German border checks won't hit economy for now, economists say
By Maria Martinez
BERLIN, Sept 17 (Reuters) -Temporary checks on Germany's western and northern borders to combat irregular migration will not hit Europe's largest economy beyond creating delays and complexities for companies already struggling with a downturn, economists say.
However, economists warned that the impact would be more severe if the temporary checks led to other further moves limiting free movement in the European Union's borderless Schengen area.
Tighter border checks came into effect on Monday at Germany's land borders with France, Belgium, Luxembourg, the Netherlands and Denmark for an initial six months, marking a further setback to free movement within the European Union.
"It looks as if this is a largely symbolic move designed to signal a tougher line on illegal immigration but the measures are fairly small-scale and not likely to impact business much," said Andrew Kenningham, Capital Economics' chief Europe economist.
He added that if this proves to be the start of a substantial move towards reintroducing land borders in the EU, it could be very significant because of the impact on transportation and as a major irritant in internal EU politics.
German retailers and logistics companies fear traffic jams, delays and higher costs.
Berenberg's chief economist Holger Schmieding argued that slight delays in deliveries will not make a huge difference because industry is not running at full capacity.
Germany's industry, grappling with high energy costs, weak global demand, a disruptive shift towards net-zero economies, and growing competition from China, continues to struggle, as the latest HCOB Purchasing Managers' Index (PMI) showed in August.
"It's a hassle, but the economic impact will likely be small," Schmieding told Reuters.
The new measures could add to costs, Schmieding said, but probably not to the extent to be visible in the overall level of consumer prices.
Much will depend on how strict and detailed the controls are, said ING's global head of macro, Carsten Brzeski,
"But a reversal of Schengen will eventually not be without a negative impact on the economy," Brzeski told Reuters. "An economy that is so dependent on trade."
BAD TIMING
Foreign trade is likely to remain subdued for the foreseeable future and a turnaround in industry is not in sight. The temporary border controls add another layer of complexity and uncertainty for business at a challenging moment.
The German economy contracted in the second quarter, sparking fears of another recession, marked by two consecutive quarters of contraction.
"It is an unfortunate timing. Our economy is already on the brink of a recession, companies are suffering a loss in productivity and are burdened by higher wages," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
Reporting by Maria Martinez
Editing by Alexandra Hudson
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
