Foreign workers drive euro zone growth, says Lagarde

An influx of foreign workers has played a key role in sustaining the euro zone’s economy in recent years, helping offset shorter working hours and declining real wages, European Central Bank (ECB) President Christine Lagarde said on Saturday.

Speaking at the U.S. Federal Reserve’s annual symposium in Jackson Hole, Wyoming, Lagarde noted that migration has pushed the European Union’s population to a record high despite falling birth rates. However, the trend has also fueled political backlash, prompting governments to tighten immigration rules.

“Although foreign workers made up just 9% of the labour force in 2022, they have accounted for half of its growth over the past three years,” Lagarde said. “Without this contribution, labour markets would be tighter and output weaker.”

She highlighted that Germany’s GDP would be about 6% lower than its 2019 level without migrant labour, while Spain’s post-pandemic recovery has also been strongly supported by foreign workers.

The EU’s population climbed to 450.4 million in 2023, as net immigration offset natural population decline for the fourth consecutive year. But the demographic boost has come at a political cost: voter discontent has driven rising support for far-right parties.

In response, several governments have tightened migration policies. Germany’s coalition government, for instance, has frozen family reunification and resettlement programmes in a bid to win back voters shifting toward the far-right Alternative for Germany (AfD).

The trend mirrors developments in the United States, where former President Donald Trump moved to expand arrests of undocumented immigrants, curb illegal border crossings, and revoke legal protections for hundreds of thousands of migrants.