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‘Force Majeure’ Paves Way for Salary Cuts in Saudi Arabia

Job seekers stand in line to talk with a recruiter at a booth at a job fair in Riyadh, January 29, 2012. REUTERS/Fahad Shadeed
Job seekers stand in line to talk with a recruiter at a booth at a job fair in Riyadh, January 29, 2012. REUTERS/Fahad Shadeed
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‘Force Majeure’ Paves Way for Salary Cuts in Saudi Arabia

Job seekers stand in line to talk with a recruiter at a booth at a job fair in Riyadh, January 29, 2012. REUTERS/Fahad Shadeed
Job seekers stand in line to talk with a recruiter at a booth at a job fair in Riyadh, January 29, 2012. REUTERS/Fahad Shadeed

A ministerial decision was issued in Saudi Arabia on Sunday to regulate the labor contract during exceptional circumstances caused by the coronavirus outbreak.

It stipulates reducing salaries in the private sector by 40 percent with the possibility of terminating the contracts.

The document, a copy of which was obtained by Asharq Al-Awsat, allows employers to reduce working hours and cut 40 percent of total salaries for a period of six months and provides for the termination of contracts with employees after this period.

The regulation defines force majeure as the state taking measures it deems appropriate or based on what is recommended by a competent international organization in a case or a circumstance to limit the deterioration of the situation.

It indicates that applying its provisions doesn’t stop state benefits for employers in the private sector, such as aid in paying wages for workers or exemptions from government fees.

It also stresses on not terminating contracts unless the three conditions that form a force majeure are met.

They are: Waiting six extra months for the measures taken and the resulting precautionary or preventive actions, benefiting from the implementation of the procedures related to reducing wages, annual leaves and exceptional leave, as well as proving that the establishment has suffered losses.

These developments come in line with the actions taken by Saudi Arabia to address the coronavirus pandemic and consider it a force majeure in the contracts signed with employees in the Saudi labor market.

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ECB's Lagarde Renews Integration Call as Trade War Looms

FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
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ECB's Lagarde Renews Integration Call as Trade War Looms

FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo
FILE PHOTO: European Central Bank President Christine Lagarde and Governor of the Bank of Finland Olli Rehn arrive at the non-monetary policy meeting of the ECB's Governing Council in Inari, Finnish Lapland, Finland February 22, 2023. Lehtikuva/Tarmo Lehtosalo via REUTERS//File Photo

European Central Bank President Christine Lagarde renewed her call for economic integration across Europe on Friday, arguing that intensifying global trade tensions and a growing technology gap with the United States create fresh urgency for action.
US President-elect Donald Trump has promised to impose tariffs on most if not all imports and said Europe would pay a heavy price for having run a large trade surplus with the US for decades.
"The geopolitical environment has also become less favorable, with growing threats to free trade from all corners of the world," Lagarde said in a speech, without directly referring to Trump.
"The urgency to integrate our capital markets has risen."
While Europe has made some progress, EU members tend to water down most proposals to protect vested national interests to the detriment of the bloc as a whole, Reuters quoted Lagarde as saying.
But this is taking hundreds of billions if not trillions of euros out of the economy as households are holding 11.5 trillion euros in cash and deposits, and much of this is not making its way to the firms that need the funding.
"If EU households were to align their deposit-to-financial assets ratio with that of US households, a stock of up to 8 trillion euros could be redirected into long-term, market-based investments – or a flow of around 350 billion euros annually," Lagarde said.
When the cash actually enters the capital market, it often stays within national borders or leaves for the US in hope of better returns, Lagarde added.
Europe therefore needs to reduce the cost of investing in capital markets and must make the regulatory regime easier for cash to flow to places where it is needed the most.
A solution might be to create an EU-wide regulatory regime on top of the 27 national rules and certain issuers could then opt into this framework.
"To bypass the cumbersome process of regulatory harmonization, we could envisage a 28th regime for issuers of securities," Lagarde said. "They would benefit from a unified corporate and securities law, facilitating cross-border placement, holding and settlement."
Still, that would not solve the problem that few innovative companies set up shop in Europe, partly due to the lack of funding. So Europe must make it easier for investment to flow into venture capital and for banks to fund startups, she said.