Testing times for Schengen [Policy podcast]

Written by Alexandra Gatto, Pierre Goudin, Risto Nieminen,

Over the years, the Schengen system has decidedly brought important economic benefits. The combination of a rising number of asylum-seekers, increasing migratory pressure, security concerns and a fragile economic recovery has put the Schengen area under stress, and called into question its functioning. A ‘wave-through’ approach applied by some Member States led to the creation of a route through the Western Balkans, allowing mixed flows of asylum-seekers and economic migrants to travel across external and internal EU borders. In response, several Member States reintroduced temporary internal border controls to manage increasing flows of entrants. Over the past year, several Schengen countries have temporarily reintroduced controls and serious deficiencies in the application of the Schengen acquis may trigger suspension from Schengen of one Member State. The long-term suspension of Schengen, however, is not foreseen in the current legal framework. The effectiveness of such a measure in terms of addressing the migratory challenge is questionable if not matched with the strengthening of common external border controls, a revision of the Dublin system and the reinforcement of the Common Asylum System. Suspending Schengen may also entail the weakening of police and judicial cooperation on terrorism and organised crime.

Listen to podcast: Schengen area [Policy podcast]

Economic impact of Schengen

In economic terms, re-establishing border controls would hinder intra-European trade and the free movement of people, goods and services. Three main impacts can be identified:

– first, direct costs: the highest and most immediate impact of border controls would be felt by the road haulage sector (€1.7 to 7.5 billion each year), but also by commuting workers (there are 1.7 million workers in the EU who cross a border every day to go to their work), by tourism (between €10 and 20 billion per year), and by the public sector´s finances (more staff would be needed to carry out checks at the borders);

– then, indirect costs, such as a decrease in cross-border movements, a loss of trust by citizens, or even a loss of confidence in the Euro, leading to less foreign investments. Therefore, by 2025 the loss in economic performance of the EU could be between €500 and 1 400 billion;

– finally, a failure of Schengen would also reduce the future benefits of the Single Market and EU integration. Europe is indeed an open economic area with considerable amount of intra-EU trade flows, and thus re-introduction of border controls would affect the whole EU, leading in particular to greater differences in regional job markets and more uneven economic development, including of property prices. Some countries would be more affected. Such a situation could cost the EU economy more than €100 billion in the long term.

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Despite the challenges it is currently facing, the Schengen area remains one of the great achievements of the EU. A Roadmap to bring Schengen back to functioning by the end of 2016 has been laid down by the European Commission. More extensive reforms however, may be required in the longer term to preserve its benefits on EU’s economy, security and free movement.

Read the publication behind this podcast: The economic impact of suspending Schengen (At a glance, March 2016)