European Union: D auerhafte border controls damage the entire economy in Europe

Closed borders could cost the German economy hundreds of billions of euros, says economist Thieß Petersen. This would also increase unemployment.

European Union:  D auerhafte border controls damage the entire economy in Europe
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    Some European countries have again introduced border controls, Bavaria has reactivated its border police. This ensures that border crossing lasts longer, even for trucks and freight trains. In some cases long queues form. Companies complain that border controls cost m time and money. In a study, Bertelsmann Foundation has investigated effect of border controls on economy. Economist Thieß Petersen sees a noticeable strain on economy to come.

    Online Time: Companies complain that new controls require ir trucks to take longer to cross ir respective borders. In view of shining economic situation, is this not a unsustainable burden?

    Thieß Petersen: No, re is a serious problem. The extended waiting times increase costs of companies, refore prices rise. Higher prices, in turn, mean that people can buy less. As a result, demand, exports and investments are declining and gross domestic product in long term.

    Thieß Petersen is an economist at Bertelsmann Stiftung. Currently, PhD economist is mainly engaged in research on globalization, growth and public finances. © Bertelsmann Foundation

    Online Time: That only affects individual companies, so economy is not facing collapse.

    Petersen: If re are permanent controls at all borders, that will harm entire economy in Europe or even beyond.

    Online Time: How big would economic damage be if Schengen falls?

    Petersen: We calculated this two years ago, with two different models: one with cautious assumption that border controls increase import prices by one percent, and one with pessimistic assumption that import prices will rise by three percent. This is span that science has discussed at time of study. In pessimistic model, loss of 77 billion euros would be summed up for Germany within ten years. If we go out of three percent, result is around 235 billion euros. In optimistic scenario, total EU is expected to lose 470 billion euros, with a pessimistic 1.4 trillion euro.

    Online Time: In view of a German gross domestic product of 3.3 trillion euros in year 2017, this does not seem very much.

    Petersen: In pessimistic model, dieWachstumsrate of gross domestic product would be 0.08 percentage points less each year than without border controls. If Germany had closed all borders in 2016, GDP would have been smaller by 6.6 billion euros in year. In year 2025 we would have a GDP that would have been less than 26 billion euros. That may sound a little, but after ten years it would have already summed up to 235 billion euros. And one has to bear in mind that if less production is produced and economy grows less, this will usually be accompanied by a rise in unemployment.

    Online Time: Before Schengen, economy was not very bad eir: German economic miracle, for example, was possible without Schengen.

    Petersen: The effect of border controls is not as great as that of an economic crisis. But it becomes problematic by fact that some of m are more and more close to border controls: protectionism of USA will harm economy, but also Brexit. Moreover, it should not be forgotten that freedom of travel has a great symbolic force. When you ask people what EU's biggest advantage is, y usually call it free travel.

    Date Of Update: 15 August 2018, 12:00

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