The European Union’s financial system would have regarded far weaker after the pandemic with out overseas employees, European Central Financial institution chief Christine Lagarde stated Saturday, warning policymakers to not ignore migration’s function even because it fuels political tensions.
Talking on the U.S. Federal Reserve’s annual symposium in Wyoming, Lagarde stated an inflow of overseas labor helped the eurozone soak up successive shocks like hovering vitality prices and file inflation, whereas conserving development and jobs intact. Employment within the bloc expanded by 4.1 % between late 2021 and mid-2025, almost matching positive aspects in gross home product (GDP), she famous.
“Though they represented solely round 9 % of the entire labor pressure in 2022, overseas employees have accounted for half of its development over the previous three years,” Lagarde informed the gathering of central bankers. With out that contribution, she added, “labor market circumstances could possibly be tighter and output decrease.”
Lagarde singled out Germany and Spain as examples. Germany’s GDP could be about 6 % decrease at present with out migrant labor, whereas Spain’s robust restoration additionally “owes a lot” to overseas employees, she stated. Throughout the eurozone, employment has expanded by greater than 4 % since 2021, whilst central bankers pushed via the steepest fee hikes in a era.
The ECB president argued that migration has performed a vital function in offsetting Europe’s shrinking delivery fee and rising urge for food for shorter working hours. That, she stated, helped corporations broaden output and damped inflationary pressures whilst wages lagged behind costs.
However Lagarde additionally acknowledged the politics. Internet immigration pushed the EU’s inhabitants to a file 450 million final 12 months, whilst governments from Berlin to Rome transfer to limit new arrivals below stress from voters flocking to far-right events.
“Migration might, in precept, play a vital function in easing labor shortages as native populations age,” Lagarde stated. “However political financial system pressures might more and more restrict inflows.”
She careworn that Europe’s labor market has emerged from latest shocks in “unexpectedly fine condition.” However she cautioned towards assuming that dynamic will final: demographic decline, political backlash and shifting employee preferences nonetheless threaten the eurozone’s resilience.