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Europe staves off mass unemployment but needs to redeploy workers

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The coronavirus pandemic is exacerbating the divide in Europe’s job market between skilled and unskilled workers, despite governments’ financial support preventing a repeat of the mass unemployment caused by the financial crisis a decade ago.

The bloc’s labour market has been largely shielded from the fallout of the pandemic by generous government and central bank stimulus, including furlough schemes that subsidised the wages of about 50m people who were put on reduced hours.

And the outlook has continued to brighten since the summer, despite a second wave of coronavirus infections and lockdowns, according to Consensus Economics, which averages economic forecasts of leading economists. 

Employment in the bloc rose almost 1 per cent in the third quarter as many of those who left the workforce and were considered inactive when the pandemic hit returned to their old jobs or found new ones, according to Eurostat.

“This time around we are talking about huge fiscal recovery plans in Europe and that should be able to prevent a massive surge in unemployment,” said Stephano Scarpetta, director of employment, labour and social affairs at the OECD club of wealthy nations.

The number of adverts on jobs website Indeed fell sharply when the pandemic struck but has since partially recovered. For instance, job adverts in Italy were down 25 per cent from a year ago in November — compared with a shortfall of 43 per cent in June.

Across the eurozone, the unemployment rate this year is now expected to be 8.1 per cent, down from the 9.7 per cent forecast in May, according to Consensus Economics. That would leave this year’s unemployment level only a little higher than the 7.5 per cent of 2019.

But the overall improvement masks a considerable difference: in the first half of the year, there was a 7 per cent contraction in low skilled jobs in the eurozone, while the number of high skilled jobs grew 3 per cent, according to the European Central Bank.

Bar chart of % of dependent employees showing Europe's use of job retention schemes has fallen but is still substantial

After this month’s vaccine breakthroughs, the challenge for policymakers is to keep supporting the labour market until an economic recovery takes hold, economists and policymakers said; people who lose their jobs still need retraining for new roles being created, because there is a mismatch between the jobs being created and those destroyed by the crisis.

Winners and losers

Several companies have significant hiring plans in Europe — including logistics group DHL which is seeking to add 3,000 staff in the region, Volkswagen planning to recruit 2,000 people and Tesla looking to hire 12,000 workers for its new German factory.

At the same time, many companies are shedding staff. Airbus, the aerospace group, is cutting 15,000 workers. Danone, the maker of Evian bottled water and Activia yoghurts, this week announced 2,000 job cuts, while steelmaker Thyssenkrupp last week said it was cutting 5,000.

The pandemic has also hit airlines hard. Lufthansa put 80,000 of its 130,000 workers on furlough after receiving a €9bn state bailout. The 700 students at its pilot school in Bremen were recently told they would no longer have jobs when they graduate.

And some industries face structural change. While German carmakers are hiring staff to work on electric vehicles, they and their parts suppliers are also cutting tens of thousands of jobs involved in making internal combustion engines. IG Metall, the union, has estimated 300,000 jobs will be lost in Germany’s metal and electrical industries this year.

“Even if enough new jobs are created in the post-pandemic economy, they may not be equally accessible to everyone,” said Christine Lagarde, ECB president, in a speech last week.

That exacerbates the structural changes already confronting the European labour market. Increased automation in many industries across the world’s 26 largest economies is expected to destroy 85m jobs by 2025, but it will also create 97m new ones, leading to a net gain of 12m, according to a recent report by the World Economic Forum.

The challenge for policymakers is to help workers losing their jobs to learn new skills that allow them to shift into areas where there are vacancies, said Christoph Kahlenberg, head of labour market projects at the Randstad Academy in Eschborn.

“If you are an engineer at Airbus or VW who is in their 50s and you lose your job, it is hard to find a new one — you are not really suitable for Tesla,” he said.

For example, to boost the supply of IT specialists that VW needs for its €33bn push into electric vehicles, the carmaker has sponsored the construction of an offshoot of the coding school 42 near its Wolfsburg headquarters, which aims to train 600 students next year.

“You can use tons of artificial intelligence PhDs in the current climate, but what do you do with all the people on the production line? We need them too,” said Max Senges, head of the new Wolfsburg school. It will not require students to have any existing educational qualifications, only to take a logic test, in order to attract workers from less educated backgrounds who need to pick up coding and digital skills.

Line chart of Online job advertisements (% change from 2019 level) showing European job opportunities remain below pre-pandemic levels

Economists are urging European governments to shift their focus from spending to prop up existing jobs to doing more to retrain and redeploy those in affected industries.

“It is important to switch from just protecting the status quo jobs to preventing an overall rise in unemployment,” said Katharina Utermöhl, economist at Allianz. “Giving companies hiring bonuses could incentivise them to create more jobs.”

Neil Shearing, chief economist at Capital Economics, said: “It’s certainly the case that government support has helped to insulate the labour market from the worst effects of the pandemic.” But, he added “it’s too soon to say that governments have prevented a larger rise in unemployment”.



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EU and US set to end Airbus-Boeing trade dispute after 17 years

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The EU and US are poised to resolve a 17-year dispute over aircraft subsidies, lifting the threat of billions of dollars in punitive tariffs on their economies in a boost to transatlantic relations. 

Diplomats and officials confirmed on Monday night that two days of intensive negotiations in Brussels had left the EU and the Biden administration with a draft deal on subsidy rules for Airbus and Boeing. The breakthrough is set to be finalised on Tuesday at US president Joe Biden’s first EU-US summit meeting in Brussels.

“I am very positive that we will find an agreement on the Airbus-Boeing issue today, in our conversation with our American friends,” Ursula von der Leyen, the European Commission president, said on Tuesday morning. “I am very positive and convinced that we will deliver together today.”

People close to the talks said the governments of Airbus’s three home countries in the EU — Germany, France, and Spain — were being consulted on the draft deal ahead of it being confirmed on Tuesday. 

The deal will take the form of a five-year accord to suspend punitive tariffs linked to the disagreement, coupled with the creation of a working group and ministerial dialogue on subsidy limits, according to people close to the talks.

The intention is that this will ensure the disagreement never re-emerges, including for new aircraft models.

The breakthrough will lift a cloud of uncertainty hanging over the airline sector, while removing the threat that EU and US consumer goods could again be hit with punitive tariffs because of the dispute. 

Those duties — on a wide range of products, from French wine to US spirits and sugarcane molasses — were suspended after the EU and US agreed in March to lift them for four months and to start negotiations on a solution. 


$7.5bn


Extra tariffs imposed by the US on European goods in October 2019

The Airbus-Boeing dispute is one of the longest running battles in the history of the World Trade Organization — a disagreement both sides have acknowledged they could increasingly ill-afford as they seek to forge closer co-operation in dealing with China’s model of state capitalism. 

EU trade commissioner Valdis Dombrovskis held talks with US trade representative Katherine Tai and commerce secretary Gina Raimondo in the days leading up the summit as the sides strove to get an agreement over the line. 

Tai’s office declined to comment.

Companies on both sides of the Atlantic have long called for a solution. The matter took on greater urgency after the US targeted European exports worth $7.5bn with extra tariffs in October 2019, while the EU imposed additional duties on $4bn of US exports last year. Both sets of measures were in line with WTO rulings in favour of each side.

But both the US and EU have been found over the years to have failed to properly implement WTO panel rulings on illegal subsidies for their aircraft manufacturing champions.

EU and US trade officials emphasised the complexity of the dispute, with each side taking issue with the other’s claim to have complied with WTO decisions. The nature of subsidies on each side of the Atlantic is also very different, with EU officials pointing to sizeable US defence contracts as one example. 

The end of the Airbus-Boeing dispute would remove one important irritant in trade relations, but others remain. 

Brussels last month held back from increasing tariffs on US goods as a goodwill gesture in a disagreement over Trump-era tariffs on European steel and aluminium. 

The two economies are also yet to fully bury their differences over digital taxes, with the issue now tied up with broader international talks. 

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Nato warns China’s military ambitions threaten international order

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Nato leaders have warned that China poses “systemic challenges” to the rules-based international order, in a sign of growing western unease over Beijing’s military ambitions.

Members of the transatlantic alliance convening in Brussels on Monday cited activities such as disinformation, Chinese military co-operation with Russia and the rapid expansion of China’s nuclear arsenal as part of the threat, according to a Nato communiqué.

The strength of the statement shows how far relations between the west and Beijing have deteriorated in the 18 months since Nato countries last met. Then they had issued a cautious statement about the “opportunities and challenges” presented by China.

The tougher language at US president Joe Biden’s first Nato summit comes as members of the 72-year-old cold war-era military pact vowed to widen co-operation in new theatres of conflict from cyber space to outer space. The Nato communiqué followed a tougher line from the weekend’s G7 meeting, when the club of rich democracies criticised China over human rights, trade and a lack of transparency over the origins of the coronavirus pandemic.

Jens Stoltenberg, Nato secretary-general, insisted Beijing was “not an adversary” but said the alliance needed to “engage with China to defend our security interests”.

“There is a strong convergence of views among allies,” he said, adding that Nato was primarily concerned about Beijing’s activities in the group’s Euro-Atlantic sphere of operation. “China’s growing influence and international policies present challenges to alliance security.”

China’s “stated ambitions and assertive behaviour” posed “systemic challenges to the rules-based international order and to areas relevant to alliance security”, said the summit communiqué, approved by the leaders of the 30 Nato member states.

“We call on China to uphold its international commitments and to act responsibly in the international system, including in the space, cyber and maritime domains, in keeping with its role as a major power.”

The communiqué pointed to China’s “coercive policies”, its accumulation of nuclear warheads and sophisticated delivery systems, and its participation in Russian military exercises in Atlantic region waters. Another trend troubling Nato allies is the involvement of Chinese companies in critical infrastructure in Europe, such as ports and via telecommunications company Huawei.

Nato said it would aim for “constructive dialogue” with Beijing “where possible”, including on climate change, in a sign of more nuanced views held by some of the alliance’s members.

The Nato broadside reflects an attempt by the Biden administration to use his first European trip to mobilise allies to push back against China.

Beijing hit back at criticism by the G7 club of rich democracies this weekend, accusing the group of “sinister intentions” and “artificially creating confrontation and friction”.

The Nato leaders also pressed ahead with efforts to modernise a grouping originally set up as bulwark to the Soviet Union. Nato is now pulling back from an era of “expeditionary” international missions, with its forces preparing to leave Afghanistan along with US troops after almost two decades.

The Nato heads of state and government approved a cyber defence strategy and extended existing powers to invoke the alliance’s “Article 5” principle of collective defence, in cases of co-ordinated cyber attacks.

“[This] will upgrade the defence, political and intelligence dimensions of cyber across the alliance,” Jake Sullivan, US national security adviser, said before the meeting.

UK prime minister Boris Johnson had also called for more investment in cyber defences in the wake of the Covid-19 pandemic, when hostile states were accused of carrying out cyber attacks on allies’ health systems.

Nato leaders also pushed through measures to strengthen their collective response to attacks on satellites, and to build capabilities in emerging technologies such as artificial intelligence. Members of the alliance have become increasingly preoccupied with potential military uses of AI and with the growing activities of China and Russia in outer space.

As well as confronting external threats, Nato faces some chronic internal divisions, notably between Turkey and some member states such as France in the eastern Mediterranean.

Additional reporting by Helen Warrell in London



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Biden says he is open to exchange of cybercriminals with Putin

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US president Joe Biden said he was open to Russian president Vladimir Putin’s proposal to hand over cybercriminals to the US if Washington did the same for Moscow, just days before the two leaders meet for a summit in Geneva.

Biden and Putin will sit down in Switzerland on Wednesday for their first face-to-face meeting since the former was sworn in as US president. Both leaders said at the weekend that relations between their two countries were at a low point, but Biden’s latest comments suggested there could be room for co-operation.

Speaking at the conclusion of a meeting of G7 leaders in the UK on Sunday, Biden told reporters he was receptive to Putin’s suggestion of reciprocal extradition of cybercriminals responsible for disruptive ransomware attacks.

Earlier on Sunday, Russian state TV aired an interview with Putin in which the Russian president said that Moscow and Washington must “assume equal commitments”.

“Russia will naturally do that but only if the other side — in this case the United States — agrees to the same and will also extradite corresponding criminals to the Russian Federation.”

Asked about Putin’s comments, Biden said: “Yes, I am open to, if there are crimes committed against Russia, that in fact are people committing those crimes are being harboured in the United States, I am committed to holding them accountable.”

“I was told as I was flying here, that [Putin] said that,” Biden added. “I think that is potentially a good sign of progress.”

An increasing number of audacious ransomware attacks has paralysed companies in recent weeks. These have included the disruption of the Colonial Pipeline, which provides petroleum supplies for much of the US east coast, as well as operations at JBS, the Brazilian meat processing company. The White House has said it believes both attacks originated in Russia.

Jake Sullivan, US national security adviser, later clarified that Biden had not signed up to a “prisoner swap”.

“What he was saying was that if Vladimir Putin wants to come and say I am prepared to make sure that cyber criminals are held accountable, Joe Biden is perfectly willing to show up and say cyber criminals can be held accountable in America, because they already are. That is what we do,” Sullivan told reporters on Air Force One en route to the Nato summit in Brussels, the second leg of Biden’s first foreign tour as president.

“This is not about exchanges or swaps or anything like that.”

Putin told NBC News in an interview that aired on Friday that relations between the US and Russia were at their “lowest point in recent years”. Biden on Sunday said that he agreed with the characterisation, but also pointed out areas where he believed the two countries could work together.

The White House confirmed on Saturday that Biden would hold a solo press conference following the summit with Putin, rather than share a stage as his predecessor Donald Trump did with the Russian president in Helsinki in 2018.

Joe Biden disembarks from Air Force One in Belgium on Sunday for a Nato summit
Joe Biden disembarks from Air Force One in Belgium on Sunday for a Nato summit © Benoit Doppagne/POOL/EPA-EFE/Shutterstock

“This is not a contest about who can do better in front of a press conference or try to embarrass each other,” Biden said. “It is about making myself very clear what the conditions are to get a better relationship.”

He added: “Russia has engaged in activities which we believe are contrary to international norms. But they have also bitten off some real problems they are going to have trouble chewing on. For example, the rebuilding of Syria, of Libya.”

“I am hopeful that we can find an accommodation that can save the lives of people in, for example, Libya.”



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