The most recent stage in the widening of the European Community encompassed the accession of Greece in 1981 and of Spain and Portugal in 1986. Since then the Community has emphasized `deepening' measures, aimed at greater integration of the financial movements, goods markets and monetary regimes of its existing members. These two processes have interacted. The integration of the `Southern frontier' will be powerfully affected by the drive towards a single market. The accession of Greece, Spain and Portugal significantly altered the balance of the EC. These countries, which differed markedly from existing members, bring new problems to the EC and have affected the move towards integration of goods and financial markets by 1992. It is in these countries that the 1992 programme may both yield its greatest benefits and generate the most awkward problems of transition.
To investigate these issues, CEPR conducted a major programme of research during 1988-9 on `Economic Integration in the Enlarged European Community', under the direction of Christopher Bliss (Nuffield College, Oxford, and CEPR) and Jorge Braga de Macedo (Commission of the European Communities, Universidade Nova de Lisboa and CEPR). Financial support for the programme was provided by the Commission of the European Communities, the German Marshall Fund of the United States, the Secretaría de Estado de Comercio of the Spanish Ministerio de Economía y Hacienda, the Fundación Banco Exterior de España, and the Instituto do Comercio Externo de Portugal.
The research programme approached its subject from the perspectives both of the joining countries and of the EC as a whole. CEPR's network structure led naturally to the establishment of three country study teams, involving two dozen researchers, to study the combined impacts of EC membership and of the single market on the joining countries. The final meeting of project participants was hosted by the European Cultural Centre of Delphi on 26/27 October 1989.

Macroeconomic Adjustment

Entry to the Community and the integration of European financial markets pose macroeconomic challenges to the joining countries. Entry also entails full membership of the European Monetary System and ultimately of its Exchange Rate Mechanism, which Spain joined in summer 1989. In his paper, on `Financial Market Integration, Macroeconomic Policy and the EMS', William H Branson (Princeton University and CEPR) examined the constraints placed on national macroeconomic policies by an environment in which monetary and financial, but not fiscal, policies are subject to rapid integration. As the financial systems of European economies become increasingly integrated, according to Branson, we should view intra-European trade imbalances as self-financing much as we do not consider inter-state payments imbalances when looking at the US trade position. If the Europe of 1993 is an integrated and largely self-financed capital market, then national governments will have to finance their deficits by borrowing on the open market, at risk premia that reflect the market's assessment of the difficulty the country will experience in servicing its debt.
This will impose a degree of discipline on national governments. If some over-extend, they will face difficulties obtaining further credit. The markets will need to be regulated at the EC level, Branson emphasized, either by a European Central Bank or by the Commission, to prevent borrowers becoming over-extended. The European Central Bank will have to accumulate a portfolio of national government debts, but this will provide incentives for governments to increase their deficits so as to capture seigniorage. Such perverse incentives will exist unless the composition of the Central Bank's debt is made insensitive to the fiscal behaviour of all its member countries. Creation of an optimal currency area therefore requires that the monetary union be matched by a unified fiscal authority.
Branson also reconsidered the familiar conclusion that countries which peg their currencies to the EMS will have to devote their monetary policies entirely to the task of maintaining exchange rate stability. This conclusion goes too far, he argued, when local financial intermediaries (essentially the local banking system) enjoy an advantage in assessing and monitoring borrowers in their own countries. Recent work has analysed a two-tier structure of financial intermediation, in which international intermediaries deal with each other and with international firms, while local intermediaries lend only to local firms and residents. Such a structure may make it possible for national governments to operate a selective monetary or credit policy, regulating local bank lending independently of the international rate of interest. This may give member governments a reason to want to preserve their local intermediation systems.
Countries such as Greece and Portugal are characterized by a dualistic financial sector, with preferential interest rates for favoured public enterprises, agriculture and large, capital-intensive private businesses. Liberalization of financial markets will raise the cost of capital to these sectors, with the risk of business failure, unemployment and further burdens on public finances. A sudden lurch towards liberalization may therefore have destabilizing effects on the macroeconomic environment, Branson warned. It may be sensible for new entrants to begin now to introduce their own liberalization programmes, he suggested, to ensure a more gradual transition to the European financial area of 1993 and beyond.

Discussing the paper, Vitor Gaspar (Universidade Nova de Lisboa) emphasized that analyses of fiscal adjustment had to take account of the long-term dynamics of public debt and the government's intertemporal budget constraint. A number of participants took up Branson's suggestion that intra-EC payments imbalances would become self-financing at some stage in the creation of an Economic and Monetary Union (EMU). Leslie Lipschitz (IMF) interpreted the work of Feldstein and Horioka as suggesting this would not happen.
In his paper on `Macroeconomic Adjustment and Entry into the EC', Paul Krugman (MIT and CEPR) presented a general framework for considering the macroeconomic policy dilemmas faced by the joining countries. In Spain, monetary policy has oscillated between restriction, intended to curb growing inflationary pressures, and relaxation, designed to prevent an appreciation of the peseta. As policy has not been fully directed to either objective, the result has been both accelerating inflation and a move into current account deficit. The key to the dilemma, Krugman argued, was whether EC membership would lead to a rise or a fall in the equilibrium exchange rates of the new entrants. In most models, import-reducing protective measures lead to an incipient trade surplus which, without an increase in net capital outflows, must be met by a real appreciation. The removal of protection should, therefore, normally lead to a real depreciation. Conversely, the removal of foreign protective barriers against the joining country's exports should lead to a real appreciation.
With uncertainty created by this policy dilemma, the government would prefer to err on the side of undervaluation to ensure a favourable competitive position for domestic industry in the early post-entry years and so avoid deflation or an embarrassing realignment. If investors expect a future appreciation of the currency, then the interest rate consistent with the exchange rate falls. If the monetary authority wishes to maintain the existing exchange rate, it must either expand the money supply, with inflationary effects, or accept the expectation of appreciation. This dilemma, which may confront other entrants, cannot be solved by monetary policy alone, Krugman argued. Apart from resort to capital controls, the only way out is fiscal tightening to compensate for the monetary expansion required to stabilize the exchange rate. Simple calculations for Spain revealed, however, that a very severe fiscal contraction, over 5 percentage points of GDP, would be necessary to avoid any real deterioration of the current account.
Richard Portes (CEPR and Birkbeck College, London) queried Krugman's formulation of the dilemma between appreciation and inflation. In an EMS with credibly fixed rates, investors' expectations for the real exchange rate were themselves based on inflation differentials. For Spain, José Viñals (Banco de España and CEPR) argued, part of the motivation for joining the EMS was to impose discipline, so there was some reason to err on the side of overvaluation initially.

Industrial Location, Competitiveness and Regional Policy

There is considerable concern about how integration will affect output and employment in the peripheral regions of the EC. These issues were addressed in the paper on `Integration and the Competitiveness of Peripheral Industry', by Paul Krugman and Anthony Venables (University of Southampton and CEPR). Firms in Northern Europe have access to larger markets than firms in Greece, Spain and Portugal. Liberalization of capital flows may lead to increased investment in these economies because of their relatively low labour costs. But their manufacturing sectors might suffer competitive disadvantages relative to those located in the centre of the EC, Krugman and Venables observed, and may suffer when intra-EC trade barriers are removed. They analysed the reduction of trade barriers between a `central' economy with a substantial domestic market and a `peripheral' economy with a small domestic market. Each economy was assumed to have an imperfectly competitive manufacturing sector, with increasing returns to scale and intra-industry trade. The periphery is relatively abundant in low-wage labour, and manufacturing is assumed to be labour-intensive.
Krugman and Venables conducted numerical simulations of the effects on output, trade and the relative competitiveness of manufacturing in the two countries as barriers to trade between them are lowered. Strong forces pull manufacturing industry towards the central economy, despite the periphery's more favourable endowment of low-cost factors of production. These centripetal forces are strongest at intermediate levels of trade barriers. If trade barriers are very low, firms in any location have good access to all markets, and the periphery will be a net exporter because of its advantages as a labour-abundant economy. When trade barriers are very high, on the other hand, both markets will be served by local firms; prices will be higher in the smaller economy, because of fixed costs. As high trade barriers are reduced, the price differential narrows, forcing exit of some firms in the periphery. Production moves to the centre, and the periphery becomes a net importer of manufactured goods.
The authors explored the dynamics of integration further by embedding their industry model in a simple general equilibrium trade model in which factor prices are determined endogenously. During the process of integration relative wages at first diverge, then converge. At intermediate levels of trade barriers, just when market access considerations are most powerful, wage differentials are the greatest. Convergence may be brought about by free trade or by forces which tend to equalize factor prices in the two countries. This suggests that, though the two economies may converge in the limit, relative wages and levels of output will in fact follow a `U'-shaped path during the process of integration. The fundamental problem for the EC, Krugman and Venables warned, is which side of the `U' we lie on. If `natural' barriers to trade, such as transport costs, barriers to communications and cultural differences, remain strong, then dismantling government-imposed barriers may not induce convergence of the Northern and Southern economies.
André Sapir (Université Libre de Bruxelles and CEPR) agreed that location mattered but argued that shortages of infrastructure and of human capital may be more important determinants of investment in Southern Europe. South Korea had experienced rapid development and investment despite not having access to a large domestic market. William Branson noted that the size of the domestic market is not exogenous, but may be affected by changes in the location of production. He also pointed out that there might be more than one centre (or periphery), and that expansion could create new centres or move existing ones. Louka Katseli (University of Athens and CEPR) thought that more optimistic results would be obtained from a two-sector model which allowed for both inter- and intra-industry trade. As it stood, the paper said that either wages in the South must fall, or its industry would be wiped out.
Alasdair Smith (University of Sussex and CEPR) analysed the `The Market for Cars in the Enlarged European Community'. The motor industry is an excellent case study since it is quantitatively important to both North and South. Smith used a formal model, calibrated to 1988 data, in which the motor industry was treated as imperfectly competitive with economies of scale in production. The model was disaggregated into eight markets and eight groups of producers, in order to model the differences in national sales patterns and the continued existence of barriers between the Iberian countries and the rest of the Community. Quotas on imports of Japanese cars into France, Italy, the United Kingdom and Spain were modelled as having an anti-competitive effect; in other EC markets there were essentially no quotas in operation.
The policy changes of most significance to car producers involve external trade policy. Present national restrictions on Japanese car imports are incompatible with the single market programme, Smith argued, so they must either be abolished altogether or replaced with a single, Community-wide restriction on Japanese car imports. Simple removal of the national VERs benefits consumers in the formerly restricted markets and imposes losses on producers, especially Fiat, Peugeot and Renault, because of their large market shares in France, Italy and Spain.
Replacement of the national quotas with a `Euro-quota' set so as to hold the Japanese producers to their existing share of the whole EC market would impose substantial costs on consumers in formerly unprotected markets. It would also secure a substantial increase in profits for Japanese producers, who could switch their exports from low-price, unrestricted markets to higher-price markets where their market share is at the moment tightly restricted. Adjustment is bound to be painful for French and Italian producers, since an EC-wide quota gave them much less protection than their existing national restrictions. Given the costs of a Euro-quota to consumers and the increased profits it will allow Japanese producers, pressures for it should be resisted, Smith concluded.

David Newbery (Churchill College, Cambridge, and CEPR) suggested that Smith's results may be sensitive to the elasticities and cross-elasticities chosen in the model. Jordi Gual (Instituto de Estudios Superiores de la Empresa, Barcelona, and CEPR) commented that if prices of Japanese cars imported into Spain fell by up to 50% after 1992, there may be a wholesale restructuring of production and location in the industry.

In `Adjustment, Compensation and Factor Mobility in Integrated Markets', Christopher Bliss (Nuffield College, Oxford, and CEPR) examined the obstacles facing EC-wide mechanisms to compensate regions that lose from liberalization and more generally to encourage investment and growth in more disadvantaged areas. Bliss distinguished between the problems of `identifying' the groups to be assisted and of `addressing', that is, choosing an appropriate mechanism for delivering the assistance. Even if it is possible to identify young unemployed as a group in need of assistance, for example, schemes to help them obtain jobs could vary considerably in effectiveness. The most popular mechanism in economic theory is lump-sum compensation: non-distorting one-off payments related only to the minimum losses individuals will unavoidably suffer as a result of efficiency-improving reforms. Bliss doubted whether it was possible to implement anything close to this in practice.
If rapid adjustment generates external economies, then a subsidy to accelerate adjustment is in principle justified. But the Commission's ambitions to provide adjustment subsidies to encourage investment and growth in relatively disadvantaged regions are subject to problems of implementation similar to those that have contributed to the frequently disappointing experience of national regional policy. If such measures are anticipated, firms not identified as in need of support may adjust their location to qualify. Adjustment subsidies also face dynamic problems. If a subsidy is made and the beneficiary fails to adjust, it may not be credible for the policy-maker to refuse a further subsidy.
The importance of factor mobility in market integration is illustrated by the EC's insistence that movements of labour and capital should be liberalized along with those of goods. In models of inter-regional trade, regional inequalities may persist either because factors of production are immobile or because of economies of scale in location. The sheer scale of regional inequalities will ensure that, even with radical liberalization of capital markets, there will be problem regions within the Community for a long period. But factor mobility accentuates the difficulties of addressing adjustment subsidies. If structural fund payments are concentrated on difficult regions they may encourage rent-seeking to attract and control assistance.
Michael Emerson (Commission of the European Communities and CEPR) emphasized the political economy of EC enlargement: in effect, the joining countries received financial assistance from the Community in return for accepting its laws. The structural funds served an essential purpose in assisting the governments of Greece, Spain and Portugal to persuade their publics to accept the regime change. Konstantine Gatsios (Fitzwilliam College, Cambridge, and CEPR) observed that the experience of state aids could in some ways be compared to compensation for adjustment. The EC had so far been unsuccessful in monitoring and dismantling state aids, partly because of difficulties similar to Bliss's `identification' problems.

Country Studies

The structures and emphases of the country studies were shaped by the differing economic characteristics of the three countries. For this reason the presentations of the three country study team leaders differed substantially in approach. The pervasiveness of structural rigidities in commodity, capital and labour markets was the overriding theme of the presentation by Louka Katseli (University of Athens and CEPR) of `Economic Integration and Structural Adjustment in the Greek Economy'. As with the other country studies, this presentation summarized the findings of a team of researchers: Nicholas Floros (University of Athens), Spyros Georgantelis (Commercial Bank of Greece), Nicholas Glytsos (Centre of Planning and Economic Research, Athens), Nicholas Karavitis, Nickolina Kosteletou (University of Athens), Dimitris Kouzionis (Commercial Bank of Greece), Nicholas Papandreou (National School of Public Administration, Athens) and Alexander H Sarris (University of Athens).
Katseli characterized the mode of economic and social organization in the Greek economy as `state corporatism', involving the state, traditional industries and financial markets in a highly structured system of political relationships. This has led in particular to a pervasive dualism. The `official' sector public corporations, banks and large private enterprises possesses command economy characteristics, is selectively protected from competition and extensively subsidized. It is characterized by fragile financial structures, persistent underutilization of capacity and low productivity. The `unofficial' sector mostly small-scale enterprises exhibits more competitive behaviour but is severely under-capitalized because its access to financial markets is restricted. In the labour market, wage-setting in the official sector has restricted inter-industry wage flexibility and inter-sectoral labour mobility, leading to substantial labour market mismatch.
The official sector faces a `soft budget constraint', Katseli argued. Firms are not bound by a strict relationship between expenditure and earnings because of their influence over administratively determined prices, tax exemptions, ad hoc subsidies to compensate for losses, and the granting of credit even if there is no full guarantee of ability to repay. This has led to rigidities in public expenditure and thence a dramatic increase in public debt as a proportion of GDP.
Liberalization of trade and of capital markets will expose the official sector to competition, shifting production towards exportables and services. In the short run, given the inefficiencies of traditional manufacturing, this will result in unemployment and a deterioration in competitiveness. As price mark-ups are reduced, operations restructured and scale economies exploited, however, competitive gains may be expected. The liberalization of financial markets will most likely raise the cost of capital for subsidized firms and reduce it for those currently denied access to credit, contributing to a further increase in unemployment.
The challenge was to achieve structural adjustment with growth. Among the priorities, she suggested, were promotion of enterprise, industrial restructuring, reform of public administration and development of more sophisticated capital markets. Such a programme would be facilitated by reorienting the EC's system of adjustment compensation away from regional policy towards specific promotion of investment and of entrepreneurial skills. A negotiated tax reform and reduction of government spending aimed at reversing the deterioration of public finances would allow a shift of the macroeconomic policy mix towards more contractionary fiscal policy and more expansionary monetary policy. Such measures would permit a gradual reduction of inflation, which would be necessary before the drachma could enter the EMS.
Dani Rodrik (Harvard University and CEPR) argued that the theoretical underpinnings of the soft budget constraint were imprecise, especially its relationship with the other pervasive features of underdevelopment identified in Greece. Richard Portes contrasted structural rigidities in Greece with those in centrally planned economies, where soft budgetism was associated with excess demand. There was also an analogy between the financing of industry in Greece and lending to LDCs: in both cases the key issue was time inconsistency.

José Viñals (Banco de España and CEPR) presented the work of the Spanish country study team in his paper on `The <169>EEC cum 1992<170> Shock: The Case of Spain', drawing on work by Javier Andrés (Universidad de Valencia), Jaume García (Universidad Autónoma de Barcelona), José Manuel González-Páramo (Universidad Complutense de Madrid), Jordi Gual (Instituto de Estudios Superiores de la Empresa, Barcelona, and CEPR), Luis Mañas (Repsol SA), Carmela Martín (Fundación Empresa Pública), Xavier Martínez Giralt (Universidad Autónoma de Barcelona), Angel Torres (Ministerio de Economía y Hacienda) and Xavier Vives (Universidad Autónoma de Barcelona and CEPR).
The most important rigidities in the Spanish economy are in the labour market, where there is very high and persistent unemployment and a severe problem of mismatch. The insufficient scale and low technological level of Spanish industry prevent it from moving quickly enough into more dynamic markets. Moreover, allocation of financial resources is hampered by inefficiencies in financial intermediation and underdevelopment of markets for long-term capital. The relative openness of Spain's capital account balance and recent reforms in banking suggest, however, that the adjustment costs in financial markets may be smaller.
Spain's industrial trade has been increasingly concentrated with EC trading partners, so membership should significantly affect industry. Since approximately a half of its intra-EC trade is inter-industry trade, Spain can make overall gains by exploiting its comparative advantage in labour-intensive production. Since intraindustry trade is also important and Spanish firms have insufficient size and low technology, there will be gains from increasing competition and exploitation of economies of scale. A large part of the gains from trade that Spain can expect to achieve within the EC will have to be based on maintaining its comparative advantage in low-cost labour and on hitherto unexploited economies of scale.
From the generally good performance of the Spanish economy during 1986-8, it might be thought that fears of traumatic adjustment were exaggerated. Viñals warned, however, that the ease of adjustment so far has been due to very favourable world economic conditions and to earlier reforms in banking and the capital account. Only a fraction of the `EC cum 1992' shock has so far occurred. The labour market is both less efficient than other markets in Spain and will benefit the least from the single market programme. Policy priorities are therefore the improvement of allocative efficiency in labour and financial markets: holding down relative labour costs and improving occupational and geographical labour mobility; and reforming the financial sector to facilitate investment in growth sectors.
Christopher Bliss referred to `insider-outsider' analysis of labour markets. Increasing the scope for firing workers made employed insiders less secure, leading to greater wage flexibility and smaller changes in employment as a result of shocks, but in the short run it would lead to a further increase in unemployment. Michael Emerson thought more attention should be paid to labour market institutions. Alexander Sarris (University of Athens) remarked that foreign direct investment in Spain appeared to be concentrated in capital-intensive industries. This may explain the coexistence of a 25% annual increase in investment with only a few percentage points reduction in unemployment. Alexis Jacquemin (Commission of the European Communities) urged the adoption of policies to encourage specialization in labour-intensive sectors.

The final country study, presented by Jorge Braga de Macedo (Universidade Nova de Lisboa, Commission of the European Communities and CEPR), was entitled `Portugal: External Liberalization with Ambiguous Public Response'. It drew on the work of a team of researchers including José Pedro Barosa (Universidade Nova de Lisboa), Cristina Corado (Universidade Nova de Lisboa), Vitor Gaspar (Universidade Nova de Lisboa), Pedro Telhado Pereira (Universidade Nova de Lisboa) and Francisco Torres (European University Institute, Florence).
The Portuguese government regards the completion of the Single European Market as a major political challenge, and the export sector has performed well during the investment boom of the last three years. But traditional ambiguity towards external liberalization remains, Braga de Macedo argued, in the implementation of fiscal adjustment, the commitment to fight inflation and willingness to join the EMS. Manufacturing comprises a capital-intensive, import-substituting segment, tied to large financial conglomerates, and a labour-intensive segment, fostered by greater access to European markets, which is oriented towards producing for both export and the domestic market. After the 1974 revolution, the financial conglomerates were nationalized without compensation and lay-offs were prohibited. Employers in the export sector responded by turning to renewable short-term labour contracts. These partially offset the new entrenchment of public sector jobs, introducing some real wage flexibility into the economy and making the labour market as segmented as the product market.
Braga de Macedo presented data which suggested that the crawling peg no longer has an effect on relative prices, notably the price of tradable goods. But the passive crawl does prevent an active monetary policy, which is a prerequisite for EMS membership. Establishing an active monetary policy will require not just consolidating the recent cessation of the Treasury's automatic access to the Central Bank but also implementing a fully credible package of fiscal adjustment. The government authorized entry of new banks in 1985 and the old banks began to be privatized in 1989, making it increasingly difficult for the government to use the banking system as implicit tax collectors and making the fiscal policy problem more difficult. Subjecting credit to the public sector to the same ceilings as credit to private firms is a welcome move, Braga de Macedo observed, but adequate commitment to fiscal adjustment is still not forthcoming. Until it is, he concluded, the policy response to 1992 remains ambiguous and may hinder meeting that challenge.
William Branson argued that a credible, multi-annual fiscal adjustment strategy would not free monetary policy from the constraints of being deployed to control the foreign exchanges. Richard Portes remarked that a combination of policy credibility and an interest rate differential that departs from interest parity would lead to capital inflows, as in other countries.

Integration in the 1990s

The conference concluded by discussing the policy conclusions to be drawn from the simultaneous widening and deepening of the EC during the 1980s issues of particular relevance in assessing the future relationship of East European countries to the EC.
Michael Emerson emphasized that it was difficult to foresee which of two, divergent paths the new members would take. The double shock of accession and 1992 might drive their economies into depression or accelerate their modernization. Unfortunately, economic principles do not point to a pre-determined outcome. In fact, the degree of indeterminacy is so great that the outcomes may range between brilliant achievement and big difficulties. In industrial location, investment could be attracted by relatively low wages in the new members, or this could be dominated by forces pulling industry towards the core. Second, economic theory suggests that if liberalization stops short of a comprehensive improvement of all product and factor markets and entails only partial reforms, the gains are highly uncertain and may even be negative. Third, if member states and the Commission work at cross purposes, as perhaps over competition policy, the effect may actually be to confuse the private sector. Fourth, the structural funds may lead to costly rent-seeking strategies.
Richard Portes focused on some issues that might have been expected to emerge from the research, but which did not feature at the conference. First, there was no call for massive expansion of the structural funds; the emphasis was on their quality. Second, at the outset the researchers expected labour mobility between the South and North of the Community to be a prominent theme, but it drew much less attention than the integration of goods and capital markets. Third, the Common Agricultural Policy was hardly mentioned, though it is clearly of major significance for the recent entrants and for intra-EC resource transfers. Fourth, the acrimonious disputes over `harmonization' and Brussels-imposed uniformity also did not feature. Finally, the conference heard little of the arguments over fiscal rules and macroeconomic policy coordination that have become so important since the Delors Report. There was much more attention to domestic constraints on fiscal policy.
Jorge Braga de Macedo referred to the sequencing of financial liberalization, arguing that domestic banking reforms could be jeopardized if external liberalization were already under way. Louka Katseli warned of the possibility of a new labour market dualism where skilled workers could move freely throughout the Community but a growing pool of the unskilled could not exercise that mobility. José Viñals foresaw a J-curve effect in which EC employment would initially decline for the peripheral countries because of significant market distortions. He also predicted that the requirement of fiscal adjustment may prevent some countries from embarking on monetary integration


The conference papers and selected discussions will be published in summer 1990 by Cambridge University Press as Unity with Diversity in the European Economy: The Community's Southern Frontier, edited by Christopher Bliss and Jorge Braga de Macedo, with a Foreword by Michael Emerson and Richard Portes.
It will complement earlier CEPR/CUP volumes on The European Monetary System, edited by Francesco Giavazzi, Stefano Micossi and Marcus Miller (hardback &pound;35.00/$59.00; paperback &pound;15.00/$22.95), and A European Central Bank? edited by Marcello de Cecco and Alberto Giovannini (hardback &pound;35.00/$12.95; paperback &pound;12.95/$17.95).