Immigrants a problem? ECB chief says foreign workers kept Europe growing

Christine Lagarde says foreign workers drove half of euro-area growth, even as EU and UK roll out tougher immigration rules

Foreign workers are not the only winners in getting a job in a developed country. Countries gain too. A jump in the share of foreign-born workers after the pandemic helped Europe bring inflation down without sharply slower growth, European Central Bank President Christine Lagarde said on Saturday.

 

A key factor “has been the rise in both the number and participation rate of foreign workers,” said Lagarde in a speech in Jackson Hole, Wyoming, at a Federal Reserve economic symposium.

 

“In Germany, for example, GDP would be around 6 per cent lower than in 2019 without the contribution of foreign workers. Spain’s strong post-pandemic economic growth also owes much to the contribution of foreign labour,” she said.

 

Inflation, growth and migration pressures

 

Lagarde’s remarks echoed economists who say foreign workers allowed companies to expand output and meet post-pandemic demand. That increased supply helped lower inflation in Europe and the United States. But the surge in migration has also triggered a political backlash.

 

“Migration could, in principle, play a crucial role in easing labour shortages as native populations age,” said Lagarde. “But political economy pressures may increasingly limit inflows.”

 

She also pointed to other factors keeping growth steady even as the ECB lifted interest rates: A fall in inflation-adjusted wages, companies hoarding workers, and more elderly people entering the labour force.

 

While foreign-born workers accounted for just 9 per cent of the EU labour force in 2022, they made up half of the bloc’s labour force growth in the past three years. More elderly workers also entered the market. Without that, she said, unemployment across the euro area would stand at 6.6 per cent instead of the current 6.3 per cent.

 

Europe’s changing immigration rules

 

The economic case comes as most major economies adopt stricter rules on foreign workers. Since 2024, several European countries—including the UK—have tightened immigration rules, while some have relaxed them:

 

European Union: In May 2024, the European Union formally adopted its Pact on Migration and Asylum, a wide-ranging legislative package that took effect on June 11, 2024. The pact will be phased in through national legislation and is scheduled for full application by mid-2026. It creates a common set of rules for handling asylum claims, accelerates border screening procedures, and expands the use of detention for those with weak claims. A compulsory “solidarity mechanism” has also been introduced: Every member state must either accept relocated asylum seekers or provide financial and operational support to countries at the EU’s external borders, such as Italy or Greece.

 

Germany: The 2023 Skilled Workers Immigration Act (FEG) was advanced with reforms cutting wage thresholds for the EU Blue Card, introducing an “opportunity card” for job seekers, and reducing residency for citizenship from eight to five years. Dual nationality is now widely permitted.

 

Belgium (Brussels region): In August 2024, Brussels relaxed visa rules to attract foreign talent, allowing easier job switching and clarifying rules for the self-employed professional card.

 

United Kingdom: The Labour government’s Restoring Control over the Immigration System white paper (May 2025) overhauled key visas.

 

< Skilled Worker visas restricted to graduate-level roles, with over 100 lower-skilled jobs removed unless on a temporary shortage list

< Social care worker recruitment from abroad ended, with renewals only until 2028

< Salary thresholds raised to around £41,700, and £52,500 for intra-company transfers

< Post-study work visas shortened from two years to 18 months

< Citizenship residency extended from five to ten years

< Sponsorship costs can no longer be passed to employees (from December 31, 2024)

< Seasonal Worker quotas rose to 38,039 in the year ending June 2025, with caps of 47,000 in 2024 and 45,000 in 2025

 

Net migration is expected to drop by 100,000 annually under the UK’s reforms.

 

Europe’s labour markets continue to rely heavily on foreign workers. According to Lagarde, Germany’s GDP would be around 6 per cent lower without them, and Spain’s post-pandemic rebound would have been weaker. Indians form a significant part of this workforce. While there is no precise data on the number of Indians employed in Europe, including the UK, the Indian diaspora in the region was estimated at about 2 million in 2021.