Foreign workers a key driver of euro zone growth, say ECB economists

FRANKFURT (Reuters) -Foreign workers accounted for much of the euro zone's economic growth since the pandemic and could help the bloc overcome the economic constraints of an ageing and shrinking labour market, a European Central Bank study concluded on Thursday.

Foreigners accounted for half of the bloc's labour force growth in the past three years, helping to alleviate labour shortages and starting to make a greater contribution in higher skills jobs, too, as their education levels are improving, the ECB said in a blog post.

"The influx of foreign workers in recent years has secured a robust growth in the euro area labour force, which has somewhat offset the negative demographic trends," the blog post, authored by some of the ECB's most senior economists, argued.

The ECB's analysis runs counter to the political trends in much of Europe where parties seeking to cut immigration have seen a surge in voter support.

As the 20 nation bloc's population continues to age and birth rates remain low, the labour force and thus economic growth is constrained, an issue foreign workers could help to address, the ECB blog added.

Among the euro zone's biggest economies, an influx of foreign workers made key contributions to labour force growth in places like Germany and Spain, while in France and the Netherlands, the contribution was notable but at a lower level.

In Italy, however, which has a relatively low labour participation rate, a greater use of domestic labour helped the economy, the ECB concluded.

While there has been a notable rise in foreign workers, unemployment among them has also declined and this is primarily due to improving education levels, the ECB added.

(Reporting by Balazs Koranyi; Editing by Toby Chopra)