Europe’s Main Economic Problem May Surprise You
On February 9, 2014, just over 50 percent of Swiss citizens voted in favor of a referendum restoring quotas for immigrants coming from other EU countries. Switzerland, a country of eight million, is not an EU member but has negotiated several agreements with the EU guaranteeing the free movement of goods, services, people and capital between itself and the rest of the EU. As a quota system would limit the number of EU citizens allowed to work in Switzerland, all these bilateral agreements would have to be renegotiated because if one element is changed, everything falls apart (“Guillotine clause”). This vote was somewhat unexpected in Brussels and other European capitals as the Swiss economy is highly integrated with the EU. Fifty-six percent of Swiss exports go to the EU, Switzerland is home to five of the top 50 European companies by market capitalization, skilled immigrants are in great need while the unemployment rate is only 4 percent, and the government budget is in surplus.
Moreover, most Swiss immigrants are European, highly skilled, and in great demand (45 percent of workers in the chemical, pharmaceutical and biotech industries are foreigners). In a country where French, German and Italian are spoken, it should not be too difficult to absorb a fairly large number (23 percent of the population) of foreigners. However barriers such as language impose greater difficulties than one might expect. The second largest group of immigrants, Germans, speaks standard German, which is quite different from Swiss German, and immigrants’ efforts to speak Swiss German are met with ridicule. The immigrants are blamed for a range or problems, including overcrowding, rising property prices and degradation of the environment. Although the anti-immigrant vote barely passed (by a margin of fewer than 20,000 votes), it is a significant victory for the ultra-nationalist Swiss People’s Party (SVP). Ultra-nationalist parties in other European countries, notably France, Finland, Netherlands, Austria, the U.K., and Germany have sought to capitalize on the Swiss vote. Marine Le Pen, head of the French National Front, said on French radio after the Swiss vote: “The country is our house. We the people have the right to decide who comes in.” Incidentally, most of these other European countries have relatively small percentages of foreign born residents (France 6 percent, UK 8 percent, Netherlands 4 percent, and Germany 9 percent).
As other extreme right-wing anti-immigration groups outside Europe, such as the Tea Party movement opposed to legalizing the 11.5 million undocumented immigrants living in the U.S., the European ultra-nationalist parties use the economic crisis in support of their opposition to immigration. Ultra-nationalist parties are opposed to both the EU and the euro and emphasize only the costs of integration. They indoctrinate and inflame the natives with the fear of immigrants who supposedly take their jobs and commit crimes while the EU governments do a poor job explaining the benefits of European integration, admittedly a difficult task in these times of severe recession. On one side, EU Governments argue about technical issues such as Outright Monetary Transaction, European Stability Mechanism, Single Resolution Mechanism, Deposit Guarantee Schemes, and full versus partial Euro-bonds with joint liability or without joint guarantees; on the other side, the ultra-nationalist parties offer the simple message that immigrants contribute to domestic economic problems. Which message is more likely to appeal to the majority of EU citizens, simple populism or complex economic messages?
Pierre Canac, Ph.D.
Associate Professor of Economics