Lagarde warns Europe’s growth relies on migrant labor

European Central Bank (ECB) President Christine Lagarde stated on Saturday that, without foreign workers, the EU economy would have been in a much weaker position after the pandemic. Despite migration fueling political tensions, Lagarde warned policymakers not to overlook its vital role.

Speaking at the Federal Reserve’s annual Jackson Hole symposium in Wyoming, Lagarde noted that the influx of foreign labor helped the eurozon absorb successive shocks, such as surging energy costs and record inflation, while also sustaining growth and employment.

Employment within the bloc rose by 4.1% between the end of 2021 and mid-2025, almost matching the increase in gross domestic product (GDP).

“At the 2022 meeting attended by central bankers, although foreign workers comprised only 9% of the total workforce, they accounted for half of the growth over the past three years,” Lagarde said, arguing that without this contribution, “labor market conditions would have been tighter and output lower.”

Lagarde cited Germany and Spain as examples. She stated that Germany’s GDP would be about 6% lower today without migrant workers, while Spain’s robust recovery is “largely” owed to foreign labor.

In the eurozone, employment has increased by more than 4% since 2021, even as central bankers implemented the sharpest interest rate hikes seen in years.

The ECB president argued that migration plays a crucial role in offsetting Europe’s declining birth rates and the growing demand for shorter working hours. She explained that, even as wages have lagged behind prices, migration has allowed companies to increase output and eased inflationary pressures.

However, Lagarde also acknowledged the political factors. Net migration pushed the EU population to a record 450 million last year, even as governments from Berlin to Rome, under pressure from voters flocking to far-right parties, took steps to restrict newcomers.

“Migration, in principle, can play a key role in addressing the labor shortages caused by the aging of the native population. But political economy pressures may increasingly constrain migration flows,” Lagarde said.

Highlighting that Europe’s labor market has emerged from recent shocks “unexpectedly well,” Lagarde warned against assuming these dynamics will persist. Demographic decline, political backlash, and shifts in worker preferences continue to threaten the eurozone’s resilience.