Lagarde highlighted Germany and Spain, noting that Germany’s GDP would be about 6 percent lower without migrant labor, and Spain’s robust recovery also benefits significantly from foreign workers. Across the eurozone, employment has risen by over 4 percent since 2021, despite central bankers implementing the steepest rate hikes in a generation.
The ECB president emphasized that migration has been essential in counteracting Europe’s declining birth rate and increasing preference for shorter working hours. This has allowed companies to expand output and mitigated inflationary pressures even as wages lagged behind prices.
However, Lagarde recognized the politics involved. Net immigration increased the EU’s population to a record 450 million last year, while governments from Berlin to Rome push to limit new arrivals due to voter pressure leading to far-right party support.
“Migration could, in principle, play a key role in alleviating labor shortages as native populations age,” Lagarde stated. “But political economy pressures may increasingly restrict inflows.”
She highlighted that Europe’s labor market has remained resilient despite recent challenges. Yet, she warned against assuming this trend will persist, citing demographic decline, political backlash, and evolving worker preferences as ongoing threats to the eurozone’s strength.
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