The Financial Burden of the Refugee Crisis on the European Economies Abstract

TheFinancial Burden of the Refugee Crisis on the European Economies


Theinflux of the refugees in the European countries in the year 2015 wasslightly higher than one million. Currently, the inflow is unmatchedin the history,andthe makers of policies are in disarray and disagreement over themanner in which to react. The readiness of a myriad of states tooffer asylum is waning. Moreover, apart from the worries aboutpreserving the identity of the nation, the principal underlyingreason to worry about is the issue of security. Humanity requiresthat the rich countries take in refugees, regardless of the financialimplication. Nonetheless, it is still useful to consider theeconomics of the influx, such as the competition on the labor market,which may drag down the wages, and consequently pinch the purse ofthe public.


Abstract 1

Introduction 4

Reception and Screening Cost 4

Humanitarian Assistance Expenses 4

Integration Cost 5

Labor Market Expenses 6

Social Services Expenditure 6

Impact on Public Sector 7

Effect of Externalities 8

Prices and Exports 8

Financing Security 9

Refugee Migration and Management 10

Conclusion 11

Introduction Therehas been an extraordinary inflow of refugees from the Middle Eastcountries into the European continent, leading to a refugee crisis.The result is a significant impact on the European economies in a bidto accommodate them (Darityp. 53).One such impact is on the financial resources, which the refugeecrisis places on the European economies. Receptionand Screening Cost

TheEuropean countries receiving the refugees have to incur the costs ofreception, and that of screening every refugee that arrives in searchof asylum. Reception, which is the first stage in accommodatingrefugees in any country, is a costly undertaking. Screening, usuallythe second phase, is often done to ascertain the refugee conduct andidentity, before accommodating them (Eddingp. 73).Apart from reception and screening, these refugees usually need sometemporary humanitarian assistance. As such, proper diet and Medicare,especially to the young children are the essential social amenitiesthat call for the intervention of the host countries whileaccommodating the refugees. Additionally, the provision of clothingis another fundamental human need that is catered for by the hostcountry alongside other humanitarian organizations. Providing suchservices to the vast population of asylum seekers is a massivefinancial burden on the host countries.

HumanitarianAssistance Expenses

Sincethe asylum seekers have to be accommodated in the host countries,they need different types of support once they arrive. As such, it isapparent that any assistance accorded to them will require the use offinancial resources (Lachenichtp. 43).An example of help that entails the use of money is the access tohumanitarian services and the items of monetary value. The short-termexpenditure required to provide the upkeep support to the newlyarrived asylum seekers is typically substantial. It includes thehumanitarian services such as the provision of shelter and nutrition,as well as the provision of the basic income. Moreover, there aresome upfront expenditures associated with necessary local languagetraining and refugee schooling towards the fundamental way of livingin the host country. These comprise of the expenditures on varioussteps used in identifying the skills of refugees, the costsassociated with processing asylum claims, and the enforced returns ofrefugees.


Therefugees arriving in European countries are usually integrated in thehost country’s way of living. They are also given other benefitsfor individual maintenance, and to cover for their vital needs. Suchexpenditures are often substantial due to the enormous number of therefugees arriving in these European countries (Lindenp. 50).For instance, the monthly housing allowances provided to the refugeesare significantly huge. These house allowances usually depend on theavailable housing conditions in that a more decent housing calls formore house allowance. It can go as much as about €10 per month forthe single adults accommodated in the reception centers to as much as€300 per month, for those with formal accommodation. Typically, theoverall costs of processing and accommodating refugees can rangebetween €8,000 and €120,000 per application for the first year ofthe arrival of refugees. However, the figure may be reducedsignificantly if the procedure is accelerated (Murshidp. 28).Germany for instance, passesthis responsibility of&nbspreception,accommodation, and provision of benefits to the municipalities, andthen reimburses them the costs incurred throughout that period. Itis, however, impossible to compare the state figures because of thedifferent accounting periods, and the variable shares. Thestate(Germany), therefore, aims at setting aside between 70 and 85percent of the municipalities’ cost at a given time to cater forthe refugees.

LaborMarket Expenses

TheEuropean economies also absorb the refugees into the labor market.Although this acts as a burden on the countries during the initialstages, it has a subsequent benefit later on when the refugeesutilize their skills in the labor market for the benefit of theeconomy. Nevertheless, the economy will have to feel the strain ofinitial integration of these refugees, especially the weakereconomies, such as Hungary, the Czech Republic, and Croatia (Selmp. 63).The host countries require specialprograms to integrate the refugees into the labor market.On the same regard, the refugees need support and assistance to beincorporated into the labor market. Such support involves the swiftpreparation of necessary documents, absorbing those who arequalified, and improving the working conditions. The financial impacton the European host countries here regards the wage bill, and theimprovement of the working conditions of refugees absorbed into thelabor market. Williams (n. p)says, “…social housing is very necessary, and it involvesbuilding flats to provide housing to those working, in particular,regions.” Such programs require financial resources.

SocialServices Expenditure

Therefugee influx in European nations also has a sizeable impact on thehealth care systems, and facilities, which also attract a substantivebudgetary allocation. The incoming refugees increase the waitinghours at the host country’s health institutions (Williams n. p).Due to the long and desperate journeys to their destinations, thearriving refugees are usually in an urgent need of medical attention,especially the children and the elderly. The majority of the refugeesare often subjected to treatment and isolation against communicablediseases when entering these European countries. As such, it is veryexpensive for the European countries to fund these health careservices, and to purchase the necessary medicine for the refugees. Asa result, the allocation of the healthcare budget in the Europeancountries becomes a strain, hence leading to the financial burden.

Moreover,the entry of the refugees into the European countries also leads toincreased expenditure on providing the essential services. Therefore,the economies of these states, have to cater for the increasedservices, such as caring, educating, as well as training the youngrefugee population. As such, this involves putting up the learningand training facilities in various fields and employing additionalpersonnel to perform the extra tasks, which the host country catersfor in terms of wages and remuneration. Typically, this happens whenthe large population of the refugees entering these countries isunskilled and young. Such a financial burden is often incurredupfront during the arrival of the refugees, but it lessens andbenefits the countries later when the educated and trained refugeescan provide labor, and revenue, which is in the form of taxes.

Impacton Public Sector

Theother aspect of the financial burden on European economies is theeffect of the refugees on the public sector. The fiscal costs and theincreased demand on essential utilities such as water supply andinfrastructure also impact on the country’s economy (Selm p. 40).Therefore, in the short term, the effects of these refugee deriveddemands on the European economies is negative. Such an increaseddemand is likely to force the governments to increase taxation, or toforego alternative public sector investment options into for exampleincrease the investments in the water provision services and theinfrastructure development.

Effectof Externalities

Theplaces where refugees live usually incur the externalities indirectimplications, which are typically in the form of the unpriced costs.Such externalities usually dent the economies’ income earning fromother sectors, such as tourism, which contributes to the revenuecollection. Furthermore, congestion and degradation of the alreadyenvironmentally precarious informal settlements in urban areas dentthe countries’ public image (Murshid p. 33). The remedy for suchlosses usually lies with the economies’ finances in planning forcorrective measures, and employing the means to curb impacts ofexternalities.

Pricesand Exports

Theentry of refugees in some of the European countries poses a financialrisk in that, the economy cripples, and experiences a slower growth.This is a burden since the economy lacks reliable systems to sustainthe vast number of the refugees.The annual growth rate of such an economy declines by a percentagepoint (Linden p. 45). The home prices and imports rise significantlyto sustain the rising population, the total volume of exports dropsdue to increased domestic consumption, and the informal economyemerges due to the existing fundamental human needs, such as housing,among others (Linden p. 45). Subsequently, the inflation increasesbecause of the surges in demand, without an equal correspondingincrease in production.


TheEuropean economies require an enormous portion of financialallocation on the security threat posed by the influx of refugees intheir countries. On that note, there is surveillance at the bordersof the European countries, which regulates the arrivals of therefugees in these countries. The reason is to ensure that therefugees are subjected to the necessary screening. Then, they areissued with appropriate documentation. The documentation ensures thattheir identification as asylum seekers is approved by the particularhost European country. Such expenditure is a burden to them.

Impactof external borrowing and taxation

Thepresence of refugees in the European countries, such as Turkey,causes economic tensions between them and the locals, as well asbetween them and the governments. This arises due to the activitiesof the refugees, such as illegal working in the informal sectors,engaging in illegal activities, such as smuggling of jewelry inDenmark, and tax evasion. As such, thereis unfair competition between those businesses that employ illegalworkers and the companies that do not hire illegal workers.Such practices usually deny the economy some revenues through wages,and taxation (Lachenichtp. 70).Apparently, this, in essence, leads to the financial burden on theeconomy.

Itis evidenced that some refugees who often have a lower level ofeducation and working experience displace the native workers inoccupations that require a high degree of specialization. Many of therefugees manage to find jobs in the service sector, especially intaking care of children and the elderly in the host countries. Assuch, this leads to an increase in the labor supply within thedomestic service sector. Thus, the influx of low-skilled workersusually puts the wages of the domestic low-skilled workers underpressure. It thus places a financial burden on the host governmentsregarding taxes, as the income of the refugees contributes less tax.

Thecost of settling the refugees who seek asylum in European countriesis enormous to some weaker economies. It is also unsustainable forsolely relying on state’s fiscal resources. As such, this forcesthe European countries to seek international borrowings, grants, anddonations, which would otherwise be intended for other economicprojects. The depletion of the countries’ fiscal resources leads toa tumble in the countries’ G.D.P. Nonetheless, the borrowings toenable the refugee funding bulges both the foreign, and the domesticdebts. Hence, the European countries experience a burden on theirfinancial expenditure in dealing with this crisis.

RefugeeMigration and Management

TheEuropean economies that host huge numbers of refugees usually havethe responsibility of meeting the migrating expenses of the refugees.The greater the refugee to citizen ratio, the more expensive it is tohost the refugees. Hosting refugees constitute a heavy financialburden on European countries’ public finances. As a result, thissubjects these economies to financial losses that are estimated to behalf of the total amount of financial and economic income of thecountry (Lindenp. 45).As such, this leads to a higher dependability on international loansand grants. Apparently, these are huge financial losses to such aneconomy.

TheEuropean economies with unfavorable economic conditions often sufferfrom the compounded economic problems, which limit their abilities indealing with the increasing refugee influx. The economies with arelatively higher domestic poverty level and high unemployment rateare often overburdened with the added responsibility of managing therefugees, thereby exerting pressure on the European governments.


Thecurrent influx of refugees in the European countries cannot beunderestimated. The issue has become a crisis, and as such, it hasbrought about a myriad of implications on the European economy. Thesignificant impact caused by the crisis of refugee influx in Europeis the fact that it poses a financial burden on the economy of theEuropean countries. The financial burden is usually caused by theexpenditures incurred on these refugees, and these costs include thereception and screening costs, humanitarian aid costs, integrationcosts, as well as the labor market expenses, and expenditures onsocial services. The refugee inflow in Europe also poses challengeson prices and exports, public sector, exports, and prices, as well ason security of the European nations, which requires the use offinances.


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