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Abolishing open borders 'could cost Germany €235 bn'

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Trucks wait at a police checkpoint just inside the German-Austrian border. Photo: DPA
10:53 CET+01:00
Reintroducing borders across continental Europe would deal the German economy a €77 billion blow, a new study argues.

The study for the eonomically-liberal Bertelsmann Foundation predicts that ending the Schengen Agreement – which did away with border controls between 26 European countries – would cost the EU a total of €470 billion between 2016 and 2025.

And that's with an optimistic scenario where the new border checks only increase prices of goods imported across EU borders by one percent.

In a less rosy possibility, price increases of three percent would slash German Gross Domestic Product (GDP) by €235 billion – with the EU as a whole facing fallout to the tune of €1.4 trillion, or approximately the 2015 GDP of Italy.

"It would be enormous economic damage," Dr Thieß Petersen of the Bertelsmann Foundation told The Local. "Germany as an exporting country is very dependent on open borders - it's very much in Germany's interest to keep Schengen."

Under these conditions, Britain would be even worse affected than Germany, losing €264 billion of GDP by 2025, while France would suffer a €244 billion impact.

And the wider world would not be spared, the authors suggest, with an impact on both the Chinese and US economies. In the worst case, they expect China to lose €288 billion of GDP by 2025 and the US to lose out to the tune of €276 billion.

"Both countries would find goods and services they buy from Europe getting more expensive. But there would also be lower demand in Europe for goods produced there, which would hit the US and Chinese economies," Dr Petersen said.

The study comes at a time when temporary border controls have been reinstated by many European countries struggling to deal with the refugee crisis.

Some extremist movements, including in Germany, have even called for the abolition of Schengen altogether.

"I hope that politicians will take the economic arguments [against ending Schengen] seriously," Petersen said.

"But among the public, [open borders] are an emotional theme, some people want to close the borders even if it causes economic damage."

Spike in cost of goods

Reintroducing border controls would hit truckers moving goods between EU countries with waiting times for their passports – and possibly their vehicles – to be checked.

Commuters who cross international borders and tourists would also be affected.

But the authors decided to limit their study to freight traffic between countries.

They anticipate that longer waiting times would hit firms with high additional costs as trucks spent hours idling at border posts.

Firms would spend more on storage facilities because they wouldn't be able to guarantee shipments arriving exactly on time.

And both of those developments would increase the cost of producing goods using raw materials from elsewhere in the EU as well as the cost of importing finished goods, they argue.

With higher prices, demand from consumers at home would fall, global appetite for goods produced in the EU would be diminished and fewer investors would risk their cash in European ventures.

Wait, there's more

The authors limited their study to the direct impact on trade in goods and materials outlined above.

But Dr Petersen noted that "there are further costs that we haven't even factored in" which could make the final bill much higher.

Tourists would join truckers in losing time at international borders, which the authors believe would cause the numbers of people travelling to drop noticeably, especially for short trips.

Meanwhile, so-called "cross-border commuters" – who live in one EU country but travel to work in another every day – would find life much more difficult.

Imagine this on your way to and from work every day. Photo: DPA

The authors predict more limited labour mobility, less varied options for bosses to hire in local labour markets and increased disparity in areas like the housing market between EU countries if border controls were reintroduced.

Travellers from outside the Schengen Area would also find their lives made more difficult, as they would no longer be able to apply for a single visa to visit all 26 countries – burdening tourists, business visitors and governments with a cumbersome administrative process.

Lastly, ending Schengen could hit intra-European infrastructure projects, such as the planned Paris-Budapest railway line.

The authors anticipate that international train travel might simply become uneconomical if border controls were reintroduced.

Blow to security

Beyond pure economic effects, ending the Schengen agreement could also bury the Schengen Information System (SIS), which European governments use to exchange security information about travellers, the study notes.

Governments might have to renegotiate complex information-sharing agreements between themselves, rather than signing up to the European standard.

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That could hit the fight against international people and drug smuggling as well as other forms of organized crime and terrorism.

Schengen is also a key piece of a mooted common European asylum and migration policy that's at the heart of Chancellor Angela Merkel's bid to bring the refugee crisis under control.

SEE ALSO: Large majority of Europeans back Merkel's plan for refugee quotas

And losing Schengen would rob the EU of one of the ways it can invite neighbouring countries – like Norway, Switzerland, Iceland and Liechtenstein – to enjoy some of the benefits of European integration without becoming full members.

How citizens think of Europe

Along with the Euro single currency, the Schengen Area is one of the most obvious benefits of the European Union for the average person on the street.

That makes it a big symbolic piece of the puzzle to remove, and one that would likely weaken the European project as a whole in the eyes of voters.

And reduced movement of people would impact cultural exchange and citizens' chances to experience other countries, the authors predict – with unforeseeable consequences and political costs far into the future.

SEE ALSO: Bavaria demands control of own borders

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