Border controls and passport checks would cost Europe up to €100bn, report claims

The return of border checks across the 26 members of the Schengen passport-free travel zone would reduce GDP by 0.8%, according to the French Government

The future of Europe’s passport-free travel zone is hanging in the balance. EU ministers are on the verge of agreeing to suspend it for two years in response to the refugee crisis. (AFP/Getty Images)

The European economy could lose as much as €100 billion (£76 billion, $109 billion) within 10 years if border checks and passport controls are reintroduced, according to research by the French Government.

The return of border checks across the 26 members of the Schengen passport-free travel zone would reduce GDP by 0.8 per cent – the equivalent to more than €100 billion – it said.

The future of Europe’s passport-free travel zone is hanging in the balance. EU ministers are on the verge of agreeing to suspend it for two years in response to the refugee crisis.

Klass Dijkhoff, the Dutch migration minister, has said member states will ask the European Commission for permission to extend border controls from May onwards if they cannot stem the flow of refugees from the Middle East and Africa.

Six Schengen members have reintroduced controls since last year: Germany, Austria, France, Sweden, Denmark and the non-EU member Norway.

Border controls are allowed for a maximum of six months. Commission officials are examining how the legal framework can be used to allow a further two years of controls at internal borders.

France Stratégie, a French Government agency, said that restabilising borders would be equivalent to a shadow tax of 3 per cent on goods. Trade between countries could decrease by 10 to 20 per cent across the Schengen area in the long term, it said.

Half of the cost would be due to a drop in tourist visits, 38 per cent because of the impact on cross-border workers and 12 per cent to the additional cost on freight transport.

An additional impact on labour mobility, foreign investment and financial flows can be anticipated but is difficult to quantify, according to the research.

For France alone, the cost would be €1 billion to €2 billion in the short term, and €10 billion over 10 years.

“Rolling back the Schengen Agreement and reintroducing border controls would generate unavoidable friction that would have an impact on the movement of people, goods and services, as well as economic activity,” the research concluded.

Researchers said the Schengen Agreement was as essential part of free movement in Europe.

“Revoking such an agreement might have important consequences for the European project. While this risk is difficult to gauge, it can certainly not be ignored,” the research said.

The Schengen Area, created in 1995, established one of Europe’s key principles – freedom of movement across 26 countries.

The area includes 22 out of 29 European countries with Norway, Switzerland, Iceland and Liechtenstein. Bulgaria, Croatia, Cyprus and Romania are waiting to be admitted, while both Ireland and the UK have opted out of the agreement.