Kate Rogers: Refugees could be a boost to the European economy

From an economic perspective, new people have a positive effect, writes our columnist

Kate Rogers
Kate Rogers

The second half of 2015 has been a challenging period for Europe. Although growth has been encouraging, it was another summer when the Eurozone lurched from one crisis to the next. Greece managed to avoid leaving the euro at the eleventh hour, but only after threat of eviction. The country is now struggling to cope with the influx of refugees to the shores of its islands, which have small populations ill-equipped to manage.

Media coverage initially focused on the tragic deaths of many refugees attempting to reach Europe's shores, but more recently the news has morphed into a political argument about the burden of receiving so many displaced families and people. Applications for asylum in the European Union are more than 70 per cent higher this year than last, and there is no doubt that the civil war in Syria will continue to provide incentives for mass migration. In the second quarter of this year, 21 per cent of Europe's first-time asylum seekers held Syrian nationality.

Although the recent influx of Syrian refugees is large, the statistics should be put in context. The United Nations estimates there are about 150,000 Syrian refugees in the wider European continent, compared with 1.6 million in Turkey, 1.1 million in Lebanon, 600,000 in Jordan and 200,000 in Iraq. Nevertheless, the rise in numbers of asylum seekers has raised anti-immigration sentiment in many EU member states.

From a macro-economic perspective, the impact of refugees is generally positive. In the short term, additional state spending on services, along with income support for refugees, is an economic stimulus. As refugees tend to have little or no wealth on arrival, they are likely to spend most of the resources they receive, supporting the local economy and acting as an efficient transmission mechanism for government spending.

The increase in the working population will boost GDP growth over the long term, although the success of this will depend on the ability of a nation to integrate its new arrivals. For Europe, migration will be an important relief to the unfolding problem of an ageing population. Forty-seven per cent of Europe's population is of working age, but this could be less than 20 per cent by 2050, according to World Bank forecasts, with Spain and Germany the most exposed.

The best long-term solution to the refugee crisis has to be peace in their own countries. However, as European governments and populations debate how best to cope, it is worth remembering that welcoming these refugees could help Europe tackle that secular problem of an ageing population, while also helping the many people who are fleeing war and persecution in their home countries.

Kate Rogers is head of policy at Cazenove Charities

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