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back to index backGLOBALtalk March,  2016


Schengen: Europe’s Free-Travel Zone Faces Possible Demise, With Heavy Cost To European Businesses

The European Union reveres the four freedoms” — free movement of people, goods, services and capital — that its existence is intended to guarantee. Now, as thousands of migrants flood into Europe from such war-torn nations as Syria and Iraq, leading to checks reintroduced on some borders, the region is facing a harrowing situation in which curbs on one of them, people, will have ripple effects on the other three.

The two questions of freedom of movement for people and freedom of movement for commerce are not necessarily related,” said Camino Mortera-Martinez, a research fellow at the Center for European Reform in Brussels. But the closing of the border would create enormous obstacles to trains and trucks.”

Those trains and trucks carry commerce throughout the 28-nation European Union, and economic catastrophe looms if countries can’t agree on a new system that preserves freedom of movement within system.

The introduction of border controls that snarl commerce could shave 0.1 percent off intra-EU trade, a cost of $1.1 billion per year to German-Austrian trade alone, according to one study. If new controls require companies to reconfigure supply chains, the transition costs would add to that burden. And even if the refugee crisis is limited to people — an unlikely event —hundreds of thousands of international commuters in Europe’s border-straddling regions could feel the pinch.

The prospect of reinstating border controls that most Europeans had written off as a thing of the past also looms over Europe’s economic integration, the raison d’etre for the creation of the union 60 years ago.

The name of a small village in Luxembourg that abuts both France and Germany, Schengen has come to symbolize the freedom that Europeans have to move around among 26 countries on the continent. The 1985 Schengen Agreement, first limited to five countries, has expanded as Europeans cottoned to the idea that border posts symbolized the past.

For Europeans who lived under Communist rule, the freedom to move around is particularly precious and inspiring.

Each day along 50 miles of road linking the Austrian capital Vienna with Slovakia’s Bratislava, Slovak nannies going to work in Vienna get the same treatment as Austrian bankers headed to Bratislava. At the same time, trucks linking Europe’s industrial heartland of southern Germany, northern Italy, Switzerland and Austria breeze — fed by lots of suppliers in the Czech Republic, Slovakia and Hungary — over borders, playing their part in the just-in-time delivery systems that characterize modern manufacturing.

But the system is underpinned by the premise that all members of the Schengen Agreement devise and enforce a common refugee and asylum policy, and right now that’s not the case, especially in Greece. So, refugees are heading to countries that seem the most welcoming, notably Sweden and Germany, creating a backlash elsewhere, and giving a taste of things to come.

The imposition of temporary border controls across some parts of the EU’s Schengen zone is already disrupting cross-border trade, with long traffic jams and rising costs for many firms,” Anna Zabrodzka, an economist with Moody’s, wrote in a recent report. To avoid even greater economic costs, the EU needs to reach an agreement soon; otherwise, those countries that rely heavily on intra-EU transport may suffer the worst of the economic fallout.”

Border checks in Germany, Austria, Hungary and Slovakia now threaten to spread throughout the EU unless countries devise a new system.

Donald Tusk, president of the European Commission, said on Jan. 19 that the bloc has no more than two months” to save Schengen at a summit planned for mid-February. This week, EU officials are pressing Greece to come up with more-effective border controls, with the possibility of a two-year suspension of Schengen’s rules if that doesn’t pan out.

Nicolas Veron, a senior fellow at Bruegel, the Brussels-based think tank, predicted Schengen is in for a rough ride.

It’s bound to get worse before it gets better,” Veron said. That’s usually a fair guess in the European Union.”

To read entire article, please click here.

Source: International Business Times - GAI





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