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Beyond Crisis: Integrating Europe’s Migrants

A new report documents the massive influx of migrants in Europe and points to a way forward for economic and financial integration.

Beyond Crisis: Integrating Europe’s Migrants

January 30, 2018

Between 2015 and 2016, 2.5 million people sought asylum in Europe, the largest mass migration since World War II, leaving Europe to absorb a population the size of Rome.

And though the tide is starting to slow, immigration will continue to be an important source of population growth for the continent. How well are these countries integrating these new residents? A new report documents the mass migration and its impact.

The largest displacement of people since WWII

The report, by Uuriintuya Batsaikhan, Zsolt Darvas and Inês Gonçalves Raposo of the Bruegel Institute, offers a comprehensive survey of European migration, including the gap between perception and reality on the ground and barriers and progress in integrating immigrants into European societies.

Countries have been deluged with asylum applications and many are struggling to keep up with the influx. As of September 2017, nearly 1 million asylum seekers were awaiting a decision on their application. Acceptance rates are 50 percent on average.

Some countries are more accepting than others. Hungary, Poland and Croatia accepted only 20 percent of its asylum applicants, while Malta accepted 80 percent and Slovakia more than 60 percent. In total numbers, Germany has accepted the most asylum applicants, followed by Sweden and Austria.

Looking more broadly, the story of where non-EU born migrants land is sometimes surprising. As of 2015, the countries with the largest share of people born outside the EU–including refugees and immigrants—were Latvia and Estonia (14 percent of its population). The countries with the lowest share (less than 1 percent) of non-EU born residents are all in Central and Eastern Europe.

By most accounts, Europe needs immigrants. For the first time in decades, more people were dying than being born in Europe. Some countries, particularly in Eastern Europe, face severe labor shortages – the result, the authors note, of both emigration and low birth rates. Ironically, many Eastern European countries are the most restrictive toward asylum seekers.

The swiftness of integration matters to immigrants’ success. The faster migrants are integrated, the better they do and the more they contribute to their host economies. If the progress of the second generation (the children of the original traveler) is an indication, most of Europe has fallen short. In most countries, the second generation is less likely to be employed (see below), has less education and earns lower incomes than the first generation. Sweden, UK and France are exceptions. Sweden, for example, has a policy of internships and language classes for recent immigrants and is quick to resolve residency issues. Sweden, in fact, ranks first in the Migrant Integration Policy Index, a ranking of a country’s integration policies in education, the labor force, health, housing and others.

Education is very important to successful integration. Many of Europe’s migrants born outside the EU have low levels of education; however, a sizable group, 28 percent, also has higher levels of education — slightly outperforming home country natives. In fact, the share of people with tertiary education is lowest for the native-born population, and thus, immigrants help in achieving the Europe 2020 strategy’s target of increasing the proportion of people with tertiary education.

Financial inclusion matters, too

Access to banks and credit is another signal of integration. Research in the U.S., for example, shows that low-income families with bank accounts are more likely to save money, have a mortgage and vote.

Yet in Europe, policies are precluding refugees from opening bank accounts, according to a Bruegel researchers’ survey of 14 banks there.

More than 60 percent of banks surveyed say that the EU-wide “know your customer” policies for financial institutions—designed to thwart money-laundering and funding of terrorists—can be restrictive, making it hard for refugees to open bank accounts. Ironically, these laws can create financial insecurity, which may foster feelings of alienation and exclusion.

Know your customer means validating identification, but under many countries’ policies, authorities take a refugee’s ID on arrival and refugees use copies. The bank must then call immigration officials to verify the ID; a lengthy process. A 2015 report notes that even if refugees have a registration card, local officials don’t always recognize it as valid. A pan-European ID registry would solve that, the report argues.

Coordinated policies can also help speed integration. Currently, European member states are adopting different policies for financial institutions with respect to migrants. Thus, the policies for France, Poland or Italy vary significantly in the level of identification required for a refugee to secure financial access. The report suggests national authorities and the European Commission should unify their approach.

Survey respondents pointed to private-sector initiatives to foster migrant integration. Banks could offer micro-credit and other specific products that refugees need early on. Micro-credit can also support entrepreneurs who want to start a small business. Financial institutions could work with phone companies to provide refugees with access to mobile phones and the internet as a way to gather and share pertinent information, particularly for mobile cash or banking.

Finally, financial inclusion will come with social inclusion. Work, training and cultural exchange programs can smooth the path to full integration, which in turn can help families join the ranks of the financially included.

Europe will continue to struggle to integrate this mass migration of people for years to come. The Bruegel report can help inform policies and programs that tap into the expertise of both public and private sectors to promote the full inclusion of this new population—and through that, advance more inclusive growth in Europe.