eu business and cultural environment - winter school 2015 [compatibility mode]
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Business and cultural environment in europeTRANSCRIPT
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EU Business and Cultural Environment
Winter School 2015
January 5, 2015
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Oil Prices have decreased a great deal in 2014Source: http://money.cnn.com/2014/12/02/investing/oil-fight-opec-us-shale-boom/
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Despite high prices, there is a reluctance to
extract shale oil and gas reserves
• France, Bulgaria and the Netherlands banned shale gas
exploration in 2011 due to powerful environmental
opposition
• The UK tried it in 2011 – but stopped after it caused
earthquakes near Blackpool in northern England
• European reserves would cost twice as much to extract as in
the US, and the expertise and equipment is non-existent
Source: http://www.naturalgaseurope.com/
germanys-shale-gas-potential-threatened
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The ‘European Social Model’
The fundamental assumption is that the state is responsible for the welfare of its citizens, including often:
- Health care
- Free primary and secondary education, and cheap (in many cases nearly free), public universities
- Free or cheap childcare, tax breaks for large families, and often money for having more children
- Long-term unemployment benefits
- Long paid vacations
- State-paid retirement
- Labor laws in favor of workers backed up by powerful unions
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Why was this model chosen?
• European states looked at some of the New Deal proposals
made by Roosevelt in the 1930s as a partial basis, though
individual countries started implementing similar models as
early as the 1880s
• After World War II – social conflicts in the inter-war years
were seen as partially to blame for the war, and there was a
tentative alliance between the left and the anti-fascist right to
set in place a social system to avoid a repeat situation
• With the end of post-war rationing in the 1950s, and the start
of an era of relative prosperity, Western European states
could afford to spend more on social programs
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Scandinavia is seen as the major success story
for the European Social Model
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Companies pay for worker benefits – the
example of French labor taxes
• The OECD figured in 2005 that in France, about 44% of income on average goes to taxes (Eurostat arrived at a similar figure – 46% -in 2012)
• This is much higher if you make more than a million euros (salary + investments), as the government has imposed a 75% tax
• Labor taxes are very high, and the French government is often accused of being uncompetitive, especially by the IMF – the government, with around 20% approval rating, is trying to reform this – the so-called ‘responsibility pact’
• The other side of the coin is that to have all of the social security benefits that France provides, you have to pay a great deal of taxes, and companies operating in many parts of the EU need to understand that issue
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Workers and Unions
• Labor laws will be much more strict in the EU than you are
used to – it is difficult to hire and fire workers
• Most hiring and firing (outside of the UK) will be based on
contracts – fixed or long-term
• Public sector jobs are often guaranteed for your whole
lifetime, but southern Europe and the UK have fired large
numbers of public sector workers during the recession
• Unions are very powerful, will battle for workers’ rights, and
can often keep people from getting fired
• Collective wage bargaining is often the rule, including in
Germany – where it is very important
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The right to strike is very important in many of the EU countries,
especially in Western and Southern Europe.
Source: http://www.dailymail.co.uk/news/article-2219583/Greeks-stage-anti-austerity-strikes-Angela-Merkel-calls-Brussels-national-budgets.html
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Company Ownership – State-Owned
Companies
• In European countries – there are a large number of
companies where the state is the majority shareholder –
especially in transportation, energy, and utilities
• France keeps a strong hold on its state-owned companies to
make sure they maintain acceptable employment levels
• The European Commission is trying to force states to reduce
the size and dominance of their companies in certain sectors,
but has had relatively little success thus far
• Eastern Europe has a greater concentration of state-owned
companies, as privatization attempts were largely halted or
reversed by the 2008 financial crisis
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Europe: the Stakeholder Model
European companies are not generally owned by a large and diverse group of shareholders, but are often owned by only a few people (a large majority of companies are family-owned) – and are responsible to their stakeholders
Stakeholders may include (but are not limited to):
- Banks - Customers
- Employees - Suppliers
- Unions
- Representatives of the local community
- Government
- Family
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An Example of the Stakeholder Model – Metso
Finland (Mining Technology and Services)
Source: http://www.metso.com/reports/2012/sustainability_results/sustainability_at_metso/stakeholder_dialogue/
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Corporate Social Responsibility: Scandinavia
and Germany
• CSR is a priority for the Scandinavian countries and Germany –
they take it very seriously
• One aspect of this is a preference for organic and fair trade
products – producers say that they have difficulty keeping up
with demand in Scandinavia
• Environmental issues are also taken seriously by many
companies in Germany and in Scandinavia
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Effects of the Eurozone crisis on EU companies
• Banks are still nervous about the instability, and it is harder than before for businesses and individuals to get credit
• Consumer confidence dropped a great deal in most of southern Europe, reducing demand, but it seems to be going back up slightly
• Despite economic and social systems designed to keep companies alive and people employed, many corporations have been forced to close due to the lack of orders and fire people – others have begun more aggressive outsourcing
• The increase in unemployment and the freezing of public sector wages has put a lot of pressure on the social systems in Europe
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A surprise: one study says that the countries that
spend the most on social programs may not be the
ones with the most problems in their economies
Source: http://www.theatlantic.com/business/archive/2012/06/the-myth-that-entitlements-ruin-countries-busted-in-1-little-graph/259056/