The Hague, Friday the 28th of November we had the opportunity to interview Nout Wellink in Hotel Des Indes. Our enthousiasm and nervousness made sure we were about half an hour early. We started the interview as soon as he entered and quickly noticed the latter to be unfounded. You will rarely meet a man who can elaborate on his knowledge and experience as clearly as Mr. Nout Wellink does, neither will you meet anyone who is as down to earth. This was reinforced by his friendly conversations with the hotel staff, whom he had also met on the streets, and they happily brought his usual order of green tea. Nout Wellink recommends everyone to attend iFinance 2015. For more information about iFinance and registration use this link. Mr. Nout Wellink. I am very thrilled to have this opportunity to talk to you about iFinance 2015. I would like to start this interview with a general question. Your experience and current membership of the Board of Directors of The Bank of China, how did it happen? They simply asked me. I was chairman of The Bank for International Settlements and made sure the Chinese became Board members. The Bank of China knew me because they are a Systematically Important Financial Institution and should abide by international regulations. This includes Basel III implementation, which I worked on during my time at the Bank of International Settlements. Banks have been under a lot of pressure in the past few years. We believe, and often hear, it is due to this regulatory pressure that benefits such as interest rate cuts are not passed through to the public. If I can answer this in a broader sense; before the outbreak of the financial crisis banks held about 1-2% of real capital, capital which they can cover risks with. This excludes “hybrid capital” upon which they cannot truly rely and the market spotted this. We multiplied the real capital figure by a factor seven to ten, depending on the significance of the bank. But it takes time before the banks are at the required levels. By international comparison European banks were in a relatively weak position. The ECB offered to supervise the banks (the 120-130 largest banks in Europe). We wanted to supervise the banks, but only after we were assured that they were healthy. The health of a bank encompassed holding adequate capital and liquidity levels, professional risk management and ensuring transparency on their balance sheets, so as to make sure there was not some secret rubbish. This is where the Asset Quality Review and stress tests come into play. Banks can only do their job once they have written off bad loans and realized the higher capital requirements. Eventually, an undercapitalized bank is required to stop lending entirely, which is worse than reduced lending. I do believe that in order to incorporate the higher capital requirements banks have three options. The first is to simply accept fewer loans and deleverage their balance sheet. The second is to sell balance sheet positions to improve their ratios, and the third is to simply attract more capital. Are banks lending less money because they are lacking the “know-how” to measure the risks’ of today’s world? You are stuck on the thought of “banks are lending less money”. You have to look at it from a different perspective. What is the function of a bank? Simply put: “The transformation of the money from savers to parties who have a need of that money”. It is often converting short term deposits in long term loans. Banks exist because they are one step ahead in the information process; that is, information they possess about others. You would not lend me money and this is simply because you know nothing about me or my credit worthiness, nor do you have any means to check up on my history. Banks on the other hand, do. Banks have a mandatory “know your customer” rule and a “caring” duty, in order to ensure nothing bad will happen. Before the crisis they put too much pressure on each other, which caused the rules and duties to fail. With respect to the products themselves, if there is demand for an AAA (mortgage) product, the banks will accommodate these products. On its own this is not a bad thing, however, you just have to wonder whether they really are AAA? Let us continue to our third proposition. How do you think new ways of financing will develop? The answer to this depends on “where?”. In Europe about two thirds of all investment streams go through banks, in the US this is a mere one third. This means that the methods of financing investments in the US are already fundamentally different from what we have here. This also enabled the US to recover from the crisis much quicker. In the US banks are less important when it comes to transferring of savings to investments. They have a deeper development in their capital markets, which include investment and venture capital funds. A new way of financing that is gaining a lot of ground in the US is crowd funding. Despite the use of the internet, one still requires some information about the parties involved. This significantly limits the possible gains of a single project. This does not mean you cannot have numerous similar projects. If you have an idea, and six thousand people are willing to invest $100, it is still a lot of money for a simple project! It is however, nothing in comparison to the billions of investment streams around the world. In Europe we should prioritize creating one big, broad market, which makes it easy to attract money from different countries and not only just banks. You would not sink 300k into a project of a friend, let alone that of a stranger on the internet. What do you think of cryptocurrencies; the Bitcoin? Very little. Money has three functions, all of which you
Interview Maarten van Bijsterveldt
Dennis and Joost spoke to Mr. van Bijsterveldt, Interim Commercial Manager at RKC. He gives his insight about the financial world around football. He explains how football clubs earn their revenue and how they manage in their market. The interview is especially focused on the financial position of RKC Waalwijk and gives some interesting insight in this sector. Could you tell us something about your career? I started as a banker twenty years ago, at first mainly for private clients. I continued my career at Rabobank as a financial planner. Here I managed to build a large network what helped me with the financial and legal planning for more wealthy clients. Thanks to that network I became director at Fortis Oisterwijk, where I was responsible for entrepreneurs and enterprises. I also worked at Fortis Tilburg and at Fortis Oss. At the time I worked in Oss, Fortis Belgium got bankrupt, what resulted in a nationalization of Fortis Netherlands. Because of the nationalization I had to unite two offices of ABN Amro and Fortis where I had to integrate and reorganize. I ended my banking career at Rabobank as a private banker. 2 years ago I helped my brother in law Joonas Kolkka with the start of the Quality Options Foundation, where I got into contact with Remco Oversier. He was interested in my methods and offered me the job of Interim Manager at RKC Waalwijk. At the moment I have my own company Klix,a company which guides organizations through the changing market. At the Quality Options Foundation, we make a worldwide network with football clubs to improve the quality of young players. Could you tell us something about your education? As a student I have chosen a challenging road. I finished HAVO and went to Eindhoven to do HTS Bedrijfskunde, but I did not finish that education and started working when I was 21. I figured that without thorough education, especially in banking, I couldn’t get anywhere. That is why I started to attend evening school commercial economics, continued with post HBO financial planner and finished with all the banking courses available. You have worked at several banks, but did those experiences help you to do your work as an Interim manager at RKC Waalwijk? Let me first point out that going from a banker to Interim Commercial Manager was not a logical career move, although past experiences helped out a lot. My biggest contribution is the wide diversity of clients I used to deal with. I was used to provide clients with a very specific product. I am also able to see what my added value will be in numerous occasions. Furthermore, I have a wide network and because I understand what companies want, I was able to give added value for sponsors of RKC Waalwijk, which was a great part of my job description. The changes I made within Fortis ABN Amro, taught me to deal with a different way of working and dealing with customers. I also have a lot of management experience and because of banking, a broad view on financial structure. Which revenues and costs are the most important for RKC Waalwijk? Structural revenues are the most important, because you cannot build a financial plan based on non-structural revenues such as player transfers. At RKC Waalwijk, total revenues were 5.6 million last year. The key revenues are television rights of FOX-Sports (35%), sponsors (50%), ticketing (15%) and merchandising. With exception of Ajax, Feyenoord and PSV, television rights are the most important revenues for Dutch football clubs. How much a club gets depends on the time you play in which league and the average rank you have had in the last five years. When RKC played in the first league last year they got 2.1 million euros, but this year they will only get around one million since they degraded to the second division. The loss RKC incurred could not be fixed with extra sponsors; because, sponsors went away because there is less exposure of their companies in the second division, which resulted in a loss of one million. The average football club spends about sixty percent of their entire budget on salaries. RKC spends 13 percent of their budget on training and costs incurred for matches. The municipality of Waalwijk owns the stadium; therefore RKC has to pay rent which contains twelve percent of their budget. What is the Influence of Municipality’s on Football Clubs? The municipalities do not voluntary spend capital on their local club. They do not have personal interest in football clubs so they are not actively involved in them. The main reason why most of the municipalities spend capital on their club is to maintain the community belonging with the club. How is the ratio between the budgets of the smaller and larger clubs in the Eredivisie? The large clubs, Ajax, PSV and Feyenoord, are all-determining in terms of television views and attractiveness. The problem is they cannot just play against each other. They need the entire competition to exist, especially now when they are not doing well in European tournaments. The large clubs get a lot of income from television, merchandising, ticketing and sponsors. The medium-sized clubs e.g. Utrecht and Vitesse, gain a lot of income from private investors. The clubs below them e.g. Heereveen, Hercacles and Cambuur, earn their income by executing a solid and clever policy. Clubs like Willem 2 and RKC, who went through financial difficult times, need a long time to recover from their low budgets. The ratios between the larger and the smaller clubs are growing every year. Ajax had a 65 million euro budget last season, while Cambuur Leeuwarden had only 4 million. The television income for this season fluctuates between 1.66 and 8.68 million euros. How important is Youth Training for Clubs in the Eredivisie, in particular RKC Waalwijk? RKC has consistent youth training. Together with FC Den Bosch they form Brabant United. Due to the current crisis at RKC, it is
Why Index Tracking in the Netherlands is catching up just now…
Long time trader Martijn Rozemuller discusses the evolving nature of exchange traded funds and their growing popularity. Martijn gives insight into the issues that have made breaking into the fierce and competitive market of actively managed funds more difficult than one would expect. With experience in building his own company, Think ETF is on its way up as investors begin to appreciate the benefits associated with low risk tracking products. For hundreds of years the stock market has appealed to society’s imagination, particularly here in Amsterdam where the first stock exchange in the world once took place. In the last decade, financial institutions have used marketing mechanisms to induce society to join the world of trading, comprising easy money and glamor. The investment community promises society attractive returns and experts with hands-on experience hold the power to attain these appealing returns- however it is not as easy as it seems. Of course, investing is a very complex process and therefore it is not wise to let every day citizens make these important decisions on their own. Here, experts take over the work and get paid handsomely in the process. As long as returns are positive, everyone benefits and therefore investors neglect the large fees associated with active investment funds. This all changed when returns in the last decade suddenly contracted. During my employment as an options trader at the Dutch trading company Optiver, I slowly realized the great difference between trading, speculation and investing. I too have made rookie mistakes before. This was when I started investing privately, but luckily I have learned from my mistakes and have adapted my behavior based on these learning experiences. I discovered that investing involves a lot more than most people would suggest. The process of searching for superior stock and the precise timing of a trade was exciting, though not effective. Over time my preference became clear towards investing by tracking indices with ETF’s. It appeared that this form of passive investing was not a highly glamorous investment vehicle per se, but rather simply tracked the market index allowing for a low cost structure. In contrast, active investing aims to beat the market while in the process attracting high costs- all despite the low probability of success. No longer was I required to search for specific shares and make decisions about when I should enter and exit the stock market. With an ETF we simply track the market as a whole and returns will more or less match the market index. There is little value in poring funds into expensive investment managers that charge high transaction costs and sometimes other hidden costs. However, unfortunately the first ETF’s weren’t completely perfect either. Reclaim Dividend Taxes There is a specific aspect that features in the use of ETF’s that I am opposed to; missing the opportunity to reclaim dividend taxes. This is also known as a dividend leakage. This is completely unnecessary as dividend taxes can be easily reclaimed in the Netherlands. My awareness prompted research into whether this could be done better. After thorough investigations and with the help of a known tax specialist, we found the solution to this flaw. The problem appeared to be the ETF’s country of establishment. By choosing the Netherlands as a country of establishment and to request for the so-called FBI-status (Fiscale Beleggings Instelling) -implying that the institution has special rights with regards to its corporate income tax- the possibility of the investor reclaiming dividend taxes withheld in advance could be possible. On an annual basis, assuming a dividend yield of about 3% to 4%, this would give additional returns to the investor of about 0.5%. This looked to me like an undiscovered business opportunity and hence, Think ETF’s emerged. ‘Success Will Follow Naturally’ Think ETF’s was established in 2009 with a belief that with the best product, success will come automatically. Unfortunately, growth was less prosperous than expected as it was very difficult to convince investors of the advantages that we, as Dutch ETF issuers, could provide them with. For decades, marketing mechanisms within banks have promoted active fund management and this concept appeared difficult to break into. Additionally, payment for providing these products is required. Banks are accustomed to investment funds paying them a fee for their services as an intermediary, this is the so-called ‘kick-back fee’. For example, an investor pays 2% in costs to an investment fund, where 1% flows back as compensation to banks. Therefore, banks experience a financial advantage in selling an active investment fund rather than selling an ETF. Hence, the difficulty we experienced in the early years. Ironically, this situation was prompted by an initiative named ‘open architecture’. With the best intentions, this system was developed to prevent banks from selling primarily their own funds. Even though the intentions were good, in practice it resulted in adverse effects. As the market ‘opened up’ foreign banks were given the opportunity to enter the market and compete with domestic banks. To stimulate the sale of their products, foreign banks started to pay distribution fees. This placed upward pressure on prices and consequently had adverse effects for the investor, as distribution fees were passed on to the final investor. Instead of reducing costs and stimulating competition and innovation, the open architecture system resulted in increasing costs. Transparency Costs and Return Thankfully, a clear change has been observed in the last couple of years. A number of factors have caused ETF’s to grow in popularity. Academic research has been a major contributor to this growing demand in investment style. Research has shown that only 20% of active fund managers are capable of achieving a higher return than the overall market index. One of the biggest challenges is to predict which fund managers that will be. In addition, the crackdown of the AFM (Authority for Financial Markets) and ESMA (European Securities and Market Authority) has brought significant change. Here, the AFM has carried out extensive research into the portfolios of actively and passively managed
Interview Arjan Blok
Can you tell us something about your studies, your career and how you started working at Essent? I studied business economics in Rotterdam. I did four internships during my studies, which is not common. I wanted the combination of theory and practice. During the last internship, at the Ministry of Finance, I asked for a structural function. Then I combined two years of my first job with my studies, which I would not recommend anyone. You cannot do your study just in the evening hours. After I worked for four years as a management consultant , I have been finance director at the State Lottery for two years. There I sold ‘the chance of luck’ and now I sell energy. The energy sector is the best sector that exists, it is my opinion for already ten years: every day is different. When you look at the developments in the last decade; so many changes are not at any other market taking place. Actually, you can say: the only continuity is the high volatility of market developments. What is the earning model of Essent? We can separate it into three elements. The first element is the production process where we make power and heat and purchase gas. The second element is the sales side; we sell gas, electricity and heat as well as services to our customers. The third element of our business model is trade. Here are the production and sale together: the objective is to optimize the entire energy chain. What important or special items are on the balance sheet of Essent? An important item contains the Essent power plants. Another is the purchase contract. As you’ve probably put contracts for the next ten years than it is today, the value of which is also on the balance sheet. In other words: as for the next decade gas supplies have been purchased and the price of gas on the market falls below the contracted price, then the value of the gas contract is negative. Due to this mandatory reporting to all stakeholders, the organization’s risk profile has become much more transparent. The government has obliged to change of audit every seven years. What do you think of this? I’m a big supporter of this. You can use an accountant for multiple purposes. Some colleagues see no added value and consider the role of the auditor only if compliance with a legal obligation. I use my accountant emphatically as second line of defense. An accountant has an objective, fact-based view, partly enforced by law and regulations. It is incredibly important to your organization to have all this. An objective third, a party who, with more distant from the details, looks sharp at the extent to which the organization is in control. After several years, however, you create a relationship with the auditor and it may get too much ‘understanding’ problems in the field of business. The danger is that you are somewhat milder than in your rating. If you change every seven years, then there will be a fresh look. This is very important for the survival of the organization. Jan Hommen, former CEO of ING provides chaos by these regulations. Companies will at the same time change their accountants and not every accountant is specialized in each industry. Do you see these problems for Essent? No, not at all. Although I ascribe a key role to accountants for the management of the organization, the auditor has no role in increasing my earning power. Our own people develop the quality of our earnings. The auditor does not contribute to this. He or she only checks my judgment, but I do not sail blindly at this. What great and significant risks identified Essent for itself? What do you do to avoid these risks and how do you cover these risks? I see two major risks: changes in laws and regulations and also unhappy customers. The client determines whether we can earn our bread in this sector. We will also do everything possible to predict the expectations of our customers well, and then live up to these expectations. When you look at regulations we are regarded as a thought leader in the field of energy. We must take our social responsibility to the knowledge we have to share with politicians, for example to help the Netherlands to develop an energy policy for years to come. We are also working with our customers every day. Only a satisfied customer will stay with us and pay his or her account. We do this with customer satisfaction surveys and our strategy to keep energy bills as low as possible. We do this by supporting customers with all kinds of products and services to be as efficiently as possible with energy. From the adage: an unused kilowatt-hour is the most durable! What happens to the retained earnings of Essent? We are continually working to its short and long-term success. Here you have to find a balance. How much do I invest of every dollar I earn today in the day of tomorrow? In addition, we look to our stakeholders. So do I give a portion to the employees, shareholders, and debt providers or do I invest with it? We pay off now on the large investments on plants in the past, and on the other hand we look at how we can achieve transition to a sustainable society. With the Energy Agreement should in 2020 14% of energy be produced from renewable energy sources. What does Essent to achieve this goal? We keep doing what we’re doing. We are the largest energy producer in the Netherlands. We also have several initiatives: onshore wind, the largest wind park in the Netherlands and we examine developments for offshore wind. We investigate whether offshore wind is viable in the long term. It is very important to choose the right ‘entry point’: if you put a wind park, it will be there for thirty years. The question is therefore:
Interview Machiel Jansen Schoonhoven
Managing director at NIBC, M. Jansen Schoonhoven, sat with the editors of Faces to inform us more about the recent activities surrounding alternative financing. NIBC deals mostly with clients with revenues between fifty million to five hundred million euros. In the Netherlands, there are a few thousand of these medium-sized companies NIBC has offices in the Netherlands, Belgium, Germany and the UK. Examples of customers are Radio 538, Jumbo Supermarkets, SBM Offshore and Heijmans. Services offered vary from financing and investing to advising in mergers and acquisitions. NIBC is very active with companies that are growing and need financial support or advice. This implies that often these companies still have their original founder, family, or private equity holders that play a major role and are a big part of the growth. Advising As mentioned previously, NIBC does a lot of advising. Not only advice in mergers and acquisitions, but also advice on how to best ‘use’ a company’s balance sheet. An example of one of these companies is Connexxion, a major public transport company in the Netherlands. This brings up the subject of alternative financing, because when giving advice, you not only advise a company to finance through bank loans, but also by other means. It has been a subject mentioned quite a lot the past two years, stemming from two main sources. The first are requests directly from the clients who reckon that banks are being more reserved and wonder if there are alternative ways to finance their company. These clients are medium-sized companies, so not the small scale cloud funding companies. The second source is the request of investors. NIBC’s clients are also pension funds and insurance companies that are big investors and want to invest not only in government bonds but also in loans to companies. This means these are not equity investments but rather a fixed income investment. The latter is interesting for these big investors because the margin is higher than with government bonds. Here, looking at the risk return relationship is key, but often turns out beneficial in their portfolio for diversification purposes. The main question then arises from these investors: is it possible to directly invest in these companies? With this question coming from two sides, namely also from the companies, NIBC tries to bring the two parties together. Developing Regulations Changes in financing have taken place both on the supply and demand side. In the past, companies that were looking to be financed would do so mainly through banks. However, because banks have to increase their buffers, bigger portions of financing is arranged by other parties than banks. There are different examples of this alternative financing, but this is not very common in the Netherlands because there were sufficient amounts of financing offered through banks. However, Basel III regulations required banks to have stricter capital requirements, which are often solved by having a smaller balance sheet. This implied investing less in companies which could possibly be problematic in the near future. In times of economic growth banks will have a hard time maintaining this proper balance between their own requirements and the requests of financing from companies, something that is expected in the short term future. The second problem is that foreign banks that were active in the Netherlands in the past have recently been retreating and focusing more on lending in their own country. This is because of the financial crisis but also because of the change of support these foreign banks received from their own governments, who put requirements on the amount to be invested domestically. These two limit the amount of credit available or to be made available to larger companies in the future. US Private Placements In the United States companies are already used to financing outside of banks. Around seventy percent of financing comes from elsewhere, leaving only thirty percent of the total financing left to banks. The Netherlands has a reverse relationship. Several Dutch and other European companies see this as an incentive to establish their financing in the United States. This market is called the US Private Placements Market, where Dutch companies physically go abroad to sign the financing documents, raising the question whether or not it is still financially beneficial or whether avoiding the trip and signing euro loans would have been just as costly. The idea of alternative financing is therefore established through our company clients as well as our investors, partially because of the success the US Private Placements has brought the United States. This creates incentives for people in the Netherlands to do the same. Dutch Application This fits the trend that institutional investors give out loans that for a term of seven to ten years, whereas banks give shorter loans that are between three and five years. It is therefore beneficial when the company is doing its financial planning to be diverse in the lengths of their loans, which also means including long term loans. An example is the public private partnership (PPP) that NIBC has done with a specific project. They have given out a loan for the Zaanstad prison. This style of PPP-project would previously only do its financing with banks. NIBC has arranged a loan with investors such as insurance companies and pension funds who have put together a long-term contract that is longer than a bank could offer. This was the first time this happened in the Netherlands. NIBC brought together the two parties and acted as a intermediary in the decision making process. The financial and structuring expertise of the bank is used, but it is not necessary for the bank to put in capital. This can be seen as a valuable addition to the services and role of NIBC as a bank. Benefits For the company taking on the loan, alternative financing can be of great value because it creates diversification of funding sources. It will allow companies to get away from being dependent on one source of financing. It is all about
The Dutch Welfare State
The Healthcare System The healthcare is one of the areas that have to deal with major changes. Rising costs and an aging population require policy solutions, such as competition between hospitals and changing the position of insurers. The current healthcare system in the Netherlands is subject to considerable change, partly because of the explosive growth of healthcare costs. The healthcare is the biggest cost center of the Dutch government with almost 75 billion Euros, which is 30% of the government expenditures. On October 19 2012, the coalition of VVD and PvdA came to an agreement. The coalition Rutte II budget cuts are 5 billion Euros on health care. Also in April 2013 a social agreement and a healthcare agreement have been concluded. As of January 2014 a couple of things have been changed in the healthcare system. The compulsory own risk is 360 Euros, a wider compensation for psychological help. National income arrangements for financial compensation for the chronically ill and disabled will be made by the municipalities. Advances in medical technology and more assertive citizens will result in making two basic choices. The first is the concern of healthcare-solidarity: the balance between uniform healthcare for everyone and more differentiated care with room for personal responsibility and self-control. The second concerns the risk-solidarity: the balance between ensuring all risks as much as possible and assuring the necessity of stopping the overuse of healthcare by personal payments. By combining the two considerations, four future options arise of the prevention healthcare, curative healthcare and the elderly healthcare. These worlds will differ in robustness: a rapid increase in expenditures from new medical technology is easier to cope with in a world where more responsibility lies with the consumer and to which the relevant care is equal to the individual preferences. A world with a strong collective interpretation of healthcare suffers from the increasing price of solidarity more than a world in which the healthcare connects with the individual preferences. Freedom of choice helps to achieve the latter but then there could be a strained relationship with a good functioning insurance market. Furnishing of the healthcare in the future requires therefore customization and depends on the economic conditions and social preferences. The Pension System The current Dutch pension system consists of three pillars. The AOW is the first pillar of the pension system. It is the basic income needed to make ends meet, everyone who lives and works in the Netherlands automatically saves for his or her pension. The second pillar is pension from the employer. About 90% of the employers have a supplementary pension. This results in receiving an additional payment on top of the state pension when you retire. Individual insurance constitutes the third pillar. Examples of this individual insurance are annuities and single premium life insurance. These savings for an additional pension are attractive for tax purposes. This method is beneficial because people can then retire earlier or have more money available when they retire. The pension costs are rising because of the aging Dutch population. Furthermore, the current pension system is very sensitive to fluctuations in the financial markets. Therefore, the AOW-age is going up and the government is adjusting the rules for pension funds and pension entitlements. According to the plans of the present government, the AOW-age will be 66 years in 2018 and 67 years in 2021. This comes with a new regulation, called “the Witteveenkader’’, where the age for supplementary pensions under favorable tax conditions moves to the age of 67. Due to the economic crisis, investments declined in value and the coverage of many pension funds has decreased. The coverage should be 105%, but a lot of pension funds do not reach this level. The people thus get lower pensions than they expected and were promised. The impact of these new pension contracts for the participants of the pension funds is difficult to assess at this time. The pension agreements so far give a basic idea, butmany details have not been completed and will be determined by the social partners at local levels. A balanced distribution between the generations is possible when the design of the pension contracts contains sufficient interest for both the young and the elderly. Three factors can work to a disadvantage of young people: a too favorable valuation of the liabilities, the reduction of the buffer structure, and the incentive to take additional risks in order to reduce the value of the liabilities. This brings, more than in the old system, the risk that the bill will be pushed forward and that the young people of today will suffer the disadvantages. The Labor Market Also, the labor market in the Netherlands is a major problem, which requires solutions. Currently, the percentage of unemployed people who are able to work is 8.5% while this was 5.4% just two years ago. This effect works two ways. On the one hand, the people who are unemployed are sitting at home and cannot help the Netherlands get rid of the crisis. On the other, those people have the unemployment law, create a lot of costs for society that originate when 8.5% of the labor market is unemployed. Another problem in the current labor market is that there are jobs available, but the right people for those jobs are not. There is a matching problem in the labor market because a lot of people do not have the education they need to get those available jobs. This matching problem is partly caused by the technological advances which cause the demand for middle-educated people to decrease. Besides that, the decrease is caused by the competition of low wage countries. Reformations are required to solve these problems, but again, the political battles are blocking this. The political parties cannot come to a consensus, which only encourages the crisis and strengthens the effects. There has already been one reform in the labor market, the shortening of the unemployment law period to one and a half year. This helps cutting
