Job-loss panic rises in Europe

PARIS -- Stephane Zervos first suspected his job was threatened when his bosses removed most of the heavy equipment from the car wheel factory where he'd worked for 24 years.

Then in May, the ax fell. His German employer, Ronal GMBH, announced the closure of its plant in eastern France, while maintaining production in Poland and the Czech Republic.

Suddenly jobless in a country where unemployment is at 9.8 percent, Zervos and 166 fellow workers were catapulted to the front of a heated debate on the steady loss of jobs to Eastern Europe, Asia and Africa.

It's a problem faced by many Western European nations -- but the countries cannot agree on a solution.

The job drain has spurred a government drive to make France more competitive, fueling a split in the opposition Socialist Party and coloring French perceptions about new European Union members in the east, where labor is cheaper.

U.S. electrical components maker Vishay Intertechnology, Inc. last month announced the closure of its plant in Colmar in eastern France, with 292 layoffs. Franco-Italian semiconductors giant STMicroElectronics cut 600 French jobs last year.

German car parts maker Robert Bosch AG used the threat of moving production to the Czech Republic to force its French workers to put in longer hours for no extra pay.

That followed a similar move by Siemens AG in Germany, where the Berlin Wall's 1989 collapse prompted an eastward shift of companies seeking cheaper labor, with automakers and their suppliers leading the way. Volkswagen bought Czech car company Skoda in the early 1990s and makes its Toureg SUV in Slovakia.

Klaxon, a unit of Italian car parts maker Fiamm SPA, also said this month it will cut 183 of its 253 French jobs, moving production of car horns to India and radio antennas to the Czech Republic.

The catalogue of closures has left French ears ringing with what former U.S. presidential candidate Ross Perot once famously called the "giant sucking sound" of jobs leaving the country.

While Perot was talking about Mexico in 1993 -- as then-President Clinton pushed the North American Free Trade Agreement -- today's French protectionists are worried mainly about Asia and the 10 new EU members that joined May 1.

Finance Minister Nicolas Sarkozy wants the EU to withhold economic aid from countries that use low company taxes to attract jobs.

The issue has split the Socialists, with party heavyweight and former Prime Minister Laurent Fabius saying France should reject the new EU constitution, in part because of French job losses. But his party leader, Francois Hollande, wants a 'yes' vote in next year's referendum.

Economists say panic over job losses is not backed by evidence and that proposed remedies miss the point.

"Every case of offshoring makes the headlines because it creates a lot of anxiety, but it doesn't really amount to much statistically," said Lionel Fontagne, director of the Paris-based CEPII think-tank and joint author of a report on outsourcing being readied for Prime Minister Jean-Pierre Raffarin.

Less than 5 percent of French investment abroad goes to developing countries, according to Fontagne, and only a fraction of that investment involves the transfer of jobs out of France.

Of all French investment in eastern and central Europe, only 10 percent involves job outsourcing, compared to 20 percent of German investments in the same region.

Fontagne believes France can stem its industrial decline only by innovating, boosting investment and making it easier to hire and fire.

"To focus purely on offshoring is the wrong way of looking at the situation -- it hides the real problems, which are internal," Fontagne said. "The question is not how many jobs we've lost because of offshoring or competition from developing countries, but rather why we're not creating enough jobs to replace them."

The government is taking a more protectionist attitude, with plans to spend $1.2 billion on tax breaks and other incentives to persuade companies to stay.

While France is trying the carrot, some European governments have reached for the stick. Portugal threatened legal action against Brax, a German shoe maker that closed its Portuguese factory with the loss of 430 jobs -- while maintaining production in Romania.

But others are focusing on ways to bring back investment. Denmark's government recently pledged to boost education to help laid-off workers master new skills.

In Britain, banking giant HSBC recently announced plans to move 4,000 jobs to China, India and Malaysia. Prime Minister Tony Blair says such moves are inevitable.

That is no consolation for Zervos, the laid-off wheel maker. At 43, the trade union member has been told he is too old to return to the physically demanding industrial radiography work he trained for in his youth.

If necessary, he will move to find work, leaving behind a grown son and wider family, as well as his wife's job.

"Why should we have to make that kind of sacrifice so that people in a bank somewhere will make a bit more profit?" Zervos asked.