Europe and Eurasia2 | Global Market Brief & labor risk index Q3 2012 update Economic Outlook Political Outlook Labor Outlook about the Economic and governments. This structural problem is also reflected in the growth. The eurozone is at best stagnating, while among individual Meanwhile, global volatility is disproportionately affecting sponsors Outlook divergences among European labor nations, economic performance Russia’s markets. Although Russian GDP expanded at a better-than- markets. The 2012 unemployment in the first quarter of 2012 varied rate is predicted to be 10.3% in expected 4.9% year-on-year for the among a contraction of 0.8% in the EU and 11% in the eurozone, first quarter, and unemployment Italy and 0.3% in Spain, stagnation ➔ Macroeconomic but the performances of national in April 2012 decreased to 5.8%, in France, and 0.5% growth in developments in Europe and economies differ starkly. While the concerns about the eurozone Germany. Despite recent talk of Eurasia will remain heavily troubled economies suffer from and a potential global slowdown growth initiatives and stronger influenced by the ongoing crisis high unemployment, in some others are causing a significant sell-off fiscal integration on the European in Russian equity and currency in the eurozone over the next few there is close to full employment. months. The central structural level, such policy changes are either markets. And Russia’s economy The jobless rate is predicted to be cause of the crisis is the fact unlikely (growth) or would take remains heavily dependent on 24.4% this year in Spain, 19.7% in that while monetary policy was years of domestic constitutional energy prices, which are likely Greece, 10.2% in France, and 9.5% integrated in the creation of the change and intergovernmental to remain under pressure due in Italy. Conversely, unemployment treaty renegotiation (fiscal union). to concerns about slowing single currency and the European in Finland will be at 7.9%, 5.7% in A rapid departure from the growth in China and the US. Central Bank (ECB), fiscal and the Netherlands, 5.5% in Germany, economic policy remains under and 4.3% in Austria. This reflects current German structural reform ■ ■ ■ the control of national parliaments the broader trend regarding GDP agenda is therefore unlikely.
Europe and Eurasia3 | Global Market Brief & labor risk index Q3 2012 update Economic Outlook Political Outlook Labor Outlook about the Political will be able to deliver on the structural reforms demanded by diverse as taxi drivers and stock- market brokers are strongly will more likely be concentrated in the Presidential Administration sponsors Outlook the country’s international creditors. The survival of the government resisting plans to free up access to their professions. So far, the (PA), where six influential former ministers from President Vladimir for the entire four-year legislative government is not budging; it is Putin’s government (when he was period seems unlikely given likely that a major structural change prime minister)—including former ➔ In Europe, reform agendas the political problems ahead, will be put in place, unlocking Minister of Health and Social will continue to raise the risk of leaving Greece and the eurozone further economic potential. Development Tatiana Golikova— political instability. For instance, in a highly volatile situation. Meanwhile, talks may start in the have been retained. The influence elections will be held on 12 summer for Hungary to receive a of the PA will therefore likely Outside the eurozone, in the outweigh that of the Cabinet, September in the Netherlands, credit line in the autumn of 2012. aftermath of elections in both which includes Putin confidante meaning that the country will be However, the outcome of these Serbia and Croatia, the challenge First Deputy Prime Minister Igor facing a prolonged period of policy talks is far from certain because of forming governments has Shuvalov and fiscally hawkish uncertainty, with unemployment the government’s statist, anti- rendered the adoption of structural Finance Minister Anton Siluanov. (albeit relatively low) currently market measures are not viewed reforms uncertain, despite the at its highest level in six years. favorably by the EU and the IMF. ■ ■ ■ unsustainability of pension systems In the Greek elections, parties in both countries. In otherwise In Russia, Prime Minister Dmitry willing to commit themselves to well-performing Poland, the Medvedev and his cabinet will likely the condition of the bailout have government’s drive to liberalize have limited capacity to implement won a majority. It remains uncertain scores of professions has also reforms, despite their progressive how much the new government triggered unrest. Workers as orientation. The power center
Europe and Eurasia4 | Global Market Brief & labor risk index Q3 2012 update Economic Outlook Political Outlook Labor Outlook about the Labor will also revamp apprenticeship contracts to make these the main how all of the changes will function in practice, economists believe Continued next page sponsors Outlook conduit into the workforce. At the same time, it will combat the that they will not immediately boost employment and may misuse of flexible contracts through even be slightly pro-cyclical.” crackdowns on illegal practices and an employer contribution The crisis has likewise triggered structure to encourage permanent reforms in the core of the eurozone. ➔ An important response hiring. The most controversial In the Netherlands, the government to the eurozone crisis has been part of the reform is exit flexibility, broke up over further austerity labor market reform in Europe’s in which the government has measures. Agreement on a new troubled peripheral economies, a moved to marginally lessen the budget was nevertheless reached. trend that will continue over the penalties for wrongful dismissals Most importantly, the VAT will be next few months. In Spain, new in larger firms (greater than 15 increased from 19% to 21%, and rules guarantee a more flexible employees). The parties backing public sector salaries are likely labor market, especially given the Monti have proposed changes to to be frozen for two years. In the promotion of collective bargaining the legislation, however, which labor market, hiring and firing laws agreements (to negotiate working may soften the law’s restrictions on will be eased, while employers conditions) at the firm level. Labor flexible contracts, alter the phase-in will be required to pay the first market reform will also play an period for the new unemployment six months of unemployment important role in Italy. Several scheme, and better accommodate benefits. Similarly, in Belgium, last months of negotiations with social older workers adversely affected year’s political crisis has delayed partners and political parties led by the government’s pension necessary structural reforms, to final passage on 27 June. The reform. Any changes will most which, in combination with high reform will replace different forms likely be marginal, though, and labor costs, weakens the country’s of unemployment insurance with the quarreling parties will probably competitiveness. However, the a single benefit. The Bank of Italy encounter some difficulty in new government of Prime Minister estimates the new scheme will striking an agreement on new Elio Di Rupo has introduced increase coverage by about 16%, legislation. Meanwhile, youth several reforms, including earlier while so-called solidarity funds will unemployment remains a chronic retirement and a reduction be established for workers ineligible problem, standing at 36.2% in in unemployment benefits to for the new benefit. The legislation May. Although it is not yet clear induce unemployed persons to
Europe and Eurasia5 | Global Market Brief & labor risk index Q3 2012 update Economic Outlook Political Outlook Labor Outlook about the sponsors Labor search for jobs. Unemployment of progressive income taxation end of his six-year term include Outlook continued is, however, still predicted to rise, (Slovakia), limited wage hikes in the raising labor productivity by 50%, thereby heightening pressure public sector (Romania), and cuts in increasing real wages by 40%–50%, for further labor market reforms. public sector jobs (Romania). Labor and having high-tech industries’ Germany, meanwhile, faces a lack unrest remains limited to occasional share of GDP rise by 30%. Putin of skilled workers for its booming strikes and ritualistic decreed that, by 2020, 25 million manufacturing export sector. (1 May) demonstrations; however, new high-productivity jobs should if growth remains subdued and be created, with highly qualified Outside the eurozone, the workers constituting at least a austerity squeezes output later in ongoing crisis has also affected third of the workforce. To address the year, the escalation of strikes is the economic outlook for the Russia’s negative demographic possible. In Turkey, the government small export-oriented countries trends, Putin signed a decree may adopt some measures to of central and eastern Europe. supporting higher fertility rates, to reduce labor market rigidities, Domestic consumption became extend the average lifespan to 74 including reductions of severance the reluctant driver of anemic by 2018, and to adjust immigration pay. The timeline for this change growth as exports to the eurozone policies to attract more qualified remains uncertain, though. It is slowed down. The Czech Republic workers. In what may spur fresh likely to run into strong opposition, and Romania (as well as eurozone immigration policymaking, the particularly from small and medium- member Slovenia) are now in Federal Migratory Service has sized enterprises, most of which are technical recession. Interestingly, been removed from the Interior able to avoid the cost of severance with the exception of Romania and Ministry’s purview and placed under the current system. Bulgaria, unemployment has not under the government’s direct increased, and in some cases it has Labor is also an important issue in jurisdiction. Extensive pension even marginally declined. Labor- Russia where, on the first day of reform (which would include raising regulation reforms will come into his return to the presidency, Putin the minimum retirement age) force across the region: changes signed 11 decrees, including a and privatization of state-owned in the base of labor taxation number of directives to improve enterprises on a mass scale are not (Czech Republic), cuts in income likely to advance in the near future. labor conditions in the country. tax (Latvia), the reintroduction Goals to be accomplished by the ■ ■ ■
6 | Global Market Brief & labor risk index Q3 2012 update About this Report The Global Market Brief & Labor Risk Index is jointly developed by KellyOCG, the Outsourcing and Consulting Group of human resources provider Kelly Services Inc., and Eurasia Group, the global political risk consultancy. The report, a proprietary blend leveraging Kelly’s labor market knowledge with Eurasia Group’s expertise in political and socio-economic risk analysis, delivers a groundbreaking resource for companies as they assess market investments and global labor strategies. Published on an annual basis, the Global Market Brief & Labor Risk Index is segmented by four geographies: the Americas, Asia-Pacific, Europe and Eurasia, and the Middle East and Africa, with detailed insights for 55 of the world’s most important economies. About Eurasia Group Eurasia Group is the world’s leading global political risk research and consulting firm. Since 1998, it has helped clients make informed business decisions in countries where understanding the political landscape is critical. The firm’s research analysts are trained social scientists with post-graduate degrees, extensive professional experience, and a diverse range of language capabilities. Headquartered in New York, it also has offices in Washington and London, as well as a network of experts around the world. For more information, please visit www.eurasiagroup.net About KellyOCG KellyOCG® is the Outsourcing and Consulting Group of Kelly Services, Inc., a leader in providing workforce solutions. KellyOCG is a global leader in innovative talent management solutions in the areas of Recruitment Process Outsourcing (RPO), Business Process Outsourcing (BPO), Contingent Workforce Outsourcing (CWO), including Independent Contractor Solutions, Human Resources Consulting, Career Transition & Executive Coaching, and Executive Search. Visit www.kellyocg.com About Kelly Services® Kelly Services, Inc. (NASDAQ: KELYA, KELYB) is a leader in providing workforce solutions. Kelly® offers a comprehensive array of outsourcing and consulting services as well as world-class staffing on a temporary, temporary-to-hire and direct-hire basis. Serving clients around the globe, Kelly provides employment to more than 550,000 employees annually. Revenue in 2011 was $5.6 billion. Visit www.kellyservices.com and connect with us on Facebook, LinkedIn, & Twitter. To Receive this Report This report is available on an annual subscription basis. To access a complimentary report abstract, and for full subscription details, visit www.kellyocg.com/marketbrief More Information To find out more about how the KellyOCG/Eurasia Group partnership can add insight to your global planning, please contact firstname.lastname@example.org EXIT
A particular slide catching your eye?
Clipping is a handy way to collect important slides you want to go back to later.