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Seen from Turkey, the squabble about the EU budget seems like fiddling while Brussels burns.

In the Turkish perspective, the large issues for Europe should not be the latest carve-up of the budgetary cake, or the palace power struggle between the European parliament and the member states, or even the necessary budgetary disciplines that Germany demands of its more rule-resistant partners and to which economically booming Turkey, unlike its economically wracked neighbour Greece, could sign up with barely a second's thought.

Seen from the south-eastern corner of Europe, the big issues are ones worthy of the name. Like whether the Europe of 2025 will have a large enough working population to sustain its burdened welfare budgets and social care systems into the mid-century; whether the Christian and secular majorities in 21st-century Europe can share their streets with Muslims; whether there will be enough gas and electricity coming reliably into Europe to prevent the lights going out in our lifetime, and whether Europe is serious and coherent about maintaining its security against threats from places such as Russia or Iran.

Last, but not least, there is the question of whether the EU can rise above its own perennial self-absorption and grasp that its relationship with Turkey, a European country of 77 million people and with a rapidly and roaringly expanding GDP of $875 billion (Dh3.2 trillion) — the China of Europe, as the Economist dubbed it — can no longer be held hostage by the atavistic parochialism of a Greek Cypriot statelet of fewer than one million people and with a declining GDP of $23 billion.

Much in its favour

To attend the annual Bosphorus conference about Turkey and the EU is to be reminded both of enduring realities and new ones. Rather like Britain, Turkey is a nation of the European periphery. Like Britain again, it looks outwards from Europe as well as inwards, which is why Turkey is also part and not part of the Middle East too.

Turkey's place in the Muslim world makes it a meeting place between West and East. Its history as an imperial power, plus its enduring military strength, mean it is forever significant in the shifting evolution of its neighbouring regions. Turkey's democratic and legal traditions, albeit often fragile, give it pivotal credibility. And you only have to keep your eyes and ears open to realise that Turkey is economically booming, confident and dynamic at precisely the time when much of Europe is none of these things.

When I was last in Turkey the mood towards Europe, somewhat in defiance of the deeper facts, was strikingly upbeat. Negotiations for Turkish membership of the EU had finally started. The economy was expanding rapidly. There had been far-reaching structural reforms. There were signs of a new and more honest attitude to the Kurds and the Armenians.

Turkish public opinion was also heavily in favour of EU entry. True, the Cyprus situation was unresolved, civil rights were sometimes precarious, and majorities in several EU countries were adamantly anti-Turk. Nevertheless, Recep Tayyip Erdogan's government had the wind in its sails and the optimism was palpable.

Growing resentment

This time, even in westernised Istanbul, the mood is becoming discernibly more irritable. This month, when the EU unveils its latest progress report on Turkish admission, there will be very little positive to report. Disgracefully, Cyprus remains as big a stumbling block as ever. Only one of the 35 chapters of the admission negotiations has been completed; many others have been frozen at Nicosia's bidding.

France and Germany are hostile, as are Austria and, increasingly, the Netherlands. Turkey's Foreign Minister Ahmet Davutoglu talks of EU membership as "still a rational choice" but complains, justifiably, about double standards and prejudices. His pugnacious chief Europe negotiator, Egemen Bagis, says the word on the Istanbul street is resentful. "My constituents say, ‘We didn't need the EU in order to triple our national income as we have done. So why bother?'"

The answer to that is that the two parties have interests in common, agreements worth making and promises to keep. But it isn't hard to see why earlier optimism has been replaced by a grittier mood. Most of the problems, though, lie on the European side of the bridge. Cyprus apart, the main issue is Europe's own economic travail. Then there is growing anxiety about immigration. This makes it a far from ideal time to start talking about the labour and travel rights of a predominantly Muslim nation twice the size of Germany.

Finally there is enlargement fatigue. Post-Lisbon, the EU is an unwieldy beast. There is an underlying sense that enlargement has gone too quickly and that the candidates for membership must wait some years before entry.

Pretty clearly, therefore, Turkish membership is going nowhere any time soon. In much of Europe, there will be sighs of relief. The failure is predictable, disgraceful and incredibly shortsighted. But at least it will not rob Turkey of its status as the most interesting country in Europe. Right now, nothing can do that.