Legend has it that the city was founded by Byzas the Megarian in 676 BC. Inspired by the oracle of Delphi, he established a settlement at Saray Burnu, which grew wealthy extracting duties from ships passing up the Bosporus. Incorporated into the Roman Empire in 64 BC, Byzantium, as it was then known, enjoyed an unprecedented period of peace and prosperity before the empire was ripped apart by civil war. The city then became Constantinople, the capital of the new 'eastern’ Roman empire.

Under the first Byzantine emperor Constantine it was transformed by an ambitious building programme, which continued under Justinian the Great (527-565AD). He commissioned the still-surviving cathedral of Haghia Sophia and ushered in a glittering era for the city. Constantinople remained the Byzantine capital until it fell to the Ottoman Turks in 1453.

As the political and economic heart of the Ottoman state, Istanbul was graced with many fine buildings over the next 500 years. But the empire’s slow, inexorable decline culminated in the city’s occupation by British forces after the First World War. It became politically marginalised when the nationalists under Kemal Ataturk established Ankara as the capital of the Turkish Republic in 1923.

POLITICS

The Turkish Republic has a secular, pluralist parliamentary system. Legislative power rests with the National Assembly or Mecli in Ankara, with 550 deputies elected every five years by a system of proportional representation. A 10% electoral threshold was recently introduced to limit the number of smaller political parties in the parliament.

The nation is governed by a Council of Ministers headed by the Prime Minister, presently Recep Tayyip Erdogan of the AK Partisi. The head of state is the president, currently Ahmet Necdet, who is elected every seven years by parliament and presides over the powerful National Security Council, made up of top members of the government and armed forces.

RELIGION

Turkey’s national religion is Islam, but the country is a secular state with religious affairs and government kept firmly apart. Turkish people are generally more moderate in their religious beliefs than their neighbours in the Middle East. This is particularly the case in Istanbul and the other main cities, although more conservative attitudes tend to predominate in areas that have received a large influx of people from rural areas and the east. Women in these areas typically choose to cover their heads with a headscarf, although few veil themselves completely.

The main religious holidays of the Islamic calendar are widely observed in Turkey. Banks, government offices and many businesses are closed, and Turks traditionally visit their family and relatives. Istanbul once had thriving Greek Orthodox, Armenian and Jewish communities, although these have been largely driven out during the course of the 20th century.

ECONOMY

Turkey has a dynamic, mixed economy with strong industrial and commercial sectors that are concentrated overwhelmingly in Istanbul and the surrounding region. Despite having a vigorous and rapidly growing private sector, the state maintains an important role in many areas of the country’s, and therefore the city’s economy, such as heavy industry, banking, transport and communication. Privatisation, although a priority of several consecutive governments, has been slow. Inefficient public firms still dominate large parts of the economy and remain a drain on the national purse.

The city’s most important industries are in the manufacturing and services sectors, with low labour rates and proximity to markets in Europe and the Middle East encouraging rapid growth.

Underlying structural problems within the economy, coupled with political mismanagement and global events, caused a series of economic crises during the 1990s. These culminated in a catastrophic devaluation in 2001, when the Turkish Lira lost 40% of its value. Thousands lost their jobs while the country’s GDP plummeted by over 7%.

An IMF-sponsored recovery plan helped stabilise the situation, although it was left to the AK Partisi government, elected in 2002, to guide the Turkish economy out of its worst recession since the Second World War.

Fiscal belt tightening and economic reform have succeeded in cutting the government deficit. Inflation has been brought down from a galloping 70% to 11.4% in 2004. Industrial production in the third quarter of last year was up 6.8% compared to 2003, and GDP grew by 4.5 %. Much needed reforms within the banking industry have boosted investor confidence and the improving economic climate has resulted in growing foreign investment. Despite these improvements, there remain economic challenges ahead, such as improving the government’s tax base, reducing unemployment and dealing with inefficient state-owned businesses.

POPULATION

Istanbul’s official population is 12 million, although conservative estimates put the city’s true size at over 15 million, and growing fast. A staggering 700,000 people are thought to arrive in the city each year, attracted by higher standards of living and better employment prospects than elsewhere in the country. The bright lights of the big city are a massive draw but for many the dream turns sour. Since the departure of large Greek and Armenian minorities during the 20th century, the city’s ethnic make-up is overwhelmingly Turkish, although small Jewish, Greek and Armenian communities do remain. Due to its role as an important regional commercial and economic centre, Istanbul has a large and diverse expatriate community.