Although its roots go back some considerable time, in the summer of 2015 Europe was suddenly and unexpectedly confronted with a dramatic increase in the number of refugees seeking sanctuary and asylum. The “refugee crisis”, as it is often portrayed, raises primarily humanitarian, political and ethical issues, both for individual member states and, not least, for the European Union as a whole. In particular the sharing of costs and issues relating to the freedom of movement between EU countries raise thorny issues. Xenophobic and nationalist elements have sought to make political capital out popular fears associated with the inflow of refugees.

Against this background, the sharp rise in refugee inflows also raises questions about the likely economic, fiscal and labour market effects. There is still considerably uncertainty about the size of current inflows, not to speak of their composition in terms of country of origin, age, skill level, or their likely distribution across Member States. It is also unclear for how long elevated inflows from countries like Syria and Afghanistan, blighted by war and acute physical and economic insecurity, will persist. Last but not least, the economic, fiscal and labour market effects of the influx will depend on the policies implemented by Member States; as these are currently being formulated, against the background of a controversial public debate, these also, remain clouded in uncertainty.

With these important caveats in mind, an attempt is made here to collate the existing information. Where necessary making various assumptions, orders of magnitude of the impacts that might be expected, both positive and negative for EU countries and their domestic populations, are indicated. On this basis suggestions for an appropriate policy response that maximises benefits and minimises costs are made. [Read more…]