European Refugee Crisis And Schengen: How Ending Europe’s Open Border Policy Could Prove Costly

As more than a million migrants and refugees passed through Europe's borders in recent years, some European governments have faced mounting pressure to freeze an open-border policy that was once hailed as a success of European integration. Suspending the passport-free Schengen policy now looks like a real possibility — but at what cost?

If the agreement were to collapse, the European Union could pay as much as 1.4 trillion euros – roughly $1.54 trillion – over the span of a decade, a study by Germany’s liberal Bertelsmann Foundation said Monday.

“The ability to totally dismantle border controls and create a kind of seamless economic territory was really held up as a major achievement,” said Jeffrey Anderson, professor and director of European and German studies at the School of Foreign Service at Georgetown University in Washington, D.C., who was not involved in the study. “Politicians are extremely reluctant to see anything happen to that. At the same time, Europe is in unchartered waters right now… Europe has never experienced anything like this.”

The prospective collapse of the Schengen policy could increase the time it takes to transport goods throughout Europe, raising costs for both consumers and companies. According to the study, the worst case scenario — that EU border controls push import prices up by 3 percent — could weigh on Germany, the bloc’s largest economy, at a cost of nearly $300 billion over the next decade. At a minimum, the report said, if import prices were to rise 1 percent, it would cost the EU about $517 billion over the next decade, according to Reuters.

“This is the first real stress test of the Schengen provisions,” said Jacob Funk Kierkegaard, a senior research fellow at the Peterson Institute for International Economics in Washington, D.C. He noted that Europe has not experienced a major refugee crisis to this extent since the early 1990s — before the Schengen agreement. Suspension of the agreement “is absolutely ... within the realm of the possible. Indeed you could argue the clock has already started ticking,” he said.

The Schengen area, which includes 26 nations, was established 30 years ago. It allows individuals to travel freely throughout most of the continent. But the recent influx of migrants and refugees has brought that policy under scrutiny, particularly after terror attacks in Paris last year left more than 130 people dead, sparking regional fears of additional violence. Schengen includes a provision that allows participating nations to suspend the agreement for two years in the event that a country fails to meet immigration restrictions. For example, Greece has been scrutinized for allowing in thousands of migrants.

Many of the migrants, mostly fleeing conflict and poverty across the Middle East and northern Africa, traveled through Europe to reach Germany and Sweden. More than 1.1 million people, including hundreds of thousands of Syrian refugees, entered Germany in 2015. Officials have said the country can cope with 800,000 people per year, but the ballooning population has prompted anger against Germany's current government. A survey published Friday found 58 percent of Germans want border restrictions reintroduced.

Right-wing parties have rallied behind such concerns as a means of pushing their anti-immigrant and nationalist agenda. Fearful of the support those parties might receive, mainstream candidates have been forced to rethink their support for open borders.

Dealing with the issue has become a balancing act for politicians, especially for German Chancellor Angela Merkel, perhaps the EU’s strongest player, according to Anderson. Next month, several regions in Germany will have elections, and right-wing parties could experience major gains.

While Anderson said the Bertelsmann Foundation's estimates seemed accurate, he indicated he was skeptical such policies would last for as long as the report projected. Ultimately, the EU would have to figure out how to step up security across Europe, while also ramping up security at external border entry points to the continent, he said.

“I don’t know anyone who’s talking about it lasting for 10 years,” he said. “The discussion is about a temporary suspension of Schengen to give some breathing room for policymakers to deal with this influx of refugees and economic migrants.”

Yet as spring looms, the refugee influx is expected to pick up. European politicians could be forced to act sooner rather than later.

“People must recognize that very dramatic things can happen here in just a few weeks’ time. This isn’t just a hypothetical [scenario] in the far distant future,” Kierkegaard said.