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Business News/ Opinion / The crisis Europe needs

It’s hard to be optimistic about Europe. Last summer, a political cage match between Germany and Greece threatened to tear the European Union (EU) apart. In country after country, extremist political parties are gaining ground. And Russian President Vladimir Putin’s incursion into Ukraine, in the EU’s backyard, has turned the common European foreign and security policy into a punch line.

Now comes the refugee crisis. The EU’s 28 member states are quibbling over how to distribute 120,000 refugees, when more than three times that number crossed the Mediterranean in the first nine months of 2015 alone.

Refugees are coming by land as well as sea. Germany alone expects as many as a million asylum-seekers this year. It is risible to think that European governments will be able to deport, or “repatriate" in diplomacy-speak, any substantial fraction of these arrivals. Like a rubber ball, they will only come bouncing back.

Nor is there agreement on how to handle this flood of humanity. German Chancellor Angela Merkel first declared that her country had a historical obligation to absorb refugees, before backing down in the face of political criticism. Hungary opened its borders, hoping that the human tide would flow onward, but then erected a razor-wire fence when it turned out that there were too few welcoming destinations. The EU’s Eastern European members initially resisted taking their share of the 120,000; but, dependent on fiscal transfers from the EU’s wealthier members, they fell into line after diplomatic arm-twisting similar to that administered to Greece.

Besides raising doubts about European leaders’ competence and solidarity, this crisis jeopardizes the EU’s signal achievement, the single market, which ensures freedom of movement for goods, services, capital, and people.

The Schengen Agreement providing for passport-free transit is what makes freedom of movement for people meaningful. But, given the inability of participating states to control their borders with non-EU countries, Germany and other Schengen members have temporarily reinstated controls. Indeed, this move could be more than temporary, with influential voices now calling for Schengen’s demise.

Dismantling Schengen would be a significant economic setback. Allowing trucks and trains to cross the EU’s internal borders without interruption not only facilitates trade; it also encourages the development of regional supply chains and production networks. Motor vehicle parts can be produced in one member state and assembled in another, after which the final product can be delivered to market. At a time when Europe is struggling to boost productivity and competitiveness, reinstating border controls would come as a serious blow.

The irony is that this is precisely the type of crisis that the EU was created to address. Solving the border-security problem requires European countries to work together. Individual countries like Greece have limited incentive to invest in controls insofar as refugees are only passing through. At the same time, unilateral action by countries, like Hungary, that are unprepared to countenance even transiting migrants, merely ends up diverting the flow.

The EU has an agency called Frontex to coordinate and strengthen national border-control policies. But governments have not allowed it to issue directives to national agencies. If the crisis is to be solved, this will have to change.

The same goes for resettlement. Germany and Sweden cannot be expected to be the only destinations for all refugee arrivals. Burden sharing is essential if the costs are to be tolerable.

In principle, the outlines of a deal are not difficult to formulate. Germany can provide money and manpower to secure the EU’s external borders. Its neighbours can then agree to accept more refugees and to offer them real economic opportunity as an incentive to stay.

Creating institutions to enhance border security and resettle refugees will require Europe to take another step toward deeper political integration, with decisions made at the EU, not the national, level. There may be a reluctance to contemplate this, but there is no choice if Europe is to have a hope of solving the problem.

More razor wire at the border is not an adequate answer. Europe also needs to address the conditions driving residents of war-torn and poverty-stricken countries to flee. So far, the EU has been singularly ineffectual in deploying aid, diplomacy, and boots on the ground to address conflicts in Africa and West Asia.

In particular, Germany, the EU’s largest country, has hesitated to contribute forces, funds, and even strategic advice, reflecting its dark military history. Merkel, her involvement in negotiations over Ukraine aside, has deferred to the German public’s historically rooted objections to deeper foreign entanglements.

Such reticence is no longer acceptable. One rationale for the European project has always been to allow Germany to project diplomatic and military force in the context of a larger, EU-wide foreign policy. That way, both Germans and other Europeans can trust Germany to be a positive force for change. If not now, one might ask, then when?


Barry Eichengreen is a professor at the University of California, Berkeley, and the University of Cambridge.

Comments are welcome at

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Updated: 16 Oct 2015, 12:22 AM IST
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