"Turkey is entering a critical year, in which its prospects for European Union (EU) membership are at make or break stage," says the International Crisis Group (ICG) in a new report.
"Both sides need to recall how much they have to gain from each other and move quickly on several fronts to break out of this downward spiral before one or the other breaks off the negotiations, which could then well prove impossible to start again," it adds.
If the situation remains unchanged and the accession talks keep stalling, there is a danger of weak reform performance by Turkey; the report also predicts new tensions between Turks and Kurds; as well as a polarisation in politics and "the potential loss of the principal anchor of this decade's economic miracle."
Ankara would not be the only losing side, the ICG reports, as there would be "longer term" cost for the EU as well.
The European Union would get "less easy access to one of the biggest and fastest-growing nearby markets, likely new tensions over Cyprus and loss of leverage that real partnership with Turkey offers in helping to stabilise the Middle East, strengthen EU energy security and reach out to the Muslim world."
Turkey has been an official candidate to join the EU since 1999 and opened accession negotiations with the bloc in 2005.
But the talks have been moving slowly since then, and only eight chapters of its 35-chapter accession package have been opened, with just one successfully closed so far.
Two more chapters are expected to be opened by the end of this week (19 December).
Loss of momentum is both sides' fault
Several negotiation chapters have been blocked because of Ankara's refusal to open its ports to Cypriot ships, despite signing a protocol in 2005 to extend its customs union with the EU to the 10 states that joined the bloc in 2004.
Turkey does not recognise the Greek government in the southern part of the divided island, while at the same time being the only country to recognise its northern Turkish section.
Earlier this month, EU foreign ministers meeting in Brussels stated that progress in this area was "now urgently awaited."
"A failure to live up to the commitment made in 2005 to open seaports and airports to Greek Cypriot traffic in 2009 would risk anti-membership EU states seeking to suspend Turkey's accession negotiations," the ICG warns.
In addition, the EU is pressing Turkey to do more to fight corruption and organised crime, to align with European standards as regards minority rights, and to push administrative and political reforms further.
"Instead of showing determined political commitment to the EU process, some top Turkish leaders have preferred to adopt an injured tone of complaint about Brussels' demands and criticism. Above all, implementation [of reforms] has lagged," the ICG says.
But the NGO puts part of the blame for the loss of momentum on the EU as well.
"EU member states should seize the chance to fix past mistakes over Cyprus by prioritising success in the new negotiations on the island and do more to encourage Turkey to revitalise its reform effort," it says.
"EU politicians must stop pushing the qualifying bar ever higher for Turkey and restate that they stand by their promise of full membership once all criteria are fulfilled," a promise that should be reasserted "firmly and often," it concludes.