Europe’s scapegoat

THERE is not a lot to do on the outskirts of Targu Lapus, a small town in northern Romania. But Catalin Konolos, a construction worker, is rarely home, so he is making the most of a mid-afternoon game of cards before he returns to Luton, a town north of London, for another spell on the building sites. Mr Konolos and his brother, Viorel, sitting beside him, typically toil for four months at a time in Britain before taking a break at home. They work for other Romanians, and have little interest in integrating. Neither speaks English.

The brothers embody the European Union’s free-movement rights. They, and millions like them, are filling labour needs abroad and improving their wages by many multiples. Much of that income finds its way to Romania, in the form of remittances to family members or via consumption (often of the conspicuous kind, as the flash cars in nearby villages testify).

The system is almost unique. What began in 1957 as a work-permit regime among the EU’s six founding members now allows Europeans to work, study and retire anywhere across the 28-member club (plus a handful of other countries) without a permit or visa. It is meant to complement the EU’s other freedoms: of goods, services and capital. Surveys consistently find that citizens prize free movement above anything else that EU membership brings. Governments also back it fiercely: David Cameron, Britain’s former prime minister, dismally failed to secure an exemption for Britain from freedom of movement earlier this year.

Yet mobility is a freedom few in Europe have chosen to exercise compared with workers in other labour markets. Americans are three times as likely to move states in search of work than Europeans are to cross borders, according to the World Bank. Language hurdles can be difficult to surmount; qualifications earned in one country may not be recognised in another. When viewed through the prism of international migration, however, the recent mobility has been extraordinary. Since the early 1990s nearly 5.5% of eastern Europe’s population has emigrated. In 2014 fully 20% of EU citizens living elsewhere in the club were Romanians (see chart).

In many ways the system has worked. The EU reckons that the extension of free-movement rights to eastern Europe after two enlargements in 2004 and 2007 boosted overall GDP by €40 billion ($45 billion). In crises free movement can act as a macroeconomic stabiliser, particularly in the euro zone, where currencies cannot adjust. In recent years southern workers have flocked to the wealthier north.

But tensions exist, seen most visibly in Britain, where arguments over EU migration fuelled much of the debate over the recent vote to leave the club. In most countries European immigrants are net contributors to the public purse. But German and Dutch politicians have fretted about “welfare tourism”. France has backed controversial new EU rules that would force companies sending employees abroad (“posted workers”) to match local wages, irking eastern European governments worried about their citizens’ jobs.

It is the home countries of emigrants, however, that have been most hurt so far. A recent IMF report found that post-communist emigration from eastern European countries has stunted their growth, strained public finances and accentuated demographic problems. Romania is among the hardest hit. Young people are disproportionately likely to leave, raising the average age and hitting the already-low fertility rate. Romania’s population has declined from 22m in 2000 to below 20m today. Remittances helped plug the current-account deficit, but they may also deter Romanians from entering the labour market.

“I am asked daily why I am still here,” says Corina Stanciu, a junior doctor in Bucharest. Young Romanian doctors can earn ten times more in western Europe than at home, she says. Ms Stanciu, who had planned to stay put until she encountered the dire conditions in Romanian hospitals, is preparing to move to Britain. Under one model of the effects of migration, by 2030 GDP per capita in some eastern European countries could fall by 4%. “Europe has destroyed us,” says an official in the deserted Romanian village of Certeze.

Yet the threats to freedom of movement are more likely to come from the countries that benefit from it. The row over posted workers shows how mobility rights can run up against the EU’s impulse to “protect” citizens in rich countries from globalisation’s ravages. Economic and technological changes are making working lives more precarious; in time, more governments may choose to pin the blame on free movement. One former senior EU official involved in previous rounds of accession talks says that an “emergency brake” rule allowing governments to halt labour inflows is inevitable. Mr Cameron’s bid may simply have been premature.

The experience of Ireland shows that emigration can be a boon, if workers gain skills and contacts abroad, and need not hamper success within the EU. The likes of Romania have much to do: improve institutions; raise the poor labour-force participation rate by cutting employment taxes; and reform social security.

Even if they could muster the political will to pull this off, countries such as Romania, with a legacy of corruption and misrule, will struggle to match the lure of higher wages in the West. Ioan, a London-based plumber “recharging the batteries” in his home village of Racsa, says he would permanently move back to Romania if he could. He has few friends in Britain, and fears it is vulnerable to terrorism. But his homeland, he says, will never offer him the opportunities he enjoys abroad.