Month: October 2012

Against the backdrop of deep recession and unemployment, Ireland’s per capital alcohol consumption fell by 9.6 percent in 2009 and is now 21 percent below an all-time peak in 2001 when Ireland’s economy was booming.

“It was the worst year for our industry in living memory,” Kieran Tobin, chairman of the Drinks Industry Group of Ireland (DIGI), told a news conference in a central Dublin pub.

Pubs have been closing at the rate of around one a day, he said, and 15,000 jobs had been lost across the sector over the last 18 months.

Last year’s drinking decline follows a 7.7 percent decline in per capital consumption in 2008, while in volume terms consumption declined 8.9 percent in 2009 after a 5.9 percent drop in 2008, the report by Anthony Foley of Dublin City University Business School for DIGI, which represents the on-trade – pubs, hotels, restaurants – and off-licence sector.

“Everything in drinks has two edges,” Foley said when asked about the health benefits of the decline in drinking.

“The average has been reduced, but no-one would argue all the problems have gone away. What ideally you’re looking for is that everybody drinks moderately and the industry sustains itself without any bad press.”

Foley’s report found prospects remained “very weak” for 2010 when the total volume of alcohol consumed could decline by a further five percent.

Last year’s decline was to an extent exaggerated by the combination of a strong euro and comparatively low excise duty on spirits in Northern Ireland.

That drove many over the border to buy their drinks in a shift the industry has estimated costs the Irish government 100 million euros ($135.1m) a year in lost revenue.

Taking Northern Ireland sales into consideration, Foley’s report found the 2009 decline was still seven percent, but the excise gap – of 24.7 percent on spirits – could narrow following the British budget this week.

The former Yugoslav republic is not bound for a Greek-style meltdown of public finances, as its public debt is below 50 percent of GDP compared to almost 120 percent in Greece, but nor is it heading for an economic rebound.

“If the government wants to do something, they have until the summer. After that we are effectively entering an election year, when nothing is ever done,” said Ante Babic of the Centre for International Development think-tank.

Regular parliamentary polls are due in late 2011.

The most pressing reforms sought by employers and analysts include urgent cuts in public spending, taxes and subsidies and a start to reforms of the public administration and labour market. The overall aim is to shift the economy from borrowing and spending towards production and exports.

“We are not going to fold like Greece, but without reforms we face a prolonged stagnation,” Babic said.

Vladimir Gligorov of the Vienna Institute for Economic Studies said unemployment, which hit a four-year high of 17.7 percent in January, would rise further without solid growth.

“EU membership will help. It makes available new funds and helps decrease the perceived risk, but it will not solve Croatia’s structural problems,” Gligorov said.

Capital still available
Katarina Ott of the Zagreb-based Institute for Public Finances, said the government could be lulled into inaction by the availability of capital on foreign markets, which it regularly taps to foot the budget deficit bill.

This year’s deficit is set at 2.5 percent of GDP, or roughly 1.2 billion euros.

“I am afraid things can carry on like this for a longer time. There is a lot of capital out there and investors actually like countries like ours, which carry a solid yield.”

Croatia’s credit default swaps are currently at 199.5 basis points, above fellow EU candidate Turkey at 163, but level with those of EU members Bulgaria and Hungary.

Zagreb is well ahead of other Balkan countries in terms of EU prospects but its socialist-era industry has collapsed and exports have dwindled, with the only major revenue boost coming from summer tourism on its pristine Adriatic coast.

“Another problem is that Croatia has little export potential apart from tourism, so even if external demand picks up, it may not help considerably,” Gligorov said.

The former Yugoslav republic, which hopes to join the EU in 2012, is unlikely to attract huge foreign investment in the next few years as its tax burden and labour costs are relatively high and incentives for investors are few.

Velimir Sonje of Arhivanalitika consultancy said the economy was set to return to growth in 2011, after a 5.8 percent decline in 2009 and a milder fall this year, but lack of reforms means that, even with EU membership in hand, growth will be lower.

“It will be much slower than in the past decade, when we had cheap capital and a huge construction and tourism boom, all of which is exhausted now. There will be no major green field investments and growth can only be driven by small and medium-sized firms,” he said.

Although conservative Prime Minister Jadranka Kosor announced recently that the government would “initiate one new measure to boost the economy every week”, analysts doubt the cabinet had the courage to tackle key reforms soon.

“There is not enough political will to have a go at structural reforms. The key here is reform of the public sector which spends way too much because all governments have pampered it to win votes,” said union leader Ozren Matijasevic.

However, he said large-scale social unrest was unlikely, judging by the farmers’ protests which took place at the start of March. Hundreds of farmers blocked roads with tractors in protest at plans to cut subsidies but eventually reached a compromise with the government.

Damir Kustrak of the national employers’ association (HUP) said HUP had impressed upon Kosor the need for urgent reforms.

“Now is our ‘to be or not to be’. The autumn is the end of story. That’s why we’re putting huge pressure [on Kosor] now.”

Despite a long internationalist tradition rooted in centuries of sea trade, the European country of 16 million has turned inwards in recent years as the economy has stagnated and political and social tensions have risen. A reduced Dutch presence in European affairs and Afghanistan could make it difficult for the continent to unite around a bailout for Greece, and could also affect troop deployments by other Western states nearing the end of their mandates.

“The Netherlands will be more sceptical about European integration,” said Philip van Praag, political science professor at Amsterdam University.

After months of simmering discord over how to tackle the financial crisis, a NATO request for the Dutch to extend their deployment of nearly 2,000 troops triggered the split of the fragile left-right coalition recently.

Local elections will offer an early glimpse into how the break between Prime Minister Jan Peter Balkenende’s centre-right Christian Democrats and his deputy Wouter Bos’s Labour Party will play out with voters.

Any new government, which would be installed after expected mid-year parliamentary elections, will also have to submit a budget by September that can reign in spending, even as voter discontent rises over proposals such as raising the retirement age and income taxes.

“We are in the middle of a financial crisis and holding elections now would lead to a lot of insecurity for the public and investors,” said Andre Krouwel, professor of political science at Vrije Universiteit in Amsterdam.

Ripple effects?
The Dutch troops, deployed in Uruzgan province since 2006, are almost certain to be brought home this year, at a time when the US is stepping up its offensive against the Taliban and urging other Western nations to do the same.

The Netherlands is among the top 10 contributing nations to the NATO mission. Twenty-one Dutch soldiers have been killed in Afghanistan.

German Chancellor Angela Merkel is pushing forward with plans to increase troops in Afghanistan, despite strong opposition to the Afghan conflict at home. Polls show that the Afghan war is also deeply unpopular in Britain.

The Dutch withdrawal will hurt Europe’s image as a partner in foreign and security issues, said Edwin Bakker, a senior research fellow at the Clingendael Institute.

The roots of Dutch unease over sending troops to Afghanistan lie in the 1995 Srebrenica massacre when lightly-armed Dutch UN soldiers, lacking international air support, were forced to abandon the enclave to Bosnian Serb forces who then killed up to 8,000 Muslims who had sought protection from the Dutch.

A damning 2002 report on Srebrenica triggered the government’s collapse and ushered in Balkenende’s first administration. Dutch politics – once known for its stability and consensus – has been unpredictable ever since.

That has coincided with a gradual slide towards isolationism. Dutch voters rejected a draft constitution for Europe four years ago.

Many are also concerned about Muslim immigration, the growing influence of Brussels over Dutch laws and Dutch taxpayers’ contributions to the EU budget.

A poll shows that 55 percent of the Dutch want highly-indebted countries to be kicked out of the EU. Another poll also showed strong support for Greece to leave the euro.

The Netherlands was one of the six founding members of the EU that signed the Maastricht Treaty in 1992, leading to the creation of the euro currency.

Swing to the right?
Geert Wilders and his anti-immigration Freedom Party are likely to be the main beneficiaries of Saturday’s government collapse and gain a more influential voice in policy.

During European Parliament elections in June 2009, the Freedom Party won enough votes to be the second-biggest Dutch party represented in Brussels after the Christian Democrats.

Opinion polls tip the party to become the largest or second biggest party in parliament by siphoning votes from Labour.

The political heir to populist anti-immigrant politician Pim Fortuyn, who was murdered in 2002, the bleach-blonde Wilders has challenged the country’s traditional tolerance of immigration and has called for lower taxes, a ban on immigrants from Muslim countries and the influence of the EU to be reduced.

“People want a new fresh party with good new views, tough on crime, tough on mass immigration and this is really what people look forward to,” Wilders told reporters. “I believe indeed we can have excellent results in the next few months and it can only change the Netherlands for the better.”

Few expect Wilders to join a coalition, but a big victory would put him in prime position to support a minority government – most likely the Christian Democrats – and drive his agenda.

“Wilders will be an outsider. He’s very clever and knows he’ll lose a lot of votes if he joins a coalition,” said Van Praag. “He has much more freedom from the outside.”

He told reporters in an interview that investor interest would rise once the Balkan country had put in place a better funding structure for hospitals, with extra money likely to come from people paying more into both public and private health funds.

Moves by the centre-right government, elected last July, to close down 21 state-run communist-era hospitals and to raise contribution levels have triggered protests in towns across the Balkan country.

Crowds including doctors and nurses have demonstrated, saying while reforms were badly needed they feared thousands of people living in remoter areas could be left without access to hospital treatment.

Another 130 hospitals will also be shut or converted to smaller centres, as part of the government’s plan, which Nanev said would be carried out, despite public opposition.

“Privatisation is the way to go,” Nanev, 47, a former surgeon said. “There must be privatisation of both hospitals and the services provided by hospitals”.

Most of Bulgaria’s 350 hospitals are state-owned, of which 71 were on a list of assets banned for privatisation. Nanev said this could be changed through legal amendments once the government had a clear strategy on sell-offs.

He said the reforms needed to show results so as to showcase the investment potential to investors.

Years of post-communist neglect and lack of political will for reforms have left many hospitals understaffed, heavily indebted, lacking contemporary equipment and even medicines.

Corruption in the sector is widespread and paying bribes to doctors for services due to be covered by insurances is the norm. Opinion polls show Bulgarians are the most dissatisfied with their healthcare system in of the 27-member EU.

To secure money for the planned reforms, Sofia is considering obliging Bulgarians to pay extra private health insurance and to raise by 2 percentage points to 10 percent of gross income, payments to state health funds as of 2011. An existing voluntary scheme to contribute to private funds has failed to work.

The ministry was also working on a new methods of calculating prices of medical services to reflect the market reality, he said.

“Reforms needs money. We cannot make reforms by saving money, this must be clear,” Nanev said but did not give figures.

The budget of the state health fund for hospitals fell 24 percent to 709 million levs ($503.2m) in 2010, data showed. Hospitals’ debt stood at some 350 million levs by end-November last year.

The poorest EU country cut total health spending this year by 350 million levs to 2.25 billion, or some 4.2 percent of GDP, nearly halve the proportion spent in many Western nations.

French nuclear firms should stop pushing expensive state-of-the-art reactors to developing countries and instead market the EPR – Areva’s flagship nuclear reactor – to rich countries where top-notch safety systems are politically key, they added.

Countries such as India or the Gulf states should be offered older, cheaper technology, analysts said, adding Areva should also work on quickly finalising a smaller type of reactor with new technology to broaden its range of products.

A consortium led by EDF and GDF Suez, and including Total and Areva, were dealt a blow in December when the United Arab Emirates picked a South Korean group to build four reactors.

Two sources close to the deal told Reuters that Abu Dhabi chose a South Korean consortium, led by Korea Electric Power Corp (KEPCO), because the 1,650 megawatt (MW) EPR was too expensive.

While the Korean consortium offered to build four 1,400 MW reactors for $20bn, the French offered to build its bigger and more modern reactors for $36bn.

The emergence of a powerful new player has turned up the pressure on French groups, which still hope to secure orders for a third of all new reactors to be built worldwide by 2030.

Other rivals bidding to stop them include Toshiba unit Westinghouse Electric, Mitsubishi Heavy Industries and General Electric Co..

The loss of the high-profile UAE deal raises the question of whether the French consortium was flexible enough to present a range of options to Abu Dhabi or simply presumed the oil-based nation had deep pockets and would pay for the EPR.

“This was not simply a question of cost,” French Economy Minister Christine Lagarde told the Les Echos paper on Tuesday.

“The French offer was probably not the best calibrated.”

EPR sale hopes
Analysts said France had to change its nuclear bidding strategy, with some asking why the French consortium did not offer Abu Dhabi existing technology, such as one of the second-generation nuclear power plants operating in France.

“They will have to wonder if they need to offer Rolls-Royces all the time,” said Jefferies analyst Alex Barnett.

France offered the EPR – a third-generation reactor developed after nuclear accidents at Three Mile Island in 1979 and Chernobyl in 1986, and which offers enhanced safety systems by better isolating the core reactor in case of a meltdown.

“The obvious response to the Koreans would have been to offer a second-generation reactor. Some of the latest ones are relatively young. They’re also proven,” said UBS analyst Per Lekander.

Sources with direct knowledge of the situation, however, said Areva was unlikely to change its strategy.

“(They are) never going to sell second-generations again. (They are) now aiming for higher safety standards, and as they stand, second-generations cannot be sold anymore in the US or Europe, which are (its) key markets,” one of the sources said.

Areva declined comment on the loss of the Abu Dhabi deal, but pointed to a smaller 1,100 MW reactor – Atmea – that it is developing and which is set to be ready by 2011, and another 1,250 MW model – Kerena – whose design is not yet defined.

Both reactors are also third-generation models, but until they are ready, France will pin its hopes on sales of the EPR.

This export drive, however, could be hampered by recent bad publicity.

The first EPR, currently under construction in Finland, has been beset by cost overruns and delays that caused Areva to take a charge of €2.3bn ($3.29bn) for the project last year.

A second unit being built in France is reportedly behind schedule, sources said, although EDF and Areva deny this. More importantly, three nuclear regulatory bodies chastised both Areva and EDF for a design fault in November.

Marketing error?
Another source insisted cost issues were behind the UAE loss. Asked whether the French nuclear consortium should have modified its offer when it appeared that the EPR was losing ground to the Koreans’, the source said: “No, Abu Dhabi asked for an EPR.”

“They wanted it but at the price of (KEPCO’s winning design) APR1400, and this was simply not possible. They had to make a choice between a product that was too expensive and a product they liked less but at a price they were willing to pay.”

“They wanted a Mercedes but at the price of a Kia,” he added, referring to the German luxury car maker and the South Korean manufacturer of smaller and less expensive autos.

These smaller and less glamorous reactors, however, have worked for decades in South Korea with a good safety record.

For a Wrapup on the UAE nuclear deal click on For an Analysis on French nuclear export hitches see For more on the EPR.

Businessman Ulrich Weitz leans forward and produces a graph showing a tenfold increase in his company’s turnover in the last 15 years.

“We’ll end this year with a profit,” he says, a picture capturing the fall of the Berlin Wall hanging behind him in his office in the historic eastern German city of Weimar.

Weitz’s business is a success story – one of a clutch of technology firms in the East whose growth since reunification in 1990 has helped the region narrow the gap with the West.

Twenty years after the fall of the Wall, much of the eastern economy has cast off the shackles of its Communist past, thanks to over a trillion euro in state transfers from the West which have helped drive a wholesale restructuring.

Productivity has almost doubled since 1991 and economic output per inhabitant climbed last year to some 69 percent of the level in western Germany, up from 33 percent back in 1991.

The changes have come at a price. Whereas the German Democratic Republic (GDR) boasted full employment, vast swathes of the East now suffer stubbornly high unemployment, running at 11.8 percent. It is 6.6 percent in the West.

Many of the stinking, smoke-belching chemical factories of the south so beloved of communist propagandists have shut down. The air is cleaner but traditional jobs have gone forever.

Many young people are leaving the region, meaning companies will face a shortage of skilled labour in the coming years. The East’s population has declined by about two million since 1990.

“There are flourishing landscapes and there are a lot of wastelands,” said Udo Ludwig, an expert on the East at the IWH economic think tank.

The government is aiming for the eastern states to catch up with the poorest western states by the end of 2019 when the “Solidarity Pact”, a package of special aid, will end.

In 2006-08 alone, eastern states received EUR45bn in subsidies for investment in the economy and infrastructure.

Subsidy pay-off
The East is finding its feet. In a report entitled “East On The Up”, Deutsche Bank economists said they expected the region to suffer less from the global economic downturn than the West as it is less industrialised and export-reliant.

None of Germany’s blue-chip DAX firms are based in the East.

“The East German economy no longer has an overriding reliance on economic development (aid), but instead is supported by increasingly independent small – and medium-sized firms, and by a few islands of big industrial production,” they added.

Many such successful eastern firms have morphed out of enterprises that existed under the GDR. In Jena, stock market-listed high-tech engineering group Jenoptik evolved out of conglomerate VEB Zeiss Jena.

In Weimar, 20 workers at a former GDR research institute teamed up with west German multinational engineering group Glatt in 1991 to found Glatt Ingenieurtechnik, which now employs 120 people. The deal gave the researchers new opportunities.

“The world suddenly opened up for us,” recalls Karlheinz Ruempler, now business development manager at the company.

Weitz bought his firm, IBU-tec, a high-technology materials manufacturer, in 2001 when it was almost bankrupt after the state axed subsidies it had depended on for a decade. He turned the company around but also credits those subsidies for some of the firm’s success.

“We still resort to things today that were generated back then,” he says.

One of the biggest challenges Weitz has faced in building up his business is recruiting the highly skilled workers he needs to work in areas like nanotechnology – a process that allows the production of high-grade materials.

He has had to attract people from western Germany.

“I don’t think you can make it as a technology company with just workers from eastern Germany,” says Weitz, who was born in Weimar but grew up abroad as the son of a diplomat, before studying in West Berlin.

“You have to know and understand the mindset of your customers… A lot of people here can’t speak English,
and that closes the route to the international market.”

He says he would have had a tougher time attracting talent if his company was not based in Weimar, a university city and UNESCO world heritage site: “Weimar helps hugely.”

Skills shortage
Both Weimar and Jena, home to Jenoptik, are in Thuringia, the eastern German state with the lowest unemployment rate, at 10.1 percent. In Berlin, joblessness is running at 13.6 percent.

Bleak prospects for many young people in less successful eastern towns and cities mean they leave the region.

“Each year, around one percent of the population between 18 and 29 years of age disappears,” said Harald Uhlig, economics professor at the University of Chicago.

IWH economist Ludwig said the key to eastern Germany’s economic future lay simply in educating its young people.

“Three things are important: firstly education, secondly education, and thirdly education,” he said.

Deutsche Bank’s economists agreed, writing in their report that the eastern states need to help young people find jobs.

The biggest dangers facing the region in the medium term stem from discontent with life in the East leading to a drift away, they wrote, adding: “Unhappy citizens are not good for economic development.”

Weimar taxi driver Dirk Richter, 40, thinks the government should do more to help young people find work but that many easterners his age expected too much when the Wall fell. He said life can be tough and he sometimes only earns ¤2 an hour.

“Despite everything, I’m happy,” he added. “If people kept their feet on the ground, they’d be fine.”

Medvedev recently criticised Putin’s government for allowing the environment to slip to the bottom of its agenda and said he would throw the weight of his presidency behind fixing it, although he did not criticise Putin by name.

Non-government organisations say the environment suffered serious damage because of lax regulation during the oil-fueled boom that coincided with Putin’s eight years as president.

Medvedev ordered the government to draft a new 20-year environmental plan and introduce compulsory environmental classes in schools, the Kremlin said in a statement.

Compulsory environmental studies on new building projects – which dropped in 2007 amid a building boom – must be re-imposed, he said.

The government was also ordered to create a survey of environmental damage and a list of proposals to alleviate it, including in the Amur River, where Russia says Chinese factories have dumped toxic waste in recent years.

The orders were drafted after a closed government meeting headed by Medvedev in May, the statement said.

A Greenpeace report warned that the environmental situation in Russia has deteriorated markedly during the oil-fuelled economic boom of the last decade. It cited Interior Ministry figures to show that the number of environmental crimes had tripled in 2000-2009.

Greenpeace Russia campaign director Ivan Blokov said Medvedev’s moves on the environment were welcome, but warned that progressive regulations had been ignored in the past.

“The current environmental doctrine was adopted in 2002, and it contained very reasonable statements which we liked,” Blokov said. “As far as I know, few of the provisions have been fulfilled so far.”

Of the entire power requirement in Niedersachsen,  21 percent is met by wind energy. Prime Minister Christian Wulff wants to increase that share significantly: “Till 2012 we want to produce 26.5 billion kilowatt hours with wind energy; that is fifty percent of the electricity consumption in Niedersachsen. In 2021, Niedersachsen will feed more wind energy into the grid than is consumed in our state.”

Niedersachsen wants to reach that goal with the help of offshore wind parks and the so-called repowering meaning the exchange of older and smaller turbines with new, higher and more efficient ones. Thus, more output with fewer turbines can be realised, doubling or even tripling the overall capacity. Niedersachsen has a lot of these small wind turbines from the beginnings of the industry. Its windy coastal region saw the installation of the first turbines by farmers who sought a second income source. Today, most wind parks are put up by energy suppliers.

Over time and with the advantage of an early start, great expertise has accumulated in Niedersachsen. The German market leader Enercon has its headquarters there as well as numerous other companies such as GE Wind Energy GmbH, Prokon Nord Energiesysteme GmbH, Plambeck Neue Energie AG and Bard Engineering GmbH and their suppliers. They export their know-how worldwide: The companies have an export quota of more than 80 percent. The global wind energy market has increased by 30 percent in 2008 for the last three years in a row, and German manufacturers supply more than a third of the world market. The biggest market for the past four years has been the USA.

The industry is supported by the research institutions located in the state such as the German Wind Energy Institute DEWI GmbH, founded by the state of Niedersachsen and ForWind, the centre for Wind Energy Research of the universities Oldenburg and Hanover. The DEWI provides research and services connected with the realisation of wind farms, while ForWind focuses on the utilisation of offshore wind power.

Natural gas
But Niedersachsen is not only leading in wind energy: It supplies almost 95 percent of the natural gas produced in Germany. The most productive gas fields are located there as well as more than 90 percent of Germany’s gas reserves. Employment rates and investments are increasing annually. According to the Association of German Oil and Gas Producers in Hannover, the number of employers in their member companies has risen by 40 percent since 2004. About 80 percent of all employers are working in Niedersachsen. In 2008, the companies increased their investments in Germany by 43 percent to €555m.

Most of Germany’s natural gas storage facilities are located in Niedersachsen, too, among them the largest in Western Europe. Four billion cubic metres of gas are stored in the WINGAS facility in Rehden. ExxonMobil operates two large storage facilities in Uelsen and Dötlingen, big enough to store 2.6 billion cubic metres. For comparison: 5.1 billion cubic metres of gas are annually produced in Niedersachsen. That is enough to supply more than two million households.

Moreover, the company BEB Erdgas und Erdöl GmbH has constructed one of the largest European gas desulphurisation plants in Großenkneten. It cleans the gas of sulphur to make it usable. That makes the plant one the world’s largest productions facilities for natural gas sulphur. Almost 800,000 tons of sulphur are sold every year, mainly to clients from the chemical industry.

Niedersachsen is also the leading region for bio energy in Europe. There are an estimated 900 biogas plants currently in operation, producing electricity by feeding on liquid manure, biological waste and energy crops. They produce more than a third of the total amount of biogas in Germany and cover approximately five percent of the state’s power requirement. “We will double that share to ten percent by 2012”, announced Christian Wulff in September 2008.

German market leader EnviTec Biogas AG from Lohne expects a growth in sales between 44 and 74 percent for 2009. The company is represented in 15 European countries, India and China. It currently builds the world’s biggest biogas plant, which will be able to supply a town with 50,000 inhabitants with electricity. EnviTec Biogas India was awarded the gold medal in the Asian Power Awards 2008 in the category “Best Decentralised Power Plant in Asia” for the construction of 30 biogas plants in Punjab. 22 percent of the turnover is already realised abroad; the company expects that share to rise to 50 percent in the coming years.

Cogeneration of heat and power
The 2008 amendment of the Renewable Energy Sources Act – a law obliging operators of power grids to give priority to electricity from renewable energies and to pay fixed prices for this – increased the compensation for bio energy and also promotes using the waste heat. Accordingly, the cogeneration of heat and power is increasing. For example, the biogas plant Hortitherm Hinrichsfehn in Wiesmoor was granted an award for its exemplary concept: The waste heat is used by a garden centre to heat their hothouses. The owners of the garden centre build the plant in 2006 because of rising prices for energy.

For the same reason, whole communities are thinking about producing their own power and heat with biomass. One model village even meets its whole energy demand with a biogas plant: In Jühnde, the electricity is fed into the grid, while the heat is transported to consumers as hot water via a district heating network. The community Lathen is also going to build a heating network to supply seven public institutions and a large amount of private households with heat from a nearby biogas plant, thus saving costs and diminishing CO2 emissions.

Further information:
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The downturn, which has hit the region’s export-led economies hard, is threatening to turn former powerhouses of the communist and post-Soviet eras into a new “rust belt” and causing a surge in unemployment and leaving deep social scars.

Geza Tokodi has worked in the Hungarian steel mill DAM in the northeastern city of Miskolc for 38 years.

The global crisis has brought him face-to-face with the unthinkable: a shutdown of the plant for more than six months, plunging the huge production halls which once employed 18,000 workers into eerie silence.

“My ears got used to the noise of the plant. Quiet is good when you want to have a rest, but here, it’s much worse than noise,” Tokodi says, walking through the vast derelict halls.

The only sound in the vast plant is the occasional crack of metal expanding and contracting as the temperature changes or the cheep of birds that venture in through broken or open windows.

The sprawling steel complex, once called the Lenin Steel Works, developed quickly in the 1950s when the communist government wanted to make Hungary “the country of iron and steel” despite its lack of raw materials and cheap energy.

In its heyday in the 1980s, the city of Miskolc had more than 200,000 residents, most working in industry.

The population has fallen to about 170,000 and unemployment stands at between 15 and 16 percent, well above the national average of 9.8 percent.

DAM, which survived privatisations in the 1990s and was rescued after previous liquidations, is being wound up again and is laying off its approximately 700 remaining employees.

The liquidation process started on June 24th and the liquidator Ratis Kft. has to put the assets up for sale. If it can find an investor, the plant may survive.

Jozsef Papp, 53, who has been at DAM for 36 years, said they had been idle since late last year.

“There have been a few liquidations, and the plant always survived, but I don’t think this will be the case now,” he told Reuters.

Steelmakers throughout Europe have operated at between 55 and 60 percent capacity usage rates this year, shelved investment plans and cut jobs to weather the biggest downturn to affect the industry since World War Two.

Social scars
Miskolc, Hungary’s second largest city, is finding it hard to cope with soaring unemployment and a lack of new jobs.

Agnes Dudas, who heads the employment office in the city, says the number of registered jobless had risen to 18,200 in May from between 12,000 and 13,000 at the end of last year.

More than half of those losing their jobs at the steel mill are aged over 50 and finding new work for them will be difficult, even though the city receives funds from an EU programme partly designed to help crisis-hit regions, she says.

“Those who worked at DAM for 30 to 40 years would have never left this plant. First they must overcome the trauma of all this, and it’s very hard,” Dudas says.

Miskolc has a Roma population of about 12,000 to 15,000, many of whom used to do unskilled jobs in the steel industry and have little choice but to rely on social assistance from the government.

Hungary’s Roma minority is one of the largest in central Europe, accounting for between six and seven percent of the population.

Growing social tension in Miskolc, once a Socialist stronghold, showed in June’s European election results when the far-right Jobbik party won 21 percent of the votes. The Socialists received 23 percent.

“Industries have collapsed and services are not developing at a pace which would allow them to absorb the extra workforce,” said Imre Lakatos, head of the Iron Workers’ Union VASAS who has worked at DAM for 40 years.

Next to the steel works, hundreds of Roma families live in houses with no running water or sewerage.

“Most families here live on social assistance now… and odd jobs,” said Ferenc Botos, who works for the local Roma minority council.

Early retirement offer
Dunaujvaros, formerly Sztalinvaros (“Stalin city”), 70km (43.50 miles) south of Budapest, is the home of Hungary’s biggest steel mill, Dunaferr.

The firm, a unit of Ukraine’s Donbass Group, saw its sales revenues drop by 40 percent in the first quarter and has said it will lay off 400 workers and offer early retirement to several hundred more to try to weather the crisis. It will have a workforce of 7,200 after the restructuring.

The town is faring better in the face of the crisis because of its proximity to Budapest and investment by South Korean tyre manufacturer Hankook in 2006 which created new jobs.

ArcelorMittal’s Czech unit, in the northeast of the country where unemployment is rife, is using only 35 to 45 percent of its capacity because of a lack of orders.

The glut in the steel sector has spread, hurting earnings for London-and Prague-listed New World Resources, which owns the country’s largest hard coal mines.

In the past 20 years, the labour force has shown few signs of changing in many former communist industrial centres.

“It will be difficult to expect any big structural changes in industrial regions because people skilled in heavy manufacturing or mining can’t transfer easily to other sectors of the economy,” said David Marek, an economist at Patria Finance.

“For the regions, it can be a big problem, especially when it comes to a high concentration of heavy industries like steel or coal. It’s a social problem, not only an economic problem.”

The European Commission’s draft budget sets spending at 131.1bn euros ($174.6bn), some 5.9 percent more than in 2010.

Funds for poor regions, research and development and to improve the EU’s economic competitiveness had the biggest increase – by 14.7 percent to 54.6 billion euros.

“The ambition of the draft budget is to continue to promote economic recovery together with the EU Member States,” EU Budget Commissioner Janusz Lewandowski told a news conference.

The EU’s 27 countries are trying to bolster a fragile economic recovery from the worst crisis in decades with fiscal stimuli, but most of them face gaping budget deficits.

EU spending on agriculture, including much-criticised direct subsidies for farmers, is to remain stable at 58.1bn euros.

Many politicians and experts have said EU farm spending, which accounts for more than 40 percent of the budget, is wasteful and distorts international trade.

Lewandowski said crisis-hit Greece should receive some 2.5bn euros in regional aid and about 700m euros in farm funds. This money will be separate from the aid package aimed to prevent Greece from defaulting, now being negotiated between Athens, the Commission, and the IMF.

But the EU’s poorer members from central and eastern Europe will be the biggest recipients of EU aid, whose general proportions are set in the bloc’s long-term spending plan. The current, seven-year plan ends in 2013.

Under the draft, foreign aid is to fall by 2.4 percent to 7.6bn euros, but spending on administration will grow by 4.5 percent to 8.3bn euros.

The EU will overhaul its budget from 2014. Politicians and analysts expect the reform to shift EU spending away from agriculture, although France, long the biggest beneficiary of EU farm subsidies, is expected to oppose this.

The draft budget will now be scrutinised by the EU’s 27 governments. They have in the past cut such spending plans, something the European Parliament is likely to resist.

The EU budget is financed by contributions from Member States, of which Germany is the biggest net payer.

Unemployment in Spain reached 12.8 percent in November, a 12-year high and by far the highest rate in the European Union. It could reach 20 percent of the workforce in 2010 as a slump in construction spreads into the wider Spanish economy, economists say. That is a level not seen since the 1990s and as Spain heads for its deepest recession in 50 years it may trigger social unrest like that of the 1980s, when high unemployment and low wages led to country-wide demonstrations and violent strikes.

Spain makes payouts of up to 70 percent of salaries for up to two years, depending on how long workers have been paying into the social security system. With nearly three million unemployed, many of those laid off during 2008 will come to the end of dole payouts this year and will struggle to make ends meet in a depressed labour market with no sign of paid work.

“This coming year, a lot of people will stop receiving the dole,” said Sandalio Gomez, professor of labour relations at business school IESE. “We could end up with social unrest as people take to the streets to demonstrate.”

The make-up of Spain’s workforce has changed drastically with the arrival of nearly five million immigrants boosting the population by 15 percent over the past decade. Desperate Spaniards who have lost jobs in construction are taking up work they formerly shunned, from cleaning bars to fruit∞picking, displacing immigrants who struggle to find alternative work.

Thousands of Andalusians applied to pick olives for this season’s harvest from December to January, according to an Andalusian job agency, leaving the previous workforce of African immigrants without employment. Despite offers from local authorities to pay their coach fares back to Africa, immigrants are sleeping rough or in homeless shelters in a situation described by one charity as a genuine social problem. Another flashpoint in the southern region was February’s strawberry harvest in Huelva, on the border with Portugal, where migrants traditionally find work.

Felix Veliz, a Madrid-based former construction sector worker from Ecuador who worked for Corman, which installed safety equipment in building sites, says many of his colleagues were forced to sleep rough when the company filed for administration in September. The 49-year old who came to Spain nearly 10 years ago cannot claim dole or seek other work, as under Spanish law he is still tied to his former company while it files for administration.

“All we want is that the judge and the labour authorities reach a decision as soon as possible so we can claim dole or get a job with another company,” he told Reuters at a commercial court in Madrid where he and fellow former employees have put in a plea to break their ties with the company. “This is like a charity case now.”

Married with two adult children, he said he used to earn up to €1,300 per month. His mortgage now costs €1,300 per month. “They started docking our salaries in May,” he said, his hands thrust into the pockets of a blue corduroy jacket in the cold December wind outside the wrought iron doors of the court.

“In July the company stopped paying altogether. That’s nearly six months, up to now. We are living off loans from friends and family.”

Discrimination
Ripples from a crumbling construction sector are spreading out into the wider economy, bringing down peripheral businesses like air-conditioning installers and tile manufacturers. The number of Spanish companies entering administration in the third quarter nearly quadrupled from the year-ago period, according to the National Statistics Institute.

“It’s the domino effect from the construction sector,” said Jose Luis Corell Badia, a Valencia-based lawyer and head of corporate restructuring at Ernst & Young Abogados. “I don’t see light at the end of the tunnel. It’s job destruction.” Cristina Ballesteros, a 29-year old former secretary for the vice-president of a multinational cement company, said competition for work is such that potential employers ask her if she plans to have children, even though it is illegal to do so.

She lives with her boyfriend but has taken to saying she is single to improve her chances. “I share a rented flat, but if it was not for that I’d be back living with my mother,” she said.

“I studied to be a secretary: it’s not a degree, it’s a two-year diploma, but now I find there are many employers who want you to have a degree to do a secretary’s job. People accept it, because they have no choice. They are asking for more and more, when it’s really not necessary.”

Outside the Madrid commercial court, others are fighting to receive payments to which they are entitled. Rafael Pliego, 54, was recently fired from his job as a security guard and has already signed up for dole but not yet received his cheque. “I have an illness and they told me I couldn’t continue working and they fired me. It happened on October 30th. I had only been working with them for five months,” he said.

“I carry on looking for work, of course. I had the bad luck to get sick, and this happened.”

Spain’s government ran the second highest surplus in the euro zone in 2007, equal to 2.2 percent of GDP, but the public accounts are sinking into the red as tax income falls and the number of people claiming unemployment benefit rises.

The central government budget deficit leapt to ¤14bn in the first 11 months of 2008 – equivalent to 1.28 percent of GDP. The central government deficit is part of Spain’s wider public sector budget, which includes the social security system, regional and municipal accounts.

Social security payouts alone in 2009 will double to three percent of gross domestic product, according to FUNCAS savings bank consultancy. “It’s grown this year at an incredible rate,” said FUNCAS analyst Angel Laborda.

FUNCAS forecasts for the budget deficit in 2009 and 2010 are already obsolete, he said, and will probably come in at around six percent of GDP in 2009 and 7.5 percent in 2010. That would shatter a European Union limit of three percent of GDP.

Prime Minister Jose Luis Rodriguez Zapatero said that the country would start to see the first shoots of economic recovery within the coming year. “The first signs of economic recovery, in the government’s opinion, will be in the second part, towards the end of 2009. We will be at a point when confidence starts to recover,” he said in an interview broadcast on his party’s Web site.

But Vicente Balmaseda, 36, who lost his job as a conference stand designer and has been studying to improve his chances as he looks for fresh work, is pessimistic. “I’ve sent around 200 resumes, every day I send them. At best I’ve had three or four interviews. I’ve only had one direct interview with a company, the rest were with agencies.

“It’s getting me down. The job market in Spain is bad across all sectors. From what they say on the TV, it’s only going to get worse.”

The bartering illustrates the effects of sanctions on one of the
world’s most isolated, repressive countries, along with surging
inflation and the military junta’s curious decision to stop printing
small notes, experts say.

“How shall I give it to you? You want coffee-mix, cigarettes, tissues, sweets or what?”

That
question is heard often in shops and restaurants in the former Burma,
where coins and small notes disappeared years ago and other notes have
now started to follow suit.

State banks were main source of
small notes for shop-owners, but they stopped issuing new currency
several years ago. Today, beggars who collect money on the street now
provide shops with the bulk of their small notes, often in return for
food.

Rampant inflation also plays a role. Consumer prices rose
by an average 24 percent a year between 2005 and 2008, according to the
Asian Development Bank. That has taken a toll on Myanmar’s currency,
the kyat.

Officially, the kyat is pegged at 5.5 per dollar. But
it fetches nowhere near that, trading instead at about 1,000 per
dollar. The cost of printing small notes is now far more expensive than
the face value of the notes themselves.

A Yangon government high school teacher said most of her pupils had never even seen coins or small notes.

Sweet currencies
In
the commercial capital, Yangon, 100 kyat (around 10 US cents) is worth
a sachet of coffee-mix or a small container of shampoo. Tissue packets
or a cigarette or sweets are the equivalent of 50 kyat.

“The
shopkeeper gave me three sweets for change of 150 kyat when I bought a
bottle of cough mixture last week,” said Ba Aye, a Yangon taxi driver.

“When
I told her that sweets would make my cough worse, she offered me a
Thai-made gas lighter. When I said ‘I don’t smoke’, she then asked me
to accept three packets of tissues that would be useful for my runny
nose.”

General-store owner Daw Khin Aye said most of her customers preferred small items like sweets to notes.

“The
small notes that are in circulation are in very bad shape – worn out,
torn, stained, dirty and in most cases stuck with tape,” she said.

In Sittwe, the capital of western Rakhine State, teashop owners manufacture their own coupons to use as currency.

“It’s far more convenient to use these self-circulated notes instead of small items,” teashop owner Ko Aung Khine said.

“But
you need to make sure coupons can’t be forged. Mostly we use a computer
to print it with the name of the shop, face value and signature of the
shop owner,” he added.

Officially there are 13 denominations of
notes in circulation – starting from 50 pya (one cent) up to 5,000
kyat. But only the three big notes (200, 500 and 1,000 kyat) are
common. The rest are growing scarcer by the month.

“So far as
I know, they print only 1,000 kyat notes now,” said a retired economist
from Yangon University. “The cost of printing is far higher than the
face value of most small notes… so they now print just the biggest
ones.”

How much money is in circulation is anyone’s guess.
Myanmar has not publicly released money supply data since 1996-97, when
it put the value at 179.82 billion kyat.

Asked by reporters for the latest figure, a senior government official replied: “We cannot tell you. It’s a state secret.”