NPC Kidwell’s Market on Pennsylvania Avenue, Washington DC 1920
One trick ponies.
Central banks cannot haul economies out of stagnation on their own, the OECD has warned. Catherine Mann, chief economist at the Paris-based think-tank, said countries were now “overloaded on monetary policy” as she described the use of negative interest rates as “a reaction of central banks trying to meet the objective of raising inflation and fostering growth alone”. Ms Mann said banks faced being “squeezed” by the unintended consequences of sub-zero rates in an environment where demand remained subdued. The OECD has repeatedly warned that fiscal policy and structural reforms are needed to ensure recoveries are self-sustaining. “In the economies where negative interest rates are most deployed, the credit channel is particularly important, and this is impaired. Banks in Europe for example have not deleveraged and they as a result are not in a position to effectively lend credit,” said Ms Mann.
“They are also squeezed in the middle between negative interest rates on the one hand and very soft economic activity on the other. So negative interest rates are tough. It’s a tough policy to use.” Mark Carney, the Governor of the Bank of England, has warned that negative interest rates could do more harm than good by eating into banks and building societies’ profits and pushing up consumer charges. Earlier this month, the ECB stepped up efforts to reflate the eurozone. Policymakers slashed its deposit rate deeper into negative territory and beefed-up its quantitative easing programme. In a bid to spur credit growth, the ECB sweetened its incentive for banks to lend by revamping its targeted longer-term refinancing operations (TLTROs).
From this June, banks that lend more will be paid as much as 0.4pc to borrow from the ECB. Ms Mann said the ECB’s actions were welcome, but would not get Europe “back on track” on their own. “The ECB has done a lot, but the effective way to enhance economic activity in the euro area is a three-legged stool: fiscal, monetary and structural. What [Mario] Draghi [the president of the ECB] has done is make the monetary leg of the stool even longer, so we’re not there yet with the recipe we need in order to get Europe back on track.” Some experts argue that central banks will be forced to inject money directly into the economy through so-called “helicopter drops” in order to boost flagging nations.
The road to helicopter money.
The lords of finance are losing their touch. Institutions which dragged the world from its worst depression since the early 20th century are finally seeing their magic desert them, if conventional wisdom is to be believed. Eight years on the from the Great Recession, voices as authoritative as the IMF and the BIS – dubbed the ‘central bank of central banks’ – have called time on the era of extraordinary monetary policy. Having hoovered up $12.3 trillion in financial assets and carried out 637 interest rate cuts since 2008, central banks have been stunned back into action in the last six weeks. The Bank of Japan kicked off a new round of global easing with its decision to cross the rubicon into negative interest rate territory on January 29.
Eurozone policymakers followed suit earlier this month with a triple whammy of interest rate cuts, €20bn in additional asset purchases a month, and an unprecedented move to allow commercial banks to borrow money at negative rates. The Federal Reserve has also taken its foot off the pedal by slashing its expected interest rate hikes from four a year to just two. But the new wave of policy accommodation has ushered in fresh panic that monetary policy is suddenly subject to dwindling returns. Instead, talk has turned to governments finally pulling their weight to support the shaky global recovery. Fiscal policy has been largely dormant in the wake of the crisis as countries have concentrated on bringing down debt and deficits levels, binding themselves to stringent spending rules in the process.
Without tax breaks and greater state investment, the world is at risk of another “economic derailment”, the IMF has warned. The latest G20 communique has paid lip service to the idea that global governments will adopt policies to “strengthen growth, job creation and confidence”. In reality, there are little signs that politicians are ready to jettison their fixations on low debt and balanced budgets to support global growth.
Part 2 of the long article above that takes a while getting to the point.
For some observers, the next phase in extraordinary central bank action has already arrived, and it is Japan which is leading the way. The Bank of Japan’s move to impose a three tiered deposit rate on banks this year can be seen as a covert attempt to transfer funds to the private sector, argues Eric Lonergan, economist and hedge fund manager. He notes that the BoJ’s decision to exempt some reserves from the negative rate represents a transfer of cash to commercial lenders at rate of 0.1pc. The system “separates out the interest rate on reserves from that which affects market rates”, says Lonergan. “It is taking the first step along the journey towards helicopter money and opens up a whole new avenue of stimulus”. In the same vein, the ECB has also signaled its intention to move away from endless interest rate cuts towards targeted attempts to boost private sector credit demand.
From June, eurozone banks will be paid as much as 0.4pc to borrow from the ECB for four years – a scheme dubbed ‘Targeted Long-Term Refinancing Operations’ (TLTRO’s). Lenders who do the most to pass on cheap loans to customers will be rewarded with the most favourable rates. “I wish they’d done it an awful lot sooner”, says Lonergan, who notes that for all its institutional constraints, the ECB still boasts a number of tools to boost bank lending. With government borrowing costs at rock bottom across the eurozone, even more QE would be unnecessary at this stage, he says. TLTRO’s however, “open the possibility of two different rates where you can leave the policy rate unchanged but lend to banks at lower and lower rates contingent on them lending to the real economy” he adds. “It is much cleverer way of doing things because savers do not suffer.”
But central bank ingenuity – however welcome – raises separate concerns about the accountability of institutions whose independence is sacrosanct but where decision-making is often insulated from public view. Lord Adair Turner, a former chairman of the Financial Services Authority, and one of the earliest advocates of helicopter money, calls for more transparency in a bid to finally smash the taboos around injecting money straight into the hands of consumers or governments. “I think it is more dangerous for central banks to forever denying what they are doing,” says Lord Turner. He calls Japan’s move to issue government debt at a rate of 40 trillion yen, while the central bank expands its balance sheet at a rate of 80 trillion yen a year, “a de facto debt monetisation”. “You are effectively replacing government debt with central bank money,” says Lord Turner. “It would be better for authorities to publish a statement, laying out the rules and assuring the world it is not too much.”
It’s been all buybacks, so this should scare you.
Last week, one day before the Fed unleashed a statement that stunned Wall Street by its dovishness and admission that the Fed had been far too optimistic on the state of the US (and global) economy, when it slashed its forecast on the number of rate hikes from 4 to 2, we said that “while everyone’s attention is on the Fed, the biggest danger to the S&P500 has little to do with what Janet Yellen may say tomorrow, and everything to do with the marginal buyer of stocks being put into a state of forced hibernation”, namely the start of the stock buyback blackout period during Q1 earnings session.
As a reminder, even Bloomberg recently acknowledged the unprecedented role corporate stock repurchases play in the current market when it penned “There’s Only One Buyer Keeping S&P 500’s Bull Market Alive.” Of course, our readers have known the identity of the “mystery, indescriminate buyer” for two years.
Today, it is Deutsche Bank’s turn to warn about the imminent end of buybacks for the next 6 weeks. From Parag Thatte’s latest Asset Allocation and Flows report:
Buyback blackout period starts Monday. An increasing number of S&P 500 companies will enter into their blackout period starting next week, about a month before the earnings season kicks into high gear in the third week of April
Deutsche Bank tries to spin it as not necessarily a source of downside:
The blackout period means a slowing in the pace of buybacks which leaves equities vulnerable to negative catalysts. However it does not automatically imply downside and as we have emphasized before it is the total demand-supply gap that is key. So flows are critical and data surprises suggest the recent flow rotation into US equities can go further
There are two problems with this assessment. First. as DB’s own chart below shows, traditionally US equity flows have seen substantial and sharp declines during the buyback blackout period during the past three calendar years. It is unclear why this time will be any different.
Second, and more important, is that as Bank of America reported earlier this week, in the latest week “during which the S&P 500 climbed 1.1%, BofAML clients were net sellers of US stocks for the seventh consecutive week. Net sales of $3.7bn were the largest since September and led by institutional clients (where net sales by this group were the second-largest in our data history). Hedge funds and private clients were also net sellers, as was the case in each of the prior two weeks, but a different group has led the selling each week. Clients sold stocks across all three size segments, and net sales of mid-caps were notably the largest since June ’09.”
BofA’s summary: “clients don’t believe the rally, continue to sell US stocks” and they were selling specifically to corporations whose repurchasing activity is near all time highs: “buybacks by corporate clients accelerated for the third consecutive week to their highest level in six months, which is also above levels at this time last year.“
Next week this “accelerating” buyback activity ends, and the question will be whether the S&P at a high enough level to give institutional investors comfort that without the buyback bid, in fact the only bid for the past seven weeks, they should now buy on their own, or will the selling, which took place as the market has soared from its recent lows in its biggest quarterly comeback ever…
… continue, only this time with a cheap debt-funded, price indiscriminate buyer on the other side to absorb all the selling. We will have the answer in just about one week’s time.
Keep your eyes on the dollar.
The oil-price rally that began in mid-February will almost certainly collapse. It is similar to the false March-June 2015 rally. In both cases, prices increased largely because of sentiment. As in the earlier rally, current storage volumes are too large and demand is too weak to sustain higher prices for long. WTI prices have increased 47% over the past 20 days from $26.21 in mid-February to $38.50 last week (Figure 1).
Figure 1. NYMEX WTI futures prices & OVX oil-price volatility, 2015-2016. Source: EIA, CBOE, Bloomberg and Labyrinth Consulting Services, Inc. (click image to enlarge).
A year ago, WTI rose 41% in 35 days from $43 to almost $61 per barrel. Like today, analysts then believed that a bottom had been reached. Prices stayed around $60 for 37 days before falling to a new bottom of $38 per barrel in late August. Much lower bottoms would be found after that all the way down to almost $26 per barrel at the beginning of the present rally.
Higher prices were unsustainable a year ago partly because crude oil inventories were more than 100 mmb (million barrels) above the 5-year average (Figure 2). Current inventory levels are 50 mmb higher than during the false rally of 2015 and are they still increasing.
Figure 2. U.S. crude oil stocks. Source: EIA and Labyrinth Consulting Services, Inc. (click image to enlarge).
International stocks reflect a similar picture. OECD inventories are at 3.1 billion barrels of liquids, 431 mmb more than the 2010-2014 average and 359 mmb above the 2015 level. Approximately one-third of OECD stocks are U.S. (1.35 billion barrels of liquids).
For 2015, U.S. liquids consumption shows a negative correlation with crude oil storage volumes (Figure 3). During the 2015 false price rally, consumption began to increase in April and May following the lowest WTI oil prices since March 2009–response lags cause often by several months. First quarter 2015 prices averaged $47.54 compared to an average price of more than $99 per barrel from November 2010 through September 2014 (44 months).
Figure 3. U.S. liquids consumption, crude oil stocks and WTI price. Source: EIA, Bloomberg and Labyrinth Consulting Services, Inc. (click image to enlarge).
This coincided with the onset of declining U.S. crude oil production after April 2015 (Figure 4).
Figure 4. U.S. crude oil production and forecast. Source: EIA March 2016 STEO and Labyrinth Consulting Services, Inc. (click image to enlarge).
Net withdrawals from storage continued until consumption fell in July in response to higher oil prices that climbed to $60 per barrel in June. Production increased because of higher prices from July through November before resuming its decline after prices fell again, this time, far below previous lows. This complex sequence of market responses shows how sensitive the current market is to relatively small changes in price, production and consumption.
Most importantly, it suggests that a price variation of only $15 per barrel was enough to depress consumption a year ago. That has profound implications for the present price rally that is now $12 per barrel above its baseline and has already increased by a greater percentage than the 2015 rally.
“For homebuyers, it is easier than ever to get mortgages.” But more important, the downpayment itself is today often being financed through peer-to-peer lending channels, [..] basically another form of high-interest “loan shark.”
The real estate market in China is once again burning hot. Home prices in Beijing, Shanghai and Shenzhen have surged by 20-30% since the Lunar New Year in February, according to state-controlled media. In Shenzhen, prices have increased by more than 70% over the past 12 months. “The makings of this rally started more than a year ago and have reached a tipping point,” says Steven McCord at JLL North China. “Policies are looser than at any time in history in the last ten years, including the major policy rollbacks of 2009.” This is not the first time China is facing a property bubble. But one thing makes this time around different – unregulated lending. Previous upswings were not driven by leverage, McCord explains. The norm was that people did not finance the maximum allowable level.
They financed, on average, half of the cost – even if 70% or 80% was allowed. Therefore, mortgages did not play a role in driving up demand or prices. “Now, we believe there are more buyers using the maximum available leverage,” he says. “For homebuyers, it is easier than ever to get mortgages.” But more important, McCord adds, the downpayment itself is today often being financed through peer-to-peer lending channels. “This is not the norm yet, but it’s appearing and it makes us uncomfortable,” he says. “This means some buyers are buying with zero down.” In his view, peer-to-peer lenders are basically another form of high-interest “loan shark.” Hong Kong Economic Journals recently reported that some 900 peer-to-peer lending platforms went belly up last year, three times the number in 2014.
While some bankruptcies were due to poor management, many companies folded after the owner or operator took the money and disappeared. “Unregulated lending adds fuel to the fire of any bubble, and this could be a real problem if it becomes common,” McCord said. Chen Zhenggao, Minister of Housing and Urban-Rural Development, said earlier this week that China’s real estate market would not collapse. “It is not appropriate to compare the real estate market in China with that of Japan in the 1990s, as the two countries are in different stages of economic development and urbanization. We also have different macro policies to control the situation,” Chen said at a news conference.
China will do what it needs to tamp down risks to the stocks, bonds, foreign-exchange and property markets as economic growth slows, Vice Premier Zhang Gaoli said in a speech. The economy faces “relatively large” downward pressure, said Zhang, who is one of seven members of the ruling Communist Party’s top decision-making body, the Politburo Standing Committee. He said plans for a 3% fiscal deficit, outlined in Premier Li Keqiang’s March 5 report to the national legislature, are meant to ease the burden on business. “There will be no systemic risks – that’s our bottom line,” Zhang told the China Development Forum, an annual gathering of global business leaders and Chinese government officials. Zhang’s remarks echoed recent comments from top officials, including the chairman of the securities regulator, that the government would act swiftly to stop the sort of market turmoil that led to a $5 trillion stock-market wipeout last August.
Premier Li Keqiang told his annual news conference on March 16 that China needs to be on the lookout for financial-market risks with “golden-gaze fiery eyes.” Speaking earlier Sunday, IMF Managing Director Christine Lagarde said China is in the middle of a historic transition that’s “good for China and good for the world.” “We should expect that, like any major transition, it will at times be bumpy,” Lagarde said, according to her prepared remarks. “A delicate balance needs to be struck between shifting to a relatively slower but more sustainable pace of growth, and advancing much-needed structural reforms.” Zhang said the government plans to cut overcapacity, especially in the steel and coal sectors. China’s 13th Five-Year Plan, unveiled during the legislative session that ended March 16, said the government will reduce as much as 150 million tons of steel capacity.
After they’ve collapsed.
China’s top planner tried to reassure foreign companies they are welcome in its slowing, state-dominated economy in a speech Sunday aimed at dispelling growing anxiety Beijing is squeezing them out of promising industries. Speaking to an audience that included executives of top global companies at a government-organized conference, Xu Shaoshi pledged to “promote two-way opening up and liberalization.” Xu promised foreign companies equal treatment with local enterprises as Beijing carries out a sweeping overhaul aimed at promoting self-sustaining growth based on domestic consumption and making state companies that dominate a range of industries more competitive and efficient. “We are ready to share these growth opportunities with you,” said Xu, chairman of the Cabinet’s National Reform and Development Commission.
The China Development Forum 2016 is being closely watched by global companies because it comes at the start of the ruling Communist Party’s latest five-year development plan that runs through 2020. Executives are eager to learn details of how the party might carry out pledges to make the economy more competitive, open more industries to private and possibly foreign competitors and to shrink bloated, money-losing industries including coal, steel and cement. The guest list for the weekend conference at a government guesthouse in the Chinese capital included executives of U.S., European and Asian banks, manufacturers, Internet and other companies.
The ruling party’s plan promises to give the private sector a bigger economic role, but business groups say regulators are trying to shield Chinese rivals from competition or compel foreign companies to hand over technology in exchange for market access. Business groups say Beijing has yet to carry out most of the reforms promised in a separate 2013 plan that called for giving market forces a “decisive role” in the economy. They point to limits on foreign ownership in an array of industries and say in some areas such as information security technology for banks regulators are reducing or blocking market access.
“Examining a range of indicators from VAT rates to steel production volumes, and comparing the results to estimates of the government deficit, produces the startling suggestion that “the real economy in China probably isn’t growing at all.”
China’s growth rate has been in the spotlight ever since Li Keqiang – China’s Premier – signalled the arrival of a ‘new normal’ in May 2015. Before then, headline rates routinely in excess of 8%, even rising above 14% in 2007, meant the detail was not scrutinised so closely. Now, however, with growth forecast between 6.5% and 7% for the period to 2020, the decimal points are beginning to matter. For China, the growth rate indicates the continuing success of their economic development, and measures their progress towards prosperity. For the rest of the world, Chinese growth has become a crucial source of global demand, driving expansion – and revenue streams – everywhere. There is, therefore, no exaggerating the significance of the number, both in fact and in appearance.
But increasing doubts are being raised. A recent article in Foreign Affairs raised the possibility that, despite a headline growth figure of 6.9% for 2015, China’s economy may not be growing at all. Examining a range of indicators from VAT rates to steel production volumes, and comparing the results to estimates of the government deficit, produces the startling suggestion that “the real economy in China probably isn’t growing at all. It may even be shrinking.” Doubts about the official figures are not new of course, but the difference between 6.9% and 0.0% is pretty striking nonetheless. And what often goes unsaid is that the official estimates are always at the high end of expectations. As a follow up, Foreign Affairs published a more optimistic account just a few weeks later.
According to this version of events, the ‘Li Keqiang’ index is out of date, reflecting the sort of industrially focussed economy that China was 10 years ago. But even this measure has different methods of calculation, producing results which vary between 2.9% and 5% for 2015. This account, however, also implies the official figures are not very precise estimates. The main argument is that the Chinese economy has changed and now shows significant growth in the service sector, as opposed to the industrial and manufacturing sector.
Zika, poisoned water, riots and impeachment: here come the Olympics.
A growing majority of Brazilians favor impeachment of President Dilma Rousseff or her resignation, according to a survey released on Saturday by polling firm Datafolha. The poll showed 68% of respondents favor Rousseff’s impeachment by Congress, while 65% think the president should resign. The president’s approval ratings have been hammered by Brazil’s worst recession in decades and its biggest ever corruption probe. Rousseff’s popularity also fell, with 69% of respondents rating her government negatively. The current%age is close to the president’s lowest ratings on record, in August 2015, when 71% of respondents rated the government negatively.
The poll also showed that rejection levels for former President Luiz Inacio Lula da Silva, who was named as Rousseff’s chief of staff on Wednesday, rose to a record 57%. That is far higher than the previous high of 40% in September 1994, before his 2003-2010 presidency. A Supreme Court judge suspended Lula’s appointment on Friday, saying it might interfere with an investigation by prosecutors, who have charged him with money laundering and fraud, as part of the probe into political kick back scheme at state oil company Petrobras. Even if Brazilians support Rousseff’s ouster, voters are not enthusiastic about a government led by vice-president Michel Temer. Some 35% of respondents say his government would be “bad” or “terrible”. Datafolha surveyed 2,794 people on March 17 and 18.
A Europe-wide idea.
Alternative fur Deutschland, formed in 2013, shocked the German establishment last week with huge gains in state elections. The results have placed it in prime position to challenge Mrs Merkel’s CDU/CSU coalition in next year’s general election. Speaking exclusively to the Sunday Express last night, party leaders shared their envy of Britain’s forthcoming EU referendum on June 23, and confirmed they would be pushing for a similar move in Germany. “I want every member state to decide what is better for them, and the only way we can really do that is to have a referendum, like the UK.” said deputy chairman Beatrix von Storch MEP. “Schengen has collapsed already. Under Schengen Europe’s borders are supposed to be protected. They’re not.
“A referendum is the only way German people can truly express if they want to stay in the EU, if they want to stay in the Euro, if they want to reform border controls to deal with the migrant crisis. They should be given a voice. They must be asked what they want.” Angela Merkel last week refused to back down on her policy not to cap the number of refugees given asylum in Germany. Over the last 12 months, more than 1.1 migrants have crossed Germany’s borders with 300,000 granted asylum. The policy will cost German taxpayers £36bn by 2017, according to a recent report. AfD won an extraordinary 61 seats in 3 regional parliaments last week, coming second with 24% of the votes in Saxony-Anhalt. “We’re still a very young party so it’s a huge success,” said Ms von Storch.
“What’s even more important is the result in Baden-Wuertemberg, where we overtook the SDP, a ruling coalition party, to gain 15% of the votes. “Our success shows that the people are no longer supporting the politics of our Chancellor and all the other parties who back her. “We are the only ones arguing that the only way for Germany to fight the refugee and migrant crisis is to close our borders.”
The 2,300 ‘experts’ promised -and needed- for the deal are not available. It’ll take weeks for them to get to the islands. What happens to new arrivals in the meantime?
Greece will not be able to start sending refugees back to Turkey from Sunday, the government said, as the country struggles to implement a key deal aimed at easing Europe’s migrant crisis. Under the agreement clinched between Brussels and Ankara last week, migrants who reach the Greek islands will be deported back to Turkey. For every Syrian returned, the EU will resettle one from a Turkish refugee camp. The deal aims to strangle the main route used by migrants travelling to the EU and discourage people smugglers, but it has faced criticism from rights groups and thousands took to the streets of Europe in protest. Greek premier Alexis Tsipras told his ministers on Saturday afternoon to be ready to begin deporting people the following day, as agreed, but officials said afterwards they needed more time to prepare.
“The agreement to send back new arrivals on the islands should, according to the text, enter into force on March 20,” the government coordinator for migration policy (migration coordination agency) spokesman Giorgos Kyritsis told AFP. “But a plan like this cannot be put in place in only 24 hours.” Around 1,500 people crossed the Aegean to Greece’s islands Friday before the deal was brought in, officials said – more than double the day before and compared with several hundred a day earlier this week. A four-month-old baby drowned when a migrant boat sank off the Turkish coast Saturday hours before the deal came into force, Turkey’s Anatolia agency reported. Hundreds of security and legal experts – 2,300 according to Tsipras – are set to arrive in Greece to help enforce the deal, described as “Herculean” by EC chief Jean-Claude Juncker.
Paris and Berlin have pledged to send 600 police and asylum experts to Greece, according to a joint letter seen by AFP. But Greek officials said they were still waiting for the extra personnel, and without them they would struggle to enforce the new accord. “We still don’t know how the deal will be implemented in practice,” a police source on the island of Lesbos told AFP. “Above all, we are waiting for the staff Europe promised to be able to quickly process asylum applications – translators, lawyers, police officers – because we cannot do it alone.” Realistically, migrants will likely not start being returned to Turkey until April 4, according to German Chancellor Angela Merkel, a key backer of the scheme. The numbers are daunting: officials said as of Saturday there were 47,500 migrants in Greece, including 8,200 on the islands and 10,500 massed at the Idomeni camp on the Macedonian border.
“If they told me I had to go back, I would drown myself in the sea.”
Europe’s refugee resettlement programme with Turkey appeared to be descending into farce last night as officials on the Greek island of Lesbos reported they had received no instructions from the EU authorities on how to proceed. As the midnight deadline approached for the EU’s new deportation regime with Turkey, organisations and local authorities on Lesbos, where the majority of boats land, said not a single new staff member had arrived and no information had been received. “We don’t know anything,” said Marios Andriotis, advisor to the mayor of Lesbos. “We have received many officers from [the EU border agency] Frontex et cetera over the past year but no one new since Friday. And nobody told us to prepare anything or do anything differently.”
“We have taken note of the deal but we are not privy to details of the implementation,” said Boris Cheshirkov, a spokesman for the United Nations Refugee Agency (UNHCR). Jean-Claude Juncker, the president of the European Commission described the controversial plan as last week as a “Herculean task” that will present “the biggest challenge the EU has ever faced”, but there was no sign last night on Lesbos of even a symbolic show of intent. Under the terms of the deal agree last Friday, some 4,000 extra staff have been promised to process all new arriving refugees who will be deported back to Turkey after undergoing fast-track asylum processing. The first deportations are scheduled for April 4. The Greek authorities said yesterday there are now 47,500 migrants in the country, of which 8,200 were on the islands and some 10,500 massed at Idomeni, on the closed border with Macedonia.
NGO workers and volunteers in reception camps on Lesbos, which will serve as detention camps for migrants and refugees waiting to be returned to Turkey, shook their heads when asked about the implementation of the deal. “Like the husband of an unfaithful wife, we will always be the last to know anything about Europe’s deals,” said a UNHCR worker in Kara Tepe camp, where 1,500 Syrians and Iraqis are currently staying. “Really, we have no information.” Refugees in the camp called the idea of being returned “inhumane”, while Amnesty International has called the deal a “historic blow to human rights” raising the prospect of future legal challenges to the deal. The EU insists the deal is lawful.
Those that are now on Lesbos will not be sent back, though with Macedonia’s border still closed, they face an uncertain road ahead. “There is nothing for us in Turkey. No life, no work. I worked bad jobs for 700 lira (£170) a month, I could not put a roof over my family’s head,” said Samir, a teacher from Damascus who had been in the camp for five days. “If they told me I had to go back, I would drown myself in the sea.” In nearby Moria camp hundreds of mainly Pakistani migrants are housed in tents pitched on a muddy field outside the sealed-off EU “hotspot”, the official reception camp. Camp volunteers debated how to break the news of the returns to tomorrow’s arrivals. “They’ll just try again,” said Emma Kriss, an American volunteer. “I don’t think people will give up.”
Article by Ada Colau, Mayor of Barcelona, Giuseppina Nicoli, Mayor of Lampedusa, and Spyros Galinos, Mayor of Athens
Two and a half thousand years ago, the islands of the Western Mediterranean were the cradle of the sciences, the arts and democracy. Today, they’re where the survival of Europe is at stake. We find ourselves facing a dilemma: either we assume our responsibility and strengthen the founding principles of the European project or we allow it to sink irreversibly. There is hope. Over recent months we’ve seen thousands of citizens, volunteers and aid workers working to save lives by helping those fleeing from war. We’ve seen local governments with hardly any legal powers carry out herculean tasks to receive refugees, investing the resources that state governments have refused.
Nevertheless, we’ve also observed, with sadness, not just the inability of European states to offer a dignified solution to the humanitarian crisis, but also transit routes being choked off; increasing border controls and repression, and the aberration of a deal with Turkey that contravenes all international law regarding asylum and fundamental rights. Local initiatives stand in stark contrast to the lack of sensitivity demonstrated by European states. While state governments haggle quotas, we cities make contingency and awareness-raising strategies that, with adequate resources, we have a greater capacity to take in refugees than has been recognized. While state governments agree to repressive measures, we municipalities are working in networks to reach deals, like the agreement between Lesbos, Lampedusa and Barcelona that will allow the exchange of knowledge, resources and solidarity between the three cities.
With state governments are incapable of thinking beyond their national context, Barcelona and Athens city halls are working together to put pressure on them to meet their ethical and legal obligations. We, the cities of the Mediterranean, urgently call for other European cities to put an end to the inhumane policies of state governments and to force them to change course in response to the greatest humanitarian crisis since the end of the Second World War. The families that have lost their homes will not rest in pursuit of a place to live in peace, however many obstacles are put in their way. Each new impediment will simply increase the risks to human life and be another incentive for those wishing to profit from people-trafficking. We call for the rejection of the deal with Turkey, which flouts international law and fundamental rights.
Human lives cannot be traded for economic and commercial agreements. The right to asylum is a basic human right that cannot be subject to discounts and bartering. We also call for an end to the criminalization of refugees, and of the aid workers and volunteers collaborating in their reception. Their work should be a source of pride, and be supported and incentivised by public institutions. Events in recent days at the border of the Former Yugoslav Republic of Macedonia, the xenophobic rallies seen in various European countries, and their subsequent electoral exploitation, are a display of indecency that should embarrass us as European citizens and as human beings.