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There was prosperity at home too: since the AKP first came to power, Turkey's GDP has trebled, the budget deficit has fallen by two-thirds. From 2002 to '10, GDP grew by a compounded annual rate of 4.8%, more than Russia, Brazil and South Korea. In 2010, Turkey's GDP grew 8.9%; the E.U.'s grew 1.9%. Already the world's 17th largest economy, behind South Korea, Spain and Canada, Turkey is expected to slow this year, and some analysts warn that its economy is in danger of overheating. But compared with much of Europe, it is a picture of health.
Emboldened by economic and foreign policy successes, Erdogan grew more ambitious abroad. With U.S. support, he sought to turn Turkey into a moderator of other regional rifts, bringing Syria and Israel as close as they have ever come to peace talks. That dream was dashed in December 2008, when Israeli Prime Minister Ehud Olmert ordered the start of Operation Cast Lead, a three-week assault on Gaza that left more than 1,300 Palestinians dead. Israel said it was provoked by rockets fired from Gaza; Syria withdrew from Erdogan-brokered negotiations.
Associates of the Turkish leader say he was personally affronted. Olmert, he felt, had left him holding the bag. His anger boiled over at a panel discussion in Davos, when he stormed off after telling Israeli President Shimon Peres, "You know very well how to kill."
Relations with Israel limped along for a while before breaking down completely in May 2010, when Israeli commandos halted a Turkish-led aid flotilla bound for Gaza. In international waters, the commandos rappelled down into the Mavi Marmara, a ship belonging to a Turkish charity. In the fighting that broke out, eight Turks and one Turkish American were killed. Israel says its soldiers were attacked on board.
Turkey has since all but broken off relations with Israel. Erdogan says nothing short of a formal apology and the lifting of Israel's blockade of Gaza will repair a once promising friendship. "The Israeli government is not being honest at all," he tells TIME. Israel has responded with angry rhetoric of its own: Foreign Minister Avigdor Lieberman suggested one way to get back at Erdogan would be to support the Kurdish terrorist group known as the PKK, which has recently stepped up attacks against Turkish military and civilian targets. (Turkey accepted Israel's aid after a devastating Oct. 23 earthquake in Van province killed over 600, but Davutoglu said that would not soften Turkey's position.)
... To Plenty of Problems
The Arab Spring finally made the Zero Problems doctrine untenable. Although Erdogan was ahead of many Western leaders in calling for Egypt's Hosni Mubarak to step down in the face of a popular uprising, he was hesitant to send the same message to Syria's Assad and Libya's Muammar Gaddafi: Turkey had sizable business interests and expat populations in both countries. Erdogan initially resisted pressure to join the NATO campaign against Gaddafi and maintained that his relationship with Assad would allow him to coax the Syrian leader into implementing political reforms. "Erdogan thought of himself as Assad's tutor," says F. Stephen Larrabee, an expert on Turkey at the Rand Corp. "He overestimated his ability to persuade Assad."
Erdogan belatedly changed his mind and then acted decisively: Turkey backed Libya's transitional council against Gaddafi, and once Assad had reneged on his promise of reforms (another slight Erdogan took personally), it began calling for regime change in Damascus. Whereas once he had invited the Assad family to holiday in Turkey, Erdogan grew openly contemptuous of the Syrian strongman. "It is impossible to preserve my friendship with people who are allegedly leaders when they are attacking their own people," he says. Turkey now provides shelter not only to refugees from Assad's crackdown but also to opposition groups that are actively plotting his downfall.
The break with Israel and Syria may have dashed Erdogan's hopes of being a regional peacemaker. It also greatly complicates matters for the U.S., which had hoped Turkey could gradually draw Syria away from the Iranian sphere of influence. Nor does it help that the U.S.'s two closest allies in the region, Turkey and Israel, are now at loggerheads. Pro-Israel Congressmen have threatened to block military supplies to Turkey, giving the White House yet another brush fire to put out.