JACKSON HOLE, Wyoming: An influx of foreign workers has given the eurozone’s economy a boost in recent years, helping offset shorter working hours and lower real wages, European Central Bank President Christine Lagarde said on Saturday. Migration into the European Union pushed its population to a record last year despite declining births but governments are placing curbs on new arrivals in response to domestic discontent.
Lagarde listed a rise in the number of workers from outside the 20 countries that share the euro as a factor that supported the bloc’s economy despite a growing preference for fewer working hours and a fall in living standards in some sectors.
“Although they represented only around 9 percent of the total labor force in 2022, foreign workers have accounted for half of its growth over the past three years,” Lagarde said in a speech at the US Federal Reserve’s annual symposium in Jackson Hole, Wyoming. “Without this contribution, labor market conditions could be tighter and output lower.”
She said gross domestic output in Germany would be around 6 percent lower than in 2019 without foreign workers and added Spain’s strong economic performance since the end of the COVID-19 pandemic also owed much to the contribution of foreign labor.
The EU’s population rose to a record 450.4 million people last year as net immigration offset a natural population decline for the fourth straight year. But this has come at a cost of political backlash from local voters, who have increasingly turned to far right parties.
Germany’s new government, for example, has suspended family reunification and resettlement programs as it seeks to regain support from voters drawn to the Alternative for Germany.
In the United States, President Donald Trump has stepped up arrests of immigrants in the US illegally, cracked down on unlawful border crossings and stripped legal status from hundreds of thousands of migrants since his inauguration.
The trade deal between the US and the EU is close to the baseline assumed by the European Central Bank, but uncertainty persists in key sectors like pharmaceuticals and semiconductors, Lagarde said on Wednesday. The EU accepted 15 percent tariffs on most items in the deal agreed last month, averting an all-out trade war and providing businesses greater clarity, even if the new barriers slow economic growth. “The trade deal establishes an effective average tariff estimated to lie between 12 percent and 16 percent for US imports of euro area goods,” Lagarde said in Geneva.
“This effective average tariff is somewhat higher than – but still close to – the assumptions used in our baseline projections last June,” she said. “The outcome of the trade deal is well below the severe scenario for US tariffs of over 20 percent.” The ECB’s baseline projection assumes economic growth of 1.1 percent next year while the “severe” outcome would have lowered this to 0.7 percent, the ECB’s June projections show. — Reuters