Thursday, October 20, 2016

4 December: NO to RENZI’S P2 Constitutional Reform

On 4 December 2016 Italian electors will be called to vote on a Referendum on Constitutional reform and a new electoral law. The question posed to electors is: “Do you approve the text of the constitutional law concerning ‘norms for overcoming perfect bicameralism, the reduction in the number of parliamentarians, the containment of the costs of institutions, the abolition of CNEL [the advisory National Council for Economy and Labour] and the revision of Title V of Part II of the Constitution’ approved by the Italian Parliament and published in the Official Gazette n. 88 of 15 April 2016?" YES/NO. Being a confirmation and not an abrogation Referendum no quorum is required for its validity.
Such a question is tendentious. The constitutional law in question does not abolish the Senate, it simply transforms perfect bicameralism into asymmetric (and less directly democratic) bicameralism, turning the Senate into a Chamber elected by a selectorate of mayors and regional councillors among themselves, instead of being elected directly by “the people” as art. 1 of the 1948 Constitution provides. What the new law abolishes is the Senate’s power to bring down the government in a confidence vote, while retaining for the proposed Senate dual legislative powers on a broad range of questions, from local issues to European directives. The number of senators is reduced from 395 to 100 (21 mayors, 74 regional councillors and 5 nominated by the President) but there is almost no reduction in cost; far from the €500mn boasted of by Renzi, it is officially estimated at €50mn a year – equivalent to one day of Italian military expenditure, or a fraction of the tax that FIAT avoids by moving its headquarters to the Netherlands. And even that tiny cost reduction in keeping the Senate at all is matched by the only part time involvement (two days per month) of the new senators most of whose time naturally is taken up by their local administrative duties. The 630 members of the lower Chamber with their generous salaries, golden pensions and handshakes, bonuses, allowances and expenses entitlements, remain untouched.  
Il Fatto Quotidiano (11 October) proposes spelling out and unbundling the long mixed question drafted by the government asking specifically whether electors approve:
·  the abolition of elections for the Senate, which will be made up of mayors and regional councillors nominated by regional Councils i.e. by parties, not elected by the electorate, and empowered to legislate in the face of popular sovereignty;
·  the concession of parliamentary immunity (from surveillance, arrest and prosecution) to mayors and regional councillors nominated as senators without ever having been elected as legislators and therefore not entitled to that privilege;
·  the complication of methods for law approval, passing from 2 to 10, or to 7, 9 or 13 according to the interpretation given to the incomprehensible text of the reform;
·  the trebling, from 50,000 to 150,000, of the number of signatures needed to introduce a law by popular initiative;
·  the survival of a Senate that will be able to or be compelled to – according to the subject matter – re-vote and modify all the laws approved by the Chamber of Deputies, replicating and complicating the bicameralism (even in its reformed asymmetry rather than current parity) that is alleged to be abrogated;
·  the expropriation of the powers of Regions to protect their populations, territories, security and environment from useless large-scale, costly and polluting public works (such as the Turin-Lyon TAV, the Third Crossing [Valico], the bridge on the Messina Strait, oil drilling on land and at sea, regasification plants, etc.) which will be decided by the Prime Minister in Rome alone and in command.
In order to raise YES support falling behind in the South and on the Right Matteo Renzi has just resurrected the multibillion euro project of the longest suspension bridge in the world connecting Sicily with the mainland, associated with Silvio Berlusconi’s premiership, and which Renzi had fiercely opposed in 2012. The project was abandoned in 2013 because of its high costs and dubious benefits, it being a long-term mafia objective, and the strait’s vulnerability to earthquakes. There are more pressing needs and better growth-promoting projects in anti-seismic investment, rail and road transport improvements, and environmental protection and reclamation. Tony Barber in the Financial Times spoke of Renzi’s reforms as the “constitutional bridge to nowhere” – nicely put were it not for the fact that opening to the mafia does not lead to nowhere but to the further criminalisation of the Italian state.

On 16 October Andrea Camilleri, Gustavo Zagrebelsky, Nadia Urbinati, Paolo Flores d’Arcais and Tomaso Montanari, Why we vote NO, posed the question that is really being asked in the referendum:

“Do you want to count less, to have less democracy, to give a free hand?”.

“We will answer NO,” they write, “… We do not want to give a free hand to this or to any other government. An inept and often corrupt political class tries to convince us that the Constitution is at fault, but this is not true. To those who tell us that to make Italy work it is necessary to change the rules we answer: we, instead, want to change the players”.

The present Parliament was elected on the strength of electoral law 270 of 21 December 2005, named after its Lega proponent, Roberto Calderoli, and better known as the Porcellum from the name (una porcata, a pig’s breakfast) attached to it by the proponent himself, which in January 2014 was declared unconstitutional by the Constitutional Court (Sentence 1/2014). Continuity of state power required that Parliament should continue to be legitimate in its functioning, but it is highly questionable whether the current Parliament should have done anything other than at most pass a new electoral law before being dissolved by the President, who was himself elected by the current unconstitutional Parliament, moreover for a second mandate not envisaged (although not specifically forbidden) by the Constitution. Instead of which the unconstitutional Parliament with Napolitano’s prodding launched itself at a major constitutional reform changing one third of our Constitution.

Moreover, since its unconstitutional election in February 2013 the Italian Parliament has achieved the unenviable record of containing 246 turncoats (voltagabbana in Italian) Members of Parliament changing sides, many of them more than once reaching a total of 325 crossings of the floor, equivalent to about one third of the combined membership of the Lower Chamber and the Senate (and rising weekly). Berlusconi, a pioneer in establishing a market for parliamentarians, purchased support that was decisive in toppling the Prodi government. With this kind of tradition there is no way even the majority premium envisaged by the new Constitution can guarantee a stable majority.

So the new Constitution dice are loaded in favour of an authoritarian regime, where the leader of the party enjoying a guaranteed 55% majority in the Lower Chamber, who will be mostly his own nominees under the party list electoral system, in addition to his and his party’s new-Constitution Senate nominees, can play an exceptionally powerful role in appointing: the Head of State, the members of the Constitutional Court, the members of the Higher Council of Magistrates (CSM), the leading Authorities responsible for sectoral functions, the RAI Board of Directors etc.; as well as legislating and exercising executive power without having to face any real opposition. And, as the UK has found, the collapse of the Labour Party and its subsequent failure to realise a real opposition has adverse consequences for the country, and for Europe.

Gustavo Zagrebelsky, the former President of the Constitutional Court, states that the combination of the new electoral law (the so called Italicum, whereby 2/3 of deputies will be nominated by party leaders), and the reforms linked to it by a YES in the Referendum would remove the checks and balances so judiciously introduced in the post-Fascist 1948 Constitution to prevent any return of authoritarianism of any kind, and create the conditions for “a shift from democracy to oligarchy”. Indeed, under Italicum a party commanding only 20%-25% of the votes in the first ballot might access a second ballot and beat the only other remaining competitor, thus gaining the winner’s premium to end up with a statutory 55% majority.

The concept of oligarchy must not be confused with that of minority. Government is always necessarily exercised by a minority, but whether or not this is an oligarchy depends on whether power is exercised for the benefit of that ruling minority and its goals, or for the collective benefit of society, in which case it is not an oligarchy but a representative democracy – as the historian Emilio Gentile observed in his rebuttal of Eugenio Scalfari, the Repubblica editorialist’s crass claim that oligarchy is the only possible form of democracy. Moreover – as Gentile pointed out – any democracy is intensely vulnerable to the oligarchic globalisation of economic and financial powers interfering with national policy-making, a major constituent of the “post-democracy” theorised by Colin Crouch. The risk is of a democracy in which the people are only comparse (extras) acting an insignificant part on the political stage at the time of the election leaving the exercise of power to party and government oligarchies, demagogic leaders, a corrupt political class, a degraded political culture and the method of populist slogans and announcements.

Renzi is simply the current mouthpiece and tool for the implementation of the Piano di Rinascita Democratica (Plan for Democracy Reborn), an authoritarian project initiated in Italy by Licio Gelli of the P2 secret Masonic Lodge (drafted around 1976, published in 1982), and pursued by Craxi, Cossiga, Berlusconi, Napolitano, with the blessing of international financial circles such as JP Morgan (2013), not to mention the support obtained through undue interference by the US Ambassador and Barack Obama in his role as the President of the US.

JP Morgan claimed that in Europe “Constitutions tend to show a strong socialist influence, reflecting the political strength that left wing parties gained after the defeat of fascism. Political systems around the periphery typically display several of the following features: weak executives; weak central states relative to regions; constitutional protection of labor rights; consensus building systems which foster political clientalism [sic]; and the right to protest if unwelcome changes are made to the political status quo. The shortcomings of this political legacy have been revealed by the crisis.”  The Renzi regime’s attempted scrapping of the Italian 1948 Constitution is custom-tailored to JP Morgan’s specifications. 

For my part, I will vote a convinced NO, and encourage all my readers who have a vote to do the same on 4 December next.

Saturday, October 1, 2016

Unpacking CETA

This Guest Post on CETA - the Canada-EU Trade Agreement scheduled to be signed at the end of October - was contributed by Peter Rossman, Director of Campaigns and Communication for IUF (the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations). After thorough reading he wrote this contribution, which originally appeared in the Global Labour Column edited by CSID (Corporate Strategy and Industrial Development, University of the Witwatersrand, Johannesburg). We are grateful for his permission to reproduce it here. An earlier extended paper on “Trade Deals That Threaten Democracy” is also available. (DMN)

‘The Parties hereby establish a free trade area…’ CETA Article 1.4.

‘Trade, like Religion, is what every Body talks of, but few understand: the very Term is dubious, and in its ordinary Acceptation, not sufficiently explain’d.’ Daniel Defoe, A Plan of the English Commerce (1728).

The Canada-EU Comprehensive Economic and Trade Agreement (CETA), like other looming mega-treaties, is a comprehensive vehicle for expanding the scope of transnational investment by rolling back the capacity of governments to regulate in the public interest. The attack on democratic governance is not restricted to the notorious Investor-State Dispute Settlement (ISDS) mechanism, which privileges transnational capital by creating a parallel legal system exclusive to transnational investors. The invasive claims of transnational investors permeate the entire treaty. 

'Free Trade' and the expanding investor universe. Canada and the EU are already among the world’s most open economies. Tariffs are at a historic all-time low. CETA’s primary mission is to eliminate ‘non-tariff barriers’ – namely the laws and regulations constructed over decades of struggle to limit corporate power and support the services and policies needed to defend workers, citizens and the environment. CETA is an investment treaty embedded in a comprehensive deregulatory project.

The treaty leaves existing regulations and policies in Canada and the EU vulnerable to investor challenges – directly through ISDS, or indirectly through corporate-driven state-to-state dispute mechanisms. It also forecloses the use of essential policy tools which progressive governments will need to reverse the social destruction which is feeding an authoritarian, nationalist and xenophobic right.

The treaty builds on an expansive definition of investment which broadens its scope beyond existing treaties between Canada and the EU. It is virtually identical to the leaked draft investment chapter in the Transatlantic Trade and Investment Partnership (TTIP).

The ‘legally scrubbed’ official CETA text states, tautologically: ‘Investment means every kind of asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment.’ (CETA, 2014: 39). Characteristics of an investment include ‘the expectation of gain or profit.’ In addition to direct investment in an enterprise, ‘investment’ includes stocks, shares, bonds and other debt instruments; concessions, ‘including to search for, cultivate, extract or exploit natural resources’; intellectual property rights and ‘other moveable property, tangible or intangible, or immovable property and related rights’, and ‘claims to money or claims to performance under a contract’ (CETA 2014: 39ff) A corporation need only demonstrate a ‘legitimate expectation’ of profit to challenge regulatory obstacles to realising that expectation.

The market access and national treatment provisions set out in the investment chapter apply to governments at every level, erasing all restrictions in the name of ‘non-discrimination’. The treaty prohibits governments from managing foreign investment for distinct objectives, and prohibits any restrictions on profit repatriation.

‘Indirect expropriation’. The investment chapter ‘reaffirms’ governments’ rights to regulate in the public interest, but investors are guaranteed expanded ‘fair and equitable treatment’ and protection against ‘indirect expropriation’ of anticipated profits through the adoption of new laws and regulations. The dispute settlement body will determine whether indirect expropriation has occurred through a ‘fact-based inquiry that takes into consideration, among other factors: the extent to which the measure or series of measures interferes with distinct, reasonable investment-backed expectations’ (CETA, 2014: 331; emphasis added). Indirect or ‘regulatory expropriation’ has enabled a growing number of successful investor challenges to public interest laws, regulations and court decisions through investor-to-state lawsuits.

Public services are exempted from market access, national treatment and performance requirements and the most-favoured-nation provisions of the investment chapter only to the extent that they are ‘carried out neither on a commercial basis nor in competition with one or more economic operators’. This is the phantom public sector carve-out established in the World Trade Organisation’s (WTO) General Agreement on Trade in Services (GATS) agreement. As there are pockets of private business in most public services, few meet these criteria. Parties must explicitly reserve the services they wish to exclude – the negative list approach – based on the United Nations’ 1991 Central Product Classification, whose thousands of entries blur the distinction between public and private and manufacturing and services. Standstill and ratchet clauses freeze current levels of privatisation, making it difficult, and costly, for governments to take privatised services back into public hands.

CETA’s Domestic Regulation chapter is not restricted to services. Governments must ensure that any regulatory restrictions they maintain or adopt ‘do not unduly complicate or delay the supply of a service, or the pursuit of any other economic activity’ (CETA, 2014: 91; emphasis added). Article 2 of the chapter on Technical Barriers to Trade reinforces limits on regulation by stipulating that technical regulations must ‘not be more trade-restrictive than necessary to fulfill a legitimate objective’[1].

The chapter on Government Procurement widens corporate penetration into governments at every level by generalising ‘national treatment’ and prohibiting ‘offsets’, defined as ‘any condition or undertaking that encourages local development’.

The Financial Services chapter allows for loosely-defined ‘prudential measures’ but weakens the potential to restrict the size or market share of financial institutions even where such measures are ‘non-discriminatory’ with respect to foreign and national investors. Governments seeking to restrict the introduction of new financial ‘products’, or limit the size of financial corporations, will find that financial corporations have, through CETA, insured themselves against regulatory risk.

The chapter on Regulatory Cooperation commits signatories to ‘remove unnecessary barriers to trade and investment’ and ‘enhance competitiveness’ through an unaccountable Regulatory Cooperation Forum, which institutionalises corporate lobbying. The Forum is tasked with reducing compliance costs, exploring ‘alternatives’ to regulation, and promoting the ‘recognition of equivalence and convergence’ – a blunt instrument for levelling protection. Governments will share ‘non-public information’ with their Forum counterparts before the information is shared with lawmakers or the public – all ‘without limiting the ability of each Party to carry out its regulatory, legislative and policy activities’!

Regulatory approaches are to be ‘technology-neutral’ – a requirement at odds with the vague promise in the chapter on Trade and the Environment in which the parties ‘commit to cooperate in means to promote energy efficiency and the development and deployment of low-carbon and other climate-friendly technologies’.

How important is investment (and its proxy ‘trade in services’) compared with trade in goods in CETA? The treaty provisions cease to apply 180 days after notice of intention to terminate. However Chapter 8 (Investment) remains in force for a full twenty years (CETA 2014: Article 30.9).

Labour’s agenda? After the Brexit vote, the European Commission announced that CETA – scheduled to be signed at the EU-Canada summit in late October – would be treated as a ‘mixed agreement’, requiring approval by the national parliaments of EU member states as well as by the main EU institutions. But the Commission proposes that the treaty enter immediately into ‘provisional’ force following approval by the European Council and European Parliament, meaning that its investment provisions would apply for some years before full ratification, and even if one or more member state voted to sink the deal.

Unions and our civil society allies are unanimous in calling for the removal of ISDS from the treaty. The European Commission’s rebranding of ISDS as an investment court fails to eliminate its fundamental toxicity (See for example Eberhart, 2016) and should be rejected on similar grounds.

But ISDS is only one element, albeit a major one, in CETA’s comprehensive corporate power grab. Transnational investors can press their claims through state-to-state dispute mechanisms, as the WTO’s Dispute Settlement Body demonstrates. The expansive claims of transnational investors are systematically built into the treaty; corporate confiscation of democratic governance links the chapters. ISDS cannot be surgically excised, leaving a text which then somehow serves as a vehicle for a progressive trade agenda. Nor can a sweeping charter of investor claims be ‘balanced’ by inserting stronger provisions to defend labour rights or protect the environment. CETA is fundamentally hostile to democracy and the labour movement; it has to be scrapped, not ‘improved’.

Behind CETA, or course, lurks the Transatlantic Trade and Investment Partnership (TTIP). Should TTIP fail, many of its ambitions can be realised through CETA. The majority of US transnationals have Canadian subsidiaries with activities and ‘expectations of profit or gain’ in the EU. They can use ISDS and other provisions to feed their growing appetites. EU corporations can sue the government of Canada, but also use Canadian subsidiaries to attack European regulations they find inconvenient, reinforcing the EU’s current retreat from regulation.

For long decades, labour has been fighting purely defensive battles against the neo-liberal trade and investment agenda; we lack an agenda of our own. Lost ground will not be reclaimed on what is fundamentally hostile territory. Crisis, stagnation and the longest investor strike in recent history will not be reversed through stronger doses of neo-liberalism. Substantial programs of public investment are needed to address mass unemployment, inequality, disintegrating public services and climate change. CETA and its flanking treaties effectively preclude them.

[1] The leaked TTIP draft chapter on Technical Barriers to Trade makes creative use of most-favoured-nation to establish that ‘Each Party shall allow persons of the other Party to participate in the development of standards, technical regulations, and conformity assessment procedures,’ and ‘Each Party shall permit persons of the other Party to participate in the development of these measures on terms no less favorable than those it accords to its own persons.’


CETA (Comprehensive Economic and Trade Agreement) 2014.

Eberhart, P. (2016) The Zombie ISDS, Brussels: Corporate Europe Observatory.

Our Italian readers will find useful these links on the subject: on the Trojan horse nature of CETA in the event of TTIP not going through, and on the European Commission decision, last July, to treat CETA as a “mixed” issue, thus requiring the necessary unanimous approval by all 36 European Parliaments (some member states have more than one). The decision was taken under pressure from Austria, Germany and France, whereas Italy had originally supported treating CETA as a “European only” issue requiring only qualified majority of heads of state and government, and subsequent ratification by the European Parliament without possibility to introduce changes. However, as Peter argues in his guest post above, CETA will be provisionally implemented from approval by the European Parliament.

For an earlier discussion of CETA ìn Italian see also

Monday, September 19, 2016

Marcello de Cecco (1939-2016)

The Department of Economics and Statistics of Siena University held a day-long conference in memory of Marcello de Cecco on 17 September, which would have been his 77thbirthday. 

I first met Marcello in October 1963 in Cambridge. Our dear common friend the late Bruno Miconi, a fellow research student in economics, introduced him to me. I already knew and appreciated Marcello from his contributions to Mario Pannunzio’s Il Mondo, but I found him even more impressive in person. Flamboyant, brilliant, learned, ironical and witty, yet approachable, friendly, generous. We got on well immediately. I have been fortunate in having him as a friend and colleague not only in our Cambridge years but also at Siena University, at the European University Institute in Florence, and at the Sapienza University in Rome – in almost daily contact for a total of over 25 years out of the over 50 years of our association.

Marcello was an alert and insatiable observer of current economic, political and social affairs, never satisfied with simple explanations but searching for deeper causes, enquiring “come va il fatto”. I remember his surprise when the daily Il Fatto Quotidiano that follows a similar inquisitive approach was published. Bruno Miconi used to say that Marcello should have been a film scriptwriter.

A Pembroke man, Marcello was held in great esteem by his supervisor Michael Posner; given his interests in international finance he was also in touch with Kingsman Richard Kahn, who however suspected him (injustly) of monetarist inclinations, because of his contacts with Chicago and Milton Friedman. Marcello had created a considerable intellectual niche for himself through his work on Eurodollars – dollar-denominated deposits held outside the US, mostly in Europe, thus escaping regulation by the Federal Reserve Board including reserve requirements. In this area at the time he knew more than his teachers and his expertise was appreciatively recognised and utilised in seminars and discussions. We both were invited to become members of the Monday Group, a seminar in Economics held regularly if reservedly in King’s. We shared an interest in the history of economic thought, indeed in a little known Russian pioneer of mathematical economics, Vladimir K. Dmitriev; Marcello edited the Italian version of his Economic Essays on Value, Competition and Utility, I edited the English version. When it became apparent that we were working on the same thing Marcello simply said that nobody had a monopoly on that author. At a Faculty seminar we presented a joint criticism of the Modigliani-La Malfa model of the interaction of monetary and real aspects of the Italian balance of payments. Later we co-operated in other research projects, especially in Florence.

Marcello was unique – among Italian students in Cambridge – in that he had come with his Mother, not wanting to leave signora Antonietta on her own back in his home town of Lanciano (pronounced as if written Langiano). They looked after each other well. Somehow, in spite of linguistic obstacles compounded by the regional variety of food nomenclature, his mother always succeeded in securing from the butcher her desired cuts of meat. Marcello gave the delightful account of his mother meeting Piero Sraffa in Cambridge Market Square, when she greeted Mr Sraffa with: “I am delighted to meet you, Professor; my son has spoken very highly of you …”. Marcello theorised the optimality of driving only second hand cars, but he chose only beautiful comfortable large ones, including a memorable Jaguar. When a lectureship was advertised at the University of East Anglia, I encouraged Marcello to apply and supported his candidature strongly. His appointment was a great success, and there, too, he met Julia Bamford – the other great woman behind the great man – so that I could boast of involvement in his taking both a job and a wife.

When the prospect of Italy joining the Euro began to be widely discussed, in 1992 on the eve of the French referendum on the subject Marcello gave enthusiastic endorsement of Italian membership. He wrote an article for Repubblica – Affari e Finanza, entitled I disgregati del 2003, which marked the beginning of his long collaboration to Repubblica (18/09/1992, reprinted in L'economia di Lucignolo, Donzelli, see Marcello’s obituary by Carlo Clericetti). In that article Marcello described an apocalyptic picture of Italy as a member of a Latin Union (with France, Spain, Portugal and Greece) ten years later: backward, underdeveloped, impoverished, authoritarian, repressive, bigoted and male-dominated; the article ends with a decrepit professor, who dares teaching politically incorrect views about the evolution of the international monetary system, being arrested and taken away by police. By contrast the member states of the Mittel-European Union thrive and prosper even more than the Anglo-American Federation, and hire the young unemployed migrants from Italy, who send food parcels to their parents at home in spite of this being officially frowned-upon.

Marcello’s enthusiastic endorsement of the euro was tempered, when it actually happened, only by his disapproval of Berlusconi’s failure to contain price increases in the changeover from lira to euro, something experienced only by Greece and there to a much smaller degree. Marcello’s enthusiasm was right: the euro brought about significantly lower interest rates; that the fiscal space was not used to reduce public debt and on the contrary encouraged greater indebtedness is another matter. The euro also brought about a rate of inflation lower than that achieved in Germany by the Bundesbank itself, and greater European and global integration of trade and Foreign Direct Investment. It did not bring about economic growth, but this was due to poor economic policies and various factors both on the demand (e.g. increasing inequality) and supply sides (productivity slowdown, etc.).

Ten years after, there was a lot to justify Marcello’s evolving position as a Eurocritic. Austerity policies enshrined in the Treaties under German hegemony were self-defeating and suicidal, Marcello was a Keynesian dyed-in-the-wool and knew it well. The German trade surplus, which Marcello attributed primarily to the post-Transition integration of Germany with Eastern Europe regardless of the weakness or strength of the euro, contravened EU rules but was unduly tolerated, and pushed trade deficit countries to run public budget deficits. Improvements could have been made, even without renegotiating the Treaties. Failure to make progress not only towards a Federal Europe design, but even towards piece-meal improvements, justify Marcello’s latest position as Eurosceptic, especially considering that he never indulged in advocating Exitaly, the Italian exit from the Euro that many advocated and still advocate lightly and unthinkingly. On the Euro, Marcello was always right.

For Marcello, the current crisis of the Euro was triggered by the Deauville Summit of 19 October 2010 at which Angela Merkel and Nicholas Sarkozy announced that at least part of any default on public debt would be born by bondholders. At the time I disagreed strongly with Marcello: why should investors who had benefited from large interest differentials, knowingly taking the associated risk, not have to bear the entire cost of default? If worried by that risk they could always have covered themselves as much as they wished by buying Credit Default Swaps. Yet, with the benefit of hindsight, now I am inclined to agree with Marcello. It was the prospect of bail-in that created the spread and effectively split the euro area.

By displaying the richness and depth of Marcello’s contributions of a lifetime, the Siena Conference stressed how dependent on his wisdom many of us had become. Today I find myself often wondering what Marcello would have said about current problems. Many Conference participants asked themselves what he would have said about Brexit: the consensus was that his natural diffidence towards Britain as a free rider of European integration, and the various exemptions repeatedly negotiated by the British (no Schengen, no common currency, the British rebate), would have led him to conclude that European integration might have progressed and improved without Britain. But we have no hard evidence that he would have taken that line. And we have no clue on what view he would have taken about the European migration crisis or the Islamic threat or the US elections with their problematic presidential candidates. It is at difficult times like these that we miss him most.

P.S. On the Siena Conference see also contributions by Emiliano Brancaccio
Paolo Paesani Salvatore Settis and Carlo Clericetti.

Sunday, September 4, 2016


Since the night of 24 August a swarm of earthquakes of an intensity up to 6.8 degrees on the Mercalli scale have repeatedly struck an area of the Appennines in Central Italy, at Amatrice, Accumoli, Arquata, Pescara del Tronto, and some other locations in the regions of Lazio, Marche, Umbria and Abruzzo. The effects have been catastrophic: 295 dead, over 800 injured, over 4000 homeless, disrupted communications, entire towns razed to the ground. Two weeks later the earth there is still subject to frequent movements.

These events have brought out the best of Italy, with the fast, selfless and effective response of public personnel and volunteers, and the generous support of the general public. Emergency services have worked; 368 persons were extracted alive from the debris; €10 million were collected for earthquake victim assistance in the first week. At the same time, the earthquake revealed the worst face of Italy.

It is reported that the decision to undertake the repair and reinstatement of public buildings and churches damaged in the 1997 earthquake, without having to implement anti-seismic regulations, was a political decision taken by no lesser person than the former President of Italy Giorgio Napolitano – a controversial politician though still in some circles widely respected as a statesman while being equally widely reviled in others for his chequered political allegiances in the past – in the form of ordnance n. 2741 issued on 30 January 1998 by him while Minister of the Interior in the Prodi government.  Not a statesmanlike enlightened decision, then, but rather an irresponsible, vulgar austerity measure that contributed to the catastrophic nature of the latest earthquake: the buildings exempted from seismic upgrading by the Napolitano ordnance included, for instance, the church and the Carabinieri barracks of Accumuli, for which the responsible authorities can still claim that “all procedures had been followed”,

Furthermore bureaucratic hastles prevented the implementation of anti-seismic measures already decided and funded (e.g. for the Amatrice hospital). Corrupt officials had authorised the diversion of funds earmarked for the strengthening of vulnerable public buildings to other uses (e.g. from the bell tower of an Amatrice church to the priest’s residence). Corrupt builders, often with mafia connections, had used too much sand and too little cement, polystyrene in place of reinforced concrete and mosquito mesh in place of robust metallic welded sheeting (one of several well documented actual instances). Corrupt technicians and certification officers had ratified as good patently unsatisfactory works on their completion. The Mayor of Amatrice expressed the general opinion when calling for those responsible for any of these actions to be tried and imprisoned with the key thrown away, just as are the thieves trying to steal valuables from collapsed homes, or the impostors collecting funds through Internet allegedly on behalf of earthquake victims but keeping them for their personal use (again actual instances – though the Mayor is now under investigation).

Even the work of a number of volunteers has been called into question, with many of them turning out to have been under-paid workers precariously employed and exploited by the so-called no-profit organisations that have taken the place of public welfare institutions now privatised (see

In that their occurrence cannot be accurately predicted earthquakes are widely regarded as acts of god – though Italy’s peculiarities in this respect include the successful prosecution of six scientists and a former government official for failing to predict the Aquila earthquake of 2009. Actually they had tried to reassure the population saying that an earthquake was unlikely 6 days before it happened. They were found guilty of involuntary manslaughter of 29 persons and injuries of 4 persons, all were condemned to 6 years in prison and provisional damages of €7.8mn in favour of 56 victims. 

There is, of course, a highly respected geological service monitoring and investigating Italy’s physical structure and there are long-kept careful records of past earthquakes, and fairly accurate assessments of seismic risk in the Italian regions, certainly accurate enough to guide building counter-measures, insurance cover, and migrations to safer areas. Italy’s Protezione Civile's seismic map of Italy is updated to 2015.

It is, nevertheless, quite understandable that people living in high risk regions might be reluctant to voluntarily invest in anti-seismic improvements to old buildings which are not subject to the stricter regulations applying to new buildings. A cost, estimated to average about €800 per square metre, all the hastle, the paperwork, the applications for permits, the time and expenses involved, the possible appeals, not to mention the bribes that might have to be paid, deter action. And the contradictory norms: the Belle Arti department, responsible for aesthetics, is unlikely to allow a structural improvement that is not simply “conservative” but involves architectural change, while the Genio Civile responsible for safety is unlikely to allow a simple anti-seismic improvement that is judged to be inadequate. So even with the best of intentions one might decide to do nothing and hope to be unscathed by an uncertain though likely event.

It is also understandable that people living in high risk regions might be reluctant to insure themselves and their homes and possessions against earthquake risks. Insurance can be unavailable in high risk regions, except perhaps at prohibitive premiums that are simply unaffordable by most people. Were insurance to be made compulsory the possibility for insurers taking undue advantage of the position arises.

However, to a very great extent location is a matter of choice.  Over time and in the ordinary course of life, opportunities arise for changing location, not necessarily abroad (though in such a case migrants should be, though at present are not, granted the status of refugees), but moving to a different part of the same country, which presents much lower costs in terms of language, customs, currency changes and other obstacles to international migration.

Those who live in areas characterised by high seismic risk can be likened to, say, heavy smokers vulnerable to cancer or obese and sedentary persons vulnerable to cardiovascular diseases, or economic migrants crossing a dangerous sea. All of them are entitled to life-saving emergency assistance and are certainly entitled to any assistance that might be voluntarily provided by the generosity of the rest of the world. Otherwise seismic victims, like everybody else knowingly and deliberately adopting a particularly risky lifestyle, should bear ultimate responsibility for the consequences of their exposure to risk. Any claim on the public purse, i.e. ultimately on all taxpayers, is a politically determined policy choice, not a statutory right.

To the extent that a government might decide to provide more than temporary emergency assistance to earthquake victims, this is best provided in the form of a cash payment, whether a capital lump sum or a recurring subsidy, which earthquake victims are able to spend where and how they wish. The notion that towns razed to the ground by earthquake should be re-constructed “where they were, as they were”, while emotionally responsive to great loss is, in truth, populist fantasy. 

Italian Premier Matteo Renzi has produced out of thin air a “Piano Casa Italia”, including the anti-seismic upgrading of all public buildings, of productive establishments and the entire housing stock of the country. After a four-hour consultation with him Renzo Piano – life senator and architect/planner extraordinaire – bluntly and soberly warned that such an undertaking would take at least 50 years and two generations. No wonder the responsibility for the Plan was given to somebody else.

Renzi proposes, further, to finance such a Plan outside the fiscal constraints of the EU; European authorities have sympathy for such treatment for only short-term and relatively small emergency interventions. The “Piano Casa Italia” so far is only a meaningless label, without dates or details or finance attached to it. Just another of the many empty announcements to which Renzi has got us used.

Meanwhile earthquake victims – of the latest like those of earlier earthquakes – will be left ultimately to fend for themselves, resigned to their destiny because they know well, in the depth of their souls, that maybe before the ground shook under their feet they should have moved elsewhere.

Monday, June 13, 2016


If I had a vote in the Referendum on whether or not the UK should remain in the EU or leave, I would certainly vote Leave. This neo-liberal Germanic Union of ours, with its unnecessary and perverse austerity, its false pretence to promote investment and growth, its failure to protect both external borders and desperate refugees, its Potemkin façade, insistence in destructive so-called “structural” reforms, is no use for anything or anyone, including the Germans. There is no prospect of conceivable change for the better except under the duress of actual or threatened disintegration. One of my favourite comedians, John Cleese, has also declared himself for Brexit, for the same reasons: “If I thought there was any chance of major reform in the EU, I’d vote to stay in. But there isn’t. Sad.” And he added: “I feel terrible about being lined up with thugs like Murdoch and Dacre and Brooks, but I do think Stiglitz and Owen have got it right...” (@JohnCleese, June 12, 2016). After all, Basil Fawlty of Fawlty Towers has always known how to deal with the Germans. A strong case for Brexit is also made here.
Having said this, that option is undoubtedly costly, uncertain in its implications both positive and negative, habit breaking and very uncomfortable. I simply do not believe the polls predicting a substantial lead for Brexit (52% over 33% in the Daily Express latest poll), in spite of the significant contribution given to the LEAVE faction by Tony Blair and Gordon Brown with their kiss of death endorsement of the REMAIN option. I believe that on 23 June the third of the voters still undecided will decide otherwise and tip the scales to REMAIN.
And if voters did choose to LEAVE overwhelmingly, it is no good pretending that the UK is a small Swiss canton voting in a mandatory referendum, for there is no such a thing in British constitutional documents or constitutional practice. David Cameron, having set up the Referendum to protect himself from Ukip’s threat, will be under great pressure to comply with the result and apply to leave under art. 50 of the Lisbon Treaty, but would not be in a hurry to make such a move. After all, he already said he will not serve another term, but he is still on course to serve until 2020, can rely on a solid cross-party pro-EU majority in Parliament, and might be able to obtain additional concessions from the EU on the strength of the vote, on top of the token ones he recently negotiated, sufficient to re-open the whole question.
But if Britain did leave, I would watch with Schadenfreude the impact of the vote on the further disintegration of the Union and the collapse of the German ruling parties. There is a group of distinguished academics, calling themselves EREP Economists for Rational Economic Policies, who have issued a “Remain for Change” Report, “Building European solidarity for a democratic economic alternative”, a generous but misguided approach. On 23 June, Vote, as the Irish saying goes, vote well, vote often.
Family loyalties, however, seem to be divided. My wife – a UK citizen who acquired double Italian citizenship through marriage  – tells me that if she had  a vote in the UK (which was removed under the Blair administration at the beginning of this century)  she would vote REMAIN:
I would vote REMAIN because I live in Italy, a country that benefits enormously from EU membership as one of the original Treaty of Rome signers for,  and by whom, the Project was designed, (one of the defeated Axis powers seeking to remedy losing) and which benefits  currently and most specifically from the UK's membership.
Italy is a transit country for incoming migrants that it fishes out of the Mediterranean, and the closing of the borders of one of the main countries of migrant settlement (as opposed to migrant transit) in the EU would have adverse effects on the transfer of migrants northwards and generate serious conflicts with any attempting to stop here rather than transit to Germany, Sweden, France and the UK.
Italy exports also over a million Italian nationals to the UK for settlement and draws strongly upon welfare payments available there to all EU citizens.  Losing a settlement of choice venue for a million Italian workers would be intensely disruptive in Italy itself.
High-quality employment in UK services, academia,  culture, and local and international administration for Italians (and other EU citizens) as well as educational opportunity at low cost from primary to post-graduate levels  in the UK are also at stake with BREXIT.  UK means-tested and universally applied welfare benefits to Italian workers at all levels both in the UK and (as is the case with many children returned to Italy) at home are very valuable and not to be lost.
Italy may be a net contributor to the EU budget, but its contribution must be set against the direct beneficial transfers and subsidies drawn directly from the UK even though the UK is not a member of the Eurozone and pretends to its electorate that there is an 'opt-out' from such transfers.
Of course, if I were settled in England I would have a different view of the whole matter - a looking glass view it might be called.  But as an Italian citizen and resident the last thing I want to see is a goose leaving with its golden eggs”.

In conclusion, it is not at all a matter of divided loyalties, nor of indecision, but a conflict of interests between two different, alternative capacities. If you live in the UK, vote to LEAVE.

Wednesday, April 6, 2016

R.E.Rowthorn on "Schengen and the European Migration Crisis"

Robert E. Rowthorn, Emeritus Professor of Economics in the University of Cambridge (England) has written an extensive comment on my previous post, which clarifies, strengthens and develops my argument. He has kindly agreed to publish it as a follow-up guest post on my Blog, which I am delighted and grateful to do:  

In his  stimulating post, Mario Nuti considers Schengen area migration policy under three headings:

1.     Free internal travel requires strong external controls,

2.     Free internal travel requires convergence of living standards within the area  (including welfare provisions),

3.     Any attempt at a fair redistribution of immigrants among countries requires the re-establishment of national borders.

He points out that the fair redistribution of immigrants, as demanded by Germany and the Pope, is inconsistent with free travel as laid down by the Schengen agreement. This may not be such an important issue, since the Schengen agreement may be on the verge of collapse.  According to a new survey by French pollster IFOP, 72% of French, 66% of Germans and 60% of Italians are now in favour of repealing the Schengen agreement and reintroducing border checks at least temporarily (Süddeutsche Zeitung, 5 April 2016).   Even if the agreement is not formally repealed, it may become a dead letter as more states unilaterally re-introduce border controls.

Nuti also makes the point that effective control of EU external borders requires the cooperation of neighbouring countries, such as Turkey.  Where this cooperation is not forthcoming effective control may be impossible within normal moral and legal constraints. This is most evident in the case of Libya, where the state is too weak to prevent the departure of migrants to Italy and the country is too unsafe to permit the return of rejected immigrants.  In my own country, the UK, the control of immigration relies heavily on support from nearby countries. The reason we do not get flotillas of migrant boats heading for our shores is not because the UK is hard to reach by sea – it is only 33km from France = but because nearby countries prevent their departure.   The future ability of the EU to control immigration from poorer countries will depend on the ability of the Union to gain and retain the cooperation of its neighbours in North Africa and the Middle East.

Immigration controls, like all forms of legal constraint, involve either compulsion or the threat of compulsion.  Immigrants who have no legal right to remain must be either persuaded to leave or forcibly deported. Failure to remove them will only encourage others.  This is why amnesties are counter-productive.  The need for removals is inversely related to the difficulty of illegal entry.  The easier it is to gain physical entry, the greater must be reliance on removals. This is not a message which liberal-minded people want to hear. As Nuti points out, rejection and forced repatriation are unpleasant and sometimes brutal. But they are a logical consequence of excluding people who have a strong desire to live in Europe.  

The feasibility of repatriation depends on the ability to identify the country of origin of a prospective deportee. It also depends on cooperation of the country of origin. Legally speaking, a country is supposed to accept its nationals who are deported from another country, but this may not always be the case in practice. Thus, it will be important in the future to gain the cooperation of the countries to which migrants are to be repatriated,

The recent agreement with Turkey involves the compulsory return of all migrants entering Greece from Turkey, who are not applying for asylum or whose application is judged to be unfounded or inadmissible. This policy may be illegal under international law but the EU is powerful enough to disregard this provided its own internal courts acquiesce. If it works, the agreement with Turkey may act as a template for future agreements regarding the control of migrant flows and repatriation.

Nuti cites an interesting analysis by Branko Milanovic in Social Europe  (May 2015).  This analysis indicates the difficulty of coming up with a workable policy towards migration from poor to rich countries.  Milanovic calls for a coordinated quota system for allocating would-be migrants between emitting and receiving countries.  He concedes that such a system would not be able to deal with random events such as the war in Syria, but he argues that it should be able to deal with economic migration: “With an orderly quota system, a person from Mali who is considering migrating to France may prefer to wait several years and get an official permission to settle there rather than to pay a people smuggler for an uncertain entry to France”.  

Although at first sight plausible, this proposal does not address the central issue, which is the potential scale of migration under such a scheme. If a quota scheme is to deter illegal migration, the expectation of getting a permit must be high and the expected waiting time must be relatively short. This means that the number of permits given out must be roughly commensurate with the number of people wishing to migrate. The suggested scheme might deter illegal migration but it would be unlikely to reduce the total number of migrants.  Indeed, the scheme might actually encourage migration by eliminating the need to rely on dangerous and costly modes of travel.

To implement even a slimmed down version of the scheme proposed by Milanovic it would be necessary to change public opinion. Even before the refugee crisis, there was widespread concern in Europe about large scale immigration.  According to an international poll taken in the period 2012-14 some 52% of Europeans thought that immigration should be reduced.  Only 8% thought it should be increased (How the world views migration, IOM 2015). The British Social Attitudes Survey reports that immigration has been consistently amongst the five most important topics of concern.  In 2013 of those questioned 56% thought that immigration should be reduced a lot and a further 21% thought it should be reduced by a little.  Such concerns have been around for a long time, but have been ignored by politicians.  However, politicians are now being forced to respond to public disquiet by the rise of anti-immigration parties.

Public disquiet about immigration is intensified by the perception that immigration is out of control. It is not simply a belief that the present level of immigration is too high that motivates this disquiet, but also a fear that the government has no means of cutting back on immigration should the need arise. In countries like Australia, where the government has a firm grip on migrant flows and can raise or lower them as the need arises, the public is willing to accept a high level of immigration.  If Milanovic’s quota scheme is to be politically acceptable, it will have to be accompanied by effective enforcement. Even then, it will be an uphill task to persuade Europeans to accept immigration on the implied scale.

Monday, March 7, 2016

Schengen and the European Migration Crisis

The Schengen Area. The Agreement signed on 14 June 1985 on a boat on the Moselle near the small town of Schengen (Luxembourg), by five of the ten states that formed the European Community at that time, effectively abolished passport controls and any other border control among the signatories thus treating the area as a single country. The Agreement was supplemented by the Schengen Convention of 1990, establishing a common visa policy. Initially the Schengen Area was separate from EU structures, as at that time the initiative lacked general consensus, but its rules and procedures were incorporated into European Union law by the Amsterdam Treaty of 1997, coming into effect in 1999. The five initial signatories (the three Benelux countries, France and Germany), were gradually followed by another 17, thus encompassing all EU member states except Ireland and the UK that opted out, and four others – Bulgaria, Croatia, Cyprus and Romania – who wish to join and are obliged to join eventually but are not yet deemed to be ready. All four EFTA member states – Iceland, Liechtenstein, Norway and Switzerland – are also associated members of the Schengen Area although they are not members of the EU. In addition, three European microstates – Monaco, San Marino and the Vatican City – are considered de facto participants. Today the Schengen Area has a population of over 400 million people.
Net gains. The creation of the Schengen Area was - in principle – an excellent decision. The effective elimination of internal borders within the Area generated considerable savings in terms of travel time and convenience for passengers, expenditure on custom officials and equipment, higher speed and lower cost of commodity transport. A recent study by Germany's Bertelsmann Foundation estimates the cost of the possible breakdown of the Schengen area at between €470bn and €1.4 trillion over the next decade, (roughly 10% of the 28-members EU bloc GDP) due to an increase in import prices of between 1% and 3%. Germany would lose between €77bn and €235bn and France between €85.5bn and €244bn under the two scenarios. The breakdown of the Schengen Area would also inflict a heavy burden on other countries, with a combined loss for the United States and China over the next decade estimated by the same study at between €91bn and €280bn. The European Commission estimated that the permanent reintroduction of border controls would cost between €5bn and €18bn a year because of lower tourism and transport delays. These estimates perhaps may be slightly exaggerated, but there can be no doubt that in the current, long and severe depression of the European economy, the impact of a Schengen breakdown, even if partial, would worsen significantly the growth prospects of the Union, with global reverberations.

Migrations. In the half-century 1960-2010 the ratio of the population working in countries different from that of their birth over the world population (corrected for the displacements which occurred at the end of World War II in 1945) was relatively stable around 3%, though with a clear tendency to accelerate that was much more marked for South-North migrations (see the figure below, where the value of that ratio in 1960 is taken as equal to 1).  
Source: Docquier, Frédéric and Joel Machado (2015), “Revenu, Population et Flux Migratoires au 21ème siècle: Un défi sociétal pour l’Europe” in Studia Oeconomica Posnaniensia, October 2014.
In subsequent years the acceleration continued. In 2015 migrants entering Europe mostly from the Middle East and Africa turned into a veritable flood – the largest flows to take place since 1945 – that put the Schengen arrangements to a most severe test: EU states received 1.3 million asylum applications, especially from Syria. On 24 August 2015 Angela Merkel announced that all Syrian asylum-seekers were welcome to remain in Germany regardless of which EU country they had first entered. She adopted this “open door” policy unilaterally, without EU agreement, after consultation solely with the Austrian Chancellor Werner Faymann; subsequently there were signs of intended policy reversal but tightening up was only slight (for instance preventing relatives joining migrants for at least a year) thus provoking an intensification of the inflow because of the migrants’ expectation of harder times; a recent poll found that 81% of the German population thought that the government had lost control over migration policy. The Bertelsmann Stiftung estimates that by mid-February 2016 an even larger number of Syrians alone had found their way into Jordan (640,000), Lebanon (over 1 million) and Turkey (2.6 million); Pakistan and Iran have taken several hundred thousand migrants from Afghanistan and Iraq respectively. In 2015 migrants crossing the sea from Turkey to Greece increased 20 times with respect to 2014. Last November the EU granted €3bn to Turkey as an inducement to hold migrants there at least temporarily, but three months later 2,000 migrants still cross daily into Europe: in order to take back non-Syrians the Turks are negotiating for more aid and other benefits such as visa-free travel to Europe, which in turn would generate a significant inflow of Turkish Kurd asylum seekers into Europe. Arrivals in Italy decreased slightly in the same period, from 170,000 to 154,000, which still represent a very large intake. For an up to date survey see Breugel, 12 February, and The Economist, interactive graphics, 6 February.
In May 2015 Branko Milanovic wrote a post in Social Europe, “Five reasons why migration into Europe is a problem with no solution”: 1) deep-seated and permanent factors such as political chaos in the Middle East and extraordinarily huge and increasing income gaps between Europe and Africa, with sub-Saharan population poised to increase almost by six times by 2100; 2) lack of an immigration tradition in Europe; 3) European political blunders due to a combination of incompetence and arrogance, such as overthrowing Gaddafi, the ultimatum to the previous Ukrainian government, and the handling of the Greek crisis; 4) the increasing influence of right-wing, populist anti-immigration parties in several European countries, even when they are not in government; 5) the total lack of strategies, policies and ideas at the European level, while the crisis calls for a multilateral solution involving co-ordination among member-states and with African countries and the European recognition that an influx from Africa is dictated by demographic and economic gaps: “Unfortunately, neither of these two conditions is close to being satisfied. So the problem, among permanent political improvisation, will continue to worsen” – he wrote prophetically. (In a post in the same series last January Branko stressed the economic positives and negatives of migrations; see also his forthcoming book Global Inequality - A New Approach for the Age of Globalization, Belknap Press).
The Schengen Area rules include provisions for temporary border controls to be re-established in case of urgency, for up to 2 and 6 months, and for outright suspension for up to 2 years in the case of threats to public order. Since the 2015 summer temporary measures have been already implemented unilaterally by several countries. Hungary closed its borders with Serbia, Romania and Croatia, allowing its army to use rubber bullets, tear gas and barbed wire against migrants. In November Slovenia started building its own fence along the Croatian border; its Parliament recently approved the deployment of the country’s army to manage the migrants’ flow at its borders. An increasing numbers of migrants have been cutting through these barriers to enter the EU.

Warren Richardson, Hope for a New Life. A man slides a child under barbed wire at the border between Serbia and Hungary at Röszke, Hungary, 28 August 2015. (World Press Photo)
Sergey Ponomarev, Russia, The New York Times, The European migration crisis: Refugees arrive by boat near the village of Skala on the Lesbos Island, Greece, 16 November 2015 (World Press Photo)

The closing of Sche­­ngen internal borders has accelerated since the beginning of 2016. In Denmark the government extended passport checks on the German border for the third time, with Sweden keeping similar checks for travellers arriving from Denmark. France is in the process of closing down the so-called “Jungle” migrant camp at Calais, whose estimated 5,500 residents were waiting to smuggle themselves to the UK on ferries, or through the Chunnel in trucks, trains or even on foot; the closure was violently resisted. Belgium reintroduced border controls on its frontier with France, hiring 290 extra-police officers to try and stop the Calais migrants from moving to its coastline. Austria has built a wall at its frontier with Slovenia; in under two months in 2016 it received 101,000 migrants compared with 4,000 in the same period last year, and has introduced a cap of 80 asylum applications per day.  Borders have been tightened between the Republic of Macedonia and Greece, allowing Syrians and Iraqis through but barring Afghans, who then were banned also by Croatia. Towards the end of February over 22,000 migrants were stranded in Greece and were expected by the Greek Migration Minister and Vice-premier to treble by the end of March; the UN estimates their number to be increasing even faster, at the rate of 3,600 per day. The Greek border with Macedonia has been nearly sealed off, threatening to turn Greece into a giant refugee camp – a “warehouse of souls” (Tsipras). 

The EU is planning to provide Greece with €700mn over 3 years (of which 300mn in 2016 for emergency assistance to migrants); reasonable proposals to trade off migrant assistance for Greek debt cancellation have been rejected as a moral hazard risk. On 24 February in Vienna ten eastern European countries – with the much resented exclusion of Germany, Greece and Italy – agreed on tightening up their own border controls with a view to stop the Western Balkan route into Europe, which of course will shift the flow back to the Mediterranean route into Italy. On 29 February at the Macedonian-Greek border “crowds of migrants were beaten back from storming a fence with a salvo of tear gas” (FT, 1 March). The current migration assault is even more serious than the Euro crisis, as Angela Merkel recently acknowledged.
Last November Jean Asselborn, Luxembourg’s Foreign Minister, declared that Europeans had only a few months to save the Schengen system. On 21 February Thomas de Maizière, Germany's Interior Minister, stated that EU member states must agree a common approach to tackle migrations ­“within two weeks if they wanted to avoid the system’s complete collapse. On 4 March the European Commission unveiled a plan, Back to Schengen, “to lift all remaining border controls by December 2016, so as to return to a normally functioning Schengen Area before the end of the year”. The options considered involve sharing out asylum seekers across the EU on a quota basis regardless of where they first arrived, either as a general procedure or only if a country is overwhelmed by a sudden influx. The IX Report on European Security reveals that a poll conducted in early 2016 among 1000 respondents each in Italy, Spain, France and Germany gives a majority of over 75% in favour of the reintroduction of border controls either unconditionally (56% in Italy) or in special circumstances (Repubblica, 7 March).
The Schengen crisis should not take anybody by surprise. The writing has been on the wall for a long time. The introduction of the Euro as a common currency had equally been an excellent idea, which however failed because it was premature before political, fiscal and banking integration; incomplete due to the ECB lacking powers as Lender of Last Resort to the EU and the member states; and because the Eurozone was subject to increasing divergence in the member states’ fundamentals. The Euro crisis was also made worse by austerity policies perversely enforced by the German-led European authorities. Precisely the same kind of criticisms apply to free internal travel within the Schengen Area: premature, incomplete and made worse by country divergence and recessionary austerity. On the impact of austerity on migrations and convergence see Michelle Baddeley, "Convergence, Divergence and Migration in an Age of Austerity", Seminar paper, Cambridge 2016:

he ability for host societies and economies to adapt will be constrained by limits on government spending. Infrastructure investment is needed in the very shortterm, including emergency infrastructure to support the immediate consequences of migration e.g. within refugee and migrant camps. Infrastructure investment will also be essential in the medium to long term to ensure that growing migrant populations have proper access to social infrastructure including housing, schools, hospitals and other medical services. Without this investment, the prospects for growing inequality, deprivation and socio-political unrest are likely to be severe – exacerbating divergences at many levels: between the global South and North, between Northern and Southern parts of the EU, and within countries depending on how different regions’ populations are affected by migration and/or how much access they have to public finance for infrastructure investment.

Three considerations are in order:
1.Free internal travel requires strong external controls. Just like a Free Trade Area requires a common external tariff barrier, free internal travel obviously requires a common external border, with a common Coast Guard, border guards and if necessary a common Army, all provided and paid for centrally. The Schengen external borders, on the contrary, are delegated to national, fragmented, uneven and inadequate controls (in spite of the rudimentary Frontex agency and the recent intervention of NATO ships patrolling the Aegean Sea). Moreover existing controls do not include brutal repression, and this humanitarian restraint is more labour-intensive. Shooting trespassers on sight, as East German guards protecting GDR borders used to do with attempted exits, is not yet reached but arrest and imprisonment in Hungary (and the extra-Schengen UK) have been, as well as the use of tear gas and rubber bullets elsewhere.
Schengen external borders are a sieve that allows through indiscriminately legitimate refugees, escaping directly from persecution and war, and economic migrants, i.e. those refugees who had already reached a safe country, or other migrants who are simply seeking to improve their standard of living. The difference between refugees and economic migrants (both classed here as migrants) is elusive, as even refugees will tend to move towards countries with higher employment opportunities and/or income, thus abandoning their “first safe country” status. This difference is fundamental: refugees are protected by UN regulation on reaching their first safe haven, the others are still subject to national endorsement and control. And even if a policy of completely open doors was adopted towards economic migrants, the speed of the migratory inflow would still have to be subject to national control. In fact the capacity to absorb immigrants into any given territory is limited at any time by short term available resources, by the country’s capacity to integrate immigrants and, as well, by their own willingness and preparedness to be integrated.
Whether or not immigration brings net benefits to the host country is a controversial matter. On balance it probably does in the long term, but the case of very fast, concentrated mass migration should be considered in its own terms. The possibility cannot be neglected of a mixed distributional impact on workers and firms through greater competition in labour markets, both in the short and long term; of significant additional investment cost in new infrastructures, and - at least in the short term - welfare costs, making immigration a public investment competing with alternative forms of public expenditure. Immigration brings possible cultural enrichment but also possible cultural impoverishment, as well as potential cultural, political, ethnic and religious conflict – even leaving aside the possibility, not entirely implausible, of migration being a vehicle of health contagion and terrorist infiltration. These drawbacks have to be set against the benefit of rejuvenation of an ageing host population, which is associated with mass immigration.
Whatever the true net costs and benefits of immigration, the increasing electoral success of right-wing, populist, anti-immigration parties in most of the developed world signals unambiguously the widespread perception – right or wrong – that the current level and/or rate of immigration are excessive: from Matteo Salvini’s Lega to Nigel Farage’s UKIP, from Jimmie Åkesson’s Swedish Democrats to Geert Wilders’ Party for Freedom, from the German Alternative für Deutschland to Viktor Orbán’s Fidesz or Jaroslaw Kaczynski’s PiS, Heinz-Christian Strache’s FPO, Milos Freeman’s Civil Rights Party, Marine Le Pen’s Front National, the Finnish and Norwegian anti-immigration parties, as well as shifts in more standard political parties (see the anti-immigration stance of Boris Johnson, mayor of London and David Cameron’s probable successor). In the US the latest polls show that immigration is fourth or lower on public concerns: the anti-immigration vote is overwhelmed by the economy, anti-Elite feelings and security issues, although Donald Trump’s large-scale wall-building and deportation plans may have something to do with his unexpectedly strong bid for the US Presidency.
When existing external borders are not in a position to identify and register all migrants, to distinguish between refugees reaching their first safe haven (which the 1990 Dublin Convention rules, stricter than the UN rules, regard as the first EU country) and all other migrants, it is unavoidable that each Schengen member state will need to reintroduce effective border controls, including visas and passport checks.
The identification of immigrants has been likened to the marking of prisoners in Nazi concentration camps, but the comparison is improper, even if identification required the use of force. Identification is essential to verify both the right to residence and entitlement to benefits.
The almost 4,000 migrants that drowned trying to cross the Mediterranean Sea, the high monetary cost (steeply rising with the spreading of border controls and obstacles) and exposure to violence and other personal risks of migration make the desperate predicament of economic migrants – running away from famine, destitution, drought, environmental and cultural disasters – very close to that of refugees running away from persecution and war. But the difference is still there: refugees have a sacrosanct right to asylum sanctioned by the United Nations, while all others by migrating place themselves at the mercy of their countries of arrival: economic migrants can be refused entry or be repatriated.
Both rejection and forced repatriation are unpleasant and brutal, but an indiscriminate open doors policy would amount to the pretense that the world in which we live, dominated by private property and territory-based democracy, is instead a non-existing utopia of global democracy and universal communism, though limited to the collectivization of social capital. No wonder such a contradictory utopia was never proposed or theorized by anyone. In the world as we know it international solidarity is necessarily a discretionary concession by those who can afford generosity, which can only be exercised collectively if backed by a majority; it is not an automatic right of those who need international solidarity. 
Moreover a policy of indiscriminate open doors to all immigrants, while reducing international inequality across countries will increase internal inequality within countries because of the greater competition in the labour market in the host countries and the impoverishment of the emitting countries, thus leading to a possible and perhaps probable greater global inequality. (The case for repatriation is developed conclusively by Alberto Chilosi, “On the economics and politics of unrestricted immigration”, The Political Quarterly, 73-4, pp. 431–435, October 2002).
All immigrants, whether or not they can be classed as refugees, should be protected from the risks of their journey, in spite of such risks being to some extent the result of their own actions, just as cancer patients are entitled to treatment even if they are smokers (though some may disagree). Preferably the cost of protecting them should be a charge on all Schengen countries, as it is now for the EU Frontex operations, but even if such cost was born by a single country’s taxpayers as in the case of Italy’s Mare Nostrum scheme it would still be desirable.
The trouble is that repatriation is costly, and should be financed by the Schengen countries as it is part of the cost of abolishing internal borders; it requires the agreement of the country of origin or of the first safe country reached, which may be unknown or might no longer exist or might not honour such an agreement (e.g. Pakistan). Moreover it is doubtful whether “pushbacks”, whereby asylum seekers are returned to a country without their application having had a fair hearing, are consistent with both the Geneva Conventions and the EU asylum code. But the fact that repatriation will not always be possible is no reason for not attempting it at least in some cases, if nothing else pour encourager les autres.  Refugees are in a different position because with the settlement of conflict in their own countries they should return home.
On 27 January Sweden – that last year received 163,000 asylum applications, the highest number per capita in Europe – announced a plan to repatriate 80,000 migrants (subsequently reduced to 60,000 then left undetermined) “over  many years”, using aircraft chartered for the purpose, but the plan is still on paper. In the same week 308 economic migrants were sent back by bus from Greece to Turkey; however Turkey will not accept more unless Europe takes more Syrians off their hands – a vicious circle. Rejection looks like a more viable option: in his current visit of the Western Balkans ahead of the EU-Turkey summit Donald Tusk, on 2 March in Zagreb, said that “Member states should refuse entry to third-country nationals who do not meet the necessary conditions or who, although they were able to do so earlier, did not apply for asylum.” (European Council communique’ 3 March). However, the concentration of rejected economic migrants in border camps is bound to create other problems, while the prospect of future rejections can only speed up current migration flows.
2.Free internal travel requires the convergence of living standards within the area (including welfare provisions). Not unnaturally foot-lose migrants who do not have stronger ties (of language, religion, relatives, friends) to a particular country will tend to choose their ultimate destination on the basis of their perception of maximum improvement in their living standard resulting from migration. Employment prospects are likely to be paramount, indeed traditional migration theory (exemplified by the Harris-Todaro model, AER 1970, 60-1) relates the incentive to migrate to wage differences between the home and destination countries weighed by their respective probability of employment (taken as 1 minus the unemployment rate), to which of course one should add the net improvement in welfare benefits. Potential immigrants may well tend to overestimate their perceived income improvement prospects, as they seem to imagine themselves and their children gainfully employed at top salaries; this is one of the factors encouraging migrations beyond reason. When expected income gains diverge across potential destinations, the more attractive countries naturally will tend to be disproportionately vulnerable to migratory inflows. Hence the incentive for destination countries to raise national barriers, and/or discriminate in welfare benefits against immigrants, or dismantle the welfare state tout court for both nationals and immigrants. Even James Meade – a liberal and enlightened economist who proposed a generous generalised basic income – in order to prevent opportunistic immigration recommended that immigrants should be treated by the principle of reciprocity, i.e. enjoy the same benefits, if any, that our nationals might be granted in the migrants’ country of origin. (It has been objected that such a rule might be applied to countries of the same level of development, such as North-North and perhaps South-South, but not to South-North migrations).
The UK is a case in point. Relatively generous benefits granted to immigrants from other EU countries, including social housing, national health entitlements and payments to relatives resident abroad, have led to Cameron attempting to negotiate “emergency brakes” with the EU, subjecting benefits to time restrictions (excluding immigrants for the first four years residence), or to resident family members (possibly restricting family re-joining). Cameron succeeded in negotiating with the EU these kinds of restrictions only for future and not for existing immigrants, which therefore strengthened the conservative government resolve to reduce welfare benefits all round. Meanwhile non-European immigrants to the UK are subjected to a minimum income to be reached within the first 5 years of residence (which has just been raised from £21,000 to £35,000 from next April), under penalty of expulsion after one additional year. New rules will make UK landlords responsible for checking the documents of their tenants, making it harder to find accommodation not only for unauthorized immigrants but also for the 60% UK citizens who do not possess a passport.
3.Any attempt at a fair re-distribution of immigrants among countries requires the re-establishment of national borders. Last July EU Interior Ministers - outvoting Romania, Hungary, the Czech and Slovak republics strongly opposed to the scheme - imposed a plan to relocate 40,000 migrants (24,000 from Italy and 16,000 from Greece) across the EU. In September an additional 120,000 relocations (16,600 from Italy, 54,400 from Greece and 54,000 from Hungary) were added, raising the total to 160,000 in two years, of which 54,000 were postponed to the following year (FT, 25 September 2015). Viktor Orbán, Hungary’s prime minister, announced a referendum on whether the country should be forced to resettle refugees, on the ground that “Introducing resettlement quotas for migrants without the support of the people is an abuse of power”; he is unlikely to lose that referendum. On 28 February Pope Francis advocated “an equitable re-distribution of the burden of migrants” (thus accepting that immigration is a burden).  However, such kind of a re-location is futile, not to say idiotic, for under Schengen completely free and unrestricted internal travel any immigrant re-located to a country other than his/her preferred destination can at any time, and eventually will, just go there. Indeed we could argue that even the relocation of migrants within a given country might have to be subjected, in order to be done efficiently, to the introduction of internal passports and controls of the kind prevailing in the Soviet Union until 1991, in order to stop immigrants from settling in the capital city and in other metropolitan areas that are already overcrowded and congested and to divert them instead to less developed areas with an abundance of cheap underutilised housing and land.
On 29 February Angela Merkel said it loud and clear: “Migrants may not pick and choose where they are to be settled” (Daily Telegraph, 1 March). She referred to their choice of country, but Germany is indeed unusual in imposing constraints on where migrants can live, both in order to prevent the formation of ghettos in big cities and to direct immigrant flows to the underpopulated regions of the former GDR where there is plentiful social housing and a shortage of young workers. Such a policy had been introduced in the 1990s at the time of a large influx of ethnic Germans from the former Soviet Union and Romania. Immigrants have their welfare benefits cut if they move away from their assigned locations. In the UK immigrants who claim social housing and some other benefits are offered it only in the northern rust belt towns.
This kind of restrictions seem necessary to the smoother absorption of immigrants, but paradoxically the European Court of Justice, ruling on a complaint by two Syrians about their German residence requirements, at the end of February 2016 decided that EU rules “preclude” them even if they are aimed at “achieving an appropriate distribution of the burden connected with the benefits”, though it also said that people granted subsidiary protection could be subject to a residence condition “for the purpose of promoting their integration”. Nevertheless German ministers are preparing a law which would expand the existing residence restrictions to refugees whose asylum requests have been approved, in spite of objections from refugee associations (FT, 1 March).
Disintegration?  At present the EU is being subjected to four centrifugal forces (see Munchau, FT 28 February. and Javier Lopez, “Europe in Multiple Organ Failure”): a North-South divide over border controls; another North-South divide about austerity and the Euro; an East-West divide over migrant re-location; and the uncertain implications of Brexit with possible contagion effects on other member states.
It is difficult to disagree with Oxford political scientist Jan Zielonka (Is the EU doomed? Global Futures, Polity Press, London, 2014) when he argues that “Sadly… at present the EU does not facilitate integration, but impedes it”… “The European Union was widely regarded as the most successful modern integration project, but it has turned into an embarrassment”… “No wonder so many citizens lost trust in the EU, and that the process of disintegration is gathering pace.” But Zielonka’s expectation that “A weakening of the EU and its member states will strengthen other political actors such as cities, regions and non-governmental organizations (NGOs)” is utterly unconvincing: the solution or even the alleviation of both the Euro crisis and the migration crisis cannot rely on a network of de-centralised power centres but will require a deep degree of centralised initiative and commitment to greater integration. See “A Plan for Europe’s Refugees”, The Economist 6 February:
“Creating a well-regulated system requires three steps. The first is to curb the “push factors” that encourage people to risk the crossing, by beefing up aid to refugees, particularly to the victims of the civil wars in Syria and Iraq, including the huge number who have fled to neighbouring countries such as Turkey, Jordan and Lebanon. The second is to review asylum claims while refugees are still in centres in the Middle East or in the “hotspots” (mainly in Greece and Italy), where they go when they first arrive in the EU. The third element is to insist that asylum-seekers stay put until their applications are processed, rather than jumping on a train to Germany.” Unfortunately, “All these steps are fraught with difficulty.”
Prospects might become clearer soon, after the next EU-Turkey summit (7-8 March), the German regional elections (13 March) regarded as a test of Merkel’s immigration policies, and the EU Summit on migration (18-19 March).
There seems to be, however, a constitutional conflict between European and international rules about treaties, revealed by the recent agreement reached by the UK and all the other member states about the special terms negotiated by Cameron for the UK. That Agreement is said to have been deposited within the UN and is therefore subject to the jurisdiction of the International Court of Justice, which operates on rules different from those of the European Court of Justice competent to enforce the European Treaties. Downing Street has claimed that the EU-UK agreement is legally binding and enforceable, but it is not clear whether any country who did not like it might seek to challenge it in the International Court of Justice. A constitutional crisis of this kind is the last thing that Europe needs today.

Note: I thank Carmen de la Camara, Marilena Giannetti, Tonino Lettieri, Ruggero Paladini and Fabio Sdogati for useful comments on an earlier draft of this post. However they should not be held responsible for any errors or omissions, nor deemed necessarily to agree with any of the propositions put forward here.

The EU-Turkey summit of 7-8 March led to a draft deal whereby Turkey would take back immigrants coming from Greece unless they successfully applied for asylum there, while the EU would take in one Syrian refugee for every immigrant sent back. In exchange Turkey would receive €6bn aid instead of the €3bn already committed but not yet disbursed, accelerate its progress towards EU accession and obtain visa-free travel to the Schengen Area for its 75mn citizens.

In the three German regional elections of 13 March Ms Merkel’s CDU Party retained the possibility of forming coalition governments but lost ground heavily, while her PSD coalition Party that had backed her immigration policies performed even worse. The xenophobic right-wing AfD gained record support.

On 18 March after ten days negotiations the EU and Turkey reached a compromise deal that commanded unanimous support, effective from 20 March. Greece obtained 4000 new personnel to process asylum applications. There would be no collective pushbacks, but starting on 4 April Turkey (that received 2.7 million migrants to date) would take back applicants who did not qualify for asylum in Greece, while the EU would take from Turkey “one for one” as many Syrians up to a ceiling of 72,000. In exchange Turkey would receive €6bn instead of the anticipated €3bn, of which 3bn up front and 3bn at the end of the year; the process of EU accession would be tentatively reopened and EU visa-free travel for Turkish citizens would be granted from next June.

The Greek government’s migration spokesman Giorgos Kyritsis declared that implementation of the deal would require more than 24 hours; Turkey will not take back migrants before 4 April anyway. The 4,000 officials, translators, judges and security guards promised by the EU still have to arrive; eight ships with a capacity of 300-400 passengers each need to be provided by Frontex, together with 30 buses. Thousands of migrants (mostly Syrian, but also Iraqis and Afghans) have continued to arrive in Greece in spite of the agreement. Greece is still relocating migrants from its islands to temporary refugee camps on the mainland. From 4 April a number of failed asylum-seekers (750 in the first week, mostly North Africans, Afghans and Pakistanis) from Greek detention centres will board a vessel chartered by Frontex and be taken to Turkey. In return Germany will take an equivalent number from Turkish refugee camps. These deportations might be illegal and have sparked violent protests but will accelerate in April.

There were still strong objections from humanitarian groups, on the ground that the deal violated international law on the treatment of refugees; Turkey is expected to conform its regulations to international standards, but refused to accept a formal commitment to that effect. European reaction has ranged from welcoming “closed borders” to condemning the “shameful deal”. Wolfgang Munchau, FT 21 March: “The deal with Turkey is as sordid as anything I have seen in modern European politics… The EU not only sold its soul that day, it actually negotiated a pretty lousy deal.”  On 22 March the UN refugee agency announced the suspension of its involvement at all closed centres on the Greek islands, on the ground that so-called “hotspots” for the reception and registration of migrants had turned into “detention facilities” in violation of UN regulations. On 23 March Médecins Sans Frontières and the International Rescue Committee also scaled back their activities in the Greek centres. Following terrorist attacks in Brussels Poland now declared that it can now no longer honour the previous government’s commitment to take a quota of 7,000 refugees out of the 120.000 to be resettled across the EU. In the week following the EU-Turkey deal migration inflows to Greece were reduced drastically, though this might be due to adverse whether conditions in the Aegean.

In the last seven months, Hungary’s courts have held 2,189 trials for border crimes (including on 18 March a blind woman and a man confined to a wheelchair accused of interfering with Hungarian borders last November, FT 22 March) leading to an exceptionally high rate of convictions of 99 per cent. Hungarian judges have chosen expulsions and long entry bans from Schengen countries over prison sentences. On 22 March Frontex was reported saying that it was trying to recruit 150 policemen and 50 officials to be deployed on Greek borders, i.e. it had not succeeded yet.

The Greek-Macedonian border will remain closed, blocking the Balkan route to Northern Europe, leaving tens of thousands migrants stranded in Greece for some time, including Syrians who thought they had been invited by Angela Merkel to come and stay in Germany. It is not clear how the 72,000 asylum seekers would be distributed among member states; once that ceiling is reached the arrangement will be "reviewed", though Central-Eastern EU members are committed to stop at that ceiling. 

The closure of the Balkan route will induce desperate migrants and their smugglers to switch to different and more dangerous routes to Europe, via the Black Sea through Ukraine, via Albania and the Adriatic to Italy, via the South Mediterranean to Italy and Spain (the last two routes having continued to be used especially from Lybia; in the first three months of 2016 immigrants arriving in Italy from the Mediterranean route have doubled). France, Switzerland and Slovenia would then be bound to reintroduce border controls, thus cutting off Italy and possibly Spain from the Schengen area; Austria is already closing the Italian border at Brennero. Liberalisation of travel for Turks would lead to an additional inflow of Turkish Kurds. According to a German think-tank refugee flows this year will amount to an estimated range of 1.8m-6.4m (the higher figure being a worst-case scenario including large numbers from Northern Africa).

Incidentally, on the costs and benefits of mass immigration with special reference to the UK, see R.E. Rowthorn’s excellent Report, 2015.