The surge of refugees in the EU can have a positive economic impact provided they are promptly integrated into the labour market, according to an IMF study presented by Bergljot Björnsson Barkbu, the IMF’s Deputy Resident Representative to the EU, at an EIB Institute seminar.

The dramatic increase in first-time asylum seekers, mostly coming from Syria and Afghanistan, (1,140,000 through November 2015, up 128% over the same period in 2014) is testing the limits of the EU’s institutional framework and is not going to stop as long as the situation does not improve in these countries, she said.

However, the report argues that there are long-term economic benefits for Europe, if the labour market efficiently integrates refugees: by 2020, GDP for the EU as a whole could rise by about 0.25%, and between 0.5 and 1.1% in countries with high concentrations of migrants, such as Germany, Sweden and Austria.

The report urges EU Member States to remove barriers to refugees entering the labour market, including rules that prevent those with pending applications for asylum from working, and advocates high statutory minimum wages. Wage subsidies – for private employers hiring asylum seekers – training, and access to temporary employment agencies, are other useful tools. Removing restrictions on refugees’ geographic mobility, including housing, would allow them to move to areas of the EU where demand for labour is high, says the report.

Most countries should be able to absorb the immediate fiscal cost within their Stability and Growth Pact targets but there are major operational issues says the report. Refugees can also help reduce demographic pressure in an ageing EU but will not solve the problem.

However, failure to integrate refugees and migrants into the labour market could drive up government debts and overall unemployment rates, states the report.

Click here for the presentation.