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The refugee crisis will test a European economy under pressure

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The refugee crisis will test a European economy under pressure

Almost everyone who crosses the Danube on an open-air ferry from Ukraine and landed in the frostbite Romanian port city of Isaacia on a recent morning had a roller bag and a stopgap plan. A woman plans to go to Istanbul with her husband. Another was on his way to Munich, where his company is headquartered. Others were meeting brothers, cousins, in-laws and friends in Paris or Sofia, Madrid or Amsterdam.

And then, they hoped to go back to Ukraine.

“I need to go back,” said Lisa Slavchevskaya, who traveled from Odessa with her 10-year-old son and 5-year-old daughter. “My husband, my mother and my grandmother are there.” She said she planned to go home in a month.

Whether such quick turnaround is possible is one of many uncertainties hanging over Europe’s fastest growing refugee crisis since World War II. No matter how the devastation in Ukraine ends, the cost of helping millions of Ukrainians escape from Russian bombs will be staggering. Some early estimates put the bill at $30 billion for housing, transportation, food and processing humanity’s floods in the first year alone.

“This is a humanitarian and medical emergency in the next weeks,” said Giovanni Peri, director of the Global Migration Center at the University of California, Davis.

What happens over the next few months will determine whether Europe will face the added cost of large-scale resettlement that has the potential to reshape the economic landscape.

European economies are still recovering from the pandemic and face stubborn supply chain constraints and high inflation. As expensive as providing short-term relief to families temporarily displaced by war, the cost of integrating millions of people in the long run will be enormous and the housing, education and health care systems will be under immense pressure. While a huge influx of workers, especially skilled ones, is likely to increase a country’s output over time, it may intensify competition in the job market. About 13 million people were unemployed in the EU in January.

“It is uncertainty that now dominates the economic calculation,” Mr Perry said.

More than three million refugees fled Ukraine in less than three weeks, according to the UN International Organization for Migration, and millions more are likely to follow as the war.

Officials, migration experts and economists say it is too early to say whether the majority of displaced Ukrainians will remain here.

This is in stark contrast to 2015, when 1.3 million migrants from the Middle East and North Africa fled Europe in search of asylum after years of war and terror, fearing persecution. Return was not an option.

Officials say relatively few people have sought such protection so far. For example, out of 431,000 Ukrainians who entered Romania, only 3,800 have sought asylum. Indeed, many won over the “refugee” label.

“I don’t consider myself a refugee,” said a lawyer, Evgeny Serchev, through a translator, as he waited to cross In the northeastern Romanian city of Sirte. But with his wife, three children and their bags stuck in one of the hundreds of cars heading towards the border, he admitted he saw the part.

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The urgent humanitarian and moral matter is compelling on the face of it; Making an economic argument can be difficult. Most research, however, shows in the long term that working refugees can help economies grow, expand a country’s productive capacity, pay taxes and support grocery stores, hair salons and clothing and electronics stores. can generate more business. This is what happened in Germany after 2015 when it took in more than a million refugees, most of them from Syria.

“Economically it was a net positive,” said Angel Talavera, head of European economics at Oxford Economics.

But countries face significant initial costs.

The European Union last week pledged 500 million euros, or $550 million, in humanitarian aid, but will have to give more. “European governments are going to blow the budget,” said Klaus Wiestesen, chief eurozone economist at Pantheon Macroeconomics. This latest drain comes on top of an extraordinary amount of public spending over the past two years to fight the coronavirus pandemic.

The sudden need for more housing, fuel, food, health care services and more will further exacerbate the supply shortage. “Inflation is going to go up, up, up,” Visteson said.

In the eurozone, inflation is running at 5.8 per cent, and Mr Wisteson said he expects it to rise to 7 per cent this year given rising energy prices. They are up about a third from last year. For the European Central Bank, he said, it would make the delicate task of balancing inflation risk with recession risk more difficult.

For those living and working in Europe, this would mean less spending power in the short term. If wages do not increase, they will be poor.

For now, Ukrainians, with strong kinship, cultural and religious ties to other European countries, are mostly met with care packages and offers of free shelter, transportation and food.

At the border of Syret, volunteers reached out to Ukrainian families and offered cups of hot tea and €5 cellphone SIM cards across the street. Organizations, businesses and individuals jockeyed for the closest location to the outpost to be the first to be given chicken soup, kebabs, blankets, toothbrushes, stuffed animals and hats.

In Bucharest the government has so far allocated $49 million to cover the cost. The prime minister, Nicolae Ciuka, said he expected the EU to reimburse a large part of that.

The European Union has given Ukrainians immediate permission to live, find a job and go to school for three years – access that migrants from other parts of the world can only dream of. And some countries, including Romania and Poland, have agreed to allow refugees to receive the same social and health services available to their own citizens.

Yet past experience with refugee crises shows that such well-being often sours as influx outweighs government finances and social services such as education and health care.

Sympathy and contributions have flooded in, but the burden of actually hosting the refugees has peaked. About 1.7 million Ukrainians have streamed in Poland alone, and Warsaw’s population has increased by 15 percent.

“We are being overwhelmed,” the city’s mayor Rafal Trzaskowski said in a news interview. “We can’t improve anymore.”

Clemens Landers, a policy fellow at the Center for Global Development, said a handful of countries are taking on international responsibility and need financial help to do so.

Global institutions such as the World Bank are an important source of cheap credit, especially for the poorest European countries, which are hosting the most Ukrainians, argued Ms Landers, co-author of an analysis of the costs of the refugee crisis.

He added that international financial aid can help ease the political and social backlash that often follows the refugee crisis.

If many Ukrainian refugees stay longer than they expected, there are reasons to believe that they can be integrated into the economy relatively quickly. Many have a network of friends and family. Their level of education is no different from that of some host countries. (In Ukraine, according to the United Nations, the average number of school years in 2017 was 11.3.) And they have a record of employment.

Mr Perry at the University of California said Ukraine’s immigrants already in Europe were working in hotels and restaurants and as home helpers for seniors and people with disabilities, something that was hard to fill in places.

Despite the widespread devastation inflicted by the Russians on Ukraine, some interviewed at the border were ready to start contemplating a long future away from home.

Irina Karpenko, who was traveling in a blue Toyota van to Cyret with her three children, two sisters and her father-in-law, said they were on their way to Bulgaria. He had budgeted around €1,500 ($1,644) per person for a one-month stay. In Ukraine, she said, “we have a house, a husband, and a job there.”

When asked what she planned to do after crossing the border, Ms. Karpenko was about to respond when her sister-in-law Karina Bohtynska got up from the back seat and said: “Go back home.”

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