Could the Euro Fall if Schengen Collapses?

Posted by Allison on 27 November 2015, 16:16

You cannot fail to have noticed the drama that has been going on in Europe over the past few weeks. War and strife in the Middle East and Africa have driven many people to find a safe haven elsewhere. For many, the solution is to head for Europe.

As you may know, many countries in Europe are part of a passport-free zone known as the Schengen zone. The zone was named after a town of the same name in Luxembourg, where the agreement on the borderless zone was signed way back in 1985.

The free movement agreement across much of Europe has always been controversial. However it has now become even more so. Indeed, some countries have been reinstating border controls in recent times. The tide of migrants coming in from Africa and the Middle East has led to hundreds of thousands of people coming into the zone. Once inside it, they can move around freely.

The sheer number of migrants means that many countries are now struggling to accommodate them all. As a result, many of them are putting their borders back in place. In some cases, small towns and villages have been overwhelmed with migrants – taking in many more people than were originally living there. Life has changed for many across Europe, and services are being stretched far beyond their capacity.

As such, it is now being suggested that the Schengen zone may fail completely. If so, it could end up taking the euro with it. The demise of the euro has often been a concern in recent times. However, Europe has not had to cope with the influx of thousands of migrants before, all wanting to escape the troubles in their own countries.

Even Juncker himself has said a single currency “makes no sense” if it is used in a zone where countries have their own border controls back up and running. It remains to be seen whether Europe can cope with the number of people flooding onto the continent. Many stories have surfaced of local problems with crime and discontent relating to this outcome. Furthermore, it is known that some of the terrorists who were involved in the Paris bombings came into Europe under the guise of being migrants. This has led many to wonder how many others are doing the same thing.

Needless to say, it is uncertain what will happen next, or whether the euro or the Schengen agreement – or both – will eventually founder. It is however certain that Europe is facing one of its biggest challenges for many decades. It remains to be seen how it turns out and whether this is the beginning of the end for the ambitious European project – and of course the euro as well.