Cleaners ditch their brooms and cloths and go on strike. No more 'clean acceptance' of their diminished wages and labor circumstances.

I have an confession to make: I was a cleaner at the time I was 20. I wanted to have some vacation money and the temp employment agency in my neighborhood offered this job to me, at the largest steel mill of The Netherlands: De Hoogovens (now Tata Steel Ltd (TATA)).

In that time I thought: well, if you become a cleaner, then you better be a good one. I broomed, vacuum-cleaned, polished and mopped my butt off. People working at the steel mill were smiling at me: “You are working too hard, son. You're all sweaty”. But after a less succesful temp job as dishwasher in a bulky restaurant near the beach, I had to proof myself again.

And I had a good time at the Hoogovens; it was honest work and I had a minivan at my disposal to drive from one building complex to another. And although some maintenance departments managed to get everything dirty and greasy again in just over one hour, every time I left a place, it was shining like a mirror.

In those days cleaning was a job that was executed by a mixture of people from Turkish, Morrocan and Dutch descent. People that had a Dutch background and spoke adequately Dutch. Some liked their job and some didn't, but as I said, it was honest work and it was not something to be ashamed of.

During my official career as an ICT professional that started in 1992, I saw the cleaner evolve from Dutch-speaking people of different descent to (mostly) East-European and African people from countries like Rumania, Bulgaria, Albania, Nigeria, Somalia, Kenya and others.

People that hardly spoke Dutch and had no connection whatsoever with the company or the people that they were working for. The cleaners became the invisible men and women of today; mostly ignored, as nobody takes real notice of them, while they don't speak enough Dutch or English to express themselves. They are eternal outsiders in a world of insiders.

These were the ideal folks for a genuine 'race to the bottom' where it concerned cleaning tariffs and wages. Initially there was a mandatory minimum wage that these people had to receive.

However, professional cleaning and general services companies that were put under extreme pressure by their corporate customers (banks, insurance companies, healthcare institutions, large manufacturing companies and the government) to lower their prices, found creative ways to avoid the mandatory minimum wages of their workers. For instance by turning their cleaners into independent workers, or by paying them a fee per cleaned object.

Especially the ABN Amro, the Dutch state-owned bank, used all kinds of guerrilla tactics to reduce the costs of their cleaning services companies right after the hostile takeover by the troika of Banco Santander SA (STD), Royal Bank of Scotland Group PLC (RBS) and Fortis-bank. Notorious was ABN Amro's letter to all cleaning companies, in which they demanded: 'we want a substantial part of the money back that you earnt from us, or else...'.

ISS, a large cleaning company in The Netherlands and other cleaning companies capitulated and returned the money, effectively paying to stay in business at ABN Amro (link in Dutch). This move of ISS shocked and outraged the largest labor union of cleaners, FNV Bondgenoten (www.fnvbondgenoten.nl).

And now, for the second time in a few years, the cleaners are fed up again with being at the bottom of the financial foodchain, ditched their brooms and cloths and went on strike. Who can blame them for this?!

The Dutch financial newspaper Het Financieele Dagblad (www.fd.nl) writes on this story. Here are the pertinent snips:

2000 people on strike in the cleaning industry (link in Dutch)

FNV Bondgenoten, the Dutch labor union, expects to mobilize between 1800 and 2000 striking cleaners for a march that leads them through Amsterdam and ends at the office of a large principal in the cleaning industry. 

During the last cleaner's strike in 2010 that lasted for nine weeks, about 1000 cleaners were striking at the peak of the protest action.

The actions follow after the failed Collective Labor Agreement negotiations (i.e. CAO) with employer's organization OSB (i.e. Organization of Cleaning Companies). Managing Director Rob Bongenaar of OSB thinks that the FNV demands too much from the industry with a wage increase of 5% and continued payment in case of sickness, additional education and reimbursement of travel expenses. According to OSB, the whole package means a wage increase of 12%

Mari Martens of FNV Bondgenoten takes the view that the actions are mainly aimed at principals that increase the working pressure for cleaners to intolerable heights. She speaks of a struggle for emancipation for the cleaner that is still not treated with respect.

While the general number of 2000 strikers might not look so impressive, you must remember that these people are mostly 'strangers in a strange land' trying to earn money for them and their families at home. Uniting and striking is for most of them the last thing to do. 

And although I can't be called a particular friend of the labor unions, in this case I happen to agree with FNV Bondgenoten. In a matter of 20 years, the cleaning industry and the people that work in it have changed into the dump pit of corporate The Netherlands:

• we don't want to see them;
  
• we don't want to speak with them;
  
• we only want to pay them as little money as possible;
  
• and when they don't do their job properly or take too much time for it, they will be the victim of our wrath.
  

It is time that this attitude towards the cleaning industry changes. The cleaning industry itself must help by giving their workers a proper education and especially helping them to learn Dutch. You only comprehend people when you understand them! You can take this from a former cleaner that was proud of his job

Why Prime-Minister David Cameron is fighting for the London City and why the UK is so weak without it!

At the end of last year, I have written two stories on the United Kingdom and in particular its Prime-Minister David Cameron: PM David Cameron of the United Kingdom is ‘stuck between a rock and a hard place’ and Sucker-ball league: The great match UK – EU ends in a tie.

Both stories had as main theme how PM David Cameron tried to save the London City as ‘a free port for ‘haute finance’ banking and trading’; a place where the prospective stricter rules for financial institutes within the Euro-zone would not apply. Frankfurt, Amsterdam, Brussels and Paris – all important financial hubs– were not amused by this possible threat to the financial level playing field within Europe.

Of course, it ended in the UK sailing its own course where it concerned the new EU legislation (see the second link). This forced the EU-leaders to design a new legal construct, enabling them to adopt stricter legislation after all, without the required full EU-27 approval.

By ignoring the desire of the wide majority of EU countries for stricter financial legislation, the UK placed itself effectively in the penalty box of the European Union: they are still a member, but a member with a strongly diminished influence. Every attempt of PM David Cameron to push pro-UK legislation in the coming months will be confronted with scornful laughter of the ‘Merkozy leadership’. How long this situation will last, depends on the future behavior of Cameron and the clemency of Nicolas Sarkozy and Angela Merkel or their successors. Keeping a cautious low-profile seems a good advice to Cameron.

Cameron himself turned into the fall-guy: scorned by the EU-leaders and deputy-PM Nick Clegg (Liberal Party) for his anti-EU, pro-City banker behavior and disliked by his own Tories for his (still too) pro-European stance. Summarizing: Cameron crashed and burned in those dreadful days in December.

Since then, there have been rumors that the UK might be invited to become a member of NAFTA (North-American Free Trade Agreement), as the NAFTA offers presumably a much better fit for the UK then the EU does.

How this might end is anybody’s guess, but people should not forget that the countries of the EU are still the UK’s most important trading partners; a void that cannot easily be filled by the North-American countries.

But let’s zoom in on the London City as the economic stronghold of the UK. How important is it anyway?!

Therefore I took the GDP per capita of all British regions in the period of 1995-2009 and compared it to the weighted GDP per capita for the Euro-zone.

Warning:

·    the British data in 2009 is originally in pounds and is converted to Euro’s at the current exchange rate of the pound (€1.20). Later I found out that the historical rate of the pound at the time was €1.12, but I couldn’t change the source data anymore, as it had not been saved properly this morning. This causes the British GDP data for 2009 being slightly too high.  

·    The Euro-zone weighted data is based on the GDP per Capita (source: Eurostat) for the original Euro-zone countries (per 2002), multiplied by my own rough weighting factor. The data for 2009 is based on my estimate, as it was not available through Eurostat. This data must therefore be considered as indicative and not as official European data.

Now that is taken out of the way, we can look at the chart that I made based on this data:

Gross Domestic Product per capita per region in the UK.
All data courtesy of: Eurostat and UK National Statistics Publication Hub

Click to enlarge

What immediately stands out is the huge difference in GDP between the London area and the rest of the United Kingdom in 2007:  

·    More than €20,000 per capita between London and South East UK (the second richest region);

·    A staggering €31,000 between London and the poorest region Wales;

·    Except London, all British regions operate within a bandwidth of €11,000;

·    Only four regions in the UK achieve a better performance than the weighted average of the Euro-zone, including the PIIGS countries (!);

And in 2008 and 2009 none of the British regions, except for London, outperformed the Euro-zone, inclusive the weak countries.

When the London City would be left out of the data, the GDP per capita in the UK would drop by about €4000 in 2009, leaving the country in the lower regions of the European Union.

This information helps to put the behavior of PM David Cameron during December’s European summit, in a historic context. And although Cameron didn’t play his hand very well, I can’t blame him for trying.

With the premise that this article is absolutely not meant to do UK-bashing, the key question is then: why is the UK in general such a weak country in terms of GDP?

To answer this question, it helps to look at the French-speaking Belgian part, called Wallonia.

Both Wallonia and the UK were frontrunners in the industrial revolution and had an enormous potential in the production of raw materials (steel and iron), heavy manufacturing industry and coal-mining in the 19th and early 20^th century.

Where Wallonia has held the head above water with the financial help of the Flanders and Brussels areas in Belgium, the UK went mainly downhill; from being one of the leading industrial nations in the world to being a problem child that can only disguise bad economic results with the excellent results of the city of London.

The British class-society with its huge differences between the wealthy, leading class people and the (underpaid) lower classes led to a counterproductive situation where envy, incomprehension, incapacity and anger were ruling.

This might have led to a creative outburst in the music industry that already lasts for fifty years, but for the British manufacturing industry it has been killing. Visible results of this situation were:

• the sometimes terrible production quality of British products;
• the militant labor unions that saw the companies and employers as enemies, instead of as partners;
• the countless strikes over the last 50 years;

The situation made that the leading British industries almost seized to exist:

The ailing coal-mining industry, that yielded too little profits in the end, has been butchered during the Margaret Thatcher era. This left whole cities in tatters and countless numbers of people unemployed and without a future. To get an impression of this havoc, please look at the beautiful British film “Brassed off”.

Also the British car industry (British Leyland and dozens of other brands) has been butchered in the Thatcher era, eventually leaving only a few brands untouched, albeit mostly under a German (Volkswagen, BMW) or US (Ford, General Motors (GM)) umbrella. See this fragment of the British show Topgear

The textile industry, the ship-manufacturing industry and other manufacturing industries moved largely to the low-wages countries.

Of course, there have been many startups in the United Kingdom since the eighties and some companies and brands have become or remained very successful. However, all in all the British industries have been ailing and the whole country is much too dependent on the London city.

If the country would be a member of the Euro-zone (which it isn’t of course), it would probably be one of the PIIGS. Now it can cover up the difficult economic situation with the achievements of the London City and by devaluating the British pound, when necessary.

Still it would be a shame if the UK would leave the Euro-zone and would become a full member of NAFTA in order to protect its London City.

In case of the UK, the following proverb is applicable: a near neighbour is better than a distant cousin. I hope that the UK and the EU both realize the truth behind this and that the EU can help the British in creating a more vivid economy that is not so dependent on the splendour of the London City.

An SMS from Ernst (23): Short Messages Service

A new year has come to us and this means a fresh and hopefully better start for everybody. I wish you all a very happy and healthy new year. 

To celebrate the coming of 2012, I send a special SMS to you. This happens also because the big news was still on vacation today. However, the little news returned in time for this article. All links mentioned in this article are in Dutch.

 

Belgian banks losing roughly €5 bln in savings. Dutch banks profit from this ‘small’ bank run.

Three Belgian news sources reported today that the Belgian banks KBC and Dexia lost €5 bln in savings’ money during 2011. Two branches of Dutch banks ING Belgium and Rabobank Belgium profited most from this money, by gaining €3.5bln in new savings. Also the Belgian bonds for private savers, the so-called ‘staatsbons’ profited from this development.

As all three news stories quoted slightly different data, I took the commonly shared data and calculated the missing or faulty data myself. I think the data mentioned in this article is pretty reliable.

Here are the pertinent snips from one of the sources, the Belgian newspaper De Morgen (http://www.demorgen.be/). 

Dexia Bank loses €3.5 bln in savings

Dexia Bank Belgium (part of Dexia SA (DEXB)) lost €3.5 bln in savings during the last year. Of the €33.8 bln that was stored at Dexia at the end of 2010, only €30.3 bln remained at the end of 2011; a loss of 10%.

The bank itself sees two reasons for the outflow of savings’ money; the hard time that the benk went through before it was taken over by the Belgian state and the success of the staatbon, the sovereign bond exclusively for private savers. The news confirms earlier messages of a bankrun that took place at DBB in October.

Also  KBC Groep NV (KBC)  (-4.7%) is among the losers.

Rise and fall in savings´ money at banks in Belgium
Amounts are based on aggregated data
Click to enlarge

This article shows not only how quickly things can go wrong at a bank when it gets ill-reputed suddenly, but it shows also that even a moderate ‘liquidity shock’ (Basel III) could easily cost a bank 10% in savings’ money. 

Noticeable, on top of that, is the amount of contagion towards other banks. In this case KBC, although itself not in trouble, lost also 4.7% or €1.6 bln in savings’ money.

Forget Italy; next to Greece, Spain remains the true problem zone of Europe

I said it on a number of occasions. Of course is Italy in big trouble with its state debt of 120+% of GDP and of course interest rates of 7% or more could create havoc in the Italian budget. But Italy remains an industrial super power and when their state debt remains under control, Italy will be OK in the future when the economy grows again. Next to Greece, the real sick man of the Euro-zone is Spain.

During the last week, there were two discomforting news messages on Spain in the Dutch financial newspaper Het Financieele Dagblad (http://www.fd.nl/). You will find the pertinent snips of both here:

Spanish unemployment keeps on rising

The Spanish unemployment rose for the fifth month in a row. Almost 25% of the Spanish working population is unemployed. In 2011 the total unemployment rose by 7.9% and ended at 4.42 mln unemployed people. This was disclosed by data from the Spanish government, published this Tuesday, January 3.

Especially youth unemployment is a big problem. Almost 50% of the Spanish youngsters that are part of the working population is unemployed.

Budget deficit in Spain ends at 8%

The budget deficit of Spain doesn’t amount 6% of Spanish GDP, but 8%. This means: more austerity measures.

The new Spanish government announced its austerity plans on Friday. The center / rightwing cabinet of PM Mariano Rajoy is ready for a tough battle.

The Spanish budget deficit was not 6% of GDP, as planned by Rajoy’s predecessor Zapatero, but 8%. This was announced yesterday by the new Spanish cabinet. Vice-PM Sáenz de Santamaría spoke after the cabinet council in an ominous tone of ‘the beginning of the beginning’ of a wide array of austerity measures. Cutbacks to the amount of €8.9 bln will already be carried through in Q1 in Spain.

Rajoy, whose Partido Popular won the elections at the end of November, announced earlier that €16.5 bln in austerity measures were projected in 2012. This amount will probably rise. Rajoy wants to reduce the state’s budget deficit to 4.4% of GDP at all costs at the end of 2012.

Finance Minister Cristóbal Montoro announced yesterday an increase of income tax rates; the lowest incomes pay 0.75% more and the highest incomes (> €300,000) pay 7% more. The wages of government officials are frozen, while state secretaries and top officials at ministries suffer an income reduction of 20%.

The cabinet didn´t state anything on the long-expected reforms of the financial sector and labor market. Rumors on the establishment of a so-called ´bad bank´ where debt of Spanish banks would be stored, are rising. Local Spanish banks, the so-called ´cajas´ didn´t write-off their real estate losses yet.

I love Spain and the Spanish people very much and I love being in this beautiful, friendly and historically interesting country. But Spain is in desperate need of a Marshall-plan 2.0 to reform and eventually fire up the economy. And it is definitely not in need of further austerity measures to the tune of €25.5 bln. 

This would be the kill-shot for the ailing Spanish economy (remember the Economic Death Spiral in my Outlook 2012 of December 29 ) and it could bring economic chaos in this country.

So European leaders, please look beyond the state debt and budget deficit dogmas and help the Spaniards and Greeks to recover their economy. But don´t help them by just throwing money at them; this would be totally useless. Help them to help themselves with economic reforms, stimulation of the manufacturing industry and the services sector and by reducing their state and private debt towards other countries and banks.

Commercial Real Estate in The Netherlands in a dead-end street

The FD wrote once again on the alarming situation in the Dutch Commercial Real Estate (CRE) market. This market seems more and more like the proverbial elephant-in-the-room that everybody tries to ignore. But if you look good, you see the grey hairy monster with its trunk, trumpeting for your attention.

Many office buildings worth as much as the ground they are built on

Office buildings are much less worth nowadays. Many office building lost 25% in value and have often as much value as the ground they are built on. This was stated by real estate advisor DTZ Zadelhoff in a report published this Tuesday January 3.

Especially in the dull office areas alongside highways many offices are vacant. About a quarter of all office space is located at these kind of spots. Presumably these offices never get a tenant again and therefore the owners should write-off substantially.

´Buildings are rated much lower than five years ago´, according to chairman of the board of DTZ Zadelhoff Cuno van Steenhoven. ´Sometimes it is hardly more than the ground value. In some cases demolition is the best solution´.

He estimates the loss of value to €10 bln. This is based on the depreciation since mid-2008, just before the credit crisis started.

However, not all CRE investors have to worry. The company mapped places where investors have good opportunities and places where they have not. Good locations are f.i. the Amsterdam Zuidas (South Axis), the zone near Utrecht Central Station and the center of Groningen.

Roughly three-quarter of all offices is in this kind of high-potential areas. Owners might have to refurbish the buildings to get a tenant, but there is no need for write-offs. The other quarter is futureless. These are offices in the satellite-cities, like Zoetermeer or Nieuwegein. Demolition or redesign of office buildings to hotels or condo´s are more favorable options.

Vacancy among offices is already rising for years. The share of vacant building rose by 0.2% to 14.1% in just a year. DTZ Zadelhoff itself is also mediator for many of these vacant offices. The company begged municipalities to stop with handing out new building ground. The more new office buildings are built, the higher the total vacancy will become.

I wrote many articles on CRE, among others in my SMS (21). Please check out my other articles by entering < (CRE) > in my search engine. Although I generally agree with the statement of DTZ Zadelhoff, I consider them way too optimistic where it concerns the 75% high-potential areas (first red paragraph).

On the Amsterdam Zuidas, mentioned above as a high-potential area, the vacancy rate was about 15% at the beginning of this year and I have no reason whatsoever to think that this number changed favorably. Besides that, Zadelhoff is in the CRE-business, so it doesn’t want to paint a too grim picture of its core business. You can take my word on it that the situation in Dutch CRE is in reality even more desperate than described in this article.

I do totally agree with the second red paragraph that municipalities should stop selling building ground. But sadly enough, the municipalities won’t, as it would exclude them from a important source of income and puts them under severe pressure from the building lobby. This means that the building frenzy will continue for some years. So expect the CRE vacancy rate to rise further in the near future.