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The Multi-Billion-Euro Pricetag Of Shutting Down Schengen

With six European Union countries instituting new border controls, the end of three decades of free movement comes with a heavy price.

The Multi-Billion-Euro Pricetag Of Shutting Down Schengen
Marco Zatterin

BRUSSELS — Thirty years ago, the European Union's passport-free Schengen zone came into being. At the time, the International Monetary Fund estimated that the abolition of border controls on the continent would add 1 to 3% to the area's GDP growth. In the most conservative estimate the pact has brought an additional 28 billion euros in economic growth; the sum could realistically be as high as 50 billion.

This is the scale of the kinds of economic benefits that would be lost if more countries were to re-impose border control, thus ending the three decades of free movement in Europe. And even a partial collapse of the zone could harbor significant costs for all.

Schengen at risk

In this tense and tumultuous time for the European Union as a whole, Schengen is in real danger of disappearing. Buckling under the pressure of the wave of migrants fleeing war and seeking better lives, six nations have "temporarily" reintroduced border controls with other EU members. While allowed for under exceptional circumstances by the agreement, this is the first time in two decades that such a closure has occurred. In the absence of Europe-wide solutions decided at minister-level meetings, more countries could follow suit to protect their security.

Dutch Prime Minister Mark Rutte, who holds the rotating presidency of the EU for the first half of 2016, has warned that the eurozone has but a few months left to save the treaty from oblivion. He has also proposed a so-called "Schengen Plan B" — a last resort in which the zone could shrink to a core of five or six countries: the Netherlands, Germany, Belgium, Luxembourg, Austria and perhaps France. Amsterdam needs open borders with Germany to maintain the viability of the important port of Rotterdam, but could favor ejecting Italy from the treaty, which it deems too hesitant in its border enforcement.

On the other hand, EU Commission President Jean-Claude Juncker has warned that any move to end Schengen would also spell the end of the euro. He may be exaggerating, but simple math tells us that the return of border controls would impose heavy costs on all member countries.

Re-imposing border controls would affect private citizens as well as commercial transport and freight, which would have to stop at every border along their journey. "The time lost at borders would depend on what border authorities are looking for," says Guntram Wolff, director of the Brussels-based think tank Bruegel. "If they have to check every truck to ensure there are no undocumented migrants traveling in them, it would hardly be a matter of minutes."

In a speech before the European Parliament in Strasbourg, Juncker asserted that an extra hour spent waiting at the border would incur a loss of 55 euros per vehicle. Every year 60 million vehicles cross at least one European border, and if each spends even just half an hour at borders — a conservative guess. This would already cost European trade 1.6 billion euros. Poland, for example, sends 3.1 million trucks across the border to Germany every year: Ending Schengen would amount to a self-imposed tax of almost 100 million euros.

Unpredictable effects

It's almost impossible to deduce the effects border controls would have on perishable goods. Spanish fruits destined for Denmark have to cross at least four borders: How long could this take on a day with high traffic? This would put "just-in-time" commerce at risk and force a revision of global distribution strategies. "The potential harm to producers is far higher than that to consumers," explains Wolff.

There are also 1.7 million cross-border commuters, who Wolff says could lose 3 to 4 billion euros a year from renewed border controls. This number balloons to 5 billion euros if you include the 200 million citizens who spend at least one night in a bordering country, who would face significant time and opportunity cost from border checks.

The end of Schengen would also be costly for states, not just for their citizens. Denmark is spending 150,000 euros a day — 50 million a year — for added security checks on the Öresund bridge, which connects the Danish capital to the Swedish city of Malmö.

German authorities estimated additional costs of at least 100 million euros a year for new controls on the country's nine borders, although this could rise to several billions. All of these costs threaten a weak continental economy still struggling to recover from two crises, and endanger the freedoms and well-being that Schengen has brought. The end of Schengen would not only make life and business difficult, but would also cost far more than declaring any war on terrorism. We must weigh the pursuit of a few thousand terrorists with Shengen's benefits for 500 million Europeans.

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