Voters in San Marino narrowly preferred to pursue an application for membership to the European Union on Sunday in the first referendum of its kind in the tiny Mediterranean republic.

But despite the narrow approval — 50.3% supported EU membership while 49.7% opposed it — supporters did not reach the threshold for a successful referendum (around 32% of all potential voters).  That’s just as well, because the European Union is not currently designed to admit microstates like San Marino — or Andorra, Liechtenstein, the Vatican City or Monaco.

San Marino is an independent republic that consists of around 61 square kilometers completely surrounded by Italy.  By comparison, San Marino’s population of around 30,000 residents is about 1/22 that of the population of Palermo, the capital of Sicily.

San Marino traces its sovereignty as a republic to the 4th century, and it survived the Napoleonic Wars, papal expansionism, Italian unification and both World Wars (technically neutral in both wars, though its government was controlled from the 1920s until 1943 by the Sammarinese Fascist Party) without being overtaken by the greater Italian state.  Its economy is based largely on banking and tourism, and its GDP per capita of around $36,000 provides the ability to fund generous welfare programs.

Proponents of San Marino’s EU membership argue that the tiny country is already subject to so much EU regulation that its membership would give it more at least marginal influence in making European policy in the future.  But that’s the same argument that pro-EU Norwegians use to make the case that Norway should join the European Union, and that’s not historically been enough to sway Norwegian voters to embrace membership.  It makes more sense in Norway’s case — though the Scandinavian country has just 5 million people, it also has one of the most powerful economies in Europe, and its combination of fiscal discipline and social welfare would make it a touchstone for policymaking decisions.  But no one thinks that we’d see an immediate Sammarinese impact on European regulatory matters if San Marino became the 29th EU member tomorrow.

The European Council recently considered the relationships between the European Union and the various microstates in a report issued in 2012 with recommendations for a more standardized approach to what is currently quite a helter-skelter set of arrangements:

• Single market / trade.  San Marino, like Andorra, Monaco and Turkey, is party to a customs union with the European Union, but other states (like Liechtenstein) are actually part of the European single market, and the recent European Council report recommended that the European Union should work to integrate all of the microstates more fully into the European Economic Area.
• Open borders / Schengen.  Liechtenstein is the only microstate that’s a full member of the Schengen area.  San Marino and the Vatican City have open borders with Italy, just as Monaco has an open border with France, but neither are technically members of the Schengen Agreement.  Andorra has neither membership in the Schengen Area or open borders with France and/or Spain, so maintains border checks with the rest of the European Union.
• Eurozone / currency.  San Marino uses the euro because, like the Vatican, its pre-eurozone currency was tied to the Italian lira, and Monaco has a similar arrangement, given its prior monetary links to the French franc.  Liechtenstein uses the Swiss franc, while Andorra has a special agreement for issuance of euro coins with the European Union.

For San Marino, at least, its current relationships with the European Union and Italy mean that it has de facto or de jure access to the single market, benefit of the Schengen free-movement zone and participation in the eurozone.

But, as the Council’s report notes, the European Union’s structure isn’t quite tailored to microstates like San Marino.  The costs of full EU membership would probably be prohibitively expensive, and the allocation of seats to the European Parliament would be wildly skewed in favor of San Marino.  The smallest EU states, such as Malta (with a population of 418,000) and Luxembourg (538,000), both have six seats, a result that already gives a Maltese voter or a Luxembourgish voter about 10 times as much representation on a per-person basis in the European Parliament than a German voter.  Even giving San Marino one European Parliament seat would skew representation even more.

Moreover, San Marino is one of Europe’s richest countries (just like the other microstates — and Luxembourg and Malta), and its size is one reason for its relative wealth — imagine what might happen if San Marino were forced to the same level of competition and openness as the other 28 EU members.  What would happen to its social welfare regime if 90,000 Bulgarians decided to migrate to San Marino?  It’s somewhat incomprehensible.

None of which should discourage San Marino’s further integration into the European Union superstructure, and San Marino’s referendum should serve as an impetus for EU leaders to consider a wider constellation of EU membership alternatives for microstates — or even, in the future, European city-states.  That could become especially crucial if the broader European regulatory superstate continues to make national governments increasingly obsolete.  That may seem like a far day off, but remember that Belgium functioned without a government for 589 days, and it’s unlikely that markets would have been so easygoing about Belgium’s governance crisis without the stability of the European structure that already sets much of Belgium’s policy.

It’s clear that there are already different ‘levels’ of integration within the European Union, from full eurozone membership (i.e. ‘core Europe’) to EU membership outside of the single currency (e.g. Sweden, Denmark) to EU membership outside of the single currency and the Schengen area (e.g. the United Kingdom) to membership in the single market without corresponding EU membership (e.g. Norway and Switzerland).  There’s no reason to prevent further flexibility to accommodate microstates or even territories — a more flexible approach might have prevented Greenland (part of the Danish kingdom) from leaving the European Economic Community in 1986.

Moreover, there’s a strong argument that city-states are underrated:

• Hong Kong and Singapore are self-recommending examples of successful city-states — they’re among the original ‘Asian tigers’ that leaped to economic prosperity in the last half of the 20th century, and both continue to dominate Asia’s economy today.
• It’s not hard to imagine that Belgium could end its federal political crisis and Europe could have a federal capital if Brussels were to separate from Belgium, thereby facilitating the emergence of a Dutch-speaking Flanders and a French-speaking Wallonia.
• You could also easily imagine Jerusalem becoming an international city-state en route to a two-state (or three-state) solution between Israel and the Palestinians.
• I’ve long thought it would be majestic for Venice to resume at least some semblance of its former glory as a city-state separate from Italy, given the millennium-long status of La Serenissima as an autonomous and often powerful republic.

Photo credit to imjonah / Flickr.