It may not be a pressing matter for financial markets right now or even in the near- to medium-term, but nevertheless, the ongoing migrant crisis in Europe is an issue of such magnitude that it will certainly have repercussions for Europe, European economies and markets. Here are some key points for investors:
A Multi-Year Issue European Union interior ministers last week approved a plan for all member countries – even those that opposed the scheme – to divvy up 120,000 migrants among them. That figure, though, is just a drop in the ocean, said Michael Testorf, portfolio manager at R Squared Capital Management. “The number of migrants and refugees in Europe is something we’ve never seen before, and the amount of people coming in over the next years is going to continue to rise,” he said. “In Germany alone, we’ll see immigrants coming in to the tune of more than one percent of the entire population of the country.”
Strained Public Finances
The number of migrants pouring into Europe is going to strain Europe’s public finances and even the most resilient European economies will have problems, said Lauren Goodwin, associate practice leader for global analytics at Frontier Strategy Group, particularly given the EU’s stringent budget deficit limits. She believes the greatest impact will be felt in Southern and Eastern Europe, where there’s less “wiggle room” and therefore more room for civil unrest. “Greece, for instance, is undergoing a massive economic crisis of its own and now there’s this sudden perception of resources having to go to help Europe more broadly, which could cause problems and unrest in the population.”
The migrant issue could also stoke nationalist and extremist politics, an issue that’s already key in Europe and that could come to a head in 2017 and 2018, during big elections in Spain and France, among others, where extreme political parties could gain the upper hand.