Germany warned its citizens to take care when travelling to Turkey and threatened to end corporate investment guarantees, steps which could hurt the Turkish economy, in a sign of growing impatience with a NATO ally after the detention of rights activists.
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Foreign Minister Sigmar Gabriel broke off his holiday to return to Berlin and deal with the crisis after Turkey arrested six human rights activists including German national Peter Steudtner, the latest in a series of diplomatic rows.
"We need our policies towards Turkey to go in a new direction ... we can't continue as we have done until now," Gabriel told reporters in unusually direct language.
"We need to be clearer than we have been until now so those responsible in Ankara understand that such policies are not without consequences," Gabriel told reporters.
Germany's DIHK chambers of commerce said that in the current environment investing in Turkey was hard to imagine.
The most concrete measure was to step up warnings to Germans intending to visit Turkey. Bookings from Germany account for around 15 percent of Turkey's tourists.
"Until now there was guidance for certain groups but we're saying that now applies to all German citizens, not just for those with certain jobs .... Everyone can be affected. The most absurd things are possible," said Gabriel.
Last year, the number of foreign visitors to Turkey fell to 25.4 million, the lowest in nine years. The travel sector contributes some $30 billion to the economy in a normal year, the country's tourism minister told Reuters earlier this year.
In its latest guidance, the foreign ministry said: "People who are traveling to Turkey for private or business reasons are urged to exercise increased caution, and should register with German consulates and the embassy, even for shorter visits."
The six rights activists arrested are among 50,000 jailed pending trial in Turkey in a crackdown that followed an attempted coup a year ago. Turkey accused EU countries of failing to give prompt support to Ankara when the coup, that killed over 240 people, was in progress.
Foreign and domestic critics accuse Erdogan of using a state of emergency declared after the coup to root out all opposition, not least in judiciary and police.
Gabriel also said he could not advise companies to invest in a country without legal certainty "and (where) even completely innocent companies are judged as being close to terrorists."
"I can't see how we as the German government can continue to guarantee corporate investments in Turkey if there is the threat of arbitrary expropriation for political reasons," he said.
"We need to talk about how we can develop our Hermes guarantee framework and how we deal with investment loans and economic aid."
On Wednesday the newspaper Die Zeit reported that Turkish authorities had several weeks ago handed Berlin a list of 68 German companies they accused of having links to U.S.-based cleric Fethullah Gulen. Turkey accuses Gulen of masterminding the coup attempt, a charge he denies.
The list included chemicals giant BASF BASFn.DE, which confirmed it was on a list that had been passed to it by German police, but declined to comment on the allegations.
Turkish Deputy Prime Minister Mehmet Simsek said on Thursday the reports were completely untrue
Gabriel said the situation also affected how the EU dealt with accession programs for Turkey and said Germany would speak to European colleagues about that in the coming days and weeks.
He also said he could not envisage talks on expanding the customs union to Turkey.
Speaking about two months before a federal election, the Social Democrat minister said the new stance had been agreed with conservative Chancellor Angela Merkel.
In June, Germany decided to pull troops and reconnaissance aircraft out of Turkey's Incirlik air base after Turkish officials refused to let lawmakers visit them.
The troops and planes participating in the international coalition against ISIS were redeployed to Jordan. Merkel portrayed the move at the time as allowing Germany and Turkey to put aside one of many problems causing friction between the two NATO allies.