The refugee crisis is getting more and more serious, with European Union leaders planning to meet on Wednesday to once again try to find a solution. But it is becoming obvious that this threatens to turn into another long, drawn-out episode of intra-European bickering in which everybody ends up on the losing side, unless pragmatism takes the place of political fighting.
Germany's chancellor, Angela Merkel, has said the country can receive about 800,000 refugees a year, but then closed the borders, effectively suspending the border-free travel area after quickly being overwhelmed by the sheer numbers crossing into it.
Other countries in Europe have followed suit, with Austria, Hungary, Croatia and Slovenia all blocking the refugees' crossings at some stages, prompting the United Nations to comment that European unity was at risk. Last week alone, more than 25,000 refugees entered Croatia, the EU's newest member, which sent them on to Hungary, which in turn eventually let them go through and enter Austria, Reuters reports.
The tensions over border controls threaten to plunge the European Union, and especially the eurozone, into a fresh crisis. Signatories of the Schengen agreement allow the free movement of goods and people across their borders without checks, and while it is difficult to quantify its positive impact on trade, analysts agree that it has been significant.
"It is fair to assume that intercontinental trade is significantly boosted by the close country ties the agreement has enabled, and that any threat to that would have consequences," Ashley Owen, head of investment strategies at financial advice firm AES International, said. "The political friction could further threaten import and exports between European countries and put trade ties under pressure. This would unduly hit small to medium-size companies which do business within Europe."
Owen is of the opinion that the influx of refugees of working age, if handled correctly, can "provide a real economic boost" over the coming years.
The problem is that there is only one country that right now would be able to absorb this workforce: Germany. Jim Cramer says the crisis could even force Germany to change its stance regarding austerity, as the government will need to spend money and build housing and facilities to integrate the newcomers. Indeed, Cramer says the effort to integrate the Syrian refugees could end up being on a scale similar to the integration of East Germany after the collapse of communism.
This would be a good thing over the longer term, as the increase in spending and consumption is bound to spill over to the rest of the eurozone while lifting Germany at the same time. Over the short term, however, introducing quotas of immigrants and forcing each country to fulfil its quota, as one of the widely circulated solutions suggests, is a really bad idea.
First, that's because the Eastern European countries that oppose it are themselves much poorer than the Western EU members; many Eastern Europeans have themselves moved to countries such as Germany, Austria, the Netherlands, Sweden or the United Kingdom in search of jobs. Second, it's because there is no fair way to decide who goes to what country; it would really amount to treating people like pieces in a game of chess.
The best solution would be to help the countries bordering Syria to cope with the influx of refugees ¿ something that, if done right, would have great benefits for the refugees, for the countries themselves and ultimately for Europe.
Lebanon hosts around one million refugees, a quarter of its population; there are almost one million in Jordan and nearly two million in Turkey. These are developing countries that have had to deal with the crisis largely by themselves, with the aid of charitable organizations. But if the European Union gets involved with funds, it could build enough facilities such as schools and hospitals to accommodate the refugees and make their return to Syria when things calm down much easier.
The refugees, as well as the local populations, could be involved in the construction efforts and later in the running of the facilities, which would solve the unemployment problem at least partially. It's not as if the EU does not have the institutions already in place to find the funds: the European Investment Bank (EIB) could issue bonds to raise the money, while the European Bank for Reconstruction and Development (EBRD) is already involved and active in helping the economies of Jordan and Turkey.
Investors waiting for a sign that Europe is close to a solution to the refugee crisis should look for any discussions about helping Syria's neighbors. In terms of U.S. companies to watch, Cramer spoke last week with Hikmet Ersek, the CEO of Western Union (WU) -- a company which is contributing 10 cents per transaction for all customer-to-customer transaction originated within the EU, up to $400,000, to help the major refugee centres. While the company is focused on helping, WU has also traditionally been very successful in transferring money from one place to the other during cross-border crises.
Keep an eye on the EU meeting on Wednesday -- it could be the beginning of an investment plan that may lift Europe, or that of a crisis that could bring about a recession.
