Italy Bars Landing of Ship With 629 Migrants as Finance Minister Takes Euro Exit, Parallel Currency Off Table

The shape of the new Italian government is becoming more visible, and so far, it’s not pretty. The head of the right wing Lega party, and now interior minister Matteo Salvini, is attempting to live up to anti-immigrant campaign promises by denying ship carrying over 600 refugees access to Italian ports. As we’ll discuss, he actually lacks the power to do that so the ship will presumably dock, but with the passengers and crew suffering more than they need to, which is presumably part of the point.

This situation is symptomatic of a bigger issue that Lega faces: it is also pretty much impossible for them to deliver on their promise of deporting up to 500,000 refugees.

In terms of the pro-spending agenda of both members of the ruling coalition, 5 Star and Lega, those at least for the moment have been walked back substantially by the new finance minister, Giovanni Tria, in an interview over the weekend with Corriere della Sera.

We’ll deal first with the migrant ship controversy.

Trying to Bar a Ship Landing: A Symptom of Empty Anti-Immigrant Rhetoric?

The lead story in many non-US papers is the effort by interior minister Salvini to keep a vessel with 629 migrants on it from docking in Italy, since under EU rules now in effect, the country where an immigrant lands is responsible for them. Salvini wants Malta to take them and Malta has said no. Italy’s case for not accepting the passengers would seem to be weakened by the fact that the Italian navy assisted in some of the rescue operations that got the migrants on the ship in the first place.

It is pretty much certain that the ship will wind up landing in Italy. Despite his bluster, Salvini does not have authority over ports. The mayor of Naples has said he’ll receive the migrants: “Naples is ready, without funds, to save lives,” he said.

That does not mean that migrants are not an issue. Estimates vary, with the total estimated at over 600,000 However, no matter how you cut and slice it that is less than the 800,000 that smaller and more broke Greece took in during 2015, the peak of the refugee crisis, per the United Nations Human Rights Commission:

According to the BBC, “Out of the 80,000 applications [for refugee status] made in Italy in 2017, 40% were successful.

Salvini contends that these humanitarian efforts are enabling human trafficking and that Europe is standing pat instead of Doing Something. On the latter issue, he has a point. Merkel has tried and failed to get other countries to take more refugees. George Soros has a point in saying that Italy should be compensated for being responsible for them (but why wasn’t he arguing that point on behalf of Greece in 2015?)

Even though new migrant arrivals to Italy are down markedly from the same time last year, in the last few days, a series of launchings from Libya raise concerns in Italy that the flow may be picking up again.

As for the migrants already in Italy, Lega’s deportation threat is hot air, as a CNBC story explains in detail. For starters, Italy would have to identify where the immigrants came from and its county would have to agree to take them back:

Federico Soda, director of the IOM [UN’s International Organization for Migration]’s coordination office for the Mediterranean, told CNBC that deportation agreements would have to be created with a vast number of countries in order for Italy to forcibly deport illegal migrants — with each nation having to first accept the migrant was from its country and accept his or her return.

With 60 nationalities registered at Italian ports last year alone, the number of countries that Italy would have to draw up deportation agreements with, in order to deport 500,000 people, would be immense, Soda said…

“It’s very fragmented and there are lots of small numbers of migrants from many countries. If you take the top five countries in terms of arrivals, they don’t even account for 50 percent of the arrivals.”

Next, Italy would have to set up costly detention centers and fly migrants back home. CNBC quotes Michael Flynn, executive director of the Global Detention Project:

“If the government were truly serious about deporting 500,000 people they would have to build a garrison state in order to achieve that goal, the cost of which would be astronomical and plunge the country’s economy into turmoil.”

Noting that Italy managed to remove, by forced deportations and voluntary returns, nearly 6,000 people in 2016 and 6,500 in 2017, when it had bed space for less than 400 in its immigration detention centers, Flynn said removing more people was unfeasible.

“Imagine the size of the system necessary to detain 500,000 people to facilitate their deportation? It is an absurd sum of money, not even counting the cost of the deportation flights.

Lega made combatting immigrants such a central part of its campaign that Salvani is almost certain to try new moves when his initial gambits fail. For instance, he’s called on NATO to help protect Italy from what he depicts as a security threat. I can’t imagine that will go very far. It seems likely that Salvani would try to punish cities like Naples that continue to accept migrants, similar to the way Trump has gone after sanctuary cities. It is over my pay grade to judge whether the national government could withhold funds from cities it deemed to be non-compliant.

Finance Minister Salutes Euro, Trashes Parallel Currency Idea, Talks Up Fiscal Rectitude

It is possible that Italy’s new finance minister, Giovanni Tria, has decided that discretion is the better part of valor, and that he’ll placate the neoliberals for now while playing a longer and stealthier game of loosening the Eurozone austerity yoke. However, his interview in Corriere della Sera not only had Tria talking down spending and talking up structural reforms, which means more squeezing of labor, but he even retreated from the idea of bucking pension “reforms”.

Readers who know the players in Italy should pipe up, but the interview appears to confirm the take of this Financial Times reader:

AlphaBet

No Tria is more a man of Draghi than of Five Stars – I would suggest to stop shorting Italy for some time…

Rather than quote the Financial Times’ recap, the Google Translate version of the interview is revealing. Headline: Tria: “Government commitment on the euro. And the debt will fall » Key sections of Tria’s remarks:

We can not be accused of adventurous budget policies…

“The position of the government is clear and unanimous. There is no question of going out of the euro. The government is determined to prevent the emergence of market conditions that lead to exit. It is not just that we do not want to go out: we will act in such a way that conditions are not approached that could call into question our presence in the euro

That looks like about as clear a rejection as one could read of the idea that Italy will ignore Maastrict limits on deficits and see what if anything Germany does. Back to Tria, on whether the government will reverse pension “reforms” as in benefit reductions:

….I am aware of the need to ensure the long-term sustainability of public finance. The legislation on the pension system requires not only to look at the short term, but also at the medium and especially in the long term. I think our pension legislation can be improved, but it will be done with attention to sustainability. Even the long-term one. We will study improvements, knowing that on these subjects we can not improvise

That sounds like most of the “reforms” will stay in place. The next question was how with plans to cancel a VAT increase, expand employment centers, and roll back pension reforms, would the government keep the deficit from rising from 2% of GDP to 3%? Tria largely ducked the question by saying the budget would be ” completely consistent with the objective of continuing on the road to reducing the debt/GDP ratio.” After some more prodding from the interviewer, Tria came down against more spending:

The goal is growth and employment. But we are not aiming to re-launch growth through deficit spending. We have a program focusing on structural reforms and we want it to also act on the supply side, creating more favorable conditions for investment and employment. In the update note to Def I invite you not to look only at the accounts, but also at the national reform plan.

Later, the interviewer asked about using the parallel currency, mini-BOTs, to pay “trade debts” meaning to business suppliers. Tria rejected the idea:

The idea points to a real problem: state debts to businesses. I believe that the best way to deal with it is to eliminate it at its root, to ensure that payments are made on time and in cash. Nothing is solved with buffer solutions.

Unless Tria is keeping his cards close to his chest and is waiting for opportunities to slip loose from austerity shackles, this interview gives little reason to see Italy as a source for reform of Eurozone austerity policies. Tria rejects deficit spending as the way to spur growth, when that is what Italy needs most. None other than the IMF itself concluded that its austerity policies were misguided, and that fiscal multipliers are greater than one, which in layperson speak, means that $1 of deficit spending produces more than $1 of GDP growth, so that deficit spending reduces debt to GDP ratio. Instead, Tria saluted “reforms,” when for the most part, they will drive Italy deeper into its ditch.

In other words, unless Tria’s actions depart markedly from his words, the populist reform agenda in Italy is pretty much dead on arrival.

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35 comments

  1. The Rev Kev

    That Salvini may have a point trying to stop that ship. If the costs of deporting so many people are prohibitive, then logic dictates that it would be better to stop the problem getting worse by halting new arrivals. Trying to stop that ship may be a warning shot and places local governments like the Naples government that try to fight this answering to their own people as to why these migrants are being prioritized over the local people.
    Sure Greece has taken in more people but they have cracked down now which is why the shift to Italy. In fact, in the first six months of 2017, arrivals in Greece had fallen by 93 % compared with a year earlier. When I think about it, I have seen very little on new arrivals to Greece in months on the TV.
    Apparently France and Austria reneged on the Schengen agreement by reintroducing border checks with Italy so all these arrivals to Italy are stuck in Italy. It’s not like they are genuine war refugees in any case. Many are from places like Nigeria, Bangladesh, Gambia, Pakistan, Senegal, etc. and paid smugglers a big whack of cash to get them to the European mainland. Come to think of it, if there had been no Brexit, I would have expected a demand by the EU that the UK take their “share” of these migrants.
    There is an article at https://www.spectator.co.uk/2017/07/migrants-and-madness-in-the-med/ which talks about the situation with Italy but in essence, smugglers take these paying migrants to take 12 miles from the Libyan coastline where NGOs rendezvous with them and take them to Italy. Yeah, it’s a taxi service. This may sound harsh but one of the primary duties of any state is to be able to defend their borders and not outsourcing it to the EU or even some NGO who is being paid by god knows who. Somebody has to pay for those ships, crews, victuals, fuel, etc. after all. In any case, what is the alternative? Open borders?

    Reply
    1. Yves Smith Post author

      I agree that with refugees being made the lasting problem of the country of landing, with only kinda-sorta-not-often help from the rest of the EU (Sweden has done more than its fair share), is a huge burden for the recipient country. But 40% of applicants being deemed legitimate refugees creates the worst of all possible worlds. A high enough proportion are have a legitimate basis for seeking asylum to make it really questionable to turn them back, yet countries like Italy are correct to say that they are a real and significant problem.

      I was focusing on the realpolitik, that there are cities (not just Naples, later reports say Polermo and other ports) willing to take the migrants. I don’t know yet what legal and financial weapons the national government can use to try to bring them to heel, but the analogy to US sanctuary cities says the cities may well prevail, particularly since all the press commentary so far has stated that the national government does not control the ports. So the coalition may be all hat, no cattle on this issue, which for Lega was its biggest campaign promise.

      Reply
      1. vlade

        IMO, the EU has a vehicle – structural funds. The problem is that right now those funds are meant to be spent only where the issue is “starting” (like poorer EU regions for internal migration, Africa/Middle East for external migrants). It needs to be recognised that while this is the right long-term solution, the short term needs also mean helping the regions that are hit by the migration.

        That is, unless you really park military on the borders, and accept killing a few (tens of) thousand random people (sink the ships that refuse to turn back, berlin-wall the land border) to make it clear to the rest they are not welcome as a solution – but that still doesn’t work for internal migration.

        Reply
      2. JA139

        As a consequence of Sweden taking more than its fair share, as you write, the Sweden Democrat party is now polling about the same as the Social Democrats aheads of the autumn general election. The Social Democrats have done themselves no favours by following the Blair-Clinton neoliberal path in gradually dismantling the welfare state system they built up over around 50 years of continuous rule.

        Reply
      3. The Rev Kev

        The country of landing. Yeah, about that. I could be wrong but I think that when refugees are picked up in international waters, which in this case is 13 nautical miles off the Libyan coast, the law says that they should be taken to the nearest port. If so, then this would have to be in Tunisia, just up the coastline. In addition, to get to Italy these boats go by Malta where there are also major ports. So Italy then would be the third point of call.
        Some Italian city governments may be sympathetic to taking in yet more refugees but it all depends on how the locals feel about the matter as in voters. Press commentary may say that the Italian government does not control the ports but as you point out, it all depends on what legal and financial weapons might be brought to bear. I would be betting on a national government here.
        Just saw that ship on the news tonight full of African migrants slash refugees being picked up and they all had orange outfits on plus orange life vests. This was not like what we saw in Greece. The whole operation literally shouts big money and I mean big as in no expense spared. I think though that with this ship being turned back we are witnessing an inflexion point.

        Reply
  2. disc_writes

    It is the Coast Guard that decides who gets to land where, and the Coast Guard falls under Salvini’s ministry. It would be weird if local administrations determined immigration policy, instead of the central government.

    The mayors’ is just electoral posturing.

    So at least on this level, Salvini wins.

    Having said that, I wonder how his stance squares with international law and the Constitution, and how wise it is for Salvini to attack Malta now that Italy is already so isolated in Europe.

    About Tria: the fracas about the Euro was just smoke and mirrors. Italy will never leave the Euro democratically: it will happen, if at all, during an emergency.

    In the best case scenario, Tria is trying to contain the damage of the previous weeks to be in a more credible position to negotiate with the European authorities when the time comes.

    In the worst case scenario, this was the deal that allowed the government to be born: as long as the Euro is not really put into question, the Lega can give free rein to their worst instincts.

    Reply
    1. DJG

      disc_writes

      From Wikipedia: The Corps of the Port Captaincies – Coast Guard (Italian language: Corpo delle Capitanerie di porto – Guardia costiera) is the coast guard of Italy and is part of the Italian Navy under the control of the Ministry of Infrastructure and Transport. Its head office is in Rome.[2]

      The minister of infrastructe and transport is Danilo Toninelli (5 Stars).

      The minister of defense is Elisabetta Trenta. The Carabinieri, who can be drawn into the issue of landings and law-and-order, report to her.

      So Salvini is grand-standing. Italian municipal elections were held over the weekend. That is the purpose of his quotes and tweets. (Like Ted Cruz, Salvini is all hat and no cattle.)

      Reply
      1. disc_writes

        Oh, oops. Got me there. I thought the CG was part of the police.

        Ok, that weakens my argument, but not completely: immigration policy is done at the governmental, not municipal, level.

        Salvini can still get the government to close the ports, but the mayors cannot re-open them.

        Besides, Naples and Palermo are bankrupt and cannot even pay for ordinary maintenance: how on earth would they be able to defy the government and provide for the migrants?

        The mayors’ declarations are noble, but they have nothing to back them up with, legally or financially.

        Reply
    2. Yves Smith Post author

      The Coast Guard is part of the Italian Navy.

      The Italian Navy participated in the operations in some of the locations that boarded refugees onto this particular ship.

      That suggests the Navy would stand pat and let the ship land if it were to make its way to a port that has said it would receive them.

      Reply
  3. DJG

    Yves Smith: Thanks for the information about Tria, who has been a bit of a non-entity so far.

    And it isn’t just Tria. Keep in mind that p.m. Conte claims to be on the faculty of LUISS, which is a university / finishing school sponsored by Confindustria, the big-business association of Italy. So Conte represents the interests of big business in holding down wages and wrecking Italy’s powerful unions, keeping Italy in the eurozone, and maintaining the conveniently depressed economy.

    Reply
  4. MisterMr

    As a (very dubious) factoid, yesterday the italian news on RAI2 (one of the main state owned italian TV channels) proposed this interpretation:

    Last year, the center-left Gentiloni government made a pact with the Lybian government, and in exchange for some financial help the Lybian government committed to control more emigration from the Lybian shores to Italy.
    This pact was actually very effective and net migration to Italy dropped by a large percentage (more than by half, although in the OP’s graphs de difference looks much smaller).
    Incidentially the Lybian government controlling emigration means locking a ton of people who cross Lybia from other african countries into Lybian jails, so it’s not a very humanitarian act honestly.

    Nevertheless the Lega won the elections in part by saying that the center left government was “too soft on migration”, which I think is BS but if you are a Lega voter and dislike immigrants, no government will ever be hard enough on immigrants.

    The flow of migrants seems to be on the uptick again, so the news program floated the idea that the reason of migrant is rising is that the Lybian government is relenting on the migration controls, in order to ask more from the Italian government.

    Reply
  5. George Phillies

    Readers familiar with economics might wonder why the Italians would fly deportees across the Mediterranean rather than loading them on a ship. Is it a covert subsidy of an Italian airline? The Mediterranean, after all, is not that wide.

    Reply
    1. Yves Smith Post author

      Please read the article. The refugees come from over 50 countries, They would need to be returned to the countries they came from and even then only if the country agreed to take them back. Many are not on the Mediterranean. And running a cruise ship to drop people off port by port would be very costly.

      Reply
      1. Tony of CA

        You’re assuming that Salvani actually cares about following proper protocols. I wouldn’t be the least surprised if he doesn’t arrange some transfer agreement with a few North African Communities. The tourist industry, one of the few bright spots in the Italy, is becoming very concern.

        Reply
        1. Yves Smith Post author

          Ahem, the only realistic way for him to return migrants is by plane. They can be rejected at immigration (as in legally never enter the country) and be sent back on the next plane. So Salvani does not have any obvious or easy way to deport immigrants.

          Reply
  6. DJG

    La Stampa is reporting that the ship Aquarius will go to Spain. The article says Valencia.

    http://www.lastampa.it/2018/06/11/italia/unaltra-nave-ong-al-largo-della-libia-salvati-migranti-salvini-non-chineremo-il-capo-96u76HI4RNKppDFGsICFDO/pagina.html

    The article also reports a current position in the straits between Sicily and Malta. Ironic. The idea is that a ship in an emergency goes to the nearest port. Valencia? Even Palma de Majorca is closer.

    Looking at the mixed results of the municipal elections, which did show an uptick for Salvini’s Lega, I’d say that I have discovered the reason for his sudden eruptions.

    Reply
    1. Yves Smith Post author

      Some other Spanish ports volunteered too. The captain of the ship probably didn’t want to take a risk steaming around Italy to get into a port, particularly since he presumably could not land readily to resupply.

      Reply
      1. Ignacio

        Salvini tweeted “first goal accomplished!”
        The accomplishement consists on calling the attention of the EU to the issue.

        Reply
        1. Yves Smith Post author

          He won a PR victory, but getting press attention is not the same as EU level action. Spain might take an extra 10,000 or 15,000 refugees this year, but unless the immigration level goes back down to the level of earlier this year, this is only a short-term solution. Recall that Merkel’s plan to get other countries to take more immigrants was rejected.

          I don’t see why the Germans are so thick that they can’t see the immigrant issue as a excuse to provide funding to the countries taking them in. If Merkel were to propose meaningful compensation, it would be a win-win. Either the broke Southern countries get some fiscal transfers, or the countries that refuse to cough up dough get told there is no free lunch, they either pay for others to house and integrate the immigrants, or they do it themselves.

          Reply
          1. vlade

            The problem is internal German politics, where an influential part of the German electorate is unhappy with what they perceive “Germans pay for everything” policy – despite the fact that EU, and EUR in particular is a massive economic boon for Germany. Call it the equivalence of British idiocy on Brexit, except that the UK got there first with crappier politicians.

            Famously (well, sort of, it wasn’t publicised much), the former German finance minister Schauble admitted at a closed meeting in the UK few years back that Greek proposals were good, but at the same moment said that their economic impact was irrelevant, as they would never be able to sell them to German electorate, and the economic impact in the end would be less than the electoral one.

            There is still solution through the whole of EU budget (structural funds I mentioned above), which already exists, and few voters understand them enough to know how much Germany contributes to that and how much someone else.

            Reply
            1. PlutoniumKun

              Ultimately, as with the UK situation, this is a political failure – the inability to communicate rationally with your own electorate and bring them along with unpopular policies. This I think has been one of Merkels key weaknesses – she seems unwilling to see that elected leaders need to work hard to bring people with them on necessary actions.

              Reply
              1. vlade

                Indeed – it’s the failing of quite a few politicians these days. Unfortunately. And then we get politicians who do bring people with them, but it’s on the simplistic solutions they peddle.

                You know, this feels so late 1920s..

                Reply
      2. Tony of CA

        It just beginning. Salvani will only get stronger going forward. Trump has already personally complimented their government. I’m sure next Salvani will step up the deportations. Yani Varoukasis expressed deep concerns over their deportations plans.

        Reply
        1. Yves Smith Post author

          Did you bother reading the post? You’ve violated our Policies by making it clear you haven’t.

          Deportations on anything more than a trivial scale are a non-starter. They would be prohibitively costly for a country that has already announced many other spending plans it is now embarrassingly having to walk back, like its income guarantee, as well as bureaucratically extremely difficult to implement. I see you missed that Italy would have to negotiate with the home countries to take them back? If Italy tries flying them in, they’ll just be refused at immigration and sent back on the next plane.

          And Trump complimenting the government is a negative in terms of securing cooperation with the rest of Europe. Unless Trump is willig to dispatch the US Navy to intercept refugee ships, his words aren’t of any help. Italy as a government isn’t allow to do deals directly outside the EU, or did you miss that part?

          I’m not fond of the Eurocrats, but cheering the opposition when they don’t have realistic plans is a negative for achieving reform.

          Reply
  7. tc10021

    I’ve always wondered if these migrants were doctors, lawyers, college professors, McKinsey consultants etc, who would work for minimal wages, if the outcry by liberals would be so strong.

    Reply
      1. Anon

        Fake news. The education of the refuges/migrants tends to be exaggerated. With limited or no European language skills the economic prospects would be limited.

        Reply
        1. Yves Smith Post author

          Bullshit. The language competence issue (their ability to deploy their skills in a different country where they don’t have much/any language skills, is separate and apart from the issue of the level of education of immigrants.

          For instance, the reason Merkel was willing to have Europe take immigrants in the first place is that Syria has solid public education.

          Having said that, immigrants who are not sponsored by an employer seldom wind up working at the same skill level as they did in their home country. Jewish professionals who fled Nazi Germany often wound up as doormen or clerks.

          Reply
          1. OIFVet

            The problem is that only a tiny percentage of the migrants were Syrians. The rest were Afghanis, Iraqis, and North Africans – hardly an educated lot with professional skills. Merkel made a big mistake, and that is now being acknowledged in Germany on an official level, however grudgingly. And the cherry on the cake: Merkel’s decision did a lot to help the rise of right wingers and nationalists all over Europe. I think we can all agree that this is hardly a good thing, especially given Europe’s history.

            Reply
  8. Older & Wiser

    So, to make a long story short, the author and the commentariat are both certain that

    (1) Italy stays in the Euro
    (2) The mini-BOTS don´t fly

    Then, necessarily
    (3) the ECB will continue to buy Italian debt come what may while pushing for fiscal austerity.

    In a nutshell, is that it ?
    Am I missing something ?

    For if that were the case, then how about entertaining the idea of a North/South secession revival and corresponding political & financial consequences ?

    Italy right now is an ultra-high pressure boiler which won´t de-pressurize just because Brussels & Berlin wants it to. The genie of huge political expectations is out of the bottle now.

    Reply
    1. Older & Wiser

      Or maybe GERMANY should leave the euro ?

      I mean, what´s the plan ?
      “Convergence” is the plan ?
      Or is it ECB forever buying un-payable debt while forcing fiscal austerity down everybody´s throat while hundreds of thousand of immigrants take over what once was the Cradle of Civilization ?
      Is that it ?

      Reply
      1. Yves Smith Post author

        It appears you reject facts on the ground, that the supposedly populist government has walked back its election noises about leaving the Euro. If you don’t like that, I suggest you take the topic up with Giovanni Tria.

        Reply
  9. Tony of CA

    I’m not saying he is going to conduct mass deportations. I agree the cost associated with such an effort would be quite high. I just believe he is going to increase the level of deportations which he will then use as a marketing ploy to increase his profile. He desperately wants to be seen as a man of action.

    Reply
    1. Yves Smith Post author

      The only country to which he could deport readily is Nigeria, due to having an agreement in place. Even so, the number he could do without incurring a lot of cost is very limited.

      Reply

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