Prague - Economists expect that another wave of redundancies this autumn will take the Czech unemployment rate from the current 8% to as much as 10% or even higher. Many seasonal jobs will end at the end of the summer, and companies are using the holiday months to draft restructuring plans.

"Many companies are using the quieter time of the summer holidays to create personnel and economic analyses," says Tomáš Zdechovský, executive director of the PR agency Commservis.com. "Some are putting together strategies on whom and under what conditions to lay off or transfer to a different position."

Firms moving east and west

Zdechovský likens the crisis to "a formula for radical steps towards long-postponed restructuring schemes and budget cuts". He says companies are already cutting employee benefits and have drastically cut on-the-job training expenses.

He goes on to say that some companies are planning to move production outside the Czech Republic, typically east. Bulgaria, Romania, Moldova or Ukraine offer significantly lower labour costs. The Czech Chamber of Commerce confirmed this trend earlier, saying about a fifth of Czech companies are considering shifting production abroad. One of them, AEES Stříbro (formerly Alcoa Fujikura), will move Czech production to Romania, shedding hundreds of Czech jobs.

"It's debatable," says Josef Středula, head of the Kovo trade union. "For now, we're seeing moves to the west, not the east. Manufacturers are moving to Germany and Austria," he says, citing a relocation of a Siemens plant from Prague and Intos's machinery plant from Žebrácko to the companies' respective home countries.

"Last November we predicted the worst would be the time of vacations, when companies will have no orders," says Středula. "It has already begun. September, October, November - those will be the months when redundancies will pick up speed and culminate."

Unemployment up to 10%

"I expect that by the end of the year unemployment will reach around 10%. And if the situation on the market doesn't improve, the jobless rate could go even higher," says Středula.

Jan Bureš, an economist with Poštovní spořitelna, also predicts a 10% unemployment rate.

That is why unions are calling for a quick introduction of a shorter work week, so that more people could retain their jobs, although they would be working for lower salaries.

Unions argue that higher unemployment would further cut household spending and at the same time increase the state's social spending. "That would create enormous pressure and further pull down GDP," says Středula.

Plans for after the crisis

In June unions asked the government to compile a crisis unemployment scenario and its possible impact on the state budget. They also call for a report on the state of the overall Czech Republic, much like the US State of the Union Address.

The unions also want to already start planning for a time after the crisis has passed.

"We have asked that the government set up a council for human resources development, so that we can prepare for the post-crisis period," says Středula.

Adapted by Prague Daily Monitor