Shocking: Carrefour finds out that culture matters

Carrefour will close 21 unprofitable Belgian stores by June 30th, cutting 1,672 jobs, and may start talks with closely held Groupe Mestdagh to sell an additional 17 to 20 stores.

Most analysts seem to agree that Carrefour has an image problem in Belgium. The Colruyt supermarket chain competes on low prices while Delhaize promotes lots of choice and a pleasant shopping experience.
Carrefour seems to be hesitating between both models and thus confuses customers.

There is yet another problem, which could teach us something about cultural changes in Belgium. Carrefour is known for its hypermarkets (superstores), and that's maybe not the best choice these days.

When I was a little boy, a long time ago, I remember that my family actually liked shopping during the weekends. While I marveled looking at the toys and media, my dad did the same buying DIY stuff and my mom was in the fashion and household appliances departments (these were the sixties and gender roles were still very much alive).

Nowadays Belgians have other plans during the weekends. Shopping has to be efficient and fast. It's not a family activity. Maybe this is different in France - Carrefour is a French company - but spending part of the weekend in a superstore is not exactly a favorite pastime in Belgium.

So I guess Carrefour made a mistake hesitating between low prices and a luxury image, but also made wrong assumptions about how people want to spend their leisure time. Culture matters, especially in retail.

Roland Legrand

A well hidden treasure

Belgian or Flemish ministers of Foreign Trade tell us they are sometimes a bit flabbergasted by what foreign investors don't know about Belgium. One of these hidden treasures is the system of 'temporary unemployment'. This week, the federal service for employment announced the budget for this temporary unemployment had more than doubled in 2009 to 1.05 billion euro.

What is so unique about the system is this: when production levels in a plant fall below the levels that require full employment of the work force, some employees can get 'temporarily unemployed'. They then receive a benefit from the government and the company doesn't have to pay the wages. Especially in industrial sectors, this is quite an advantage. In the aftermath of the financial crisis, the system has been expanded to office workers.

There are two sides to the story on this one: on the one hand it's an asset to attract foreign investments and an asset to cushion the bumpy ride of an economy in recession. On the other hand it's quite an expensive system if the temporarily unemployed get really unemployed. As it seems that the economy could very well remain sluggish for quite some time, something else is needed: not efforts to keep people in old jobs, but to get them into new jobs.

Bart Haeck

Why Belgium doesn't join the PIGS-club

Somewhere in October the Belgian sovereign debt will cross the line of 100% of GDP. This raises an important question: how vulnerable is the country to the Greek disease? How fat is the chance that hedge funds will not only attack Southern Europa, but Belgium as well?

Well, it seems the odds are good for Belgium. Although employment is low and sovereign debt is high, it takes more than that to join the PIGS-club. Some key-issues:

1. The budget deficit is lower in Belgium than it is in the Eurozone. This has to do with the advantage of a small open economy. A big stimulus is not helpful, because a lot of the impact flows away via international trade. That's why there was no big stimulus. But as a small and open economy, Belgium could surf on the stimulus plans in Germany, France and the UK, its most important trade partners. Sometimes small is beautiful.

2. The Belgian sovereign debt is huge, but isn't foreign. The current account is more or less in balance: families save money and buy government bonds and treasuries. As a result, hedge funds don't have much of a hedge to speculate on the Belgian government bond market.

3. Belgian credibility is still all right on the bond markets. Last week, I was at the World Economic Forum in Davos, and the Greek prime minister George Papandreou gave this message: the biggest deficit in Greece is the credibility deficit, not the budget deficit. The Greek bond drama is about unreliable statistics in the first place. Belgium doesn't have this problem. And if I may remind of what Paul Krugman stated at the end of 2009: Belgium has proved it is a reliable debtor. Even in the midst of the economic crisis in the 70ies and 80ies, it never defaulted.

4. About a quarter of the Belgian government debt needs to be refinanced this year. This seems threatening, but shouldn't at current rates. The federal government now pays an average 4% interest on its debts. When it refinances a bond, it nowadays pays 3.7%. And a lot of the Belgian sovereign debt is short term, with very low intrest rates (lower than 1%).

There is one thing to worry, however. The way to shrink the deficit to 3 percent of GDP in 2012 isn't an easy one. First of all, the government is working towards a deficit of 3.4 percent in 2012. The rest - 0.4 % of GDP - has to come from a better than expected economy, or an extra effort of the federal government in 2012. Mind you: 2011 is a federal election year.

Secondly, the regions have to help lowering the deficit, but from 2012 on Flanders doesn't want to. This is creating tensions between the federal government and the Flemish government. Flanders doesn't want to help the federal government because it thinks it does enough - and because it is following the so called Maddens-doctrine (the strategy not to 'bail out' the federal government if Flanders doesn't get a state reform in return). The federal government says that Flanders is neglecting its responsibilities.

Conclusion:  2012 will be a tricky year, but is still far away. In the meantime, there is no need to join the PIGS-club, which sadly creates the opportunity to play some blame games.

Bart Haeck

Brussels: a sad, sad planet

For those who live in Brussels, the city can turn out to be a sad sad planet. Last week a Kalashnikov-style hold up on an exchange office and the decision of a school to move because its students were mugged too often, heated the debate about insecurity in the capital.

Very soon, a very Belgian thing occurred. While the Dutch speaking (Flemish) press discussed the issue very elaborately and - in my opinion - exaggerated by calling certain streets in Brussels a no-go-zone, there hardly was any debate in the French speaking press. The French speaking socialist mayor of Brussels City even called the hold up - a policeman was shot down with a Kalashnikov - a 'fait divers'.

In my opinion, the insecurity in Brussels is only one part of the story. In fact, there are three parts in the story of the failing government in the Belgian capital:

1. Education: in Brussels one out of four students never finishes high school (in Belgium it is called 'secundair onderwijs'. When you finish it at 18 years old, you start working or you go to university.)

2. Work: in Brussels one out of five is unemployed. There is a strong correlation with the previous mentioned figure. Two of three unemployed in Brussels only finished the school-grades you are supposed to get when you're 16, or has a foreign education that is not formally recognized in Belgium.

3. Crime: crime figures of the federal police show that Brussels is doing worse than the rest of the country, but only when it comes to theft. If one takes a look at figures for violence, rape, murder, etc, they are as high in Brussels as in Belgium. The same goes for vandalism.

So yes, there is an insecurity problem in Brussels. But the education problem is as urgent, as is the unemployment issue.

One of the underlying issues is migration. As a capital, Brussels attracts a lot of immigrants. They often lack the education and language skills for the higher level jobs a European capital has to offer.

A second issue is the horrible institutional framework in Brussels. In fact, there are five levels of government.

Level 1. The laws of the European Union.

Level 2. Federal law on justice, police, home affairs, ...

Level 3a. The government of the Brussels region: economy, international trade, local authorities, urban planning, ... Important to notice is that the Dutch speaking politicians have a protected minority in the regional parliament and the regional government of Brussels.

Level 3b. The French speaking community in Brussels and the Dutch speaking community in Brussels: both of them have authority on education policy in schools and welfare policy in hospitals, officially organizing things in Dutch or French.

Level 3c. The gathered commission of the French speaking community and the Dutch speaking community in Brussels. This commission has authority on bi-lingual cultural organizations. (We don't have many of them, but a few though.)

Level 4. The 'provincial' level. Brussels doesn't belong to a province, but has sort of a provincial governor nonetheless. There are signals that this function - which is not needed - will be abolished.

Level 5. The 19 Brussels communities. The difficult - and again very Belgian thing - is that the 19 mayors are French speaking. So there is some French speaking pressure to delegate power from the regional government (that has a Dutch speaking protected minority in it) to the Brussels communities, where no such protection exists.

How does Brussels cope with its key problem of uneducated immigrants on the job market and its crime? This way. As Pascal Smet, a former Brussels socialist minister said: In Brussels everyone is empowered to do something, but no one really is ever responsible. A sad, sad planet, it sometimes is.

Bart Haeck

This uncanny quiet month of January

It has been some time since we published a new blog post on Belgian politics, but then again, for Belgian politics it has been a very quiet month of January. It seems prime minister Yves Leterme is trying to do the very same trick his predecessor Herman Van Rompuy did: getting popular by remaining silent in turbulent times. In the political language of the day, this is called 'stability'.

In the real economy however, things are moving fast. If 2008 was the year of the financial crisis, and 2009 was the year of the economic crisis, 2010 has started as the year of the social crisis. In the first month of the year Belgium has seen social conflicts in companies as AB Inbev, DHL, HP, Gates, Janssen Pharmaceutica, ArcelorMittal, Volvo Trucks and Picanol. Most of the attention went to the Opel-plant in Antwerp, which mother company General Motors is closing down.

As a result, Flemish unemployment is quickly going up to the highest level in four years. The good news is that with an unemployment rate of 7.5% Flanders is still quite well off. The bad news is that Wallonia, with an unemployment rate that is twice as high, is not well off. And what to say about Brussels, that crossed the 21% last month.

 (Some explanation with the graph: NWWZ means 'niet werkende werkzoekenden, or people not working but looking for a job). 'Vlaams Gewest' means 'Flemish region'. 'absolute aantallen', simply means 'absolute figures'.

 

There has been some reaction. At the end of January, thousands of people - 35,000 according to the unions, 26,800 according to the police - joined a manifestation in a rainy Brussels to ask for jobs and respect. The federations of companies reacted with a petition, signed by 20,000 people, to ask 'space' and respect for business.

Politicians have responded by organizing meetings. In the Flemish Region, where Opel Antwerp is located, minister-president Kris Peeters has organized an industrial summit. In the federal government, unions and business federations are sitting back around the table. They now have one month to agree on an agenda.

The big question is how much longer the federal government can afford this situation. The slow turning of the federal government is making especially the younger generation nervous. Young politicians and MP's of Open VLD, sp.a and Groen! (liberals, socialists and greens) have started a petition and a Facebook-group 'the clock is ticking' to voice their protest. Their message: do something, and do it quick. It may hurt, but doing nothing wil only increase the pain in the end.

Bart Haeck