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RESTRUCTURING IS BEHIND MANY CUTS BUT UNEMPLOYMENT WILL FALL THIS YEAR, SAY ECONOMISTS

Labour Office plans for massive layoffs

PRESSURED by deregulated energy prices and corporate restructuring, Slovak industries will be laying off large numbers of workers this year, say officials from the country's National Labour Office (NÚP).
While some of the redundancies stem from difficulties within individual companies, job losses are also expected because of restructuring at recently privatised and profitable firms. Analysts, however, say that employment levels on the whole will rise this year as the country's service sector continues to develop.
Although the layoffs have not started yet, the NÚP says around 20,000 employees are expected to lose their jobs. Slovakia's current labour law requires that companies planning layoffs clear the reductions with the NÚP and give eliminated workers two months' notice.

PRESSURED by deregulated energy prices and corporate restructuring, Slovak industries will be laying off large numbers of workers this year, say officials from the country's National Labour Office (NÚP).

While some of the redundancies stem from difficulties within individual companies, job losses are also expected because of restructuring at recently privatised and profitable firms. Analysts, however, say that employment levels on the whole will rise this year as the country's service sector continues to develop.

Although the layoffs have not started yet, the NÚP says around 20,000 employees are expected to lose their jobs. Slovakia's current labour law requires that companies planning layoffs clear the reductions with the NÚP and give eliminated workers two months' notice.

"In January, more than 1,200 people from 25 firms lost their jobs in this way," states a press release from the NÚP.

State-owned railway network operator ŽSR says it is planning up to 5,000 redundancies over the next four years, as it works to reduce ballooning debt and overcome the costs of January's three-day rail strike.

State-run Slovak Television (STV) is also planning layoffs to cut costs and bring the haemorrhaging station back to profitability by the end of this year.

However, reductions are not limited to debt-ridden state giants.

Mass layoffs also threaten workers at the Závod SNP (ZSNP) aluminium smelter in central Slovakia's Žiar nad Hronom, privatised last year on condition that the buyer, Žiarska hutnícka spoločnosť (ŽHS) backed by corporate raiders Penta Group, invest nearly Sk1 billion (24 million euro) into the company through 2006.

Although the sale contract required that ZSNP's buyer plan to maintain the current employment level of over 3,700, the company has already handed out 434 notices, and more have not been ruled out.

Profitable firms sold off in recent years are also planning cuts, as the former state monopolies restructure under outside management.

The new owners of regional energy distribution firms ZSE and SSE, Germany's E.ON and France's EdF, say they plan to cut their respective workforces by up to 10 per cent over the coming years.

Former gas monopoly SPP, sold early last year to a French-German consortium, is also planning reductions. However, SPP officials say they will reduce worker numbers by not replacing outgoing retirees.

"At our company, there is a natural decline in employment. The older [workers] will go on pensions and we will not employ others to take their places," said SPP spokesperson Dana Kršáková.

"Right now we are going through restructuring, and future employment developments will depend on the results of that," she said.

Despite the bad news, economists say that downsizing is the necessary result of communist-era overcapacity, and that cuts in worker numbers will be accompanied by a rise in worker productivity - a required development as price controls are eased ahead of EU accession.

"In former state firms, there was overemployment, and the trend should go towards a reduction of positions and an increase in pay for the remaining employees, because their productivity will rise," said Ján Tóth, senior analyst with ING bank.

"A reduction in the number of employees in less profitable firms could also be related to increasing input costs, which puts pressure on labour productivity. But the economy as a whole is for now showing record growth in employment in the private sector," said Tóth.

Unemployment remains one of Slovakia's most pressing economic problems. January figures from the NÚP show that 17.7 per cent of the population is out of work and ready to take a job. While this is down from 19.7 per cent in January 2002, the figure remains among the highest jobless rates of the 10 EU candidate states.

While mass layoffs will exacerbate unemployment problems in some regions and sectors, Tóth says that employment growth in other areas will allay some of the damage, and reduce jobless figures overall by the end of the year.

"This year there will be more pressure on employment growth, because domestic demand in general is not very high," said Tóth.

"I am not predicting a growth in unemployment, but a continuing decline. The number of unfilled work positions is now quite high compared to previous years," he said.

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