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July 2019, Volume 25, Number 3

Europe, Asia

The EU continues to struggle with migrants who reach Greece, Italy and Spain by boat and apply for asylum. The European Commission in summer 2016 proposed that the Dublin agreement, which makes the first EU country reached by an asylum seeker the country that decides whether the person is a refugee, should be retained. When "too many" migrants arrive in front-line states in Greece, Italy and Spain, the EU Parliament ordered that some migrants be redistributed by quota to other EU countries.

Many governments, especially those in Eastern Europe, have refused to accept the asylum seekers allocated to them under the EU quota system. Italy's government since 2018 has refused to allow migrant rescue ships to bring migrants to its ports and halted the EU Sophia operation that deterred smugglers by confiscating their boats and rescued migrants whose boats sank in the Mediterranean.

Some rescue ships continue to pick up migrants at sea, but they are having more difficulty finding a port to offload the asylum seekers. The German Sea-Eye's Alan Kurdi ship had to wait several days at sea before Malta allowed the 64 migrants picked up off the coast of Libya to be transferred to Maltese ships and brought on land. All of the rescued migrants will go to non-frontline EU states such as Germany.

The 28 EU countries including the UK elected 751 members to the European Parliament in national elections in May 2019. The major centrist parties, the conservative European People's Party and the center-left Progressive Alliance of Socialists and Democrats, lost seats to parties on the left and right.

Euroskeptic populist parties won a quarter of the seats, up from 20 percent in 2014. Populist parties did best in Hungary, Italy and Poland. The League in Italy won a third of the vote, and the National Rally in France won a slightly higher share of the vote than President Macron's party. The Greens increased their share of the vote, especially in Germany.

Two-way EU-US trade was $1.3 billion in 2018, with the US having a $380 million deficit. Many leftist and rightist parties reject freer trade. US chicken is a flashpoint. US processors wash chickens with chlorinated water to kill bacteria, prompting most European countries beginning in 1997 to ban chicken imports from the US. EU processors use cold air and water to decontaminate poultry carcasses, which the EU says requires them to be more careful. The US responded to the poultry ban with a 25 percent tariff on European trucks; the ban and the tariffs remain in place today.

Austria. People's Party (OVP) Chancellor Sebastian Kurz called for elections September 29, 2019, breaking up the two-year old coalition government of his OVP and the anti-migrant Freedom Party (FPO) after a video surfaced that showed the Freedom Party leader in July 2017 promising a Russian woman government contracts if her boss bought Austria's biggest-circulation tabloid and supported the Freedom Party. The Freedom Party and other European rightist parties have ties to Russia, often accepting loans or donations from Russian oligarchs.

Opinion polls in summer 2019 suggest that the OVP has the support of 38 percent of voters, the SPO 22 percent, the FPO 19 percent and the Greens 10 percent.

Britain. Eight Poles were charged in July 2019 with operating a human trafficking ring that lured 400 Polish workers to England, where they were required to work long hours for low wages. Five of the defendants were sentenced to prison terms of four to 11 years for recruiting vulnerable workers, isolating them, and having their wages paid to traffickers rather than to workers.

A European Union report in 2018 estimated that half of EU trafficking victims were EU citizens from Romania, Hungary, Poland and Bulgaria.

EU and British leaders agreed to postpone Britain's exit from the EU until October 31, 2019. The Brexit plan negotiated by PM Theresa May was rejected by Parliament three times, and no alternative exit plan received a majority vote in Parliament. A majority of British voters in June 2016 voted to leave the EU.

PM May resigned in May 2019 and is expected to be replaced by Boris Johnson, who was May's first foreign minister. Johnson, who was born in New York, promised that the UK would leave the EU with or without a revised exit agreement with the EU. Johnson said he would require immigrants to learn English. In the 2011 census, almost 99 percent of the residents of England reported speaking English very well.

About 25,000 people own half of the land in England. The Land Registry includes 85 percent of English land, but land owned by the Crown, the aristocracy and the Church that has not been sold in centuries is not recorded in the registry. Britain has relatively high and rising land prices. Land accounted for half of England's net worth in 2016, double the 25 percent share of land in Germany's net worth. The EU Parliament in a 2017 report estimated that three percent of farms in the EU controlled half of the farm land.

Denmark. The Social Democrat Mette Frederiksen became the second female PM after elections June 5, 2019, putting all four Scandinavian countries in the hands of the Social Democratic parties that have governed for most of the past 75 years.

Denmark's Social Democrats won 48 seats in the 179-seat Parliament after getting tougher on asylum seekers in response to the Danish People's Party, endorsing taking assets from asylum seekers to cover the cost of caring for them and banning Islamic face veils. As the Social Democrats got tough on immigration, the People's Party lost seats in Parliament.

France. Yellow Vest protestors continue to demonstrate most Saturdays against high taxes and inequality. An April 14, 2019 fire that destroyed the roof of the 850-year old Notre Dame Cathedral, bringing in pledges of E1billion for rebuilding, but rekindling protests about inequality.

France has a long history of immigration, and differs from other European countries in accepting immigrants and their children as future French citizens. The so-called Republican tradition stemming from the 1789 French revolution has a strong egalitarian ethos that aims to ensure that people abide by the social contract as individuals, not as members of minority groups.

France resettled citizens from its former colonies and recruited guest workers in the 1950s and 1960s. When recruitment stopped in 1974, most guest workers in France sent for their families rather than returning home, leading to a backlash among some French residents who opposed especially Muslim immigration. The National Front won control of the city of Dreux in 1984 by pledging to deport African migrants.

Immigration averaged 100,000 to 200,000 a year during the 1980s and 1990s despite efforts to reduce immigration. President Macron, elected in 2017, has taken steps to tighten asylum by requiring applicants to apply soon after their arrival in France and making it easier to deport foreigners to safe-third countries if their own countries would not accept their return.

Germany. Some 186,000 foreigners requested asylum in 2018; there were 162,000 first-time and 24,000 follow-up applications. The number of first and follow-up asylum applications was 222,700 in 2017, 745,545 in 2016 and 476,650 in 2015.

Many of the migrants who arrived in Germany in 2015-16 and were granted asylum or temporary protected status are finding jobs. In November 2018, 51 percent of all foreigners in Germany were employed, compared with 69 percent of Germans. However, only a third of foreigners from non-European countries were employed.

The education levels of refugees who arrived in Germany in 2015-16 vary. A quarter have primary school education or less, while 40 percent went to secondary school. Half of those who arrived in 2015-16 completed language and integration courses by the end of 2018, and a third of 2015-16 arrivals spoke German well. Rejected asylum seekers were quickest to find jobs in Germany, perhaps to avoid deportation.

German employers, who complain of too few skilled workers, worry that a 2014 law that allows workers to receive full pension benefits at age 63 after 45 years of employment will aggravate labor shortages. Unions argue that Germany has no national skills shortages noting that, even in occupations where employers complain they cannot find workers, wages are not rising rapidly.

Elections for the European Parliament in May 2019 demonstrated the weakness of the major political parties, the CDU and SPD. Their shares of the vote, 29 percent and 16 percent, was less than half of the total, which may threaten the coalition CDU-CSU-SPD government in power since March 2018. The Greens won 20 percent of the vote, attracting young voters, and the AfD 11 percent, drawing votes especially in the former East Germany. In summer 2019 polling, the Greens were favored by more Germans than the CDU.

Germany's government in June 2019 approved a package of laws aimed at facilitating the entry of skilled foreigners and expediting the removal of failed asylum seekers.

Greece. Over 50,000 asylum seekers who arrived in Greece in 2015-16 and hoped to move on to Germany and other northern European countries are still there, often living in camps with limited facilities. Many migrants want to move to Germany, so a false rumor of an opening of the Greek-Macedonian border in April 2019 prompted several hundred migrants to rush for the border, where police blocked their exit.

Greeks elected the center-right New Democracy party led by Kyriakos Mitsotakis in July 2019, ending four years of rule by the leftist Syriza party of Prime Minister Alexis Tsipras that began in 2015. New Democracy won 40 percent of the vote and 158 seats in the 300-seat Parliament, while Syriza won 32 percent. The Greek economy remains a quarter smaller than it was in 2007, the unemployment rate is 18 percent, and over 50,000 young and educated Greeks emigrate each year, for a total of over 500,000 since 2007.

Bureaucracy and a creaky legal system make Greece a difficult place to do business, slowing foreign investment and recovery. The government spends more on pensions than on education, and is reluctant to reduce pensions that often support extended families. Private businesses say that high taxes mean they must pay low wages, making them unable to attract good workers.

Hungary. The Council of Europe in May 2019 accused Hungary's government of abusing migrants, another report in a series accusing PM Viktor Orban of eroding checks and balances in Hungary. Orban's government dismissed charges that it was starving asylum seekers held in detention camps along its border with Serbia.

Critics say that Hungary's government continues to detain rejected asylum seekers and deny them food in a bid to encourage them to leave voluntarily. Hungary says that it is not obliged to provide food for foreigners found not to be refugees.

Italy. Interior minister Matteo Salvini is leader of the League Party, which opposes African immigration to Italy. Salvini is especially opposed to rescue ships that wait off the coast of Libya for migrants who set off in rubber dinghies designed to hold 50 in emergency situations but are packed with 100 or more migrants who expect to be rescued 14 miles offshore.

In June 2019, Italy denied permission for the Sea Watch 3, operated by a German NGO and flying a Dutch flag, to unload 40 rescued migrants in Lampedusa. When the Sea Watch 3 defied Italian authorities and collided with an Italian border patrol ship as it brought the migrants into port, the captain was arrested. Salvini promised to enact legislation to fine rescue boats landing migrants in Italy without permission E50,000 and to allow the government to seize their ships.

Some 2,700 migrants landed in Italy in the first six months of 2019, down from 17,000 in the first half of 2018. Many of the migrants who reach Italy wind up in Sicily, where a Nigerian mafia known as the Black Axe combines with the Italian mafia to exploit Italians and migrants.

Salvini's tough stance against illegal arrivals by sea is popular with many Italians, but draws criticism from migrant advocates, who predict that the number of unauthorized migrants in Italy will increase because so many find it hard to obtain legal status. One prediction is over 700,000 unauthorized foreigners in Italy by 2020.

Spain. Spanish voters on April 28, 2019 gave the leftist Socialist Party (PSOE) 123 seats in the 350-seat Parliament, double the number of seats won by the rightist Popular Party (PP). The PSOE, which heads a minority government that is supported by the Podemos and regional parties, is expected to remain in power.

The PP and PSOE have alternated in power since the return of democracy in the 1970s, but were challenged by three new parties, the leftist Podemos, the rightist Ciudadanos (Citizens), and the anti-migrant Vox. Rightist parties want more central government control over Catalonia, while leftist parties support regional autonomy.

Spain has 47 million people, a labor force of 19 million and 3.6 million jobless workers. The rightist parties want to make the labor market more flexible, while the leftist parties want to increase protections for workers. Spain has the third longest life expectancy, after Japan and Switzerland. The government paid pensions to 10 million people at a cost of E145 billion in 2018, and the pension deficit is widening.

There were five million registered foreigners in Spain in 2018, down from 5.7 million in 2008. In 2018, some 60,000 migrants crossed the Mediterranean to Spain. Podemos wants Spain to welcome asylum seekers, while Vox wants to prevent their entry and deport unauthorized foreigners.

Turkey. Turkey, a country of 80 million, has amassed enormous debt to fuel its economy under President Recep Tayyip Erdogan. The lira has fallen and interest rates are 24 percent, as investors expect devaluation and slower growth. Erdogan in July 2019 fired the head of the Central Bank, reportedly because he failed to lower interest rates and sustain the construction boom. Almost $330 billion of Turkey's government debt is in dollars and Euros, so a devalued lira could make it harder for borrowers to repay. Turkey's GDP was $765 billion in 2018.

South Africa. Voters in May 8, 2019 punished the African National Congress, the ruling party since 1994, for corruption and mismanagement, giving it 57 percent of the vote, the ANC's lowest share of the vote since 1994. One example of ANC problems is Eskom, the state power firm that produces over 95 percent of South Africa's electricity and imposes frequent power cuts on its customers.

Corruption in Eskom, the largest state-owned firm, allowed private individuals to effectively "capture" its management, according to a state-capture inquiry. Eskom's major problems stem from two coal-fired plants that are behind schedule, over cost and frequently break down. Plans to split Eskom into three units, for generation, transmission and distribution, and increase transparency and eliminate jobs and are opposed by unions, important ANC supporters.

India. Agriculture employs almost half of Indian workers but generates a sixth of GDP, explaining why most of India's poverty is in rural areas. Half of India's 1.2 billion people are younger than 25, and the number of youth entering the labor force increases by almost a million a month.

India does not have labor-intensive manufacturing industries to absorb new job seekers. PM Narendra Modi in 2016 voided 90 percent of the cash in circulation and unveiled a new goods and services tax, disrupting investment and the economy (most of the old bank notes were eventually returned to circulation). Modi says that he needs to be re-elected in 2019 in order to modify employment laws that make it nearly impossible to fire full-time workers, and change real-estate laws that impede the accrual of land to build large-scale factories.

Australia. Australians voted May 18, 2019 to keep the Coalition government of the Liberal and National parties in power, defying polls that predicted Labor would displace the Coalition, which has been in power for six years. PM Scott Morrison won his first national election after displacing previous coalition leader Malcolm Turnbull in August 2018, becoming Australia's fifth PM in five years.

The Coalition, which will have 75 seats in the 151-seat House compared with 65 for Labor, called for reducing immigration from the current 190,000 to 160,000 a year, while Labor called for maintaining immigration at 190,000 a year and doubling the annual intake of refugees to almost 30,000.

Pundits predicted that voters would punish the Coalition for resisting demands to reduce the use of coal that generates carbon emissions. Australia is in the midst of severe drought, and global warming is threatening the coral of the Great Barrier Reef. However, the Coalition won Queensland, a rural coal-producing state sometimes compared to the US South where India's Adani wants to build the Carmichael coal mine, which would be one of the world's largest.

Australia in 2019 has gone 28 years without a recession, defined as two quarters of declining GDP; the US will have gone a decade without recession in summer 2019. The Australian economic miracle reflects exports of coal and iron ore to China and economic policies that prevented Australia's Big Four banks from taking speculative risks that banks in other countries took before the 2008-09 recession.

The long Australian boom raises the question of whether recessions are necessary. Economists Joseph Schumpeter and Hyman Minsky argued that recessions were necessary to purge economic excesses and to curb risky behavior that spreads in good times. House prices rose faster in Australia than in the US and have been falling since mid-2018, raising the question of whether Australia can have a soft landing.

Housing prices are rising faster than wages and incomes in most of the world's major cities, reflecting an influx of domestic youth and migrants seeking opportunity in places that are relatively built out. Local and global investors betting on further price appreciation also help to drive up prices, prompting Australia, Canada and New Zealand to place restrictions and taxes on foreign investors purchasing houses.