By Gabriela Baczynska and Paul Taylor
BRUSSELS (Reuters) - The European Commission set out a timetable on Friday for restoring open borders in Europe by the end of the year as EU leaders cajoled Turkey to act to stop the flow of migrants fleeing conflicts in the Middle East and beyond.
Ahead of an emergency European Union summit with Turkey on Monday, the EU executive announced the first payouts from a 3 billion euro ($3.3 billion) fund to help it cope with the roughly 2.5 million Syrian migrants on Turkish soil.
It also said Turkey was making progress towards achieving eagerly sought visa liberalization for its citizens in the EU.
In return, Brussels is demanding that Ankara crack down on people smuggling and take back all illegal migrants who do not qualify for asylum in the 28-nation EU.
Meeting in Paris, the leaders of Germany and France agreed that refugees fleeing war in Syria should stay in the region and said their common objective was to put Europe's frayed Schengen passport-free travel agreement back into operation.
"Our efforts are not done yet," Chancellor Angela Merkel told a joint news conference with President Francois Hollande. "I understand that Turkey also expects Europe to deliver."
Merkel pressed for Monday's summit with Turkish Prime Minister Ahmet Davutoglu in an effort to show results before three regional elections on March 13 in which her conservatives face losses to the anti-migration Alternative for Germany party.
European Council President Donald Tusk, who will chair the summit, was meeting Turkish President Tayyip Erdogan in Ankara on Friday to press him for decisive action to stop the unbroken flow of migrants into Greece.
In Brussels, the Commission presented a step-by-step plan to implement agreed or already-proposed measures - including a new EU border and coast guard - to curb the influx after more than a million people arrived in an uncontrolled stampede in 2015.
"We cannot have free movement internally if we cannot manage our external borders effectively," Migration Commissioner Dimitris Avramopoulos told a news conference. He also announced the first 95 million euros in aid to Syrian refugees in Turkey for education and humanitarian projects.
In a pre-summit report to EU leaders, the Commission estimated that a complete collapse of passport-free travel in the 26-nation Schengen zone could cost the European economy up to 18 billion euros ($19.8 billion) a year. Much of the cost would fall on cross-border commuters, transport and tourism.
But investment bank JPMorgan Chase said the short-term impact of more probable selective border controls was likely to be "small in business cycle terms".
Eight EU countries have temporary, emergency border controls in place now to control the flow of migrants, putting in jeopardy one of Europe's most prized achievements.
More than 1.2 million people submitted asylum requests in the 28-nation EU last year, including 363,000 Syrians and 178,000 Afghans, the EU statistics agency Eurostat said.
Some 442,000 applications were submitted in Germany, the top destination for refugees and migrants, followed by 174,000 in Hungary, which erected barbed-wire fences and used security forces to shut people out, and 156,000 in Sweden, it said.
Stockholm, long regarded as the most generous EU state towards refugees, said it would scrap payments of daily allowances to migrants whose asylum applications were rejected in its latest attempt to curtail the influx.
Fewer than one-fifth of Germans believe the EU will agree on a common approach to the refugee crisis, according to a poll published by the daily Die Welt, and some 48 percent want Berlin to improve protection of Germany's national borders.
A clear majority — 56 percent — said Germany should cut its EU contributions if Monday’s refugee summit fails.
While Brussels and Berlin are pushing for a European response to the crisis, more and more EU states are skeptical it could work and are resorting to unilateral steps.
"The Commission would never announce that Schengen is over," one Brussels-based diplomat from an EU country said.
"That would be a major political blow to them, the first real setback in the whole process of European integration. It would be like the pope announcing there is no God."
(Additional reporting by Paul Carrel in Berlin, Andrew Callus in Paris, Nick Tattersall in Ankara; Writing by Paul Taylor; Editing by Louise Ireland)