Do you have any better idea?
Unfortunately we have seen how things go if you take the american approach and fund your intelligence services with vast summs of money.
I fear that there is no real solution to this problem. It doesn't matter how hard we restrict anything, attacks will still happen. We've seen in the past weeks in France and in Germany how easily civilian technology and tools can be used to kill.
To fight domestic terrorism you would need to monitor Mosques known for radical preachers and the concerning internet pages very consequently, probably with an permission to check everybody who visits said Mosques or internet pages regulary. Also you would need to find out who finances all this. Organizations like the IS or Al Quaeda (whether it's an organization or not) can't finance themselves fully and certainly receive financial support from somebody. Stopping that financial support would weaken terrorists a lot.
I personally suspect certain persons from Saudi Arabia (a country which I personally absolutely despise, no matter how international and friendly they try to appear).
I personally think the secret services are already doing a pretty good job at preventing terrorist attacks. Unfortunately lone wolfs as we've seen them last week are almost impossible to stop.
So no, I don't really have a better idea on how to fight terrorism. But closing the borders for refugees has literally no influence on the threat and possiblities of terrorism imo.
On the opposite, the camps which will undoubtly emerge on the border crossings are an ideal breeding ground for extremist ideologies of any kind. I prefer having the refugees in an area where they can be actively controlled and where they can be supplied with at least the basics of what they need to live. And no, I have absolutely no problem with cutting down some of the rights of not yet and unapproved asylum seekers, like freedom of movement, and punishing people rigorously who break the laws of their host country (of course you have to differentiate between minor and major infractions here and refugees shouldn't be punished harder than a usual citizen, but a refugee with several infractions should be turned away).
Another thing about terrorism is that we usually don't hear about the big sucesses, since many attacks are prevented by secret services and operatives and the very essence of a secret service prohibits it to make that public.
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There is no Real Psychological Effect to be Honest.
The Psychological Effect is the Fear which is Spread on Purpose by the Government to Justify more Government Control without Resistance.
This does of course lead to some Increase in the Far Right Parties. But this Increase is Fairly Small and not going to Change something.
Especially not if the Government Deal with the Problem.
For example.
The AFD has been Stuck ever since the Refugee Crisis Left off.
Not solely by the government. A large part of it is thanks to the media, who reports every incident in order to make money.
I would call that fear a psychological effect, since terrorist attacks aim for exact that fear. That's the reason why terrorists never kill quietly.
I'm honestly glad that the AfD is on the edge of breaking fully apart. It's the first step of the ending of the rise of the far right in Europe.