The refugee crisis presents the most significant challenge that the European Union is facing since its foundation in 1993. As a result of wars, limited economic opportunities and political instability in the Middle East, millions of people are migrating to Europe in order to seek asylum. While the increasing financial expenditure on refugees is testing the fiscal strength of EU nations, the crisis presents a long-term economic opportunity for European nations to overcome their problems related to the aging workforce. Though the economies are set to benefit from higher aggregate demand due to increased public spending and higher tax revenue due to employment growth, there are several political problems associated with the migrant crisis resulting in rise of xenophobia and anti-EU sentiments. This research paper explores the economic challenges as well as opportunities associated with the European refugee crisis and examines the potential to convert this humanitarian disaster into a favorable situation for EU member states.