In Ostrava and its surroundings, the crisis in the coal sector threatens the jobs of thousands of miners. The fear of a shocking domino effect in the coming months could bring down the Moravian-Silesian region, one already beset by serious economic and social problems
In this area there are many workers used to descending every day into the bowels of the earth, hundreds of feet deep, to earn their daily bread. People who almost don’t know what fear is. Yet, for several months in Ostrava and its surrounding area, the tension has been palpable. “I fear for my family, for my children, because I do not know what future I can promise them”, admits Martin, a forty year old in his twentieth year as a miner, commenting on the latest headlines in the newspapers.
The entire city is waiting with bated breath over the mass dismissals that may take place in the coming months. Attention is particularly directed towards the coal mine Důl Paskov, a few miles south of Ostrava, which is owned by the OKD, and employs more than 2,500 people. The possible closure could trigger a domino effect of devastating proportions in terms of employment and social consequences. The regional governor, Miroslav Novák (Social Democratic) said that in the coming months in the layoffs in the Moravian-Slesian region could affect 13,000 workers.
For the population it would be a huge blow, in an area of the Czech Republic where unemployment has already reached double-digit percentages. Citizens are terrified by the prospect of a repeat of what happened in 1998, when in the short span of a year, the region experienced a rise in the unemployment rate from 8% to nearly 12%, before continuing to rise over the next five years to 17%. On that occasion it was the miscalculated privatization of the two steel giants Nova Hut and Vítkovice that had an effect. From 2006 to 2008, years in which the Czech Republic experienced strong economic growth, there had been a significant recovery in employment. Today however, after the last five years of crisis, the situation has come back to be in a severe state, with a unemployment rate already close to 10%.
“Today, for every free workplace, there are 20 people looking for employment”, said Yvona Jungová, the director of the Office of Labour and Employment of the Region, in a dejected manner.
Ostrava’s mayor, Petr Kajnar, seems even more pessimistic. A Social Democratic in his seventh year in office, it is the first time he has had to deal with a disaster of this magnitude. In his view, the number of workers that risk losing their job is even higher than the figure reported in the analyses of the authorities in charge: “I think it could be even 25 thousand people and the city administration is absolutely unable to absorb such a large number of layoffs. In such a situation, the only force able to intervene may be the Main Government”. Kajinar also remembers what happened in 2002, another dark period in terms of employment, saying “then the town financed the construction of the industrial area of Ostrava, Hrabová, which now employs 8,000 people, with 700 million crowns. However, now my administration does not have that kind of money”. The mayor followed by launching a message towards Prague: “In a situation of this kind, to avoid the worst, the government should also consider the possibility of buying the Paskov mine”.
The fear is clearly one of a social catastrophe, in a region where there is already no lack of problems, and from which many people, especially young people, prefer to leave. It is estimated that the city of Karvina, another mining town located 18 km east of Ostrava, in the last 30 years has witnessed the number of inhabitants to drop from 80,000 to 60,000 people.
Before the crisis that the Důl Paskov and OKD are facing, the reassurance of the owner group, New World Resources (NWR) of tycoon Zdenk Bakala, seemed to have little effect. Despite the five years that have passed since then, the days when Bakala was celebrated as the Coal Baron of Central Europe seem long gone. Then the NWR was the protagonist of an amazing expansion, which also occurred by landing on the stock market, with placements in the streets of Prague, Warsaw and London.
The atmosphere today has changed completely. At NWR they swear that all measures will be evaluated to avoid the worst, and that the possible closure of Důl Paskov will not occur before the end of 2014. A very meagre consolation for those whose job position is at risk.
The laws of the market appear to be merciless indeed. In recent times, the excessively low demand for Paskov coal (metallurgical coal or coke) has meant that the production has become more costly much more than the selling price. In addition, the latest news on the NWR budget sadly speaks clear: in the first six months of this year, the losses have reached a staggering figure of nearly 400 million Euros (about ten billion crowns), while the market was expecting a maximum of 70 million euros. Yet another abyss, from which the experts come to a sole conclusion, that the continuing operation of the Paskov mine is untenable, especially since so far the attempts to find a buyer willing to take over the property have proved to be in vain.
The layoffs have actually already begun. Just a few weeks ago OKD announced the closing of the contracts of 250 workers, mostly full time employees. By September there will be a decrease by one-third of the staff of temporary workers, whose number is expected to drop to 2,700 people. The first steps of a plan of expense reduction, given the scale of the crisis, up to now appear to be totally inadequate. Trade union representatives have refused the OKD’s request to decrease the salaries by 20%, which currently have an average gross amount of 32,000 crowns per month.
It is not only the fate of the OKD which is currently worrying people in the region. In Ostrava the steel giants Evraz Vítkovice Steel have been faltering for some time. In this case too, the next few months will be decisive.
by Giovanni Usai