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Where is the eurozone’s labour market heading?

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Last week, FT Alphaville pointed out that the headline unemployment numbers in the US and the eurozone were painting an overly rosy picture of the labour market.

Since then, a few things have been brought to our attention about the situation in the eurozone that paint a more detailed picture of what’s happened over the summer months after its economies reopened.

The news from the past few months was largely positive, though we’d caution that the labour market is still faring far worse than the headline unemployment figure — which, in the eurozone, is 8.1 per cent — suggests. (We’d also recommend this excellent read from the FT’s economics correspondent Delphine Strauss on hidden joblessness).

Now, the good news. After a summer in which caseloads eased and economies reopened, the amount of hidden unemployment and underemployment fell.

There are a few aspects to this. But first, let’s back up a little. An important distinction in the way in which the US and eurozone have handled the economic policy response is that, while Washington has handed benefits to individuals, the eurozone has focused on offering incentives to businesses to keep staff in their current roles — even if they can no longer work their regular hours. These state-run short-term work schemes are in place across all four of the eurozone’s major economies: Germany, France, Spain and Italy.

The proportion of the labour force registered for state-run short-term work schemes has — as one might expect given the relaxation of rules — fallen sharply over the summer. Here’s a chart from Capital Economics highlighting the scale of the falls:

And here’s one from UBS, which also includes a comparison with the UK:

UBS also thinks that the amount of people who have dropped out of the labour market entirely due to the pandemic has fallen from 4.3 per cent of the pre-pandemic workforce in April, to 1.1 per cent by July.

But, as caseloads rise across the region, these improvements will almost certainly go into reverse. Most of the restrictions now being announced involve the shutting down of leisure and hospitality facilities — examples include the plan to close bars and restaurants in Paris for at least a fortnight, and for eateries in Frankfurt to shut up shop by 10pm. These are also the industries where the use of short-term work schemes had fallen most dramatically.

The following charts, from the Munich-based Ifo think tank, show the change in use of Kurzarbeit between May and September. In the hospitality sector the use of the scheme has plunged from 72 per cent of the workforce in May to 26 per cent in September as restaurants reopened. If cases continue to rise and restrictions tighten, many workers in the sector are likely to have to go back on Kurzarbeit. The contrast between the use of the scheme in May and September has been far less pronounced for manufacturers, which can more easily adapt workplaces to stay open during surges:

Unlike in the UK, where chancellor Rishi Sunak has said furlough will come to an end at October’s close, workers in places like Germany and France will continue to benefit from government schemes, should their employers opt to curtail their hours. So will Italian employees. Spain, a laggard, has now agreed to extend its scheme until January 31 2020.

The schemes vary in design, from Germany’s broad and generous Kurzarbeit programme to Spain’s more targeted approach. But their use will help keep a lid on labour market distress — and support demand — across the region in the months ahead. We suspect the UK’s support scheme to replace furlough, unveiled by Sunak last month and which asks for a far greater contribution from the employer than any of its eurozone equivalents, won’t be widely taken up. 

Some think that is no bad thing and that the UK’s and the US’s approach will lead to a faster adaptation of the labour market to meet the challenges of the post-Covid economic landscape. The eurozone’s focus on keeping workers in their current roles, meanwhile, could create zombie jobs. We can see it from both sides. Though scraping support at a time when rising caseloads are on the up seems to us a recipe for disaster, both for labour market conditions and — given the knock-on impact on confidence and spending — the broader recovery. 


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Global house prices: Raising the roof

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Missing Belarus activist found hanged in Kyiv park

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Belarus updates

A Belarusian opposition activist has been found hanged from a tree in a park near his home in Ukraine, a day after he was reported missing. Local police said his death could have been made to look like suicide.

Vitaly Shishov, who led the Kyiv-based organisation Belarusian House, which helps Belarusians fleeing persecution find their feet in Ukraine, had been reported missing by his partner on Monday after not returning from a run.

Shishov’s death follows weeks of increased pressure in Belarus by authorities against civil society activists and independent media as part of what the country’s authoritarian president Alexander Lukashenko has called a “mopping-up operation” of “bandits and foreign agents”.

Many Belarusians have fled the country since Lukashenko launched a brutal crackdown last summer after nationwide protests erupted following his disputed victory in presidential elections. About 35,000 people have been arrested in Belarus and more than 150,000 are thought to have crossed into neighbouring Ukraine.

Franak Viacorka, an aide to Belarusian opposition leader Sviatlana Tsikhanouskaya who met UK prime minister Boris Johnson on Tuesday in London, said Shishov’s death was “absolutely shocking and unexpected to all of us”.

“He [Shishov] and his friends helped people who were moving to Ukraine,” Viacorka told the Financial Times. “They were very helpful, especially for those who have just arrived and didn’t know what to do.”

Viacorka said many activists living in Ukraine, such as Shishov who fled Belarus in 2020, had “complained about possibly being followed, and receiving threats”.

Kyiv park where Vitaly Shyshov’s body was found
The Kyiv park where Vitaly Shishov’s body was found after he failed to return home following a run © Gleb Garanich/Reuters

Downing Street said that after meeting Tsikhanouskaya, Johnson condemned the Lukashenko regime’s severe human rights violations. “The UK stands in solidarity of the people of Belarus and will continue to take action to support them,” a spokesperson said.

Ukrainian police have now launched a criminal case for the suspected murder of Shishov, including the possibility of “murder disguised as suicide”.

Yuriy Shchutsko, an acquaintance and fellow Belarus refugee who found Shishov’s body, ruled out suicide, pointing out that Shishov’s nose was broken.

“I suspect this was the action of the [Belarus] KGB . . . we knew they were hunting for us,” he told Ukrainian television.

Ihor Klymenko, head of the National Police of Ukraine, subsequently said Shishov’s body had what appeared to be “torn tissue” on his nose and other wounds, but stressed it would be up to medical examiners to determine if these were caused by beatings or the result of suicide.

There was no immediate comment from Lukashenko or his administration.

Belarusian House said: “There is no doubt that this is an operation planned by the Chekists [the Belarusian KGB] to eliminate someone truly dangerous for the regime.

“Vitalik was under surveillance,” it added. “We were repeatedly warned by both local sources and our people in the Republic of Belarus about all kinds of provocations up to kidnapping and liquidation.”

Adding to the swirl of attention on Belarus this week, Tokyo Olympics sprinter Krystsina Tsimanouskaya on Monday took refuge in Poland’s embassy after alleging she had been taken to the airport against her will, having criticised her Belarusian coaches.

The athlete has said she feared punishment if she went back to Belarus but has so far declined to link her problems to the country’s divisions.

Shishov’s death comes five years after Pavel Sheremet, a prominent Belarus-born opposition figure and journalist, was killed in an improvised bomb explosion in downtown Kyiv while driving to work at a local radio station. Lukashenko has ruled Belarus since 1994.

Ukrainian authorities at first suggested Belarusian or Russian security services could have been involved in the hit, as Sheremet was close to opposition movements in Russia as well.

Instead, officials charged three Ukrainian volunteers who supported war efforts against Russia-backed separatists in eastern Ukraine — although they steadfastly denied involvement and authorities were unable to provide a motive in what has been widely described as a flimsy case.

Additional reporting by Jasmine Cameron-Chileshe in London



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EU pledges aid to Lithuania to combat illegal migration from Belarus

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EU immigration updates

In the latest sign of deteriorating relations between the EU and Belarus, Brussels has promised extra financial aid and increased diplomatic heft to help Lithuania tackle a migrant crisis that it blames on neighbouring Belarus and its dictator Alexander Lukashenko.

Lithuania detained 287 illegal migrants on Sunday, more than it did in the entirety of 2018, 2019, and 2020 combined, the vast majority of them Iraqis who had flown to Belarus’s capital Minsk before heading north to cross into the EU state. Almost 4,000 migrants have been detained this year, compared with 81 for the whole of 2020. 

“What we are facing is an aggressive act from the Lukashenko regime designed to provoke,” Ylva Johansson, the EU commissioner for home affairs told reporters on Monday after talks with Lithuania’s prime minister Ingrida Simonyte. “The situation is getting worse and deteriorating . . . There is no free access to EU territory.”

The EU imposed sweeping sanctions against Lukashenko’s regime in June, after he fraudulently claimed victory in last year’s presidential election and then led a brutal campaign to violently suppress protesters and jail political opponents. Lukashenko has ruled Belarus since 1994.

The rising concern over the migrant crossings, which EU officials say is a campaign co-ordinated by Lukashenko’s administration, comes as one of the country’s athletes competing in the Tokyo Olympic Games sought refuge in Poland after team management attempted to fly her home against her will after she publicly criticised their actions.

Johansson said the EU would provide €10m-€12m of immediate emergency funding and would send a team of officials to the country to assess the requirements for longer-term financial assistance, including for extra border security and facilities to process those attempting to enter.

Simonyte said that Vilnuis would require “tens of millions of euros” by the end of the year if the number of people attempting to cross the border continued at the current pace.

Lithuania’s foreign minister Gabrielius Landsbergis told the Financial Times in June that Belarus was “weaponising” illegal immigration to put pressure on the Baltic country over its housing of several opposition leaders. Since then, the flow of illegal immigrants from Iraq, Syria, and several African countries has increased sharply.

Iraqi diplomats visited Vilnius at the end of last week after Lithuania’s foreign minister flew to Baghdad in mid-July. Johannson said on Monday that EU diplomats were engaged in “intensive contacts” with Iraqi officials, which she said were “more constructive than we had hoped”.

State carrier Iraqi Airways offers flights from four Iraqi airports to Minsk, according to its website. Former Estonian president Toomas Ilves suggested on Twitter that the EU could cut its aid to Iraq “immediately until they stop these flights”.

Speaking at the border with Belarus on Monday, Johansson added that the tents provided by Lithuania were unsuitable for families. Lithuania’s interior minister Agne Bilotaite said she hoped the number of illegal migrants would subside in the coming months but that Vilnius was planning to build some housing to accommodate them over the upcoming winter.



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