EU migrant crisis

The EU is set to receive around one million asylum

applications in 2015 and possibly a similar amount in 2016

• Handled ineffectively, it could further boost support for anti-EU parties and hinder EU integration

Europe is gripped by an historically unprecedented level of migration that presents both opportunities and risks. According to the OECD, the EU will receive over a million applications for asylum this year, and the UN High Commissioner for Refugees (UNHCR) estimates arrivals of a similar size next year.From an economic perspective, Europe needs more workers. It is well known that most parts of Europe have rapidly ageing populations. This results in slower growth and thus tax receipts, whilst simultaneously increasing government spending through pensions and healthcare.

The eurozone, in particular, is about to embark on this demographic challenge with a mountain of debt. The easiest way to support more pensioners is to have more taxpayers. Out of a working age population of 220 million, we estimate that one million more immigrants per year could boost eurozone potential growth by 0.2% per year, and cumulatively potential GDP by 2025 could be EUR300bn higher than it would have otherwise been. Whilst it takes time to integrate immigrants into the labour force, even in the short term, higher public spending needed to cope with the crisis could support growth.

The challenge for governments is therefore to integrate the new arrivals into society and the labour market quickly. This will take considerable funds and effort. It requires a major improvement in training and education of the migrants as well as the indigenous population. If governments fail to act decisively, it may simply exacerbate the frustration that has been simmering amongst the European electorate since the financial crisis. Many parts of Europe are still gripped by high unemployment, particularly youth unemployment, and pressure for government cutbacks. If Europe’s leaders fail to adopt a coherent strategy, and one that communicates the benefits to the indigenous population, then fear could breed resentment.

Even before this, we were seeing rising support for ‘anti-Europe’ parties and immigration as voters’ top concern. Governments have not yet been able to find a comprehensive solution, but this issue cannot be ignored. Migrants will arrive. An insufficiently bold response could mean that Europe fails to integrate and misses the economic opportunities that migrants can bring. In which case, the political backlash may be even more pronounced.

Migration by country of origin

Migration is not a new phenomenon for the EU, but in recent months there has been a surge in the number of people seeking refuge from the conflicts in Syria, Afghanistan, and other parts of the Middle East and Africa.Understanding the exact state of play is difficult given the lack of coherent data. The most problematic data are arrivals at each point of entry and the numbers currently awaiting relocation. The UNHCR estimates that 530,000 migrants have reached Europe by sea so far this year and the vast majority (400,000) have entered Greece and Italy (131,000). There is also a significant number travelling across land entering via Hungary.

The data on asylum applicants are more complete but lagged since migrants must get to their final destination before launching an application. 

Asylum applications for countries in the EU had already reached 630,000 by the end of August. By the end of the year, the number of people is expected to top one million . This is the largest EU migrant influx at any point in recorded history, exceeding the last period of significant migration, which was in the early 1990s around the former Republic of Yugoslavia conflict Of the applications made by August this year, just under half are from the politically volatile areas of the Middle East. Almost a quarter are from Syria , followed by Afghanistan, Iraq, and Iran.

 

There are also significant inflows from Pakistan, and Sub-Saharan Africa. What is particularly challenging for the European authorities managing the crisis is the breadth of country of origin, with all the different languages and cultures that they bring, and the difficulty to distinguish between asylum seekers and other economic migrants.Indeed, economic migrants arriving from Kosovo and Albania were numerous, although numbers are slowing following a domestic campaign to highlight the likelihood that applications for asylum will be rejected.