Unemployment risks creating new divide in Europe

Updated 09 January 2013
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Unemployment risks creating new divide in Europe

BRUSSELS: Record unemployment and fraying social welfare systems in southern Europe risk creating a new divide in the continent, the EU warned yesterday, when figures showed joblessness across the 17 EU countries that use the euro hit a new high.
Euro zone unemployment rose to 11.8 percent in November, the highest since the euro currency was founded in 1999, according to the statistical agency Eurostat. The rate was up from 11.7 percent in October and 10.6 percent a year earlier.
In the wider 27-nation European Union, the world's largest economic bloc with 500 million people, unemployment broke the 26 million mark for the first time.
But the trend is not uniform. Unemployment is increasing mainly in those countries, mostly in southern Europe, where market concerns over excessive public debt have pushed governments to make the toughest savings, pushing the economies into recession.
States have raised taxes and slashed spending — including by cutting wages and pensions, measures that hit the labor force in the pocket and reduce demand in the economy.
Laszlo Andor, the EU's Employment Commissioner, warned the uneven impact of the crisis could create a rift.
"A new divide is emerging between countries that seem trapped in a downward spiral of falling output, fast rising unemployment and eroding disposable incomes and those that have so far shown good or at least some resilience," said a statement from Andor's office.
Last year "has been another very bad year for Europe in terms of unemployment and the deteriorating social situation," said Andor. "It is unlikely that Europe will see much socio-economic improvement in 2013."
The single biggest increase in unemployment over the past year took place in Greece, where joblessness soared to 26 percent in September, up 7.1 percentage points over September 2011's 18.9 percent. The highest overall rate in the EU was in Spain, where 26.6 percent of the workforce was jobless in November, up 3.6 percentage points over last year.
By contrast, Austria posted the lowest unemployment rate in the EU, at 4.5 percent. The rate in Luxembourg was 5.1 percent, and the rate in Germany was 5.4 percent.
Beyond Europe, unemployment in the US has been edging down this year and was at 7.8 percent as of November. In Japan it was only 4.1 percent.
"It is clear that the economic implosion of several (EU) member states continues at a troubling pace," said Graeme Leach, chief economist at the London-based Institute of Directors. He said the stark statistics were "compounded by the political and human impact of terrifying levels of youth unemployment in Spain, Greece and Italy."
The problem of joblessness is made worse by the fact that southern EU nations are increasingly chipping away at their social safety system to make do.
"Most national welfare systems have lost much of their ability to protect household incomes against the effects of the crisis," said Andor.
The figures illustrate the daunting tasks confronting the European Union. While the threat of a collapse of the euro zone due to too much government debt may have receded, the national economies — many of which are in recession — will struggle to recover as long as joblessness continues to rise, creating poverty and fueling social discontent.
Beyond savings cuts, governments have also made reforms — particularly of labor practices and education — to promote employment. But they take time, both to enact and to feed through an economy.
As unemployment across the euro zone continues to rise, many analysts are concerned whether the political will to continue to cut budgets can be sustained.
"We expect the unemployment rate at the euro zone level to continue to rise from 11.8 percent in the latest figures to 12.5 percent by early 2014, as euro zone businesses and households remain wary, and governments continue to cut back," said Tom Rogers of Ernst & Young Eurozone Forecast.
One bright spot in yesterday's EU statistical releases were new figures showing economic sentiment in the euro zone had improved in December. The so-called economic sentiment indicator rose by 1.3 points to 87 as confidence improved among consumers and almost all business sectors.
Analysts said it was likely a result of improvements in financial markets, but warned that with unemployment still high, a recovery in the economy was months away.


Saudi insurance stocks soar as female drivers take to the road

Saudi Majdoleen Mohammed Alateeq, a newly licensed Saudi driver, gets out of her car in Riyadh on Sunday. The insurance sector is just one segment of the economy set to benefit from the lifting of restrictions on women drivers in the Kingdom. AFP
Updated 25 June 2018
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Saudi insurance stocks soar as female drivers take to the road

LONDON: Saudi insurance stocks surged on Sunday, with investors expecting the sector to reap significant dividends following the lifting of the ban on female drivers.
Insurance stocks — one of the worst performing sectors on the Saudi bourse for the year to date — outperformed other classifications on Sunday, ending 2.4 percent higher, compared with a 1.8 percent rise for the Kingdom’s headline index.
Amana Insurance and AlRajhi Takaful were the best performers of the day, gaining 9.9 percent each. Tawuniya, the Kingdom’s largest insurer, ended Sunday 1.1 percent higher, with only one of the country’s 33 listed insurance providers closing lower for the day.
The lifting of restrictions on female drivers — which came into effect on Sunday after first being announced in September — is part of a series of wide-ranging reforms introduced as part of Saudi Arabia’s Vision 2030 economic transformation program, designed to diversify the economy away from a reliance on oil revenues.
The advent of women drivers is forecast to benefit the economy by significantly increase female participation in the workforce, and stimulating financial, insurance and retail sectors among others.
The insurance sector is set to draw particular benefit from the move, but may remain under pressure, according to rating agency S&P.
“We anticipate that efforts of the local authorities to tackle the large number of uninsured drivers, combined with the arrival of women drivers … and the introduction of additional benefits under the unified medical policy from July 1, will support further premium growth in the industry in the medium term,” said S&P in a research note in April.
“However, these factors may be offset by the large number of foreign workers that have already left or will be leaving the Kingdom in 2018.”
In spite of yesterday’s price surge, insurance stocks are 8.4 percent lower for the year to date. Tadawul as a whole is up 15.6 percent so far this year, making the bourse one of the world’s best performers for 2018.
Investor sentiment on Sunday was also boosted by investor optimism after index provider MSCI announced last week that it would upgrade Saudi stocks to its Emerging Markets Index from next year.
The widely anticipated upgrade — which puts Saudi equities on an index tracked by around $2 trillion worth of global assets — is expected to attract up to $40 billion of international funds, Tadawul CEO Khalid Al-Hussan told Arab News last week.
MSCI’s upgrade came after a similar move by fellow index provider FTSE Russell in February, which is also scheduled to come into effect from next year.
Banks were among the other bright performers on Tadawul on Sunday. Arab National Bank led gains, closing up 4.2 percent, while blue-chip names NCB and AlRajhi rose 1.6 percent and 2.3 percent respectively.
Some petrochemical companies also added value, Reuters reported, following a rise in oil prices after OPEC decided on only modest increases in crude production last week.
Outside Saudi Arabia, Gulf markets posted minor gains. In Dubai, where the index was flat, Air Arabia was unchanged. Shares in the airline have declined by more than 10 percent since early last week, when the company said it had hired experts to protect its business interests in private equity firm Abraaj, which has filed for provisional liquidation. The airline said its exposure was around $336 million.
Last week, the UAE’s securities regulator asked listed companies to declare their exposure to Abraaj.