Germany has agreed to give jobs or apprenticeships to about 5,000 young unemployed Spaniards every year, under a deal signed by labour ministers from both countries in Madrid on Tuesday, the Financial Times reported. The deal reflects rising concern in Berlin and other European capitals about a looming social crisis in countries such as Spain, where the rate of youth unemployment now stands at 57 per cent. But it also highlights Germany’s growing need for qualified workers, which is fuelled both by demographic changes and by the recent strong performance of the German economy. The move forms part of a broader European drive to increase labour market mobility across a recession-scarred continent, where language barriers and cultural differences still make it much harder for workers to find jobs outside their home country. Read more. (Subscription required.)
Daily Insolvency News Headlines
Wed., May 22, 2013
Italy is considering allowing older workers to reduce their work hours while mentoring younger employees as a way to bring down youth unemployment, which is a growing scourge across Europe, The Wall Street Journal reported. Labor Minister Enrico Giovannini said that he planned this week to discuss the idea of "generational handoff" contracts with union leaders, who so far have been strongly supportive. Such a plan could offer substantial savings to employers and provide a critical bridge to the labor force for young job seekers, who have borne the brunt of Italy's longest postwar recession. However, it would not create any new jobs, and taxpayers would have to pick up the tab for pension contributions for the older workers who choose to participate. The plan is "costly, but possible," Mr. Giovannini said. The coalition government of Prime Minister Enrico Letta has made improving the plight of Italy's younger generation—38.4% of whom are unemployed, despite being the most educated in the country's history—the new administration's top priority. Mr. Giovannini, an economist who left the helm of Italy's statistics agency to become labor minister, is considering a host of measures. Among them are tweaks to laws to make it easier for companies to hire temporary employees and renew their contracts, and measures to fund the wage-supplement program for workers furloughed during downturns. Read more. (Subscription required.)
Swedish prosecutors have questioned the former head of bankrupt car maker Saab and two others in an investigation into suspected tax offences relating to the running of the company, officials said on Tuesday, Reuters reported. Prosecutors are looking into allegations that executives at Saab, which collapsed in 2011, obstructed proper tax checks over the years 2010 to 2011, a turbulent time for the company, when it was sold by General Motors to small Dutch sports car maker Spyker, and when problems which led to its collapse emerged. In documents released by Vanersborg court in western Sweden, home to the former car maker, the prosecutor said former chief executive Jan-Ake Jonsson, former chief financial officer Karl-Gustav Lindstrom and former chief legal officer Kristina Geers had been detained for questioning in the investigation. The Financial Crimes Unit has given no details of exactly what it alleges the three did to prevent the tax office carrying out its checks. But the chief prosecutor at the unit leading the investigation, Olof Sahlgren, said it involves measures being taken when company accounts were drawn up. Saab, a maker of cars since 1947, crashed into bankruptcy at the end of 2011, less than two years after General Motors sold it to Dutch sportscar group Spyker. Read more.
Since the financial crisis hit Europe in 2008, few issues have proved as divisive as deciding how to protect bank deposits, The Wall Street Journal Brussels Beat blog reported. A proposed European Union law that would force states to build deposit-guarantee funds has been stuck in the bloc's decision-making process for almost three years. And in the countries where they exist, the funds remain far too small to cover the €100,000 ($129,000) per bank account they are supposed to insure. Until this year, the deposit-guarantee funds of European countries weren't seriously tested. Domestic banks were usually bailed out with taxpayer money and all depositors—even those with more than €100,000 in their accounts—and senior bondholders were protected without governments dipping into these funds. The failures of a couple of small Danish banks were the notable exceptions to that rule. But this sense of security for savers and senior creditors was shattered with Cyprus's bailout. In exchange for a loan of €10 billion from the euro zone and the International Monetary Fund, Cyprus's government restructured the country's biggest bank and wound down its second-biggest bank, forcing senior bondholders and depositors with more than €100,000 to take steep losses. The Cyprus bailout showed that tolerance for expensive bank bailouts in Europe is running low. It also violently brought home to savers in cash-strapped countries that they were much more vulnerable than those in financially flush states. Read more. (Subscription required.)
A surge in requests for bankruptcy protection among Brazilian small- and mid-sized corporate borrowers is setting off an alarm among private-sector banks, which could raise borrowing costs and restrict access to credit to fend off the practice, analysts at BTG Pactual Group said on Tuesday, Thomson Reuters News & Insight reported. Weak operating performances among small- and mid-sized companies, accelerating inflation that is squeezing their margins and flagging economic growth have prevented a faster decline in loan defaults at some banks, analysts led by Marcelo Henriques said in a client note. According to their estimates, corporate lending currently accounts for about 50 percent of the banking system's consolidated loan book in Brazil. The worrisome trend in bankruptcy protection requests could make private-sector banks even more wary of lending, fanning a "risk-off mode" they embraced last year to stave off the worst environment for the industry in years. According to credit research company Serasa Experian, bankruptcy requests soared an annual 24 percent in the first quarter to 247, the highest since the implementation of a revamped bankruptcy law in 2005. Read more.
Europe faces a decade of stagnation without “sustained and significant reforms,” Mark Carney, the incoming governor of the Bank of England, warned Tuesday. Mr. Carney, currently Canada’s top central banker, said Europe can draw lessons from Japan on the dangers of taking half measures, The Wall Street Journal Real Time Economics reported. It’s been almost six years since the global financial crisis, but Europe remains mired in recession, fiscal austerity, low confidence and tight credit conditions restraining economic activity, he said. “Deep challenges persist in its financial system. Without sustained and significant reforms, a decade of stagnation threatens,” Mr. Carney said in his final public address as governor of the Bank of Canada. He noted how Japan had struggled for more than two decades since that Asian nation was beset by its own financial crisis. Japan recently embarked on a “bold policy experiment” to end the “debilitating legacy and its success or failure will have a major impact on the outlook over coming years,” he said. Mr. Carney, who also heads the Basel-based Financial Stability Board tasked by G-20 leaders with spearheading financial sector reform, said a key lesson from Europe’s experience is the critical role that a sound financial system plays in the transmission of monetary policy. Read more. (Subscription required.)