S&P reassures EU states on costs of refugee crisis

One of the world’s leading credit rating agencies yesterday reassured EU governments that the costs of resettling refugees won’t undermine their credit worthiness.

Standard & Poor’s instead warned that failure to agree a common policy among European countries could worry investors that the EU still has “governance issues” and raise questions about the EU’s power and influence to meet future crises.

It comes as EU governments continue their war of words, blaming each other for closing their borders as they struggle to deal with the thousands of refugees and migrants from the Middle East and Africa.

But S&P said that what mattered most was the perception of the EU failing to strike common policies to deal with the crisis and the potential for extreme xenophobic political parties across the continent benefiting as a result.

It said Germany and other countries do not face lower credit ratings from the costs of resettling refugees.

“Standard & Poor’s sees no sovereign rating consequences for Germany or other EU countries from taking in refugees now on the move from Syria as well as other countries in Europe, the Middle East, and Africa,” it said.

“Over the longer term, there could be a mild positive impact on growth in EU countries that grant asylum to the new arrivals.”

However, S&P played down an often-cited reason for Germany accepting the refugees saying that refugees in Germany would not totally alleviate the economic pressures of an ageing population there.

“The politics of the refugee question may be what matters most. The narrow national interests of nation states may still constitute an obstacle that hampers the ability to arrive at a swift and appropriate collective response,” said S&P.

“This could be relevant for EU sovereign ratings in a future financial crisis. The response to the refugee question could also lead to more support for populist and even outright xenophobic parties, taking away from the budgetary reform agenda.”

The greatest migration to Western Europe since World War Two has also created an institutional crisis for the 28-member EU, with one of the bloc’s signature achievements, its Schengen system of border-free travel across much of the continent, unravelling this week under the strain.

Germany yesterday called for EU financial penalties against countries that refused to accommodate their share of migrants.

A Czech official said such threats were empty but nonetheless “damaging”. Slovakia said they would bring the “end of the EU”.

Under new rules that took effect from midnight, Hungary said anyone seeking asylum at its border with Serbia, the EU’s external frontier, would automatically be turned back, and anyone trying to sneak through would face jail.