By Vaibhav Tandon

As highlighted in this week’s lead article, immigration is one of the most divisive issues in the upcoming U.S. election.  But the topic has also been a touchstone of political debate on the other side of the pond.  In fact, nowhere is the problem more poignant than in Europe.

More than 385,000 migrants entered Europe last year, nearly triple the COVID-era low in 2020.  But the number is just a fraction of the 29 million immigrants who have arrived over the last decade.  Between 2010 and 2019, the eurozone saw the world’s highest level of net migration, after the United States.  Migration was the main source of population growth in several parts of Europe. 

Conflicts and the risk of further geopolitical events have been the main contributor to migration in Europe.  The Ukrainian emergency is the largest displacement in Europe since World War II, with over 6 million Ukrainian refugees registered across Europe.  Germany, Poland, Czech Republic and the U.K. have hosted the highest number of those displaced.  Europe also received the most migrants from Syria in 2023.  Humanitarian emergencies in countries like Afghanistan and a rising number of natural disasters have also forced people to seek shelter and economic opportunities away from home.

Despite the many challenges of immigration, many European countries cannot afford to close their doors to immigrants.  New entrants will be essential to countering the demographic headwinds that most European states are facing. 

United Nations and Eurostat projections show that the population over 65 years old in the common currency region is expected to grow 25% by 2040.  Amid falling birth rates, working age populations in Europe are projected to fall sharply, by an average of 6% over the next 15 years.  Italy, now considered the “gateway to Europe” for irregular immigrants, shows the worst demographic dynamics, with its working age population predicted to shrink by as much as 11% by 2040.  Even a higher migration flow than witnessed in the recent past will not be enough to wholly offset the expected deterioration in old-age dependency ratios in key member states.

There is no denying that excess immigration puts a strain on the host nation’s resources, as seen in countries like Australia, Canada and the United States.  But the gains outweigh the costs.  Without immigration, many European nations will find their economies crippled by a drop in labor supply, leading to higher inflation.  A rapidly ageing population will put strains on pension systems and tax revenues, raising concerns about fiscal sustainability.  Stronger migration flows than what has been witnessed historically could add one quarter of one percent per year to the eurozone’s real growth, according to a Morgan Stanley analysis.

Despite the potential economic benefits, immigration continues to trigger hostile political reactions.  The wave of arrivals has sparked bitter discussions over the continent’s identity and security.  Higher immigration was one of the main reasons behind the surge of the far-right parties in the June European Parliament elections.  These parties are calling for policies that not only make it more difficult to enter the continent, but are also seeking mass deportations. 

Germany and nine other member states have already brought back border controls this year.  Sweden, a popular destination for immigrants, is shifting to a more restrictive migration system that imposes stricter conditions for low-skilled labor immigration and improves conditions for high-skilled workers.  Spain is the only major member state bucking this trend as it has relaxed its migration laws to provide non-European citizens easier access to the country’s labor market. 

Europe needs new blood to rejuvenate its economy.  Locking down borders will lock in a disappointing economic future.