IMF’s Christine Lagarde Tells Europe Refugees Can Boost the Economy

Influx from Syria can be a stimulus rather than a burden if governments adopt policies to facilitate refugees’ entrance into the workforce, she says.


An influx of refugees from Syria, the Middle East and North Africa has roiled European politics, raising security fears across the continent and giving a boost to right-wing nationalist parties in many countries. But rather than seeing refugees as a burden and a threat, governments should see them as a much-needed stimulus to their economies, says the head of the International Monetary Fund.

Countries with high refugee flows such as Germany, Austria and Sweden could experience a boost in their growth rates of as much as one percentage point a year by 2020, while the European Union as a whole could see an annual bump of 0.2 points, Managing Director Christine Lagarde told a seminar at the IMF-World Bank spring meetings in Washington on Wednesday. “In a region where average growth is about 1.5 percent, 0.2 percent is worth looking at,” she added.

IMF research earlier this year predicted a modest short-term stimulus from government expenditures on refugees, amounting to 0.13 percent of gross domestic product EU-wide by 2017. The positive effect should increase as more asylum-seekers find employment and spend their earnings, assuming the newcomers follow the integration pattern of past immigrants. To speed the transition to work, the fund recommended that countries experiment by subsidizing employers who hire refugees, or by granting temporary exemptions to minimum wages. Concerns among native workers that cheaper immigrants or refugees will steal their jobs have proved largely unfounded in the past, the report said.

One experiment with accelerating refugees’ transition to employment is taking place in Jordan, the neighbor that has borne the brunt of the exodus from Syria’s civil war. Jordan houses six times as many refugees per capita as the most generous European country, Sweden, according to IMF figures. A new scheme there allows Syrians to move into blue-collar work, where they largely do not compete with the educated native work force, said Imrad Fakhoury, Jordan’s minister of planning and international cooperation, who shared the stage with Lagarde. “We have found a way to expand the economic pie of Jordan but not displace Jordanians from their own jobs,” he said.

Nonetheless, the burden of accepting displaced neighbors is taking a heavy toll on Jordan’s finances, said Fakhoury, who is in the midst of negotiating a new IMF support package. “Our debt-to-GDP level is 93 percent, but it would be 73 percent without the Syrian refugees,” he said. The minister excoriated Western nations for dragging their feet on $700 million in aid committed under the so-called Jordan Pact signed in London in February. “So far this is only one-third funded,” he said. “European nations have to understand that it is ten times less costly to deal with refugees in Jordan.”

Europe has learned some important lessons from the chaos that began last autumn as refugees streamed northward, encountering a hodge podge of shifting border policies and a contentious ad hoc attempt to adopt a quota system to spread the refugees around the EU, said Kristalina Georgieva, a vice president of the European Commission, the EU executive agency, who also participated in the panel. “In the new world, we cannot deal with 28 different asylum policies,” she said. “We are working to harmonize them.” Along with a united refugee regime, Europe will develop a common border police and coast guard to control its frontier, she pledged. Until now, Greece, Italy and other states accessible to the Middle East have borne the responsibility. EU leaders have set a goal of reaching agreement on the border police and coast guard by June.

The promise of securing the border should placate Eastern European countries that have vehemently objected to Brussels’s attempts to force them to accept Muslim refugees, predicted Georgieva, who is Bulgarian. “One thing Eastern Europe knows how to do is guard the border so that not even a bird can fly across,” she said.