Report on Financial and Economic issues around the EU and affects on Arcelor Mittal - Essay Example

It is critical to note that the firm reports its operational performance across the whole Europe wide region and therefore country wide segregation of the relative performance of the firm is relatively not present. What is key to understanding is the fact that firm is facing strong macroeconomic risks in these countries as fiscal expansion has been curtailed by the relative governments in these countries. The weak demand is mostly due to the austerity measures taken by the governments. Since Governments are major users of steel and related products therefore a decline in the fiscal expansion is one of the key reasons for decline in the business of the firm in PIIGS and other European countries.

Details of Staff Employed Firm has reported that 37% of its employees are located in EU27 countries. (Statista.com,2000).  These countries are 27 European countries where firm have operations of different nature including mining, steel production, construction and other related activities. The production sites are located in Madrid, Averio, Ireland and other smaller locations where firm operates its so called mini-steel mills. In Spain, firm has four different production locations where firm is engaged in different activities including steel production as well as mining activities.

Since firm is located in Luxemburg therefore the number of employees working in the headquarters of the firm is also included in its workforce in Europe. Difficulties in PIIGS Markets In Spain, firm is facing severe problems of high energy prices and lack of alternative energy resources. The lack of these resources therefore has increased the overall level of operational cost for the firm and resultantly has an impact on its profitability. (Mitchell,2012). In Ireland, Portugal, Italy and Greece, one of the key difficulties is the lack of demand being generated from the government and private sector.

Since these countries are still under strict austerity measures. In Spain, firm is also facing disputes with the employees and many of the Staff members have protested against the closure of factories in Madrid.( En.tengrinews.kz 2012)  In Greece, firm is specifically facing debt related issues and the major write down by the firm in Europe is appropriated towards the Greece debt. Most of the challenges faced by the firm in the EU region come from Greece as the country as a whole hardly avoided bankruptcy after due funding support from European Union member countries.

Cost of borrowing is also on the rise especially in Greece due to heavy borrowing by the government and bond issues.( Eichengreen, 2012)  Apart from this, the global demand for Steel is slowing down causing overall decline in the business operations of the firms. It is critical to note that EU27 experienced a negative growth rate of Steel consumption during 2012 suggesting that the overall demand is on the decline in these markets. Expansion or Contraction Firm is already on its way to close some of its production facilities in Spain as it has closed its Madrid facilities and is also in process of redeploying some of its staff to other locations in Spain.

This indicates that firm is curtailing back on its operations in Spain and same practice may also be adapted in other countries and markets also. It is also already in process of closing down its furnaces in