Germany is ready to spend on hosting refugees
Let us set aside the cultural, interethnic and religious problems that will certainly arise from hosting such a number of refugees arriving in Germany mainly from Muslim countries. Let us focus solely on the socio-economic aspects.
The question immediately arises: who will pay for all this? The answer is extremely simple: the state in the form of federal, state and local authorities. They have the corresponding expenditure items; next year they will be increased by 6 billion euros. Thus, in the federal budget for 2015, 1 billion euros were allocated for hosting refugees; in the budget for 2016, an additional 3 billion will be added. Another 3 billion will go to the federal states and municipalities. However, Berlin assumes that total spending on hosting refugees could reach 10 billion euros in 2016.
Is that a lot or a little? According to the results of the first six months of 2015, the budget surplus of all public authorities in Germany amounted to 21.1 billion euros, half of which came from the federal government. Thus, the steady growth of the German economy and record-high employment provided Berlin with surplus tax revenues in the amount of these same 10 billion over six months.
In other words, as Deutsche Welle notes, Germany does not even have to abandon its ambitious goal of running a deficit-free budget not only in 2015 but also in 2016, thereby showing an example of strict fiscal discipline to other eurozone countries, in order to finance the hosting and maintenance of refugees. If a small deficit does arise next year, Berlin can easily borrow the necessary funds on the capital market on very favorable terms. So there is no need to raise taxes in the foreseeable future.
What will the money allocated for hosting refugees be spent on? On their initial accommodation in dormitories, on food and basic necessities, on paying them 143 euros monthly, on medical services and, naturally, on the administrative apparatus. If you think about it, it is essentially a small government program to stimulate the economy.
Instead of using the unexpected surplus to pay down public debt, Berlin is doing what its eurozone partners have long been urging Germany to do: using taxpayer money to boost domestic demand. After all, mass purchases of food and consumer goods for refugees, renting of residential containers, paying for the services of craftsmen equipping and maintaining dormitories, the work of bus drivers, translators, doctors – all of this means pumping money into the domestic market.
Of course, 10 billion from the treasury could be spent in a more innovative and efficient way, and the German economy will certainly not receive any special impulses from this money. However, in the short term, there will definitely be no negative macroeconomic effects from investments in hosting refugees (the cooling of the Chinese economy is an incomparably more serious threat).
Positive effects for the labor market include the urgent creation of new, well-paid jobs: 3,000 in the federal police and 1,000 in the Federal Office for Migration and Refugees (BAMF) in Berlin.
Thus, at this stage, hosting hundreds of thousands of refugees requires enormous organizational and logistical efforts from Germany, but does not create major socio-economic problems. However, they could arise in the medium term. If today's refugees, having received official permission to stay in Germany and all the material benefits they are entitled to by law, are content with the status of social welfare recipients and do not want or cannot find work, the financial burden on the state will begin to grow rapidly.
How great is the danger of such a development? No one knows. One can only hope that people who risk their lives and health to cross seas, borders and thousands of kilometers do not do so in order to live as dependents in the country of their dreams for the rest of their days. Especially since the vast majority of arrivals are young people with their whole lives ahead of them, and many Syrian refugees are representatives of the middle class, well-educated and clearly striving to realize themselves in a new place.
However, it is not just about the mindset of the refugees themselves. Until now, laws and administrative practices in Germany have not facilitated the integration of people granted political asylum into working life: the habit of protecting the labor market from unnecessary competition had an effect. But in the 21st century, the situation in the country has changed dramatically: the population is aging and shrinking, there is a growing shortage of labor, the retirement age had to be raised to 67 because fewer young people are paying contributions into the fund from which more and more elderly people receive pensions.
Experts have long been sounding the alarm: to maintain the current level of prosperity, Germany needs a large-scale influx of migrants, otherwise by 2030 the German economy will face a shortage of 10 million workers. So business has been demanding that the government actively attract foreign labor resources for a number of years.
And now, thanks to the unexpected mass influx of refugees, there is suddenly an opportunity to at least partially solve this problem. Of course, not all among the arrivals are, so to speak, ideal candidates for the available vacancies. After all, the German economy does not need cheap labor, but skilled labor. However, we emphasize once again: Germany is currently not recruiting, but saving people in distress.
Nevertheless, many refugees have decent chances on the German labor market. As of the beginning of September, 40,000 positions remained unfilled in the vocational training system, which involves most of the country's enterprises. Many companies are willing to take refugees as apprentices (even if they still speak German poorly), but do not want to start a three-year training program for young people without knowing whether they will receive the right to stay in Germany or not. Therefore, businesses demand that the asylum application processing procedure be sharply accelerated.
Another demand from businesses to politicians: accelerate and simplify the procedure for granting permits for the construction of social housing. It is believed that with such a number of refugees, 250-300 thousand new affordable apartments will be needed annually, while in 2014 no more than 70 thousand were delivered. If the government, for example, somewhat relaxes the sharply tightened requirements for energy efficiency of buildings (ideally to the 2009 level), then a boom may even be possible in this segment in the coming years.
So if the German government and parliament act quickly and flexibly, the current influx of refugees will begin to produce positive economic effects fairly quickly. And this in turn will help reduce the severity of other problems that inevitably arise when such a large number of foreigners resettle in the country.