World Economy

Refugees Can Boost EU Economy

Refugees Can Boost EU EconomyRefugees Can Boost EU Economy

European Union officials on Thursday put a positive economic spin on the bloc’s refugee crisis. In a forecast, officials predicted that the three million migrants expected over the next three years would provide at least a small lift—a net gain of perhaps a quarter of 1% to the European economy by 2017.

With that prediction, the European Commission, the bloc’s executive arm, used one of its periodic economic forecasts to wade into one of the most divisive issues Europe has faced in decades: migration, Yahoo reported.

The arrival this year of large numbers of people from Syria and other war-torn countries has driven a wedge between countries like Germany that have sought a more accommodating stance and those like Hungary, which want far tighter border controls.

The commission, in its autumn economic forecast, said “the arrival of large numbers of asylum seekers” would require increases in public spending to manage the influx—spending that would provide a stimulus to the European economy.

Access to Labor Market

There would also be an additional positive impact from the increase in workers, “provided the right policies are in place to facilitate access to the labor market,” the commission said in a news release.

Some analysts questioned whether the European Commission was being too optimistic in its forecast—whether because too few of the newcomers will have the right job skills or be young enough to make long-term contributions to the economy, or because too few countries are ready to absorb the migrants.

“Member states have very different philosophies about how soon migrants can actually be integrated into the labor market,” said Stephen Booth, the co-director of Open Europe, a research group in London. “Germany has been willing to allow those seeking asylum to take jobs more quickly than, say, countries like France.’’

The commission’s report acknowledged that the European recovery has been slow. And it warned against expectations of a rapid turnaround because of challenges that include the slowdown in China and regional tensions created by a standoff with Russia over Ukraine.

Cost and Benefit

The long-term economic gains from the huge numbers of refugees arriving in Germany will far outweigh the massive costs of the crisis, a leading economist told the Guardian.

Marcel Fratzscher, the head of the German Institute for Economic Research or DIW, has said the hundreds of thousands of newcomers this year as well as the hundreds of thousands more expected over the coming years, are a major opportunity for Germany and that its strong financial position makes it ideally placed to welcome them.

“In the long run the refugees are an incredible opportunity for Germany,” Fratzscher said. “Because of the surplus in the public budget, and a labor market that’s doing incredibly well, there’s probably never been a better moment in the last 70 years for Germany to deal with the challenge.”

In a study to be published, the DIW concludes that while the current situation–with thousands of refugees continuing to arrive on a daily basis–is a huge economic and social task, the benefits of giving a new home to the refugees will clearly start to outweigh the costs “within the next five to 10 years”.

The report offers a counterweight to the prevailing view that Germany is in danger of collapsing under the weight of the refugee crisis.

While recognizing “the chaos and fears” in some parts of Germany and the “huge logistical challenge” the country faced, Fratzscher said Angela Merkel’s open-door policy would change the face of German society for the good.

Fratzscher is the leading voice of a growing number of key public policy advisers in Germany to argue that because of its imminent demographic crisis, and with businesses crying out for workers, there is clear potential for refugees to help German society.

In a recent report the Macroeconomic Policy Institute said the refugees would boost the German economy and “act almost like a stimulus program”, by forcing long overdue investments in Germany’s weakened infrastructure.