ULI CONFERENCE 'Toxic mix' of immigration and populism threatens European stability

A 'toxic mix' of immigration and populism is threatening European stability and its economic development, delegates at the annual conference of ULI Europe in Paris heard on Wednesday.

In the past 70 years the EU has enjoyed an extended period of peace and great prosperity, but with immigrants from war-torn Syria and other non-European countries continuing to seek new routes to Europe, there is a very real threat of more nation states rising within the EU alongside the ongoing risk of a Brexit, according to British author and Sky News journalist Tim Marshall.

‘Unless somebody sorts it, the EU will potentially fail,’ he told delegates at the annual conference of ULI Europe in Paris on Wednesday. ‘It has fallen apart very quickly…it’s now all at risk.’

He added that he did not see the current dissatisfaction within the EU and liberal European values as a blip in 2,000 years of European history but as a very real threat to the future of the EU. The rise of immigration and the drift to the right of populist and even fascist political parties in Europe are a toxic mix that could have far-reaching consequences on the further economic development of the region, he added.

‘What troubles me is the influx of people that is changing our societies and causing a political drift to the right across Europe from Greece and Spain to Sweden, Hungary and Finland...in Greece 500,000 people voted for Golden Dawn which is a proper fascist party,’ he pointed out. ‘When you look at history, it’s not inevitable that we progress.’

He pointed to recent riots in Paris and in the UK and the example of the Swedish authorities taking valuables away from desperate asylum seekers at their borders. ‘The biggest fear is not immigration but the rate at which it’s happening. I can foresee refugee camps with 250,000 people in Greece and Macedonia. When the rioting begins, what do we do then?’

Europe’s political leaders are ‘stuck in an ideological prison’, he added. ‘Their populations have left them years ago. They don’t get it; they have no concept of their concerns. There’s a lot of mistrust and a huge dissatisfaction with Brussels.’

Brexit also still looms large amid ongoing negotiations between UK prime minister David Cameron and EU authorities. Marshall predicted that there would be a domino effect if the UK gets its way with EU negotiators on new terms for its continued membership of the EU. ‘If the UK wins, other countries would want to carve out a bit for themselves as well,’ he stated.

New rules needed
The current level of geopolitical risk is toxic, agreed Michael Heise, group chief economist at German insurer Allianz. ‘We don’t know how will play out. What’s unique is the unpredictability of the situation. The question about how Europe will come out is hard to forecast, but it will have an impact on economic development,’ he said.

He also conceded that what Marshal described as ‘a cuddly Europe’ would have to change its rules for immigration. ‘We need to create different rules and laws for economic migrants. It’s the wrong thing to do to use the way of asylum rights.’

Heise added, however, that he was fundamentally optimistic about the future of the EU. ‘I think we will see action with the escalation of more asylum seekers coming into Europe. The Schengen area may be abolished and things may escalate in Greece. But policy makers will not let the EU fall apart,’ he predicted. ‘It’s too big to fail.’

That said, the ongoing turmoil in financial markets is adding another layer of uncertainty, he noted. ‘It has been a bad start of the year for financial markets, with geopolitical tensions in the Middle East, in particular Saudi Arabia and Iran, disaccord in Europe about ongoing migration flows, and a feeling that we are not in charge.’

The slowdown of the Chinese economy and capital outflows out of this market as well as other emerging markets, is also causing havoc on financial markets, he added. ‘There has been a lot of bad news, the oil price has decreased massively and we are seeing a lot of volatility on markets. That volatility is here to stay, all the risks are not going to disappear.’

Nevertheless, assuming the status quo will remain basically as it is, relatively favourable economic conditions should then prevail, he continued. ‘We are seeing fairly decent economic growth, despite the turbulence on the stock markets and the more risky financial segments.’

Low oil prices will boost demand
And while the collapse of the oil price is clearly bad for oil producers, for the huge majority of economies it is a big boost to private consumption, he pointed out. ‘For demand, it should have a net positive effect. Production costs will go down which will also have an impact on the supply side of the economy…the industrialised world will continue to grow at a decent rate. We are predicting around 1.8-1.9% growth for Europe, while the figure for Germany and the US will be above 2%.’

In addition, the weak euro means that exports are doing well while reforms in the peripheral countries of Europe are starting to reap the fruits of their efforts, he said. ‘Spain and Portugal have done a lot to improve their economies, so has Ireland. Ireland posted growth of over 5% last year while Spain turned in 3%.’

France and Italy are also slowly getting back on track, Heise said. ‘Italy’s performance has been quite impressive. And now France is surely but slowly implementing reforms to boost employment, cut taxes and streamline the public administration. In terms of GDP numbers, these countries are doing OK. If confidence grows and sentiment changes, that should take a bit of wind out of the sails of the populists.’