Après une vigoureuse reprise des ventes de luxe au premier trimestre 2010, l’environnement s’était assombri avec les plans d’austérité qui se profilaient en Europe et avec la chute des marchés boursiers intervenue mi-avril dernier. Le joaillier italien Bulgari a estimé que le marché européen devrait rester difficile et que l’impact des mesures d’austérité face au mur de la dette se ferait surtout sentir en 2011. En même temps, La Prairie avait dit pour sa part ne pas anticiper avant 2012 un retour à ses niveaux d’avant la crise, tandis que pour Cerruti, les marchés français et italiens pourraient terminer l’année sur une note stable. L’horloger Hublot, filiale du numéro un mondial du luxe LVMH, s’est lui aussi dit prudent pour l’année malgré un très fort rebond des ventes de montres en début d’année. L’Europe compte pour environ un quart du marché mondial du luxe.

La foire de SIHH est un baromètre de la santé du secteur et la foire a confirmé les commandes en hausse et un retour en bonne santé, largement due aux économies en Asie. Le marché asiatique talonne désormais les marchés européens.

Richemont (qui possède les marques Cartier, Montblanc, IWC, et autres) a affiché une hausse des ventes de 23%. Entre octobre et décembre 2010 le groupe a réalisé un chiffre d’affaire de EUR 775 million, en progression de 43% sur la même période l’année dernière.

Tous les acteurs ont dit que c’est en Chine que la croissance des ventes du secteur a atteint souvent 20%, voire plus, et les économistes ne font pas de scénario de fort ralentissement de sa croissance. Le pays, devenu l’eldorado des groupes de luxe malgré des difficultés administratives et bureaucratiques, verra ainsi l’essentiel des ouvertures de boutiques.
La zone euro est un marché important, mais la réserve de croissance se trouve aujourd’hui dans les pays émergents et notamment en Chine, dont la demande tire l’ensemble du secteur.
Le consommateur chinois, pour qui luxe rime avec Occident, est devenu le premier consommateur du secteur — en comptant les achats réalisés dans le pays et ceux liés au tourisme — comptant pour environ 25% des ventes mondiales, devant l’Américain, l’Européen et le Japonais (à parts sensiblement égales de 20%).

Au SIHH, les directeurs de plusieurs marques ont fait le même constat: “la reprise est bien là.”

The return to profitability of the financial sector — even if only a fictional result of massive and sustained printing of new money — is resulting in a new optimism and a renewed wave of hiring.

Financial news services in Switzerland are all reporting a sharp rise in the number
of job vacancies between June 2009 and May 2010, with UBS and Credit Suisse accounting for the majority of new jobs and employment opportunities (consultancies have also risen but are not counted in the figures).

On the other hand, the survey show stagnation in the insurance industry. According to the financial news agencies banks are increasing their staff because they have lowered their overall operating costs. In the insurance industry, such cost restructuring has not yet taken place.

Meanwhile the Swiss government accord with the USA for the handover of UBS accounts to the American tax authorities is set for approval by the Swiss parliament, despite the agreement’s being illegal under Swiss law. Many representatives in Swiss parliament expressed frustration at having to choose between foreign engagements undertaken by the executive and Swiss law.

Switzerland’s bank secrecy laws forbids financial institutions and intermediaries from transmitting to third parties information about customers. The law dates to 1934 — Article 47 of the Federal Law on Banks and Savings Banks, punishing transgressions with sentences ranging up to 3 years in prison and fines of up to 250,000 francs. Bank secrecy is also a part of contract law, transgressions liable to civil action.

In March 2009 a minor revolution took place with the federal council of Switzerland — its executive — changing the juridic landscape and and modifying the legal framework to conform to Article 26 of the Model Tax Convention of the OECD. The Swiss people have not yet had an opportunity to vote on and ratify or reject the changes made by the executive council of federal government.

Late last month, the Swiss federal government also announced its intention to prohibit the filing in Switzerland of foreign funds not registered with their authority to regulate and tax ‘gray’ money, by which is usually meant undeclared funds.

Banking secrecy exists in several other jurisdictions besides Switzerland, such as the Cayman Islands, Bermuda, Virgin Islands, …,the State of Delaware in the United States, the Bahamas, Andorra, Liechtenstein, and Singapore. Historians claim that Switzerland’s 1934 banking secrecy law was motivated by commercial interests and the interests of tax competition.

Up until its recent repudiation, banking secrecy laws were lifted in some cases, particularly in the context of criminal proceedings, and requests for mutual administrative or judicial. Such requests originated from foreign authorities and targeted a specific customer identified in a designated bank. They were motivated usually by investigation for fraud or money laundering. The recent upsets in Swiss jurisprudence now allow for routine requests from foreign authorities for simple tax evasion or undeclared funds on account.

The lines in the sand have been in continuous movement, with a bewildered, unfocused and irresolute Swiss government currently holding out for a non-automatic exchange of information. At this point Switzerland has agreed to communicate information on request to foreign authorities, but not to send it ‘automatically.’ Similarly, Switzerland has not yet agreed to provide information in transactions known as “fishing expeditions,” where a foreign authority asks for a list of customers without any particular criminal suspicions.

Prior to 2009, Swiss law distinguished between tax evasion and fraud. Therefore administrative assistance was granted only for cases in which fraud was at issue. The simple concealment of funds was not considered a pursuable offense. However, part of the enormous changes that have taken place in Switzerland over the past 12 months are the abolition of this distinction: now the simple neglect to declare funds to a taxing authority, whatever the amount, is considered to be actionable.

Many Swiss-based financiers comment that Switzerland has missed a golden opportunity to strengthen itself as a global financial center, arguing that the OECD’s placement of Switzerland on a ‘gray’ list would be toothless, and would have the added advantage, opposite the intentions of its drafters, of driving great quantities of funds into Switzerland. Most of Switzerland’s banking and financial community does not understand why the government rushed to comply with the OECD’s directives; and many are openly calling the competence of government leaders into question, with councilor Hans Rudolf Merz in particular being singled out for ridicule and contempt in many Swiss newspapers.

Under pressure from the OECD, Switzerland undertook in March 2009 to revise its double taxation agreements with states asking for administrative assistance in accordance with Article 26 of the Model Tax Convention of OECD. Negotiating 12 revised conventions have allowed Switzerland to be removed from the OECD’s ‘gray list’ and receive the gold star of their approval. In fact Switzerland she has renegotiated more than this number of conventions. Additionally, within the generally cloudy juridic context and a weak, uncertain Swiss government, many other scandals have shaken the Swiss banking environment.

In December 2009, an employee at HSBC in Geneva gave French authorities bank data on taxpayers with hidden accounts in Switzerland. Thus France obtained through espionage a list of some 3,000 alleged tax evaders, which it intends to prosecute. It is also free to transmit this data to other States. In February 2010, Germany purchased for Euro 2.5 million another stolen list, containing the data bank of 1500 German taxpayers with accounts mainly at Credit Suisse, apparently stolen by a German national working at the Bank.

Meanwhile, the banking and finance sector in Switzerland has suffered a massive exodus of funds and general panic as the legal environment appears to change from week to week.

The Swiss Bankers Association (SBA) has tried to counter the government’s concessions with a proposal for a “final tax, or withholding tax that the banks would levy and disburse to foreign tax authorities, while ensuring the anonymity of their clients. Compared to existing bilateral agreements with the European Union, this proposed system would extend the tax base to dividends and capital gains. The European Union is not interested in this, but rather seeking the automatic exchange of information.

Seeking to avoid at all costs an automatic exchange of information but apparently unable to formulate such a stance on generally accepted notions of national sovereignty, the government said just recently in late February that it intended to prohibit the placement in Switzerland of foreign funds that had not been duly reported to their country’s tax authorities and that going forward ‘gray’ money would be strictly regulated. The methods for achieving these new goals were not elaborated.

With each new successive demand, the Swiss government has given in and renegotiated previous accords and treaties in place.

Automatic exchange of information would effectively remove the last vestiges that remain of Swiss bank secrecy.

Mergers and acquisitions in the European Community are expected to rise 20% over their 2009 levels.

Analysts are watching the takeover attempt of Cadbury by Kraft in the UK for $10.5 billion as a sign of events to come during 2010.

The last data coming from Mergermarket confirms the trend during the Q4 of 2009 toward acquisitions and mergers to grow market share, a key strategic wind shift from mergers of necessity related to the financial crisis to mergers of opportunity to achieve growth.

According to a survey published in December by Boston Consulting Group and UBS, roughly 20% of the managers surveyed indicated that they were planning a major merger operation for 2010. Merger activity is expected to be largest in the United States. More generally, analysts are expecting 2010 to mark the return to a more normal economic environment, using more traditional modes of financing and less risk.

For such consolidations and restructurings to occur, several factors need to be simultaneously present. First, there needs to be a realistic valuation of companies with an adequate balance of profits and reserves and the measure of taste for risk; a climate of confidence needs to return.

In this context, pharmaceutical companies or companies dealing in raw materials, or financial insitutions will be particularly active and an increasingly preponderant role will be played by companies operating in emerging economies.

Analysts also underline that financing of operations will rely on cash or exchange of stock, though the market expects several more months of cheap money during which time companies can finance their operations with cheap loans.

In 2008 while the lucrative holiday period drew near, luxury watch production had slowed, brought to heel by the global financial crisis. Since mid-2008, exports declined and unemployment rose, with notices of staff reductions being announced by large multinationals each month.

In Neuchatel where a large number of luxury brands are located, the manufacturer Ulysee Nardin had to fire 12% of its 25o man work force and produced at a slower rate.

But since September, according to the management, the ateliers are running at 100% with orders rising and the company has ended its practice of partial unemployment.

Ulysse Nardin has inaugurated a new boutique in Beijing and the Neuchatel-based luxury watch maker seems braced for renewed good times. The director of the company, Rolf Schnyder, recently stated recently that the company would end the year in the black, albeit with less profit than last year. 2008 had started off very well for the Ulysse Nardin but finished off badly. 2009 started off badly and has apparently finished well.

The Director’s prognostic is that the recession has ended and that growth has returned, with November sales 30% higher than those for November 2008.

Nonetheless, Mr. Schnyder believes that the United States will take much more time to recover, and their market is important for the luxury watch maker; that said, the importance of the US market has declined from 30% historically to currently 18%.

An unstated reason for the return to health is that the company is operating with a smaller workforce, which, for the moment, the company does not seem in a rush to rehire.

Additionally, with the rise in orders, their production capacities cannot keep up. The various subcontractors upon which the luxury brands depend – for watch casings, dials and other parts– let go substantial numbers of staff over the past year and do not have the resources to produce at the old capacity levels. They probably are also wary about too rapidly hiring back staff.

Also, despite the return of strong sales, the distribution of sales has nonetheless changed, with a marked decline in sales of super expensive pieces and a concomitant rise in sales of moderately priced pieces.

The phenomenon is identical in China and in the United States. Ulysse Nardin’s director believes that the worst is also passed in the United States and the economy is recovering, though it will be a longer road to elsewhere. Besides the US and China, Russia is also an important market for the luxury brands, as well as the middle east, though with the financial crisis in Dubai, sales have dropped by 70%. A large part of the luxury watch maker’s sales figures this year in Spain, Italy, Turkey or Florida has come from Russian tourists.

The disappearance of banking secrecy in Switzerland may result in an irrevocable loss of roughly 25% of revenues from Swiss private banks.

Analysts from the Research Institute in Basel (BAK) added that even a complete removal of banking secrecy would not result in total flight of foreign capital in Switzerland, since a significant part of these account are held by institutional investors or Middle Eastern customers unconcerned about banking secrecy.

Moreover, according to the chief economist Urs Müller, “all the accounts in Switzerland aren’t necessarily undeclared funds.” The BAK economist further hypothesized that rising financial markets would permit the financial sector a slightly better than average growth.

Among the chief economist’s other entertaining assumptions and uncorroborated hypotheses are that the Recession has already hit bottom, that the Swiss financial sector will recover first, and that other sectors like machines tools, consumer goods, and luxury watches will follow.

The BAK maintains that the Swiss economy will grow between 1.5% and 2% in the medium term. BAK Basel has 25 years of experience drawing up forecasts of economic development at the Swiss and international level.

Their website (bakbasel.ch) doesn’t indicate what percentage of their forecasts turn out to be correct.

According to the study undertaken by Ernst and Young which surveyed the management at over 700 multinationals, Switzerland remains a prime choice when companies decide to relocate their activities.

Switzerland emerged more desirable than France or the United States, according to the study. The rationale behind the choices was chalked up to a stable political environment and a solid and favorable legal environment, as well as quality of life, social climate, and other factors like schools.

Switzerland took a hit, however, on its tax environment, dropping from 4th in 2007 to 11th in 2009. The study asserts that as a consequence of the dilution of banking secrecy, 23% of companies see Switzerland negatively as a potential place to invest, in contrast to 15% in 2007. 50% of companies surveyed planned to invest in Switzerland, against 74% in 2007.

Every year the WEF, based in Switzerland overlooking lake Geneva, publishes a global ranking of the most competitive economies.

This year the WEF noted that Switzerland was characterized by both an excellent environment of innovation as well as a sophisticated business culture.

The WEF also noted that Switzerland had been much more resistant than the US and Europe to the world economic crisis. Further, the problems in the financial sector were much less pronounced in Switzerland than elsewhere in Europe or in the US. In effect, problems in the Swiss bank sector were essentially circumscribed to UBS.

Switzerland also earned its first place for its top research institutes and excellent collaboration between its research institutes and the private sector. Switzerland’s public institutions are among the best in the world and its infrastructure was rated as excellent.

However, the WEF noted that access to university education in Switzerland remains weak – on this criterion Switzerland was rated 46th globally. Even if immigration is allowing Switzerland to compensate for the penury of educated qualified professionals on the Swiss job market, the WEF recommended that Switzerland raise the level of average education to better respond to the needs of an advanced economy.

The WEF’s ranking was a welcome shot in the arm for the Swiss economy, which has nonetheless suffered slowdowns and layoffs in the luxury watch making, textile and hospitality industries.

Among the sectors, flourishing despite the overall economic in Switzerland, the insurance industry remains strong, with an industry unemployment rate below 2%.

The energy sector is also doing very well — every business and sector touching production of electricity, gas, air conditioning, etc – with an industry unemployment of about 1.5%. Another sector oblivious to moroseness is teaching: teachers are practically untouched by unemployment with the sector showing slightly more than 2% of teachers without a job.

Among the professions which appear to be crisis-resistant are managers – there seems to be no end to jobs for managers who can streamline, rationalize, increase productivity, etc. – top IT specialists, and finance professionals. The majority of cuts that some banks have had to make due to strong declines in revenues have not been in trading and finance, and job offers for top financial talent remain strong.

Tangentially, the World Economic Forum is among companies, organizations, and institutions having resisted the crisis, and with its chic campus in Geneva’s ritziest suburb and solid revenue stream of expensive membership fees, is an attractive employer in the Geneva area.

Order books, particularly of exporting Swiss industries continued to empty during the second trimester, with orders falling strongly. Inside analysts say the the drop in business is as bad as it was in 1991.

Sales figures registered a 13% drop with respect to the same period in 2008. Output dropped 15% according to the Federal Statistics Office (OFS).

The results support the arguments that a return to a robust health will take considerably more time for Swiss exporters.

Bulgari is preparing to let go 50 staff at Daniel Roth and Gérald Genta Haute Horlogerie SA. The administrative center in Meyrin is expected to bear the brunt of the cuts with 45 of the 50 layoffs. The management at Bulgari has already discussed with staff the company’s intention to drastically reduce headcount at the two brands.

Dow chemical will be closing its European offices at Morges and concentrate its activities in Horgen (Zurich). After the purchase of its competitor Rohm Haas the American chemical group had two centers in Switzerland. Roughly 40 staff were offered a job at the Horgen offices. Before announcing the definitive closing of the Morges offices, 25 staff had already left on their own.

Elsewhere, numerous companies have been launching restructuring programs in response to the poor economic climate.

Since the beginning of the year, Holcim, Swiss Re, UBS, Credit Suisse, and Adecco have all eliminated thousands of jobs. Holcim (cement; St. Gallen) reduced its headcount by nearly 10,000 workers, down to 81,500.

In April Swiss Re announced the elimination of 1200 jobs and a cost reduction program to save CHF 400 million. En 2009, the management expects a saving of CHF 150 million.

UBS cut 4400 jobs through end June, to settle at 71,806 staff, and there are a further 4800 jobs to be cut, according to management. Last spring UBS put some of its staff on partial unemployment – a watershed event: no Swiss bank had ever done that before. The measures actually were directed at their HR recruitment staff. Zurich accepted the request; the canton of Vaud refused it.

In July Credit Suisse indicated it cut 4900 jobs. At the end of June the Bank has 46,700 staff.

ABB wants to economize $ 2 billion, with the half the savings accrued in 2009 but has so far not made any major staff cuts.

The prognostics for Switzerland in 2010 are not especially optimistic.

According to the Swiss unions, purchasing power will strongly decline in 2010 as prices rise, inflation begins, and salaries stagnate.

We might point, at this juncture, that the unions and syndicates of Switzerland were all willing advocates of the open markets in Switzerland and the integration with the European community, which is the principal causative factor of the decline in purchasing power and standard of living.

Currently the unions are predicting a decline in the gross national product of about 3%, with a further decline in 2010 of perhaps 1%. The unions’ predictions are more pessimistic than the government economist’s because they take into account precisely the decline in purchasing power which will have a strong effect on the Swiss economy for some time to come.

The decline in purchasing power of Swiss households is estimated to diminish by several billion francs in 2010 as a result of the massive rise in health insurance premiums, a rise in the CO2 tax, and austerity measures by the different cantons to brake the acceleration of public debt. Overall the forced savings represents about 1% of the GNP – about 5 billion francs. Converted into employment, this equals about 40,000 jobs !

The current recession is expected to follow a W pattern and the positive signs of improvement are expected to reveal themselves later on as just a simple renewal of stocks. The small perceived rise in production is not a sign of rise in demand as claimed by certain over-optimistic observers. And the rise in unemployment is expected to further damage demand down the road.

A variety of economists and commentators are expecting to see over 250,000 unemployed by 2010. This constitutes a historic record for Switzerland and of course the record unemployment will cause ancillary damage in psychological problems and other health and social problems.

Further, 2009 has seen the destruction of banking secrecy in Switzerland, leading to an important exodus of foreign funds under management in Switzerland. Subsequent to the agreement made with the United Sates, the Swiss federal government is now besieged with demands for similar cooperation from France, Germany, Turkey, and elsewhere.
No one has yet provided a credible estimate of the part of GNP made up by the Swiss financial services sector but private estimates such as by Banque Pictet in Geneva have estimated that the removal of Swiss banking secrecy will cost roughly 100,000 jobs in Switzerland.

According to the Swiss association of creditors, the data for May shows a steep rise in bankruptcies.

Close to 450 bankruptcies were registered last month, making the fourth consecutive month where bankruptcies exceed 400 per month. So far 2009, there have been more than 2100 companies declaring bankruptcy.

A large percentage of these companies are young companies, start-ups and PMEs.

Nonetheless, extrapolating these figures gives an estimate of over 5000 bankruptcies for 2009 in Switzerland, something not seen in Switzerland since 1974.

In May there were 2600 new companies (roughly 10% less than last year in May) registered with the Chamber of Commerce. The number of firms struck from the lists rose 20% to 200 companies.

To put these numbers in perspective, in 2004 there were 460,000 companies registered (the period of the last recession) and this number rose to 515,000 in January 2009, thus an overall rise of 55,000 companies. The number of SARL companies rose 90% of the same period and the number of individual companies (i.e., independents or ‘INC’s) rose 40%. SA companies rose 25% during this same 5 year period.

In 2008, almost 60% of the surveyed companies were less than 5 years old, as opposed to 48% in 2004. And only 23% of registered companies are older than 10 years.

Analysts say that the high proportion of young companies is an important risk factor for the economy. For one, these companies have less funds for investment and also tend to suffer first in economic downturns when overall business decreases.

Analysts are asking whether financing structures are appropriate for the needs of younger companies. Specialists are asking whether the government can play more of a role in fostering or godfathering younger companies if the options are scarce in the private sector.

Surprisingly, amid the general steep rise in companies declaring bankruptcy, personal bankruptcies actually decreased in May to 503, a drop of 7.7%. From January to May the drop was even steeper – down 11.5% to 2420 bankruptcies.

The fortunes of the luxury watch making sector in Switzerland have continued to plummet with the number of workers joining the unemployed increasing 13.2% in one month.

The official rate of unemployment in Switzerland across all sectors is now 3.4% — although, as in all countries these official statistics are vigorously massaged and include only those currently receiving unemployment benefits.

At the end of March there were 135,000 unemployed enrolled at regional placement offices (ORPs), about 2500 more than in February, according to the federal government’s SECO. Compared to March 2008, the number of unemployed increased about 30%.

According to the statistics, unemployment affects foreigners more than Swiss with the respective rates 6.9% and 2.4%.

The number of long term unemployed – those who have been looking for more than a year– remains so far relatively stable: there were roughly 16,000 in March 2008 and there are roughly 16,000 now.

The SECO is planning for an unemployment rate of 3.8% for 2009 and 5.2% for 2010.

At the moment, the sectors hemorrhaging the most jobs are banking/finance and luxury industries. However other industries heavily export-oriented have also been affected, like machine tools. In the luxury watch industry, the number of jobs lost over the past few months has been striking.

Unemployment is also becoming a serious problem among youth, with the number of unemployed among 16-24 year olds rising to 4% from 2.9% last year.

Reductions in working hours – so called ‘partial unemployment’ – in which workers work fewer hours and are paid proportionally less, has continued to progress as well. For many months the banks have been letting go employees each month in drips of 10 or 20 at a time. The luxury watch sector is the most recent casualty of the global downturn, in terms of its impact on the local economy.

Sectors such as pharmaceuticals and agroalimentary industries are doing very well, despite the terrible economy, with Nestle recently announcing its intention to hire several hundred new employees over the next 12 months.

In the present dire economic conditions allow companies and organization to test the mettle of their managers. It’s easy to manage in prosperous times: things practically manage themselves and mistakes are buried in an enterprise’s overall profitability.

But as orders fall, unemployment rises, and the pressure for performance, competence and reactivity rise at private companies, managers must steer through severely troubled waters and their performance will be subjected to much more brutal and unimpeachable scrutiny.

What do you do when demand for your product or service is drying up? How do you cut costs without cutting off your legs ? How do you grow when markets are shrinking ?

For top managers and senior directors and executives, getting through turbulent times is never simple. The common behavior in such situations is to retreat and wait until things improve, but this is often not the best decision in the long run. Often, downturns present excellent opportunities for a companies to re-invent themselves, steal talent from adversaries, and otherwise position themselves for long term prosperity.

In this current downtown, which many are now calling a depression, managers are mainly trying to stop the flow of cash from leaving the building, especially by cutting staff and eliminating unessential jobs, but this strategy carries the risk of damaging the essence of the company and impairing the possibility of future recovery.

Getting rid of the brains who are responsible for actually making your products or producing your services competitive in the first place is bad strategy. PR can be as big an enemy to senior management as the collapse of the economy; management will probably have to invest substantial resources in communicating with their troops. Staff need to see resolution and certainty, which also helps to quell rumors. Business psychologists say that it is much better for employees to know they will be losing their jobs than for them to remain in cloud of uncertainty about it for an extended period of time.

Further, the natural reflex of hunkering down in a crisis and retreating in an attempt to conserve cash can be disastrous for a business – throwing away important partnerships or opportunities or ventures. Things like research and development must continued and producers of all kinds need to consider that cut capacity can be difficult to rapidly re-instate. When the upturn occurs, you will have lost key talent, and hiring it back will be very expensive.

A lot of managers had an easy time from 1997-2007. We are now in a period which will bring talented managers to the fore.

The conventional local wisdom is, “Switzerland is not an island.” In spite of dim memories of the Golden Age in the not-too-distant past when foreign nationals were accorded work permits for Switzerland on a case-by-case basis, and unemployment was less than 0.2% (Switzerland, like the United States, carefully selected its foreign population by educational and professional criteria) the current Zeitgeist– proclaimed throughout official channels and their surrogate establishment media– is that Switzerland must be another supermarket in a world full of supermarkets.

There are few voices in Switzerland at this time that imagine Switzerland as a boutique, rather than a supermarket. While a boutique sells high value-added goods and services and leverages its intellectual property and ‘brand,’ the supermarket competes essentially on price. As such, it is entirely subject to the mercurial winds of global price competition, and the inexorable reality that a Chinese laborer earning $1 / day will force you to lower your standard of living before his living standard rises to meet yours.

The global recession, like all economic trends, fads, and social tendencies, has taken its time to arrive in Switzerland. It’s rare that something starts in Switzerland –we are a risk-averse nation, that prefer mimicry to originality—but everything eventually ends up here. (The Author will wager that even Guantanamo’s inmates will end up here!)

So it is that the recession – soon to become depression—has arrived. We shouldn’t be surprised. After the theft of $65 billion of public funds to (temporarily) rescue a private institution that should simply have been nationalized, the amount of resources available to confront the tsunami about to wash over us is limited.

According to a report from the International Labor Organization (ILO), the unfolding economic crisis may cause the number of unemployed across the globe to rise to over 50 million if the situation continues to deteriorate. Luckily, employees of the ILO need not fear for their public sector sinecures, and may even hire additional staff to grapple with the increased workload of reports as the situation worsens.

In Switzerland, the effects of the global economic crisis on the Swiss employment market have begun to be strongly felt. Already last December, to avoid layoffs, numerous companies announced measures of unpaid leave – partial unemployment through reduced working hours rather than firing staff.

But in January, the first wave of layoffs began. Swissmetal laid off 35 workers, Allianz Suisse 250, Ebel and Zenith 50, Girard-Perregaux 22, GF Charmilles 180, and the list has promised to grow long, and well into 2010, according to the SECO (the federal secretariat for the Economy), which predicts a rise in unemployment of at least 0.7% this year and another 1% in 2010.

Despite this less than rosy assessment (analysts outside the government claim the SECO statistics are unrealistically low) of a degenerating domestic economy, the Swiss federal government remains ferociously in favor of the bilateral agreements with the EU, permitting anyone in the European Community to come work in Switzerland. In exchange, we Swiss residents obtain the dubious privilege of being able to go work in the much less-well-paid, less environmentally sound, less safe, and more bureaucratic European Community.

Professor Yves Flückiger of the University Employment Observatory argues that Switzerland will be strongly affected by the global recession because of it’s reliance on exports (about 50%). As an example, the violent fall of orders in the automobile sector has had a powerful impact on some Swiss exporters in the equipment manufacturing sectors and spare parts industries. The German cantons will necessarily be more heavily affected because they are more oriented toward manufacturing exports to the United States. Swissmem is already predicting a loss of 25,000 jobs in 2009 in the machine industries, electrical equipment and metals.

The monoculture of the economic philosophy of global free trade and the parallel misguided application of a ‘supermarket’ business model will render significant portions of the Swiss economy vulnerable to major perturbations and mass layoffs. These segments of the economy are further affected by the rise in the Swiss Franc against the dollar and the euro. The segments of the economy which conform more to a ‘boutique’ model – such as high tech and luxury—should prove to be more resistant. Biotech, pharmaceuticals, and high technology sectors are still thriving.

Analysts are expecting waves of layoffs in the banking and financial sectors, and in the insurance industries. The layoffs, however, will not be general to the sectors. Among the banks, while UBS and Credit Suisse are suffering, the Swiss cantonal banks are thriving, smothered under huge influxes of new cash from customers fleeing larger and potentially insolvent institutions. Many of the cantonal banks are vigorously hiring.

The luxury watch industries are also complaining about diminishing exports, but the suffering is mainly among the moderately priced products.

Other sectors expected to be hit strongly by the slowdown : the media sector, the telecommunications sector, tourism, and the construction industry.

Geneva is preparing to run away with the New York financial district’s mantle. As Wall Street melts down, liquidating tens of thousands of jobs, Geneva is positioning itself to take a large slice of the action.

Specifically, Geneva covets the business of hedge funds management, which generates lots of tax revenue and provides loads of jobs for financial and banking professionals who manage the investments.

While the Geneva financial community – particularly the insular world of independent portfolio managers – is reeling from the exposure to the Madoff swindle (which will probably cost Geneva investors close to $10 billion), the government is busy drafting new regulations that will make Geneva an attractive domicile for funds management.

The Swiss federal government has been successfully lobbied the past few years by bankers and financiers to bring about new financial regulations and tax laws making Switzerland in general an attractive place for funds managers to set up shop.

With the crises blowing through the New York financial district, Geneva’s hedge funds managers are already rubbing their hands in anticipation, counting on the fact that the new tax laws will combine with the stricter Swiss surveillance and regulation to create an environment much more competitive for investment funds, now that confidence is at a historic low point and reference points of sobriety, integrity, and honesty seem hard to find.

Other commentators point out that if the author of such a fraud could come from a former president of a major stock exchange, whose funds were audited left and right, then can anyone, anywhere, who invests in funds they don’t fully understand, ever be safe ?

According to economists at UBS, Swiss salaries declined on average in 2008. The UBS analysts neglected to mention whether salary declines in Switzerland were aided or offset by remuneration packages paid to UBS executives.

The UBS study, which surveyed over 350 companies and more than a dozen sectors of the economy, concluded that salaries in Switzerland would rise in 2009. the projections are based on projected rises in compensation packages minus the effects of increases in the cost of living.

In 2008, salaries declined roughly .5% as a result of steep increases in the cost of living in Switzerland, notably in raw materials (gas and food) as well in rent.

Economists are betting on a trend reversal in 2009, based on the supposition of both salary increases and price deflation (or at least stagnation) based on the projected economic slow-down. The UBS analysts believe that inflation will fall below 1.4% in 2009. The net result, if the analysts are correct, will be a 1% gain in purchasing power on average.

Last week, Migros announced salary increases for its 88,000 strong workforce of roughly 3%, as well as a raise of their minimum salary from CHF 3300 to CHF 3700. The measure is expected to cost Migros approximately CHF 130 million, but the management at Migros believes the measure will buy them an important amount of confidence and good will in this period of turbulence in financial markets and the economy. Other sectors announcing wage increases: construction industry. The salaries of jobs in building and construction will rise 2.4% following vigorous negotiations and conflict between company owners and the unions.

The largest wage increases are expected to be for jobs in the IT and telecoms fields (+3%), as well as the luxury watch brands (2.9%) and the machine industry (+2.8%). Jobs in banking and finance and jobs in insurance are expected to see salary increases of slightly less than 2%.

Executive recruitment has been marked especially by the internet and the growing economy in Switzerland. Companies in Switzerland though in a strong economy, remain wary of a downturn around the corner as a result of the problems in international credit markets and therefore executive recruiters see a strong rise in very competent candidates and reduction in mandates from multinationals for recruitment.

Nonetheless, because the Swiss economy remains strong, sectors such as luxury industries and watchmaking, as well as high-tech industries, continue to exert strong pressure on recruiters for top qualified specialists and executives.

Many executive recruiters in Switzerland, in addition to their core business of finding top candidates for their enterprise clients, also engage in coaching of in-place executives and teams. The market for coaching is growing rapidly in Switzerland.

Of course, the biggest revolution in executive recruitment has been the internet, which has completely changed the recruitment market in the space of fewer than 10 years. Previously, recruting an executive was a thoroughly confidential matter, operating by private networking. Now thousands of potential candidates for a position are a mouseclick away: the central difficulty of recruiters has shifted from hunting to selection. The internet, at the same time it has solved the problem of putting candidates and recruiters in contact, has created the new problem of how to evaluate and select in an efficient manner.

In addition, the ubiquity of internet in the employment process has rendered the candidate who sends in application by post a suspicious anomaly, a candidate who prima facie appears to have no clue as to the manner in which modern work is done.

In the french speaking part of Switzerland the economy has become particulary dynamic, evolving from an array of largely small and medium sized companies to a large park of multinationals, european corporate headquarters, and start-up technology companies.