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Control: How a Fear of Foreigners Is Gripping Europe When Its Economy Needs Them Most

11 minute read
Carla Power / London

Three scenes from Europe’s winter of discontent: In a central market in Florence in December, a far-right extremist armed with a .357 Magnum kills two Senegalese migrants and injures three others before turning the gun on himself. In Brussels, the Dutch block fellow E.U. members Bulgaria and Romania from entry into the Schengen area — the 26-country zone where Europeans can travel freely without passports — citing fears of corruption and crime. In the French coastal city of Toulon, President Nicolas Sarkozy kicks off his campaign for this spring’s elections with warnings that Europe is too exposed, “open to the winds” of cheap imports from China and migration from Eastern Europe and beyond.

Three very different events in three European countries, all pointing to a shared regional mood: a fear of a borderless Europe and the foreign influences it brings. The euro crisis has exposed the cracks in the European Union’s fiscal unity, triggering talk of a two-speed Europe and tensions between northern lenders and southern debtors. But it has also fueled anxieties about the much broader and deeper issue of identity, spawning debates on who is allowed to be European and who is not. At precisely the moment E.U. leaders are calling for closer integration to save the euro, Europe’s mood has swung toward nationalism and xenophobia. “At the time that Europe needs more market-driven reforms, the political climate for those kinds of reform has become very unfavorable,” says Simon Tilford, chief economist of the Centre for European Reform in London. “People feel threatened.”

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All the better for Europe’s populist-extremist parties, which have seen unprecedented growth over the past two years. Mainstream politicians — particularly those facing upcoming elections, like Sarkozy — have ratcheted up the rhetoric on national identity and attempted to bolster their countries’ borders. A 2011 report on right-wing extremism from the London think tank Chatham House found that 30% to 60% of European voters believe there are too many immigrants in their country. “It was always assumed that the rise of nationalism would be an awkward passing point that Europe would travel to en route to integration and greater stability,” says Matthew Goodwin, a political scientist and author of the report. “That passing point is going to be much longer than we’d anticipated.”

The ramifications for European economies are grim. The rise of extreme parties in Greece — which now account for roughly half the Greek vote, up from one-third a few months ago — could set back an E.U. deal to right the country’s economy. Bulgaria and Romania, which were set to enter the Schengen passport-free zone in September, have been put off until 2015. And last spring, the Danish and French governments challenged the Schengen policy by reintroducing limited border controls. If moves like those continue, a more tightly guarded Europe — one constrained by border disputes, trade barriers and a static labor force — could lead to as much as a 25% to 40% haircut in cross-border trade within five years, according to Pankaj Ghemawat, professor of global strategy at IESE Business School and author of World 3.0: Global Prosperity and How to Achieve It. A drop-off in migrant labor would be especially damaging, given the continent’s aging workforce. Europe’s biggest economic gains “come from reducing barriers to people-flow,” says Ghemawat.

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Generation Bifurcation
The Euro crisis makes it all too easy for E.U. countries to forget the boons of belonging to the world’s largest trading bloc and for Schengen’s 400 million citizens to ignore the benefits of passport-free travel. After Europe’s physical and tax barriers were abolished in 1993, trade between member states rose by between one-third and two-thirds. The E.U.’s so-called four freedoms — the movement of goods, capital, services and people — have helped it weather a globalizing economy. As a region, Europe leads the world in terms of integration with other nations, according to the 2011 DHL Global Connectedness Index, with European countries filling seven of the top 10 slots. Today, about two-thirds of E.U. member states’ trade remains in the E.U. The region’s capital flows in much the same way: over two-thirds of it remains in Europe. “The extent of mutual dependence is just grossly under-estimated,” notes Ghemawat. “You talk to Germans and mention that 60% of their exports are to other Europeans. They’re so used to thinking that they’re global, they’re a bit shocked to discover that the E.U. still matters to them.”

But for Brussels, dictating a shared sense of purpose isn’t easy in a region where unemployment rates range from Germany’s 7.1% to Spain’s 20.1% and per capita GDP spans from Bulgaria’s $6,300 to Luxembourg’s $104,400. For earlier generations of young Europeans, a borderless Europe meant cheap flights, educational exchanges and the freedom to live and work across Europe. For today’s youth, it’s likely to mean Brussels-imposed austerity and declining living standards: in eight European countries, 30% of young people are unemployed. “For the last generation, the idea that European integration is the future was something you just didn’t question,” says Hugo Brady, a senior research fellow in Brussels at the Centre for European Reform. “That’s no longer true. This generation lacks the will to reverse European integration. They’re not going to rip the system down, but they’re not sure how to make it work. So they’re sort of stuck.”

Before the recent crises, a unified Europe was an easier sell. In the 1970s and ’80s, with memories of World War II still fresh, a common market that turned former enemies into trade partners didn’t just seem like good economic sense; it seemed like magic. In the 1990s, the fall of communism helped boost the notion of a common European identity along with national economies. After the E.U. enlargement in 2004, the new East European members saw their living standards rise, their unemployment rates drop and their GDPs rise by an average of nearly 2% a year. Those who migrated to work in Western Europe could see income gains on average of over 100%, according to a 2007 report for the German Marshall Fund. Enlargement helped rich West European nations too. Their GDP-growth rates held steady at just over 2%, their output grew from increased trade and investment, and most of the E.U. 15’s unemployment rates dropped. As a whole, labor mobility within the E.U. adds about 0.3% to the E.U.’s aggregate GDP, according to the European Commission.

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But the economic gains of a unified Europe have been unevenly distributed, and that’s where the potential for populist discontent lies. The German Marshall Fund study found that white collar jobs were affected less by intra-European migration than blue collar ones, which saw the new competition from migrants resulting in falling wages and job losses. “A country can get collective gain, but there can be individual losses,” notes Ulrike Guérot, a senior research fellow at the European Council on Foreign Relations. “After enlargement, Germany had a double-digit rise in trade with Eastern Europe. But a low-skilled worker facing competition from across the border won’t feel those gains. That’s the legitimacy gap facing the European Union — and that’s the policy gap that creates populism.”

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Seeds of Discontent
Right-wing nationalists have found fertile ground in that gap, attracting the young and disillusioned, mostly male and relatively poorly educated. Though Europe’s far right tends to recruit among the lower-middle and working classes — people hit hard by the region’s fiscal woes — supporters are far more likely to say they are more afraid of losing their national identity to migrants than losing their jobs. One study found that worries over an erosion of “cultural unity” were nine times as important to right-wing populist voters as crime or the economy. It is the scourge of multiculturalism that most worries Daniel Carlsen, a rising presence in the far-right scene in Denmark. Just 21, he’s already renounced his earlier ties to a Danish Nazi party, which he quit last year, and founded the Danskernes Parti, or the Danes Party. “We’ll have an ethnic immigration policy that says non-Western people should not come to Europe or at least to Denmark,” says Carlsen. “Non-Western foreigners are threatening our way of life, not just because of Islamic rituals but because of exploding rates of crime.”

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Extremist parties like Carlsen’s may be small, but over the past two years, xenophobic populism has bubbled up into national and European legislatures. In 2010 the far-right Swedish Democrats gained 5% of the vote. The same year, Geert Wilders — an outspoken anti-Muslim who once compared the Koran to Mein Kampf — led the Freedom Party to become the third largest party in the Netherlands and a key ally for the government. In Austria in 2010, a poll found that the most popular political party among young Austrians was the far-right Freedom Party. And in the 2009 European parliamentary elections, 12 countries — from Belgium and Britain to Bulgaria and Slovakia — sent populist extremists to Brussels. “Since World War II, we have never had so many right-wing extremist parties in national parliaments, and we have more than ever in the European Parliament too,” says Cecilia Malmström, the E.U. commissioner for home affairs.

The Balancing Act
Conscious of the rise of populist xenophobia on the fringes of European politics, mainstream leaders have ramped up their rhetoric casting doubts on integration. Britain’s David Cameron, Germany’s Angela Merkel and France’s Sarkozy have all distanced themselves from earlier multiculturalist policies. The baldest rejection came in 2010 from Merkel, who said Germany welcomed immigrants but that its multi-culturalism project had “failed, utterly failed.” Parliaments have passed laws promoting so-called national identities, with the French and Belgians banning burqas and the Netherlands requiring migrants to take lessons in the Dutch language and Dutch culture. “Right-wing populism can become significant by affecting the political debate as a whole, pushing government policy into illiberal territory,” says Thomas Klau, senior policy fellow at the European Council on Foreign Relations. “There’s a temptation for mainstream parties to integrate some of the agenda of the more extreme anti-migrant forces into their own policies.”

The most glaring example of this trend lies in France, where Sarkozy’s chances of re-election this spring may hinge on his wooing supporters from Marine Le Pen’s National Front (NF). As with many other right-wing parties across Europe, Le Pen has successfully padded out the NF’s old anti-migrant message with new economic critiques of the E.U. She’s airbrushed out the crude racism of her father Jean-Marie’s NF, presenting herself instead as an anti-euro, anti-Schengen candidate who wants to protect French interests from Brussels and foreigners. At E.U. summits, Sarkozy is Merkel’s greatest ally in pushing for tighter fiscal integration. At home, he’s made sure to be seen as a defender of French values who’s tough on migrants from Eastern Europe and beyond. In 2010 his government deported hundreds of Bulgarian and Romanian Roma from makeshift camps across France. And last spring, he temporarily closed his borders to hundreds of Tunisian migrants fleeing the upheavals in North Africa. The episode led to a scrap with Italy, which was angered by the lack of E.U. solidarity over its migrant crisis, and a joint petition with then President Silvio Berlusconi to revise Schengen’s border rules. Securing Europe was a theme Sarkozy repeated in his recent Toulon stump speech: “Schengen,” he said, “must be rethought.” Doing so could be expensive. A rollback on Schengen, says economist Tito Boeri, could cost about 0.5% of the E.U.’s GDP.

Similar border disputes have cropped up elsewhere. After the Bulgarians and the Romanians were blocked from entering the Schengen area this fall, E.U. member Romania retaliated with what the Dutch media dubbed the “war of the flowers,” stopping trucks carrying Dutch tulips at the border, claiming concerns over bacterial infections. A salve for Romanian pride, perhaps, but building up borders sets a dangerous precedent economically. Ghemawat notes that after a border went up between the Czech Republic and Slovakia following their “velvet divorce” in 1993, trade between them dropped by three-quarters over four years.

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Rebalancing a two-speed Europe will require just the opposite, especially as the continent ages. Promoting internal migration and open trade in the E.U. “was a good idea when times were good. It’s an even better idea now,” says Ghemawat. A European Commission study predicts that Europe will need 56 million migrants by 2050 to compensate for the anticipated falloff in domestic workers. “To boost growth, we have to get people with the best skills — wherever they come from,” says E.U. commissioner Malmström. The question is whether national leaders can muster the courage to tell their citizens so.

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