’s investment is expected to encourage additional next-generation mobility projects and attract further foreign investment, particularly from South Korean companies.
“We hope Hyundai’s investment decision will serve as an example for other South Korean companies,” he said.
“Türkiye will continue to support all investors who produce, develop technology, create qualified employment and strengthen our position in global value chains.”
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