By Katka Svickova
As the crisis progresses from the financial into the real economy and starts hurting the businesses as well as their staff, what is a better defense of an individual against its vagaries: his or her brain- or muscular power?
At the moment, we do not yet have a clear picture about how badly hit in terms of real production cuts and subsequent unemployment the Central European economies really are and will be by the global financial crisis. Yet there are already a few signs of who is affected...
In the Czech Republic, especially the trouble of the car and car part manufacturing sectors are put into spotlight. Skoda Auto, the Czech Republic's largest car manufacturer and a subsidiary of Volkswagen since 1991, has cut down production. The Czech Automotive Industry Association predicts that nearly 10 percent of the country's auto workers, or around 10,000 people, could lose their jobs within six months. So far, however, the redundancies started with contractual manual workers, partially „imported“ from countries like Vietnam and Mongolia to overcome bottlenecks on the domestic labor market. Also in the case of the glass, textile and logistics branches, the unemployment hit predominantly manual workers. In the whole Czech economy, up to 40 000 more redundancies are expected in 2009. Conversely, Slovakia, called also the Detroit of Europe, has not yet heard of any mass lay-offs by the automotive investors or in any other economic sectors.
At the same time, reading these forecasts, one should not forget that the seasonally adjusted unemployment rate in the Czech Republic was 4,4 % in October 2008 (Eurostat) – one of the lowest in the EU. Besides lay-offs, there are also many vacant positions on the labor market (albeit their number is lower than a few months ago). Qualified and skilled IT workers and engineers are still in high demand.
Also in Hungary, which was hit very hard by the financial crisis, the real economy started to feel the pain. National Labour Service (AFSZ) reported that there were 420 000 job-seekers in October 2008 whereby their number increased by 21 000 in a single month. As of February, further 14 000 employees could lose their jobs besides the already announced lay-off plans. Firms cutting their staff are for example Laird Technologies (electronics component manufacturer), Suzuki, Foxconn (manufacturer of spare parts for mobile phones), Videoton or General Electrics. In all, the crisis is felt most in the construction, automobile, electronics, IT and equipment manufacturing, tourism, hotels and processing industries.
Hungarian government plans to linder the effects of the crisis on workers by creating jobs in public work programs: in 2008, 25,000-30,000 poor and jobless Hungarians had temporary work and further 50,000-90,000 jobs should be created. This indicates a message about the skill level of workers made redundant – these public work programs can be hardly dominated by highly-skilled positions. Moreover, engineers, IT graduates and other tertiary educated workers are still demanded by employers.
Polish economy is also bracing for lay-offs in its glass, steel, chemical, automotive and electronics branches. At the same time, exporters in Poland were threatening to lay off staff already in summer 2008 (so before the economic crisis). According to forecasts, the unemployment may exceed 10 % - but this is hardly a steep jump compared to 9,6 % in June 2008. One of the sources of increased unemployment is going to be, according to expectations, a return of a part of the large Polish emigrant workers pool from Western Europe.
In all, at this stage, it seems that the adverse development in the real economy has not yet bitten the well-educated core of the labor force in Central Europe. Rather, it will probably lead to tuning down of the outcries about the scarcity of welders, metal turners and other manual professions, and the need for more young people to learn these professions.
In the end, therefore, the cloud of unemployment might have a silver lining: a clear message to the policy makers as well as individuals that investment into people´s brains has good and stable returns. Moreover, this kind of investment may not vanish into thin air so easily, like the billions sunk in sub-prime financial investments did.
Jan 8, 2009
Who loses in the economic crisis?
Nov 17, 2008
Hungarian promises to IMF and future trends in EU10 banking regulation
By Zdenek Kudrna
Hungary had signed a Stand-by agreement with IMF on November 4, 2008. Apart the standard clauses on the fiscal and monetary policy, it includes a section on the financial sector policies. Although, these commitments are made under pressure to fence off the impact of the global financial crisis, they may foreshadow future changes of the EU10 banking regulatory regimes.
The reason why Hungary is threatened by the financial crisis more than her Visegrad neighbors is fiscal profligacy of her government. High debts and high deficits of public finance over the last few years induced the independent central banks to restrictive monetary policy. In turn, high interest rates (and rather stable exchange rate of forint) motivated households to borrow in euro, Swiss francs or even yen. This resulted in the much higher vulnerability of household balance sheets as they essentially bear unhedged exchange rate risk. Both of these risks were exacerbated by the financial crisis that triggered liquidity trap and capital outflows from emerging markets.
In this context, the Stand-by agreement reviews what by today counts as standard firefighting measures including:
To address the foreign lending problem of households, the agreement envisages that banks and indebted families would
The crisis also induced the Hungarian government to submit laws to the parliament that would allow Hungarian Financial Service Authority and financial infrastructure to catch up with what most of their EU10 neighbors have done a few years ago.
Judging what all this means for the future of banking regulation in EU10 is fraught with uncertainties. However, unless we see major moves on the EU level and providing that existing regulatory regime will only be patched not scrapped, we could observe the following:
All of this has always been on the table. However, the unpleasant experience of Hungary and also Baltic states, Romania, and Bulgaria, may help to turn proposals into action in other EU states and on the EU level.
Aug 16, 2008
Nuclear Energy revival in Czech Republic, Slovakia and Hungary
By Andrej Nosko
Czech ambassador-at-large for energy Bartuska recently compared European countries' nuclear power policy to people, that want to legalize marijuana, while half of them already smoking in private, being afraid to admit it in public. In this post I look at three of these smokers - Czech Republic, Hungary and Slovakia.
Czech Republic, Slovakia as well as Hungary are experienced 'smokers.' Generating around 40%, 55% and around 40% of their electricity by nuclear respectively.
Czech Republic has two nuclear power plant (NPP) sites - Dukovany (2x WWER 440 / V213) and Temelín (2x WWER 1000). Slovakia has had two NPPs Jaslovské Bohunice (WWER 440 / V213) last two of its five units are scheduled for shutdown by the end of 2008 after the political decision during the EU accession negotiations; and Mochovce with two units functioning (WWER 440 / V213) and two more units foreseen to be completed in 2012 and 2013 respectively doubling its overall capacity. Hungary has a single NPP site at Paks, operating four WWER 440/V213 units (one of which was bought from Poland, after its nearly completed Żarnowiec NPP was abandoned)
The renewed interest in nuclear is not confined to CEE countries, whole world is reconsidering nuclear, since, although leaving many questions open, it currently is the only commercially tested and viable technology that provides CO2 free alternative to fossil fuels.
The debate was stirred-up again just before the Brussels summer holidays at July 2, 2008 conference, when Known supporter of nuclear energy, Hungarian MEP Edit Herczog (MSZP) mentioned that Hungary should increase its nuclear potential.
This comes at the same time as Czech ČEZ announced that it would double the capacity of its Temelín NPP, and Slovak PM mentioned at various occasions that political decision to close Bohunice NPP should be reconsidered, or a new NPP should be constructed at the site, as well as at other sites.
These moves are not limited to our three regional 'smokers,' Italy, country that shut down its NPPs after a referendum in 1987 has announced that it would go nuclear again. Poland, which after a local referendum suspended construction of its first NPP seems to be reconsidering its anti-nuclear stance and should join the 'smokers' club by 2020.
Although nuclear is currently the only viable solution if EU is to stay true to its aims of cutting the CE2 emissions, it is not without problems. Most of the EU countries have not considered answers to the question of spent fuel and associated waste. Also the question of nuclear proliferation is one that needs to be taken very seriously. Nonetheless, just like with the smoking, pretending that it doesn't happen is not helpful, we need to talk about the associated problems and weight the solutions.
EDITED 18/12/2008:
On December 18, 2008 Slovak government announced its selection of Czech national energy champion CEZ, as its strategic partner for construction of the 5th unit. This should be done by a common company with shares of 49%CEZ and 51% Slovak government to be set-up next year. New NPP unit should be operational in 2020. Minister of economy Jahnatek mentioned 7 points criteria for selection, including (quoting Minister Jahnatek):
- ability and experience with building 3rd generation reactors
- whether the company is vertically established in Slovakia
- opportunities and ability in terms of dynamic stability of transport network and grid
- sufficient financial backing
Minister mentioned EdF and Enel as trailing in the second group behind CEZ, according to government information, 10 companies were in the selection process.
The event gain attention in Slovak news primarily through the voiced criticism of government for not announcing a open competition, or transparent selection of this strategic partner.
Jul 13, 2008
Europe’s greatest energy-secret hidden beneath the onions and garlic!
By Andrej Nosko
The natural gas field near the city of Makó, known for the garlic and onion farming, is considered to be one of the largest continental troughs in the world. If the initial estimates prove to be accurate, amount of the non-conventional gas found under the garlic and onion fields of Makó would mean it is the biggest onshore gas field since 1959 discovery of Groningen field in Netherlands. This would position Hungary as an important gas producer, potential exporter and would free Hungary altogether from its gas import dependence.
Makó in the recent news
Although the presence of the non-conventional gas in Hungary strictly speaking, is not such a novelty. The news reemerged when on March 31, 2008 USA, Texas based consultant RPS Scotia Group, published the Resource Estimates of the Makó trough, and in the begining of April MOL Nyrt, the largest acreage holder for unconventional plays in Hungary and the owner of a well-developed energy infrastructure in Hungary, announced results of its joint study with Exxon, noting great potential in the Makó area.
The following map has been compiled and redrawn from various illustrative images, included in the Falcon Oil and Gas Ltd. FORM 51-102F1 (Management Discussion and Analysis for the year ended December 31, 2007) and MOL April 14, Press release, to illustrate the contractual relationships in the Makó trough. The map is interactive, and annotated, feel free to click on the colored polygons, or open the larger map before reading further.
View Larger Map
Open Map in Google Earth Progam (You must have Google Earth software installed)
Contractual relations in Makó trough
Although the largest acreage owner of the unconventional gas resources in Hungary is MOL, the news of Makó deposits was publicized mainly in connection with a series of announcement of joint deals between Canadian Falcon Oil and Gas Ltd., Hungarian MOL, and USA based ExxonMobil.
On April 10, 2008 the TXM Exploration and Production LLC, wholly owned subsidiary of Canadian British-Columbia based Falcon Oil and Gas Ltd. entered into a Production and Development Agreement with ExxonMobil Corporation affiliate Esso Exploration International Limited (acting in Hungary through its subsidiary ExxonMobil Kutatas es Termeles Magyarorszag Kft). On April 11, 2008, was this agreement followed by MOL and Exxon which signed an agreement to start a joint exploration work program in blocks 106 and 107 (see the map) in Makó Trough, as well as MOL's taking part on the Exxon's stake of the previous deal with Falcon. On May 16, MOL and ExxonMobil signed a Heads of Agreement to undertake a joint technical study of basins in Hungary with unconventional hydrocarbon potential.
Makó deposits in historical perspective
The predecessor of MOL, Hungarian state-owned oil company was exploring nonconventional gas deposits in Hungary (click for map overlay) already in 1960's and 1970's, and as WSJ quotes, geologist Dr. Gyorgy Szabó, currently a director at Falcon, who took part in the geological survey of the region in 1970s, Hungarian geologists "knew there were hydrocarbons there, but we also knew the rock was low-permeability and low-porosity." According to WSJ, in the late 1980s, the World Bank financed a deep-drilling program in Hungary, supervised by experts from the U.S. Geological Survey. The results of that review ended up in the hands of John Gustavson, founder of USA Boulder-Colorado based Gustavson Associates, who was touring former Warsaw Pact nations in 1991 on the lookout for oil and gas. In 1998 he acquired the license for a big chunk of Makó. Gustavon unsuccessfully tried to entice major oil companies into the project. Acording to WSJ he won interest of Marc Brunner, now CEO of Falcon Oil and Gas and, back than founding chairman of Ultra Petroleum, Pannonian Energy (which was in 2001 acquired by Gasco Energy of which Mr Brunner is currently a Chairman) and Pennaco Energy (Acquired by Marathon Oil), all companies with significant exprience in nonconventional gas exploration, notably in Wyoming.
Estimations of recoverable sources
Besides the news converage which is rather unreliable, since it does not provide citations, one can use two available reports for the 'preise' estimations. It is the September 2006 Independent Resource Assessment from The Scotia Group and March 2008 update to this report. The reports can be obtained throught search in the SEDAR database. The selected data from the reports is included in the following table (The comparison data is used from the BP Statistical Review of World Energy 2008):
Show the table in full screen.
This table summarizes the probabilistic summation of the recoverable resource estimates, nonetheless, this is only the technical probability of the project, and the certainty of the exploration still varies significantly. According to various sources, time to go online for the Makó gas varies from late 2008 to 2012 or to even later dates. Nonetheless, the news of the Makó deposits is very interesting and important, and although the nonconventional resources are not the cheapests there are, with the prices of gas predicted to rise substantially for Europe, even the nonconventional gas resources will prove indispensable and affordable.
If the predictions of Alexei Miller, Gazprom CEO, of gas prices rising to $500 per 1,000 cubic metres from the current $400 by the end of 2008 - or even $1,000, should the oil prices hit $250 per barrel - prove accurate, Makó's Hungaricum will not be onions and garlic, but natural gas and, a new landscape populated by hundreds of gas drill rigs.
Link to photo gallery of drills (added on November 19, 2008)
