Tag Archives: Netherlands

Dutch and Finnish economies shrink more than expected

In the category “some saw it coming, some didn’t” the news that both the Finnish and Dutch economies shrunk more than expected recently.

The Dutch economy shrunk by 1,4% in the first quarter of 2014 (compared to the previous quarter in 2013, 0,5% compared to the same quarter in 2013) and the Finnish economy 0,8% (compared to the same quarter in 2013, 0,4% compared to previous quarter).

In the Dutch case, the explanation is that due to the mild winter, less natural gas was used and exported (as one fairly large element in the developments). The Dutch Statistics Office states that loss of jobs is still growing, especially in health care. But on the other hand, rising investment and industrial production is noted, which seems to show that the underlying trend would be upwards.

In the Finnish case, both primary and secondary production decreased, by a large 3%. Services production decreased by 1%. Also the number of employed decreased, as did the number of hours worked relative to the first quarter of 2013.

What does this data tell us? First of all, even in the so-called core countries the crisis is far from over. Second, I do think the Netherlands may experience more positive developments because of the news regarding investments. Without investments there can be no growth. For Finland it is more difficult to find recent data on investments, but this source states that in 2013 investment declined (in value) by about 5% and in the current year they are expected to fall by more than 4%. In combination with the ongoing attempts of the Finnish government to shrink its budget (to aim for the Maastricht-criteria) this does not bode well for the Finnish economy. Although this is not based on a calculation, I think even the official estimate of GDP growth for 2014 of 0,5% must be very optimistic.

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‘France by the Numbers’ and a reality check on Finland and the Netherlands

‘France by the Numbers’ and a reality check on Finland and the Netherlands

A good read, and the graph on performance in GDP-change is very useful. What do you mean, Finland has turned a corner? Yes there are some positive signs regarding some big firms, but there are ever so many co-determination negotiations to lay-off people or make them redundant.

‘Again, things aren’t good. But you do have to wonder why the French elite is so easily intimidated into making a hard right turn while the elites of much worse cases like Finland and the Netherlands remain steadfast in their notion that the worse things get, the more committed they have to be to inflicting further pain.’

Is the Helsinki housing market like the Dutch housing market?

I am wondering about that. I am not an expert on housing policies, and only to some extent are tax rules on deduction of interest in mortgage similar in Finland and the Netherlands, but consider these similarities:

– space constrained: the Netherlands is a small country in which physical space is very much constrained for building real estate, in particular in the West. Helsinki is similarly space constrained: on one side is the sea, on the other sides there are other municipalities. As in the Netherlands, Helsinki has a few areas of nature which the locals value very much for their intrinsic value and recreation, which leads to resistance to their ‘development’ (see here).

– Helsinki experiences an influx of people from elsewhere in the country (see the last graph in this post), much like the West of the Netherlands (by and large)

– Helsinki, like parts of many cities in the Netherlands, has especially in the inner city lots of buildings which are especially valued for their location, style or age (think pre-1960s flats and especially the 1930s Jugendstil buildings). Many of these are, in addition to normal residental use, in use by companies, which pushes their value up, I guess.

 

One of the problems in Helsinki, which is incidentally also the big problem in the Netherlands, is that there are not enough suitable houses/apartments for so-called starters, i.e. first-time buyers (young people). Or put in another way – there are too few of them or they are simply too expensive. Because of the space constraints new such residencies are built in locations where young people may not necessarily want to to live as a first choice (i.e. far from the center).

 

Taking into account that the Netherlands and Finland (/Helsinki) are experiencing housing bubbles (which are now deflating in all likelihood, at least in the Netherlands), what would be sensible steps to make the housing markets in the Netherlands and Helsinki work better?

More background to the Dutch downgrade and a rebuff of S&P’s analysis

This post by Dutch Bas Jacobs on the downgrade by S&P’s yesterday is essential reading. As we say in Dutch, ‘Hij maakt er gehakt van.’ It touches on some issues I have mentioned in past posts (such as the private debt situation) but in much more detail. To quote the conclusion:

To conclude it’s highly unlikely that the Dutch government runs into any budgetary problems at any time soon. The following S&P statement is therefore nonsense: “Fiscal space is increasingly limited, however, with the government’s net debt expected to increase to 71% of GDP in 2014.”  Apart from the silly 3-percent deficit rule imposed by Brussels, there is absolutely no danger that the Dutch public finances spiral out of control if budget deficits were about to increase during the upcoming years. (Note also that S&P confuses gross and net public debt.)

But:

Sadly, I would not be surprised that Dutch policy makers would take an economically highly inconsistent credit-rating report to justify even more austerity, rather than take the S&P report as a wake-up call to relax austerity and help the private sector restore its balance sheets.

King Willem-Alexander (i.e. the Dutch government) declares: classical welfare state is unsustainable

He said this, in English, on Prinsjesdag 2013:

The transition to a participation sociaty is particularly visible in social security and long-term care. The traditional welfare state from the second half of the twentieth century, produced schemes precisely in these areas that in their current form are unsustainable and are not suited to people’s expectations. In these times, people want to make their own choices, their own lives and to arrange care for each other. It fits with developing care and social services close to people and to organize these in conjunction with citizens. To achieve this, the government decentralizes government stakes in three areas […].

To which we now have a critique: ‘Did The Dutch Start The End Of Social Europe?’ by  Jose Igancio Torreblanca. I encourage to read the article but this sentence is central:

The Dutch government now thinks that some aspects of welfare should again be the business of the individual, while others should devolve upon local rather than national authorities.

I know that a lot of Dutch people are not at all happy with this. To many it feels if the costs of care are just put on the shoulders of individual citizens. This is especially true with the concept of ‘mantelzorg’, where elderly or otherwise needy people get access to official care only if close relations (family, neighbours, friends) cannot anymore cope with providing care. In an aging society there is a problem of keeping the welfare state working, but this does not seem like the right way to me.

Temp agency work as a business cycle indicator? – The Netherlands

‘Everybody knows’ the Netherlands is one of the promised lands of Temp agency work. The role of functional and numerical flexibilization can be fulfilled by agency workers, and according to the publication Temporary Agency Work Works! from the branch representative ABU shows that in a sense the temp agency business is the biggest employer in the Netherlands.

But there is more. As the ABU states, the temp agency sector can be seen as an indicator for the state of the economy. This is quite understandable from the view of the use of temp agency workers in the Netherlands – all levels of education are well-represented and key sectors as well (administrative work, industry, technology, medical sector). Combined with the actual volume of temp agency workers (nearly 30% of total employment contracts)  one can actually see quite well a kind of business cycle in this picture. The data there is from 2005 to 2011 and shows worked hours, but here the situation from 2012 onwards can be seen. It is clear that actually already in 2006 the worked hours of temp agency workers started to decline, followed by an actual decline between 2008 and 2010, followed by the now-famous ‘mini-recovery’ of 2011. Since 2012 the number of hours worked in this sector has continuously declined.

So if this indicator is any reliable signal, the Dutch economy is not nearly recovering, regardless of what is e.g. said here in this Financial Times analysis. I haven’t had time to figure out what is meant by the ‘pension funds can take over some of the bank lending in the new policy context’ -idea but it sounds a bit weird.

Finnish bankruptcy filings increasing – Real estate bubble deflating?

The Finnish Techology and Economics -weekly Tekniikka&Talous has a news item on Finnish bankruptcy filings. It would be interesting to see the statistics in European context but I don’t have the time, nor do I know whether Eurostat has the level of statistical refinement that the data from Statistics Finland has. Below you can first read my translation of the original post:

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According to data by Statistics Finland 1856 bankruptcies were filed during February-July, which is 106 (6,1%) more than in the same period last year.

The total personnel in companies that field for bankruptcy amounted to 9.188, which is 1.122 (13,9%) more than in the same period last year.

In terms of numbers, the most bankruptcy filings occurred in the sector ‘other services’, which consists of ICT-services, finance and insurance, real estate, ‘professional, scientific and technical work’, administrative and support services, training/education services, social and health services as well as arts and entertainment services. There where 507 bankruptcy filings in this sector, which is 9,5% more than in 2012 in the same period.

A decline of bankruptcy filings in construction

Bankruptcy filings increased in agriculture, forestry and fisheries, industries and mining, retail, transport and storage, hotel and restaurant sector and in the ‘other services’ sector, but on the other hand decreased in solely the construction sector. This sector saw 7,4% less bankruptcy filings that in 2012 in the same period.

As a methodological note, filing for bankrupcy does not mean per se that the bankruptcies will be executed – the process can also be left unexecuted.

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As always with such a news item, it is hard to say whether this represents positive or negative developments, exceptions from the trend etc. So for your information I have compiled two graphs: the total amount of bankrupcy filings since 2003 (the data doesn’t go back further) and the same kind of graph by sector. The sectors are according to the Finnish Standard Industry Classification TOL 2008, which corresponds with the most recent NACE-classification. C is industry, F is construction, G is wholesale and retail as well as the sale and repair of motorvehicles, H is transport and storage and I is accommodation and restaurants.

Source: Statistics Finland

Source: Statistics Finland

The data does not yet include the data introduced in the news item, but bankruptcy filings have increased. The news item gives the main ‘growth’ sectors of bankruptcy filings. In the graph below, the category ‘other services could not be incorporated easily, so while that is said to be the greatest contributor to bankruptcy filings with more than one third of bankruptcy filings in the first half of the year, it is not shown here. However, it could be about half of the missing roughly 1000 bankruptcy filings per year if we compare the numbers in the sectoral vs. total bankruptcy filings. This could be scrutinized closer.

Source: Statistics Finland

Source: Statistics Finland

Although the news item emphasises the decline in bankruptcy filings in construction, this is misleading in my opinion because it is the single largest sector for bankruptcy filings (by number of filings). Nearly all the sectors in the graph show a spike in 2009, which arguably was when the initial effects of the eurocrisis were strongest.

Usually, the construction sector is quite a good indicator of how a country is doing, as it reflects new investments in real estate (both for private and business use). I have previously mentioned the possibility of a Finnish real estate bubble, and although it is hard to say, the big increase of bankrupcies in construction since 2003 may signal the end to any such bubble. In this context it is perhaps interesting that the second-biggest sector of bankruptcy filings is the wholesale-and-retail sector: companies in this sector are typically the inhabitants of new business parks, as are the companies in the ‘other sector’ category. I can’t say if this is too big a stretch (from bankruptcies to deflating bubbles) but I have a gut feeling it is related – just like in the Netherlands where bankruptcies in construction have increased drastically since 2009.

So what does this mean? To a large extent, more data should be presented, e.g. the number of personnel affected, the regional spread, etc. But increasing bankruptcies are always a bad sign. There is an institution of Finland which has exact statistics on real estate sales, in particular business real estate, but this is a paid service.

Therefore, it is a bit wait-and-see. Today, a Finnish bank predicts that next year the Finnish GDP will grow by 1,7%. There are a lot of assumptions behind that projections, such as growth in demand from Europe (AKA the ‘Eurocrisis is over’-argument) and the assumption of a (very) moderate wage increase through the collective agreement negotiations going on right now. I wouldn’t be surprised if this projection turns out to be too optimistic.