The Coronavirus crisis has triggered intense debate about border closings in the Schengen area as a way to contain the spread of the epidemic. Austria stopped some trains from Italy and as the virus spreads the open border policy will be further tested. Whether or not such a measure makes sense from an epidemiological point of view is beyond the expertise of the authors. The Schengen regulation in any case does allow travel restrictions in case of a threat to public health (Article 2(21) an 6(1e) of Regulation (EU) 2016/399).
This post looks at some of the possible economic consequences of border closings. Many workers rely on the Schengen agreement that allows them to cross the border without any ID controls. More than 1.9 million residents from Schengen countries crossed the border to go to work in 2018. As can be seen in the chart below, 0.9% of the employed citizens living in Schengen countries work across the border. The share of cross-border commuters is particularly high in Slovakia (5.5%), Luxembourg (2.7%), Croatia, Estonia and Belgium.
The Schengen agreement’s relevance stretches beyond cross-border commuting to work. In 2018, EU-27 citizens made almost 320 million trips of one night and over to other EU-27 countries, more than 39 million (12%) of those were for business purposes.
When back in 2015 we looked at the effects of border controls in the context of the migration crisis, we argued that the direct economic effects of additional border controls were likely to be relatively limited. The assessment now would be different: Stopping cross-border travel would lead to a major disruption of economic activity. It is therefore no surprise that the EU for the time being has decided not to close borders.