Analysts: Schengen disintegration would damage Slovakia's exports

The possible disintegration of the Schengen area would significantly damage Slovakia's export competitiveness, as it is among the six EU countries where foreign trade within the Schengen represents more than 70 percent of their overall foreign trade balance. According to an analysis released by UniCredit Bank Czech Republic and Slovakia on Wednesday, the existence of the Schengen area (joined by Slovakia in 2007) has contributed to doubling Slovakia's foreign trade over the past ten years. Schengen allows free cross-border movement of people, goods, services and capital, so it has significantly contributed towards the emergence of new businesses, tourism development and retail, and it has helped boost employment in Slovakia. If permanent border checks are reintroduced between countries within the current Schengen area, Slovakia will suffer significantly from the inability to transport goods, resulting in a decline in the volume of transported goods. If the exports of basic food and consumer goods drop by 5 percent, Slovakia's GDP will shrink by 0.3 percent. The labour market would also suffer, as commutes for many people working across the border would take longer. This could result in a slight unemployment increase in southern Slovakia and the region of Kysuce in north-western Slovakia, for example. Also considered by the analysts is an option of introducing a 'mini-Schengen' between the Visegrad Four countries (Czech Republic, Hungary, Poland, Slovakia). "This would only feebly mitigate the negative effects of the Schengen disintegration for exports," they said.

The bank's analysts also looked recently into the possible effects of Brexit (meaning "British exit" from the European Union), concluding that Britain would lose 6 percent of its economic output as a result. Meanwhile, Slovakia is far more export-oriented than Britain, so if the UK left the EU or the union disintegrated, the damage suffered would be several times higher, added the bank analysis.