Potential impact of migrants on Europe

Policemen watch as migrants walk on the other side of the border from Serbia near Asttohatolom, Hungary September 15, 2015. [Photo/Agencies]

To some extent, the pictures of migrants trying to make their way north after having crossed the Mediterranean or Aegean Sea illustrates an age-old truth: Besides unrest, destitution back home and attempts to flee war, migrants also want to work.

In Europe today that mostly means going to Germany, Scandinavian countries, Britain and other places, such as the Netherlands.

As free movement of labor is one of the founding principles of the European Union, many migrants will likely end up where the jobs are and, to a lesser extent, where other migrants from their home region have already settled to provide start-up comfort and support.

Take Germany, a favorite destination of the new migrants, as an example. According to recent reports, Germany may receive 400,000 to 500,000 more immigrants this year than it expected six months ago. If so, that would add 0.5 percent to 0.6 percent to the German resident population. For the EU average, the increase may be half that scale.

The EU needs some common response. That should include a clearer foreign policy designed to stabilize Syria and Libya, urging Turkey to play a fully constructive role, and a common definition of who qualifies as a refugee and who can be sent back to safe countries of origin in the Western Balkans.

Of course, a quota system to distribute refugees can make sense to process their claims fast. However, those who are accepted may ultimately move to where the jobs are and not respect an initial quota distribution between, say, Germany and Hungary or Britain and France for very long.

Expect a small stimulus to aggregate demand. Extra spending on migration-related issues may amount to 0.3 percent to 0.4 percent of annual GDP in Germany and perhaps a few other places.

Some other countries will likely quote this as a reason to exceed fiscal targets. On balance, the result could be a near-term stimulus to demand some 0.2 percent of the eurozone GDP for the second half of 2015 and probably all of 2016.

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