A fierce-looking banner strung between two swaying trees in this hillside town on the Black Sea sums up how the locals here feel about the steel factory that is their principal employer: "Erdemir is our sweat," it proclaims. "Each of us would die for it."

Turkey recently put this state-controlled company, its biggest steel maker, on the auction block. With 13 suitors lining up to bid, including companies from Russia, Britain and South Korea, Erdemir could become one of Turkey’s most successful privatizations—a potent symbol of economic progress as Turkey begins arduous negotiations this autumn to join the European Union.

But first the sale has to happen.

The auction process has run into an unexpected surge of opposition from political leaders and business executives who argue that privatizing the company is not necessary, given its profit. Moreover, they add, Turkey cannot afford to surrender a strategic asset, especially when Europeans seem increasingly reluctant to admit the Turks into their club of nations. 

Then there are the factory’s 7,500 workers, who fear now that they could lose their jobs under a foreign owner. Protests have erupted here and in other cities, as Erdemir has become a fraught symbol of Turkey’s uneasy passage from its sheltered past into a free-market future.

"This is a real test for Turkey," said Metin Kilci, president of the Turkish Privatization Administration, which hopes to sell Erdemir by the end of the year and follow it with sales of other state assets, including an insurance company, a sugar factory and the Istanbul Hilton.

The Turkish government has won kudos for stabilizing its economy, with the help of loans from the International Monetary Fund, after a deep crisis in 2001 brought this nation of 69 million to the brink of bankruptcy. Turkey grew nearly 9% last year, a pace that rivals that of China.  

The government of Prime Minister Recep Tayyip Erdogan is also credited with taming decades of sky-high inflation, which had turned Turkey’s currency, the lira, into something close to funny money.

But the process of privatizing state-owned companies has been dogged for 20 years by legal challenges and political interference. As Turkey bids for a place in the European Union, it is eager to show its resolve to open its economy to the outside world.

"We would be more than happy if a foreign company wins this tender," Kilci said in an interview in Ankara, the nation’s capital.

Kilci expressed disappointment that U.S. Steel was not on the initial list of potential bidders. U.S. Steel, which is based in Pittsburgh, owns factories in Slovakia and Serbia. A spokeswoman for the company declined to comment.

Analysts, however, said a sale to any foreign buyer could still be blocked. The chamber of commerce here has filed a lawsuit opposing a sale. National opposition is robust and well-organized. And there is a receptive audience for dark warnings about foreigners taking advantage of Turks. The dispute has played on the front pages of papers for weeks.

"There’s a Turkish saying, ‘We serve foreigners the best meat - the lamb without the bones,"’ said Cemal Senturk, who represents local manufacturers who buy steel plates from Erdemir.

Turkey’s attitude toward outsiders has not been helped by the chilly reception it is getting these days in Europe. Although its campaign to join the Union is still officially on track, with membership negotiations scheduled to start on Oct. 3, popular sentiment in Europe has turned palpably against it.

Some of that is fueled by fears that low-cost Turkish workers will take European jobs. Some is linked to security concerns that have intensified since the London bombings: As a Muslim country, Turkey cannot escape the taint of radical Islamic militancy, even if it is a moderate, secular society.

Politics reflects the popular mood. Germany is likely to elect Angela Merkel, a conservative leader who opposes Turkey’s bid, as chancellor in September. In France, Nicolas Sarkozy, the interior minister and would-be president, has also expressed qualms about Turkey.

"The Turks are quite angry," said Katinka Barysch, chief economist of the Center for European Reform, a research group in London, who recently wrote a report about Turkey. "They think, ‘We’ve done so much for the EU, now the EU needs to do something for us."’

In the case of Erdemir and its steel operation, critics say Europe’s biggest contribution would be to skim off the cream of its output.

The company currently supplies about a third of Turkey’s demand for flat steel, which is used to make ships, cars, machinery and household appliances. If a foreign buyer takes over Erdemir, people here say it would export the high-quality steel to Western Europe, forcing Turkish companies to switch to lower-quality steel imported from Ukraine or Kazakhstan.

"The foreigners are very profit-oriented," Senturk said. "Why would they care about the problems in Turkey?"

Twenty-three Turkish manufacturers that buy steel from Erdemir have banded together to submit their own bid. But they face well-financed rivals, like Mittal Steel of London and Arcelor, based in Luxembourg, which are the world’s two largest steel makers.

Owning a steel plant in Turkey is attractive, analysts say, because the country has become a hub for auto manufacturing: Ford, Toyota, Renault and Fiat all assemble cars here. Arcelor has ties to Renault, analysts say, and might like a Turkish factory to supply the local Renault plant.

More broadly, the global steel industry is ripe for consolidation. After two years of voracious demand, much of it driven by China’s torrid economy, analysts predict a sharp slowdown in sales, which could result in an oversupply. Acquisitive giants like Mittal, which already owns 8.6% of Erdemir’s shares, are seizing the chance to add to their holdings.

The Turkish government knows it has a brief window of opportunity in which it can command a premium price. "Steel is a cyclical business," Kilci said. "In five years, it might be losing money again."

Erdemir, which was founded in 1960 and began production in 1965, has had its share of bad years. It lost a total of $169 million in 2001 and 2002, which were difficult years for the industry, before rebounding with a profit of $261 million in 2003 and $473 million last year.

Although the Turkish state owns only 46% of Erdemir’s shares, it controls the board and appoints senior management. Even those managers sounded dubious when asked why Turkey needs to sell it.

"That’s the question I constantly keep asking," said A. Kerim Dervisoglu, who became chief executive in 2003.

On Monday, Erdemir announced that Dervisoglu had stepped down as chief executive because of poor health. Analysts in Istanbul said his exit more likely reflects his feelings about the sale.