Italy illustrates the way to liberal democracy’s demise

Complacency about the rise of populists is typical of failing political systems

Wolfgang Münchau


The League leader Matteo Salvini, who is looking to take Italy out of the euro © AP


Comparing today’s populists and nationalists to the Nazis and fascists of 80 or 90 years ago is pointless. But I see much clearer parallels between the fall of Germany’s Weimar Republic and the vulnerability of Europe’s liberal elites. Some of the current defenders of the liberal order are making the same mistake as, for example, the German Centre party of the early 1930s, by underestimating the scale of the threat that they face.

Harold James, a professor of history at Princeton University, has recently given us 10 reasons why our political systems today share some of the self-destructive characteristics of the Weimar Republic. One is the strength of the economic shock. Another is an excessive optimism about the power of constitutions to protect the system.

I would like to offer some additional thoughts on the role of complacent narratives — the stories we tell each other that make us feel better. As a commentator on eurozone affairs, for example, I keep hearing that an Italian exit from the euro cannot happen because it is not allowed. Italy’s constitution, for example, makes it impossible for a government to rescind international treaties by referendum.

This argument not only overestimates the power of constitutional law to protect us from illegal acts by governments, as Prof James pointed out. It also ignores the circumstances under which a country would leave the eurozone. All its government would need to do is engineer a financial crisis, declare force majeure, and introduce a parallel currency over a long bank holiday weekend. There is nothing in the Italian constitution to prevent a financial crisis or to stop a government from giving people the means to buy food.

This is also why it does not matter why the Italian coalition agreement no longer contains a formal euro exit clause, as it did in an earlier draft. We know that Matteo Salvini, leader of the League, wants to create conditions for a euro exit. We also know that some, though not all, members of the Five Star Movement, their potential partners in government, want that too.

That is all we need to know.

Another argument is that the financial markets would frustrate such a rebellion. Those who make it again commit the error of attaching the mindset of a centrist politician to that of Italy’s new leaders. Centrists, in Europe at least, have an emotional need to be considered fiscally conservative. Centrists look at bond spreads the way deer stare at headlights. To someone such as Mr Salvini, a financial crisis is not a threat but a promise, one that allows him to pull the plug on euro membership.

A third argument is the supposedly super-human ability of the Italian president to prevent disaster. Italy’s constitution has (wisely) given the president strong powers. The president has the right to appoint ministers and can refuse to sign legislation deemed incompatible with the constitution. But presidential mandates are finite, and even a strong president such as Sergio Mattarella cannot tell MPs and senators to pass a eurozone-compliant budget.

A fourth argument is that the centre will always be able to stitch things up. Really? I recall the attempt by the Democratic party and Silvio Berlusconi’s Forza Italia last year to change the electoral system in their favour. They miscalculated the sheer scale of support of the populists. You cannot save liberal democracy through gerrymandering.

The centrists are now resorting to the hope that the politically rehabilitated Mr Berlusconi could once again strengthen their hand. I see no evidence for this view. And what does it say about Italian politics if its future could only depend on the man who is primarily responsible for the country’s economic disaster?

Fifth, I hear it said that, if all else fails, there is always the European Central Bank. Mario Draghi, its president, saved the eurozone in 2012, but can he save liberal democracy? His main anti-crisis tool, a programme known as Outright Monetary Transactions, is irrelevant in this case. OMT was designed for rule-compliant governments that find themselves under a speculative attack by investors. That is not the case here.

Finally, there is the hope that the economic recovery will benefit the centrist parties. I think the opposite is the case. Five Star and the League will generate a recovery through a large fiscal stimulus — and will gain the credit for it. They are in power precisely because the centrists have failed to deliver on the economy. The truth is that there is no such thing as a technical backstop for liberal democracy.

Herein lies the main lesson of the Weimar Republic. If liberal democracy fails to deliver economic prosperity for a sufficiently large portion of the population over long periods, it ends — along with the financial and economic institutions it has created.


What Is Happening to Global Growth?

Investors are being wrong-footed by weaker than expected data

By Richard Barley



NO REBOUND
IHS Markit composite eurozone purchasing managers index

Source: FactSet





The soft patch in the global economy is looking more soft and less like a patch.

Wednesday’s flash purchasing managers indexes for the eurozone and Japan showed fresh declines. The eurozone composite index fell to 54.1, compiler IHS Markit said, an 18-month low and weaker than forecast; in Germany business confidence about the outlook slipped to its lowest since November 2016. 

The numbers are the latest test of the consensus view that slower growth outside the U.S. in the first quarter was just a soft patch. Instead of playing catch-up to positive economic surprises as they did throughout 2017, investors are being wrong-footed by weaker than expected data.


TURNAROUND
ICE BofAML U.S. dollar index

Source: FactSet



The level of the PMIs is not the concern: they still point to growth. But coupled with concerns about trade wars and renewed political risk, the downward trend is turning winning trades into losers. One by one, starting with the big drop in stocks at the end of January, trades betting on a continuation of the trends from 2017 have fallen by the wayside.


EMERGING TROUBLE
Total returns on emerging-market local-currency bonds in dollar terms

Source: Bloomberg
Barclays index via FactSet


The most significant surprise move is in the dollar, which has reversed after falling throughout 2017, and is now up nearly 2% this year on ICE’s index. Emerging-market bonds and stocks that were flying high have been hit; a Bloomberg Barclays index of local-currency emerging-market government bonds has fallen 5.7% this quarter in dollar terms. Italy’s political ructions have turned a gain of 2.8% for the country’s bonds at the start of May into a near-1% decline, ICE BofAML indexes show. Traditional haven bonds haven’t eased the pain, with U.S. Treasurys selling off and ultralow yields in Japan and Europe providing little cushion.

All of this likely makes the market more sensitive to bad news. For instance, higher oil prices are starting to be seen as a problem for growth and inflation, rather than a sign of underlying demand. A further rise in the dollar could create even greater pressure on emerging markets by tightening global financial conditions.

The consolation for investors is that economies are still healthy and growth in the U.S. has remained strong. That may yet create opportunities in now cheaper stocks and bonds. But if slowing growth tips more toward contraction, markets have further to fall.


Is Big Tech Destroying Retail Markets?

Maria Gonzalez-Miranda , Ivailo Izvorski  

Businessman paying with a credit card


WASHINGTON, DC – Information technology is not just transforming markets; it is also making them ubiquitous, particularly for household consumers. From pretty much anywhere in the world, one can now search out goods and services, compare prices from multiple sellers, and give detailed shipping and delivery instructions, all with a mouse click or a screen tap.

No doubt, this is a dream come true for anyone who grew up shopping in real, hands-on markets, with sellers displaying their wares on store shelves, on public squares, or along dusty roads. In many cases, routine purchases required long waits or extensive bargaining. But with online markets, savings are generated in many dimensions, and transaction costs are sharply reduced at all stages of the process.

Online markets have the potential to improve consumer welfare substantially, by fueling competition on price, efficiency, and customer experience, whether through search engines or single platforms such as Amazon. And if consumers spend smaller shares of their disposable income on each purchase they make, they will have room to consume more, thus boosting overall economic activity.

But are online markets meeting this potential?

If anything, the description above is already dated. Nowadays, online retailers use consumers’ Internet activities and other personal data to deliver “targeted pricing.” To take one particularly controversial example, airlines now use travelers’ data to customize ticket prices in ways that essentially cancel out the savings once offered by online markets.

Indeed, if you search online for a more expensive car or a more expensive vacation, that fact will be documented by tracking cookies or other means of online surveillance. And with these data, digital advertisers and retailers will offer you more expensive watches, home furnishings, or airline tickets than they would to a lower-income user searching within the same categories.

And in some cases, they might even offer different prices to different people for the same good or service.

Part of the segmentation of online markets involves web companies testing price points to estimate precisely the demand curve and its links to household characteristics. For example, a May 2017 article in The Atlantic notes that, “As Christmas approached in 2015, the price of pumpkin-pie spice went wild. … Amazon’s price for a one-ounce jar was either $4.49 or $8.99, depending on when you looked.”

This form of price discrimination is legal as long as it does not occur on the basis of race, ethnicity, gender, or religion. Taken to the extreme, it means that data about our preferences, incomes, and spending patterns could soon be used to determine an individually calibrated price for all transactions. In that scenario, 100% of consumer surplus could potentially be extracted 100% of the time.

To be sure, price discrimination will not happen for every good and service, and the trend could be tempered by competition from offline retailers or new entrants vying for market share by offering lower prices to everyone. Alternatively, the data collected in some industries could become so widely shared across competing firms that they will all converge on a single price for each individual. In fact, companies today are probably already facing this kind of price segmentation, especially those that have amassed a lot of public data.

This suggests that markets could potentially become extremely fragmented, such that consumers’ choices will be strictly limited to the offerings that have been selected according to their data profiles. As any student of economics understands, this kind of situation decreases overall welfare, because every consumer will be forced to pay the maximum of what they are willing to spend for each good or service they purchase, keeping nothing “extra” for themselves.

Making matters worse, rapidly rising capital and skill requirements for production, among other factors, is sustaining a trend toward less competition among companies across a wide range of sectors in advanced economies. This, together with the systematic “extraction” of consumer surplus, will have far-reaching macroeconomic implications, particularly through changes in private consumption patterns. For consumers, the slice of the economic pie made available by their disposable incomes will shrink in real terms, leading to a fall in aggregate demand. Thus, at the end of the day, there will be less for everyone.

Amid the ongoing debate about how the dominant tech firms should and should not be allowed to use personal data collected from users online, many of these firms have continued to decide these questions for themselves – and, by extension, for the rest of us, too. For the sake of social welfare in the years and decades ahead, we must ensure that these decisions are compatible with the creation and maintenance of healthy, competitive markets. After all, a system that benefits consumers benefits everyone.


Maria Gonzalez-Miranda is Practice Manager in Macroeconomics, Trade, and Investment Global Practice at the World Bank.

Ivailo Izvorski is Lead Economist in Macroeconomics, Trade, and Investment Global Practice at the World Bank.


China, Trade and Artificial Islands

By George Friedman

 

China and the United States have agreed to substantially reduce the massive trade imbalance between the two countries, according to a joint statement released over the weekend. Also over the weekend, China reportedly landed military aircraft on artificial islands it built in the South China Sea. Though these issues don’t appear connected, they are: Both have to do with the relative power of China and the United States, and both deal with perceptions more than reality.

Since President Donald Trump’s election, the United States has been deeply concerned with the balance of trade with China. For the United States, trade is a social issue. Increased trade with China has helped the U.S. economy as a whole by shifting production of certain goods to China’s low-wage economy. But it has also created severe social stress among those left unemployed or underemployed, a significant part of U.S. society.

For the Chinese, utilizing their low-wage environment to entice Western businesses to transfer production to China was a fundamental element of their national economic strategy. It surged the Chinese economy but also left it vulnerable to the appetites of other countries, particularly the United States, for their goods at a time of global stagnation and intensifying competition among low-wage producers.

A trade war would hurt parts of both countries’ economies, but on the whole, China needs that trade more than the United States does. Therefore, the aggressive American stand inevitably led China to agree to reduce the trade imbalance. But agreeing to reduce the imbalance doesn’t mean China actually will. It’s still unclear how Chinese exports would be restrained or how Chinese purchases of American goods would be increased to create more balanced trade. The Chinese government can increase its controls over the mechanics of trade far more readily than the Americans can.

Both sides have an interest in declaring victory and continuing to do business as usual. The Chinese are not in a position to give up their trade surpluses with their major customer, nor can they endure the avalanche of other countries making similar demands. But the Chinese understand American politics: They know that the Trump administration wants a win, and they are likely calculating that Trump will settle for the appearance of victory. That might be true, but since Trump’s political opponents are likely to point out that the emperor has no clothes, Trump will need to press the issue, and the Chinese have made what is for them a major concession. The pressure will continue from the U.S., and relations will deteriorate, but it is hard to see how China has much room to maneuver on this. Still, both sides have bought themselves some time.

Meanwhile, China continues to develop its military capabilities in the South China Sea. Last month, U.S. Navy Adm. Philip Davidson told the Senate Armed Services Committee that China can now control the South China Sea “in all scenarios short of war with the United States” because of its increasing military presence there. China has reportedly started to base some aircraft, including bombers, and missile systems on manmade islands in the region, causing concern among other Southeast Asian countries.
 
 
Some see this development as a major advance for China, but it’s hard to understand why. The Chinese bombers located on these islands would be used only in the case of war. And if a war does break out, these islands would be turned into craters. They do not affect U.S. naval power because they are small and their location is known. Neither satellites nor unmanned vehicles would be needed to locate them. Cruise missiles launched by air, sea or land could neutralize the islands rapidly. Certainly, the Chinese could build air defenses, but as we have seen in Syria, shooting down cruise missiles doesn’t protect your position. Since any air defense system can be saturated by too many missiles, an attacking force could calculate how many missiles it will take to penetrate the system. And since cruise missiles are unmanned, the U.S. wouldn’t hold back out of fear of taking on casualties in the way it might if neutralizing the Chinese positions required manned aircraft.

On the surface, these islands are hard to see as military bases at all. Given the size of the South China Sea, China could launch air attacks using manned or unmanned vehicles from bases on the mainland. Basing aircraft on these islands might give China a shorter time to reach some targets if it initiated conflict, but that advantage would quickly disappear. The islands are small, the number of aircraft that can be deployed on them is limited, and the first American response would eliminate them.

There’s a broader point about the strategic reality here. After years of trying to change the balance of power in the South China Sea by taking control of key islands, the Chinese have failed to do so. They have built the artificial islands to compensate for their failure. The advantage this deployment gives them would be militarily insignificant in a time of war. Its value is psychological – it improves China’s international prestige as a rising power, and it’s useful for domestic Chinese consumption. (Although, this type of advantage requires vastly overestimating the significance of these islands.) As China must gesture accommodation on trade issues, it must gesture toward its growing military power.

China’s power in both issues is less than it appears, at least at this point. The Chinese agreement to reduce the trade imbalance leaves open many opportunities for failure. The Chinese deployment of aircraft to artificial islands that are hard to defend opens new vulnerabilities to the Chinese. In both cases, the Chinese gestures have some importance. Each can conceivably become more important than it is now, but neither is as important as it appears.


In Europe, as Migration Falls, Nationalism Rises




Summary
The migrant crisis that erupted in 2015 has drastically altered the landscape of European politics in several ways. It created a divide among EU member states, separating countries into two groups: those that willingly took in migrants and agreed to the quota system, and those that did not. The crisis has also encouraged the rise of anti-immigration, anti-establishment political parties, which now play key a role in politics in counties of the latter group.
 
In the past two years, migration has fallen significantly. The International Organization for Immigration reported that 172,000 migrants reached Europe by sea in 2017 compared to 363,000 in 2016. But regardless of the decrease in numbers, migration remains at the center of many political debates in Europe. It is especially pressing because most migrants who have arrived since 2015 are likely to remain on the Continent in the long term. Migration will therefore be a key political issue in Europe (and European elections) for years to come. Anti-establishment movements are highly invested in the immigration issue and won’t let it fad away easily.
 
Immigration will also play a critical role in defining the European identity and the European Union’s function in the future. Internationalists hope for a United States of Europe but lack the coercive mechanisms to make this dream a reality.  
They are in direct conflict with those who want the EU to be secondary to the pursuit of national interests, whatever those interests may be. The debate will keep Europe internally focused as it faces divisions and struggles to define its path forward. This Deep Dive will assess the status of the migrant crisis today and the impact migration will have on the geopolitics of the Continent.

 
Geography
Migrants coming to Europe can be divided into two categories: refugees fleeing war, often coming from the Middle East and South Asia, and economic migrants fleeing dire economic conditions, often coming from Africa. 

For refugees from the Middle East and South Asia, Bulgaria and Greece are two major entry points. From there, migrants use three routes (all of which end in Austria and Germany) through the Balkans to access the rest of Europe. Though the Balkans is a predominantly mountainous region, the mountains have not acted as a natural boundary to curb the flow of migration, as refugees typically use rail and road transport for at least part of their journey
 
The majority of people using these routes are fleeing war in Syria and Iraq. Of the illegal border-crossings through the Eastern Mediterranean and Western Balkans reported from January to March this year, 2,882 were from Syria, 1,833 were from Iraq, 1,046 were from Afghanistan, 806 were from Turkey, 430 were from Pakistan, 68 were from Kosovo and 57 were from Albania. 

Migrants coming to Europe for predominantly economic reasons tend to originate from Africa and often use Italy and Spain as entry points. From January to March this year, Eritrea was the largest country of origin for migrants to the EU through the Central and Western Mediterranean with 1,552, followed by Tunisia with 1,190. Others included Morocco (507), Guinea (498), Mali (410), Nigeria (401), Cote d’Ivoire (310) and Pakistan (288).
 
 
Building Walls
Due to the accessibility of modern transportation in this region, the mountains of Southern Europe do not act as an effective natural barrier against migration. Given that the EU is a free movement zone, its poorly defended external borders render it especially vulnerable. The EU was not established to deal with external security threats as a bloc, and diverging national political interests have hampered the establishment of common security policies.
 

The lack of a common foreign policy made it more difficult for the EU to stem the flow of illegal migration. The European Border and Coast Guard Agency, also known as Frontex, was established in October 2016 to improve the security of the EU’s external borders. Originally, Frontex’s main mandate was to facilitate coordination between the border agencies of member states. In May 2018, the European Commission proposed the creation of a body consisting of 10,000 border guards to patrol the external borders of the Schengen area. In addition, the commission has proposed an increase in spending for 2021-27 by 35 billion euros ($41 billion), nearly three times the current budget, to protect the EU’s external borders and manage migration. This proposal will likely be heavily diluted and include opt-out options after further negotiations, as is common for all EU policies.
 

Within the Schengen area, temporary border controls have been erected in an attempt to monitor and stem the flow of migrants. France implemented border controls as early as 2015, after a terrorist attack in Paris left 130 people dead.
 
Germany has patrolled its border with Austria since September 2015 and, in September 2017, introduced systematic checks on incoming flights from Greece to prevent illegal entries. The Austrian government introduced checks on all external borders in September 2015, but later limited them to the borders of Hungary and Slovenia. All of these controls are due to be reassessed this month, but they will most likely be extended. France, for instance, confirmed in April that checks will remain at all border crossings, including airports and ports, beyond the May deadline. The aim of these border controls is to prevent migrants from entering member states illegally, thus forcing migrants to claim asylum at official checkpoints and borders.
 

In January 2018, Austrian Interior Minister Herbert Kickl of the anti-immigration Freedom Party ordered the creation of a “border protection unit.” If another major influx of migrants were to occur, this standby police unit would secure border-crossings and carry out identity checks. Austria may also extend its checks to the German border. Last month, Kickl said this was a possibility for the second half of this year, when Austria will assume the rotating presidency of the European Union.
 

Denmark introduced border controls in January 2016 for all of its land borders and sea routes to Germany. The Swedish government established border controls in November 2016 at ports in the south and west of the country, as well as on the Oresund Bridge, which connects Sweden and Denmark. Norway (which is not a member of the EU but still a member of the Schengen area) introduced checks on ferry routes to Denmark, Germany and Sweden back in 2015 and has boosted police checks along its Swedish border.
 

In Hungary, the government has spent more than 1 billion euros on strengthening its border defenses since the crisis began. This includes erecting a fortified barrier along its border with Serbia and Croatia. Likewise, fences have been erected between Slovenia and Croatia. And even Macedonia, a non-Schengen state, has built physical barriers along its border with Greece.
 

Under EU law, it is the member states, not the commission, that have the prerogative to reintroduce border controls. The commission can only issue an opinion on the necessity and proportionality of these measures. In 2016, the EU officially recognized the necessity of border controls.
 

The reintroduction of such controls is not a fatal blow to the free movement of citizens and legal residents in Europe; when crossing a border, one is only required to show an identity card or passport. These borders do not impact the ability of people within the free movement area to travel for business or leisure, or even to choose to reside and work in other member states. The border checks are of the same type as those between France and Britain, which is part of Europe’s free movement area but has opted out of the Schengen zone and therefore requires passport checks at its border.
 
But the reintroduction of border checks among Schengen countries does help certain political parties make the case that national interests should trump those of the EU.
 
Outsourcing the Problem
Migration flows have fallen not because solutions to the crisis were found but because Europe has managed to outsource the problem to Turkey and Libya. 

In 2016, the EU signed a deal with Turkey stating that people arriving illegally on Greek islands through the Aegean Sea, including asylum-seekers, would be returned to Turkey. Turkey agreed to improve conditions for refugees there, and it was understood that Turkey would use its security forces to intercept migrants and prevent boats from leaving its shores. In exchange, the EU agreed to several conditions. First, the bloc would provide 6 billion euros of assistance to Turkey, divided into two tranches, for dealing with refugees. The EU would also resettle Syrian refugees from Turkey legally; one refugee would be resettled for every illegal migrant returned to Turkey. The EU also agreed to grant Turks access to the Schengen zone by June 2016 if Turkey fulfilled 72 conditions on border security and human rights. Lastly, the EU agreed to renewed EU membership talks for Turkey. 

These commitments have yet to be carried out. In June 2016, the European Commission announced that Turkey had failed to meet the 72 conditions and that visa liberalization was thus postponed indefinitely. At a press conference in Ankara last February, Erdogan’s spokesperson Ibrahim Kalin announced that Turkey had completed all the necessary conditions and submitted to Brussels a working plan for visa liberalization. So far, there has been no response. In March 2018, Turkey’s ministry for EU affairs criticized the EU for not transferring the full first tranche of aid, which totaled 3 billion euros, to Turkey. In addition, the promise of renewed membership talks has yielded no tangible results. 

The EU, on the other hand, has reaped the benefits of the deal. As a result of the EU-Turkey Joint Action Plan, the number of arrivals on the Greek islands has fallen dramatically. A joint report issued in 2017 by the European Commission stated that irregular arrivals decreased by 97 percent. And though arrivals to the Greek islands still outnumber returns, the action plan has achieved its main goal: to contain one of the largest flows of refugees to Europe in the union’s history. 

Greece’s highest administrative court, the Council of State, ruled in April that refugees and migrants who cross by boat from Turkey to the islands of Lesbos, Samos, Kos, Chios, Rhodes and Leros must be allowed to travel to the mainland instead of being held in camps, which are increasingly overcrowded. This decision applies to new arrivals, not to those currently held in camps on the islands. If the court’s ruling is applied, the number of migrants reaching Greek shores will likely spike once again; and after reaching the Greek mainland, migrants will attempt to move further inland to Central Europe. So although Europe’s containment of refugees arriving through Turkey to Greece has reduced flows since 2016, it remains fragile. 

The number of migrants coming to Italy from North Africa has also been contained, this time through cooperation with Libya. Of all the migrants that reached the European Peninsula by sea in 2017, almost 70 percent arrived in Italy. Thus, Italy’s efforts to curb migration flows have had a significant impact on the total number of migrants arriving on the Continent. The EU did not make a deal with Libya similar to the one reached with Turkey for several reasons. First, there are three competing governments in Libya and numerous clan-based militias that answer only to themselves. Thus, there is no central authority that could follow through on a deal. Second, the EU-Turkey deal labels Turkey as a safe country for refugees. There is simply no way such a determination could be made about Libya given the country’s current state of affairs. This has left Italy to solve its immigration problems on its own. 

Italy has reached out directly to Libya, a former colony and an old ally. Geographically, Libya is the most convenient place from which migrants from Africa can reach Europe via Italy or even Greece. During Muammar Gaddafi’s rule, Libya made an arrangement with Italy to contain migration. When the civil war broke out there and Italy sided with the rebels, Gaddafi threatened to release migrants to Italy. This inevitably occurred after the collapse of Gaddafi’s regime and his subsequent death, with smugglers taking advantage of the disorganized and ineffective coast guard.
 
 
In 2017, Italy took steps to change this. In April of that year, Italy’s interior minister mediated a peace deal between tribal groups that control trafficking routes from Algeria, Chad and Niger. The Italian coast guard trained the Libyan coast guard and sent aid to repair Libyan service boats. Furthermore, Italy forced aid groups rescuing migrants to operate far from the Libyan coast. The idea behind this was that if migrants knew help was less accessible, fewer would take the risk. 

The interior minister’s biggest victory was reaching an agreement with clan-based militias along the Libyan coast west of Tripoli, which helped stem sea-based human trafficking to Italy. The Italian government has denied making any direct payments to militias. Instead, it says aid has been funneled through the UN-backed government in Tripoli, including vehicles, boats and salaries to militias in the western Libyan city of Sabratha, the largest launching point for migrants across the Mediterranean. Several unity government officials have told The New York Times that Rome also increased payments and supplies of equipment to militias in other coastal smuggling hubs, including Zuwarah.

The Italian strategy has proved extremely effective at reducing flows. Migrant arrivals from Libya fell by about 50 percent between June and July 2017, the month the deal was reached, and have since remained low. The bargains made with the rebel groups, however, remain fragile: They depend on continual buying of support from militias that have the upper hand at the bargaining table.
 
 
Italy’s arrangements in Libya, which have gained support from several EU governments, have faced legal challenges. Allegations that these arrangements have led to human rights violations, including torture and slavery, were made this month after a case was filed in the European Court of Human Rights against Italy. Global Legal Action Network, a U.K.-based nongovernmental organization, and the Association for Juridical Studies on Immigration, an Italian NGO, filed the case on behalf of 17 Nigerians who survived a sea rescue operation in November 2017. These migrants were attempting to cross the Mediterranean to Italy and were returned to Libya, where they say they were verbally and physically abused. The submission is supported by the Italian nonprofit ARCI and Yale Law School’s Lowenstein International Human Rights Clinic, among others. The legal process can take up to three years. Should Italy lose, it may be forced to stop equipping, training and coordinating with the Libyan coast guard.
 
If this happens, more migrants are likely to reach Europe’s shores. This case serves as a demonstration of the fragility of European containment strategies.
 
Europe Divided
Migrant flows may be receding for now, but the affects of the migrant crisis are going nowhere. The immigration issue has divided European states both internally and among themselves, and the influx of migrants from outside of Europe has played into to the hands of populist parties across the Continent. 
 
These parties share a common theme: rejection of the establishment, both at the national and the EU level. This anti-establishment view is anchored in the economic downturn following the 2008 economic crisis and the subsequent austerity programs imposed on the eurozone under Berlin’s leadership. Populists often denounced these economic policies as being contrary to the interests of the nation, but they were imposed nevertheless by governing elites serving other, non-national interests. Most populist parties adopted similar rhetoric over immigration policies, in particular the attempt by Brussels to establish quotas for refugee intake by member states. 

Concerns about Muslim migrants have become a key topic of debate in domestic elections. The main point of contention is how many people should be taken in and whether the mechanisms proposed by Brussels to deal with the migrant inflow are appropriate. In the 2016 French election, Marine Le Pen’s National Front faced off against Emmanuel Macron’s En Marche, which took a softer stance on migration but still argued for controls. In the German election last year, Chancellor Angela Merkel and then Social Democratic leader Martin Schulz both said that Muslims are part of Germany. Merkel defended her 2015 open door policy, which has divided not only her party but also the Social Democrats. In the Hungarian election, a central pillar of Prime Minister Viktor Orban’s campaign was that if he was not elected, Hungary would be overrun by refugees.
 
During the 2018 Italian election, former Prime Minister Silvio Berlusconi denounced illegal migrants living in Italy as a “social time-bomb ready to explode,” pledging mass deportations. The other member of his Forza Italia coalition, the League (previously called the Northern League), agreed with his position, arguing that migration should be controlled. The Five Star Movement, the party that won the most votes in the election, strongly criticized how Brussels has dealt with the influx of migrants. The Italian Democratic Party defended the deal engineered with Libya. 

The main geopolitical impact of the migration crisis has been the weakening the EU through internal divisions. These run, broadly speaking, between the east and the west. This split is intimately connected to who holds power in member states. Anti-immigration populists have had the most success in Eastern Europe, in countries such as Poland and Hungary. The immigration issue has, as a result, become an even more important topic in domestic politics in these countries because it is a means for parties to mobilize their base. These parties vehemently criticize the softer immigration policies of Western Europe and those engineered in Brussels to spread the burden of migrant resettlement across the EU. The Hungarian government has consistently framed the immigration debate as a choice between a multicultural EU and a Europe based on Christian values. In essence, the immigration debate has brought to the forefront questions about the EU’s core principles and future. 

Anti-immigration parties have a stronger presence in post-Soviet countries than in Western member states for two reasons. First, there is a different historical experience with immigration in these two regions. After World War II, Western Europe took in large numbers of non-Christian migrants from multiethnic backgrounds, particularly from former colonies. France, for example, saw an influx of Algerians fleeing the civil war from 1954 to 1962. In Britain, immigrants arrived from the Indian subcontinent and the Caribbean. In general, from the 1960s onwards, the majority migrants to Western Europe came from outside the Continent, including people arriving as guest workers. Germany, for example, signed treaties with Turkey (in 1961), Tunisia (in 1965) and Morocco (in 1965). 

Post-Soviet counties, on the other hand, historically have had fewer migrants of diverse ethnicities, religions and cultures. While it is true that non-Europeans came to the Soviet Union for schooling, they came in much lower numbers compared to those who went to Western Europe. And since the collapse of the Soviet bloc, there have been no large waves of non-European migrants to Eastern Europe. The fact that Eastern Europeans have had less interaction with migrants of different ethnic and cultural backgrounds makes it much easier for populist leaders to frame non-European migrants as a threat to their nations. 

The second reason why anti-immigration parties have a stronger presence in post-Soviet Europe is that those parties also typically reject liberal social values that are more prevalent in Western member states and instead support Christian-based values. Since the collapse of the officially atheist Soviet bloc, Christianity has re-emerged as a pillar of national identity. Therefore, populist rhetoric about the threat from Muslim migrants has gained much more traction in this region of Europe than in Western states, which tend to be more secular. These differences in historical trajectories illustrate why populists have had more success in Eastern Europe than in Western Europe, cementing the East-West rift over immigration policy. 

The most controversial measure proposed by Brussels on immigration was refugee quotas. A resettlement plan for 160,000 asylum-seekers was launched in 2015 to relieve pressure on Italy and Greece, the main countries of entry for migrants. The aim was to spread the refugee burden among member states based on the size and wealth of each country. Romania, the Czech Republic, Slovakia and Hungary voted against mandatory quotas, but to no avail. However, the program was curtailed in September 2017, after the transfer of fewer than 28,000 refugees. The same month, Slovakia and Hungary sued the EU for its quota policy, but the European Court of Justice ruled against them.
 
Nevertheless, since the quotas were initially assigned, the Czech Republic has accepted only 12 of the 2,000 asylum-seekers it was supposed to take in, while Hungary and Poland have accepted none. In December 2017, the European Commission launched a legal procedure against Poland, Hungary and the Czech Republic at the European Court of Justice for refusing to accept refugee quotas. But these governments will likely only face fines. 

Currently, under the EU’s Dublin Regulation, a refugee or migrant must register in the first EU country of arrival and cannot seek asylum elsewhere for six months. This system is meant to prevent migrants from claiming asylum in several EU countries at the same time. With the June 2018 EU summit approaching, Bulgaria, which currently holds the presidency of the Council of the European Union, has proposed extending that period to 10 years. This proposal is supported by Berlin but has met fierce criticism from Italy and Greece. Others have proposed encouraging voluntary allocations of refugees from those countries that are hardest hit to others. These voluntary allocations would be encouraged with financial incentives, and mandatory quotas would be imposed only if migrant numbers spike again. The 2021-27 budget plan proposes linking EU cohesion funding – which supports economic development and investment in member states – to new conditions that include the acceptance of refugees. With this new condition, Brussels is trying to penalize members that do not accept migrants and reward those that do. As with most of its policies, the EU can incentivize this behavior but ultimately cannot force its will on member states.
 
Conclusion
Migrant flows are receding for now, but the divisions in Europe they have brought to the surface are not. The East-West divide between states willing to take at least some refugees and those resisting any efforts at redistribution continues to deepen. In 2015 alone, over 1 million migrants arrived in Europe.
 
Although steps are being taken on the national level to integrate migrants, populists will continue to use the issue for years to come to gather electoral support by portraying migrants as a threat to the nation. Most migrants come from regions that remain unstable and the deals struck to contain migrant flows in Libya and Turkey remain fragile. As a result, Europe might face another wave of migration in the coming years, and the EU is little more prepared than it was in 2015.