France warns of €100bn EU border control hit

France has warned that traffic jams and red tape caused by the reintroduction of border controls within the EU would reduce the bloc’s annual gross domestic product by €100bn.

Many EU countries, under high terrorist alert and grappling with an unceasing flow of asylum-seekers from the Middle East and Africa, are considering ways to tighten security at their borders and some are demanding the reimposition of controls on weakspots in the bloc’s external frontier, especially Greece.

The reintroduction of border controls among the 26 members of the Schengen passport-free travel zone would leave the bloc’s economy 0.8 per cent smaller than it otherwise would have been by 2025 according to France Strategie, the French government’s economic planning agency. The impact would mostly stem from reduced tourist spending and trade.

“The short-term costs of reinstating controls, albeit not negligible, are limited, but if those controls were in place permanently, it would have a much bigger impact on trade and jobs longer term,” Jean Pisani-Ferry, head of France Strategy, told the Financial Times.

Many countries including Germany and France have triggered an emergency clause in the Schengen treaty allowing them to perform border checks in case of a security emergency or a sudden influx of migrants.

Berlin did so last year after Germany became the preferred destination of hundreds of thousands of asylum seekers. France reinstated tighter controls following the terror attacks that left 130 dead in Paris in November.

Those exceptional checks can be extended beyond six months if the European Commission approves. EU interior ministers last week discussed the possibility of starting such a procedure, pointing to Greece’s inability to screen and process migrants landing on its shores.

Reinstating border checks will cost the French economy between €1bn and €2bn per year in the short term, the France Strategie economists estimated.

The 122m tourists who visit the country for a day would be less inclined to do so, meaning a loss of €500m to €1bn for the tourism industry per year. The number of French people working in Belgium, Germany, Spain, Luxembourg and Italy would shrink by 10,000 with the additional time and hassle of border controls — an economic loss estimated at €300m. Meanwhile, controls on trucks would cost the French economy between €60m and €120m a year.

Although manageable in the short term, the deeper economic effects would raise the cost to €10bn a year if controls remained for a long time, wiping out the benefits in trade accumulated over the years, the report concludes. Several academic studies estimate that passport-free travel has boosted trade by 10 per cent to 20 per cent within the zone.

The disappearance of Schengen would amount to an additional tax of 3 per cent on goods and services, Mr Pisani-Ferry said. France, which is struggling to rekindle growth and cut record unemployment, would see its GDP cut by a 0.5 percentage point, or €10bn a year.

“We need to find a more effective system to ensure security but we shouldn’t permanently question the principle of free movement of persons,” Mr Pisani-Ferry said. “It’s about persons but it has a big economic impact.”