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German government mulls limiting migrant remittances

October 25, 2023

The German Finance Ministry says it wants to restrict remittances that migrants send back home. This would risk increasing poverty in poorer countries, say experts.

A Black person holding Euro notes with a Sparkasse leaflet in the background
Many refugees send home a part of their small monthly benefitsImage: Friso Gentsch/dpa/picture alliance

The German government is looking for new ways to deter irregular migration, as the parties in Olaf Scholz's coalition reel from regional election defeats and a shift to the right in the country's political debate.

Now a new proposal has come from the leader of the party that has suffered the most drastic erosion of voter numbers: Christian Lindner, head of the neoliberal Free Democratic Party (FDP), whose Finance Ministry is currently "checking whether it is technically and legally possible" to stop asylum-seekers sending the benefits they get in Germany back to their own countries.

More and more politicians in Germany favor paying asylum-seeker benefits in kind via a payment card, rather than cash. The German government's commissioner for migration agreements, Joachim Stamp, has already called for such a move, which is supported by Scholz as well as all of Germany's state leaders.

People 'want to work'

But migration experts wonder whether stopping remittances is possible, or will have any measurable effect on the money sent home, as the benefits that asylum-seekers receive are so low.

"I don't think this has been thought through yet," Matthias Lücke, a migration expert at the Kiel Institute for the World Economy (IfW), told DW. "When people come here they want to work properly and support their families, but the idea that the little asylum-seeker benefit is some kind of 'pull-factor' — I don't think that's credible."

Lücke also had moral problems with the idea: "I think it's a very strange definition of freedom, to say: 'Here's a poor person, and they want to give money to even poorer people, and I want to forbid that,' — I can't understand how that is supposed to work legally or how it makes sense politically," he said.

Tobias Heidland, an economics professor at Kiel University, thinks that even if depriving asylum-seekers of cash did slow remittances, it would also come at a cost: "We know that being able to participate in society is important for integration."

In any case, he said, "I don't think this would make a big difference. I think it's mostly going to be a policy that has an impact as a signal to the population here that something has to be done."

Western Union on a smartphone
It is difficult to stop people making international bank transfers or sending cash via companies like Western UnionImage: Inna Talan/PantherMedia/IMAGO

Finding other means to send money

Experts were also skeptical whether the payment cards would really prevent asylum-seekers from getting their hands on cash, since people could use the cards to buy goods and sell them. The ultimate effect of such restrictions, said Lücke, may just be to strengthen informal cash transfer networks, such as the Hawala system, which facilitates international money transfers through trust among underground traders.

"And that's something that we should not encourage," he said. "Because often those payment networks can be on the margins of criminality and the financing of terrorism."

Germany's far-right Alternative for Germany (AfD), the most anti-immigration of Germany's major parties, has called for a tax on remittances, though international experience has shown that attempts to restrict overseas payments have not been particularly successful.

"Other countries have tried taxing remittance sending with little success, as these flows can also be sent via informal methods, making them hard to track," said Catalina Amuedo-Dorantes, professor of economics and immigration expert at the University of California, Merced. "In Africa, for instance, remittances are often sent informally through the hawala system. Migrants turned to more formal methods as they became cheaper and safer. If countries restrict the sending of remittances, however, many might opt for using informal methods."

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Bigger than development aid

World Bank statistics show that remittances are a huge part of the flow of money around the world— in fact, remittances to developing countries are now three times as large as development assistance from donor states. According to a recent World Bank statement, remittances help to alleviate poverty, improve nutrition, and are "associated with increased birth weight and higher school enrollment rates for children in disadvantaged households."

Remittances are also growing. The war in Ukraine has resulted in a huge increase in remittances to that country in the past year, while the latest German Federal Bank figures show that the most money is sent to Turkey, Romania, Poland, and Syria, in that order.

For many families who club together to send one person abroad, migration is a way of diversifying income to mitigate the effect of crises at home, such as climate-related natural disasters or political unrest.

"You can think of migration as a portfolio investment decision," said Heidland. "Migration is for many people in the world the most profitable investment they can make. That's why they take substantial risks."

Of course, most migrants pay traffickers to get them into other countries, and another government argument made by Lindner was that the remittances from benefit payments may be used to pay off traffickers.

That might be true, said Lücke, but then again, traffickers are simply another cost for migrants to cover — and because of the global inequality in wages, it is still worth it for them.

Edited by: Rina Goldenberg

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Benjamin Knight Kommentarbild PROVISORISCH
Ben Knight Ben Knight is a journalist in Berlin who mainly writes about German politics.@BenWernerKnight