"Athens" by Matt Kieffer is licensed under CC BY-SA 2.0. To view a copy of this license, visit <https://creativecommons.org/licenses/by-sa/2.0> What is the Schengen Area?
The Schengen Area is an agreement between the European Union and a few neighboring non-EU members, allowing for the free movement of citizens and goods between its borders. This model has proven to be especially important after the fall of Europe’s colonial empires. After decolonization, major European powers lost pivotal markets provided by their colonies. In the face of economic collapse, promoting trade between fellow European nations seemed like the best solution. Since then, former colonial nations like Germany, Italy, and France now have fellow EU members as their largest trading partners. In the years since its widespread adoption, the importance of the Schengen Area to the European Union cannot be overstated. As a result, millions of European citizens rely on the Schengen Area economically. With limited trade restrictions, European companies can purchase raw materials efficiently and economically. Additionally, France and other wealthy but aging nations have access to an abundance of able-bodied workers from lower-income EU nations, with the majority of immigrants being between 25-54 years old. Proponents of the Schengen Area claim that benefits also extend to smaller European economies. Most notably, this benefit is seen through the removal of internal tariffs. Industries that belong to smaller nations, such as Poland’s PKN Orlen, the Netherland’s Stellantis, and Sweden's Ikea, can take advantage of the economies of scale provided by a single European market. These factors have allowed economies in countries such as Poland and Malta to more than double in size since 2004. What it means for Greece Unfortunately for Greece, the economic opportunity promised by the Schengen Area has facilitated its decay instead of its prosperity. This decline is rooted in the nation’s recent economic crisis. The 2009 Eurozone Crisis was triggered when Greece dramatically underreported its debt levels in order to join the newly created Eurozone, causing creditors to lose faith in the nation. As a consequence, the nation eventually defaulted on its debt, sending the economy into freefall. In the years since, the Schengen Area has been blamed for preventing a full economic recovery. At the most basic level, Greece needs increased economic activity to recover, yet the existence of the Schengen Area has seemed to dramatically lower the productivity of the nation by facilitating a mass exodus of high-skilled workers. Before the Eurozone crisis, Greece had thriving research outputs, which led to remarkable productivity in biomedical sciences, natural sciences, and engineering. Post Eurozone Crisis, the nation’s research metrics have been consistently below the EU average regarding human resources (74.1% of the EU average), research systems (67.7% of the EU average), and digitization (50.5% of the EU average). The subpar performance of Greek research can be explained by the income disparity between EU nations. Whereas the average salary in the EU is around 40,000 Euros, Greece is towards the very bottom of European wages at 16,000 Euros. If maximizing salary is one’s goal, then there is little incentive for researchers to stay in Greece, especially considering that EU citizens can simply migrate to a wealthier nation without border restrictions. The data supports the idea that well-educated EU citizens are taking advantage of higher salaries available in the surrounding countries. A comparison of the immigrant education levels among EU nations reveals trends of a “brain drain,” where highly skilled citizens are migrating to nations with opportunity, notably Germany and France. For instance, 39% of immigrants migrating to Germany completed a university degree. Additionally, according to France’s 2022 census bureau, 30% of European immigrants arrived with at least three years of higher education. In comparison, 16.1% of immigrants to Greece have completed higher education. Furthermore, from 2010 to 2015, Greece recorded net-negative immigration, suggesting heavy emigration from the country. Within the context of the Schengen Area, the data strongly suggests ambitious Greeks are choosing to take their talents to wealthier EU nations. Greece’s Response Greece hopes to promote immigration and dissuade emigration through economic stimulus and tax cuts. To achieve this goal, Greece has increased subsidies for research equipment and award fellowships. Citing the need for young talent and innovative ideas, Greece has also approached the European Investment Bank for a 180-million-pound loan to create the Hellenic Foundation for Research and Innovation. The country hopes that this loan will provide a financial incentive for foreign nationals to immigrate to the nation. The Greek government has recently introduced generous tax incentives as well. As an example of how attractive these benefits can be, certain Greek residents can opt to have a 7% flat tax on foreign income sources. Despite these policies, there has been little sign of a reversal of this so-called brain drain. Proponents of economic stimulus and tax cuts may cite these policies as having had a positive influence on stabilizing Greece’s net migration in recent years, compared to the country’s decreasing net migration flows from 2010 to 2015. However, this could also be credited to Greece taking in over 1,000,000 Syrian refugees from 2015 - 2016, instead of being evidence of a net inflow of researchers or high-net-worth individuals from other EU countries as intended. This interpretation is further supported by the nation’s continued plateau in GDP from 2015 to the present. Despite the many issues that come with the Schengen Area, Greece has not expressed interest in leaving the Schengen Area at this time. The Future Implications of the Schengen Area for Greece The Schengen Area’s success in facilitating economic integration between larger and more prosperous nations like Germany, France, and Italy has paradoxically led to economic stagnation for Greece. Governance over the Schengen Area remains a complex issue that requires ongoing attention and collaboration from all member states to ensure that its benefits are balanced with the various economic realities of different countries. Ironically, the EU has amended the Schengen Area, focusing on strengthening external borders from refugees outside of the EU instead of addressing issues faced by member nations like Greece. Considering the EU is still dealing with the Syrian Refugee Crisis, amending internal Schengen Area policies will likely not be a primary concern for the foreseeable future. The mission of the European Union, and by extension, the Schengen Area, is to provide economic prosperity to all its member states. While Greece’s situation presents challenges, it does not warrant the restriction of migratory freedoms. However, it may prompt Greece and the EU to consider whether an amendment of internal migration policies is warranted. Parker Lee is the director for the Economics & Business team and currently a fourth-year undergraduate at the University of Washington’s Foster School of Business. Jiaohao Chen is a fourth-year undergraduate at the University of Washington’s Foster School of Business.
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