Few companies are rushing to invest in Europe   11 Jul 2013

Federation of European Employers

Few companies are rushing to invest in Europe, in spite of early signs of an economic upturn.

In a month when the EU welcomed another member state and the way was opened for another EU country —  Latvia — to join the eurozone, we might well be lulled into assuming that neither the EU dream nor the single currency are discredited after all and that things are looking up. Indeed, the OECD’s composite leading indicator for the eurozone has now been at, or above, the long-term average trend line for the last three months and GDP projections even for the current year are being revised upwards.

Yet there are few signs that companies from outside the EU are lining up with investment projects to take advantage of the long-awaited recovery, and one factor that is discouraging investment is the uncertainty in domestic markets. Although high unemployment rates should indicate that there is a good pool of available labour and that employers are in a buyers market when it comes to wage rates, unemployed people do not make good consumers and poor productivity still haunts the European Union, particularly in its most recent member states.

Certainly many former barriers to improved productivity have fallen during the recession.  Governments have relaxed working time limits to allow flexible working practices and collective agreements have abandoned many former restrictive practices.  Even so, huge national differences remain in working time. Workers in Romania, for instance, work the longest hours in Europe — a total of over one month more per year than workers in Finland. Similarly, workers in Germany enjoy a statutory holiday entitlement of two weeks more than workers in Estonia.

Long working hours should logically correlate with a greater opportunity for wealth generation — yet this is not apparent. Both Finland and Germany have per capita GDPs well above the EU average, whilst Romania and Estonia are amongst the least productive countries.

Speaking at a breakfast briefing by the Federation of European Employers (FedEE) today the FedEE Secretary-General, Robin Chater, underlined that a further issue for potential investors is the way that governments give with one hand and take away with the other.

“Although corporation tax is slowly falling across much of Europe there has been much political over-reaction to press reports about corporate tax evasion.  Immigration rules are also being tightened and greater penalties imposed even on employers that have been the victim of forged visas and work permits.  Added costs have also arisen from employment law amendments such as those just introduced in Hungary and the new facility for part-time educational leave in Austria.  Even in the lower cost countries of eastern Europe social security contributions remain generally very high and widespread corruption continues to make the conduct of business transactions particularly problematic”

Mr Chater went on to underline the need for a concerted strategy for EU recovery which he believes is “profoundly lacking at any level”.

“I look with despair at countries such as France where the male-female wage gap is one of the worst in the world, yet all the government can do is continue to tinker with maternity leave in order to pressure men to share it with their wives and partners ... or in the UK where attacks on bankers — the lifeblood of the economy — continue and every development that can encourage employability — such as the zero hours contract — is automatically suspect and under review by government.”

ENDS

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