Turkey has a lot in its favor, but the country still has much work to do on political and human rights if it wants to join the European Union, the European Commission said.
The report praised Turkey on some fronts, but there are still membership doubts
In its annual report card on membership readiness, the European Commission, the EU's executive body, said Turkey has proven itself to be a reliable international partner and a key energy transit route.
But Brussels warned the country must work harder on political and human-rights reforms.
"Turkey's geo-strategic position gives the country a vital role in the EU's energy security, particularly diversification of energy sources," the European Commission said. "Closer energy cooperation between the EU (and) Turkey ... is essential."
Eagerly awaited report
Nevertheless, "a new impetus now needs to be given to reform," in order to strengthen democracy and human rights, and to modernize and the country to bring it closer to the EU," the report said.
The report card is an eagerly awaited event for both proponents and opponents of Turkey's membership in the EU. Each year, it rates the accession progress of all candidate countries.
2008 saw strife between the AKP and secularists
Turkey has been a candidate for EU membership since 1999 and opened formal talks on accession in 2005, but officials in Brussels say its progress has been limited, especially under the impact of the summer's power struggle between the ruling AKP party and the country's secularist elite.
"The year 2008 was marked by strong political tensions in domestic politics," EU Enlargement Commissioner Olli Rehn said. "Constitutional court cases highlight the need for an urgent revision of rules governing political parties.
"The country has every chance to make 2009 an important year in its accession progress by accelerating the momentum of legal and democratic reforms," he said.
Nevertheless, Rehn refused to set a date for the completion of Turkey's accession talks, saying that this would depend on the pace of reform in the country.
Organized crime, Cyprus still sticking points
Turkey's perceived weakness in fighting organized crime is also a "serious concern," the commission's report said.
Turkey's policy of vetoing the entry of EU member Cyprus into international organizations and Ankara's refusal to let NATO, of which it is a member, cooperate fully with the EU because of its dispute with Cyprus "created problems for EU-NATO cooperation."
Turkey is a key transit country for natural gas
However, the commission praised Turkey's cooperation on foreign-policy issues such as Iraq, Iran and the summer's Russian- Georgian war.
"Turkey has enhanced its positive role of regional stabilization, in particular as regards the Caucasus and the Middle East," the report said.
The commission acknowledged Turkey's importance as a transit country for natural gas, stressing that "the Turkish authorities have repeatedly confirmed their commitment to the realization of the (Nabucco) project," which would bring gas from Azerbeijan to the EU, bypassing Russia.
Orphanage controversy in Britain
Meanwhile, a British television program that showed undercover footage of horrifying conditions in state orphanages in Turkey has unleashed a new controversy with Europe.
Turkey accuses Britain's Duchess of York, whose investigation filmed children dressed in bedclothes and rags tied to their beds or left in cots all day, of using the show to intentionally smear Turkey and jeopardize EU membership.
Spokesmen for the UK television program denied the allegations.