A new survey from Aarhus University shows that financing difficulties are still – four years after the financial crisis – costing jobs. Even among the best-performing companies. According to Niels Westergård-Nielsen, Professor of Economics, Denmark is ready to move on, but the politicians are putting obstacles in the way in the form of strict requirements on the banks.

2012.08.13 | Anne Shirin Ørberg

The financial crisis has cost 180,000 Danish jobs, but according to Niels Westergård-Nielsen, Professor of Economics at Aarhus University, Business and Social Sciences, some of these jobs could have been saved. He is behind a new survey of 1,961 Danish companies and is now pointing to financial problems as an important cause of job cuts. A cause which the politicians could eliminate if they only dared ease the strict requirements on the banks.

Also affects the strongest companies
The analysis of the new survey is very clear: The companies that are experiencing financial difficulties eliminate more positions than other companies. Limited credit, higher interest rates and a general reluctance to finance new projects have consequently had very tangible effects.

- What is very interesting is that this correlation also applies to the companies that have performed best through the crisis, says Niels Westergård-Nielsen, who has identified the same pattern among the companies that did not experience slower demand in 2011 and also report higher revenues.

- We know that we have a serious problem when financing difficulties are costing jobs for the companies that should really not be having trouble with their banks, says the Professor.

Time has run out for the bank packages
According to Niels Westergård-Nielsen, the cause of this is the strict banking policy that followed in the wake of the crisis.

- The bank packages impose very strict requirements on the banks to be reluctant to lend money. That was clearly very necessary at the beginning of the crisis, but the fact that the lending restrictions are still in force four years later implies that the knot has been tightened so much that the crisis is being prolonged, he says.

Restrictions on the banks could have made a difference in 2007 and 2008 when the volume of investment got out of hand. But no one stepped in at that time. Now in 2012, the financial straitjacket does more harm than good, says Niels Westergård-Nielsen.

- The economy is now getting back on track; however, the companies cannot keep up when the banks are refusing to lend. This is costing jobs. Later, when the wheels will really start turning again, it will be wise to tighten the knot to avoid a new crisis. But not now, now we need to move on, he says.

Politicians need to wake up
The results of the survey could be used as input in the debate on how to get Denmark back on its feet after the financial crisis, and Niels Westergård-Nielsen hopes that the figures will be an eye-opener to the adamant few who refuse to accept that financing difficulties have an impact on job cuts.

- The Danish Bankers Association will not acknowledge that there is a problem that needs to be solved. That is a problem, because this is where the policy is being framed, he says.

For further information, please contact:

Professor Niels Westergård-Nielsen
Aarhus University, Business and Social Sciences
Department of Economics and Business – Economics
Tel.: +45 87164982
E-mail: nwn@asb.dk
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