A new paradigm for the production of nuclear energy could change the calculus for both artificial intelligence and cryptocurrency mining, but it requires substantial upfront investment in relatively untested technologies. 

The US will soon develop and deploy its first commercial small modular reactor (SMR). An SMR is a nuclear power source with a much smaller infrastructure footprint than traditional fission reactor plants. These so-called “next generation” reactors are also purported to be much safer. 

Small modular reactors

While small reactors have been around since at least the 1950s, the advent of SMRs could serve as a game-changer for large organizations such as AI training and data centers and cryptocurrency mining facilities. 

Unlike traditional reactors, SMRs can be manufactured in a factory and then shipped to a client’s location. Functionally, these platforms can be set up to produce as much as 300 megawatts of energy and could feasibly be built almost anywhere. 

Crypto mining’s power problem

There are currently hundreds of peer-reviewed research articles available on the subject of cryptocurrency and clean energy. Many large mining companies have begun exploring nuclear power as a safe, clean alternative to traditional energy infrastructure.

However, the primary factors keeping the average cryptocurrency mining facility or artificial intelligence data center from relying on nuclear energy are availability and the high upfront costs of construction. 

SMRs solve some of those problems. They’re purportedly easier to develop, require less maintenance and operational staff, environmentally friendly, and are theoretically substantially more economically feasible over the long term than alternative solutions including large nuclear reactors. However, they still require a significant upfront investment to develop. 

Google’s new deal

Kairos Power, a United States-based nuclear engineering company, recently inked a long-term deal with Google to develop and bring the company’s first SMR online “quickly and safely by 2030,” with continuing rollouts planned through 2035. 

Michael Terrell, senior director of energy and climate at Google, lauded the deal as a win for clean energy:

“This landmark announcement will accelerate the transition to clean energy as Google and Kairos Power look to add 500 MW of new 24/7 carbon-free power to U.S. electricity grids.”

Google’s commitment to developing what may ultimately become the first commercial US-based SMR manufacturing partnership represents the opening bell for the nascent commercial nuclear power industry. 

While not every company has pockets as deep as Google-parent corporation Alphabet, the cost of entry for on-site nuclear power is likely to drop as the first generation of SMRs are manufactured and improved upon over time. 

Ultimately, barring a fusion breakthrough, SMRs could be the cryptocurrency mining industry’s most economically efficient and environmentally friendly method for energy generation.

Source: COINTELEGRAPH

The eurozone economy has been struggling since late 2022, but its labour market has continually been overheating. It's been something of a conundrum that the unemployment rate is at historic lows of 6.4%, given the economy's hardly grown for two years. In 'ordinary' times, that labour pressure would never have been so intense. But we are now getting back to some sort of normality. The days of stagnation without rising unemployment are set to come to an end. 

Look at vacancy rates. They've been coming down from historical highs, but they're still above pre-pandemic levels. Coming down, too, is the number of businesses reporting that labour shortages are limiting their growth. Those two things normally coincide with recession. But, despite the weak economic data we're getting month after month, that's not where the eurozone is right now. 

So, we're arguing that we're starting to transition into something far more normal, and it will have a more noticeable effect next year, with unemployment creeping up and wage growth trending markedly lower. Here's why...

Okun’s law suggests a higher unemployment rate, but vacancies are dropping

The Okun's law used is based on Abel and Bernanke (2005), which uses output and unemployment gaps to derive a relationship between GDP and unemployment. Data from the European Commission has been used to determine potential GDP and the natural rate of unemployment (NAWRU). To estimate the relationship, data from 2000-2019 has been used as the pandemic hugely distorts the relationship. This results in expected deviations from the natural unemployment rate, which has been converted to an actual unemployment estimate.

Source: Eurostat, European Commission AMECO, ING Research calculations

An extraordinary buildup of labour pressures

The labour market has seen two clear breaks after the initial pandemic shock in 2020: a drop in hours worked and a decrease in productivity. Average hours worked by Europeans dropped markedly due to short-time work schemes and lockdowns, and they've never fully recovered. Similarly, the productivity of Europeans per hour worked has also not been able to match the pre-pandemic trend of already lacklustre labour productivity growth.

The combination of those two breaks has resulted in extra demand for workers to match the gap of fewer hours worked per person and less output produced per hour worked. Assuming total economic output remains constant over time (despite the limitations of this assumption) and that labour productivity and average hours worked continue their pre-pandemic trends, there would be a need for 4.3 million fewer workers than are currently employed.

Productivity and work hours have seen a trend break since the pandemic, favouring extra workers

Trend is based on the average growth in productivity/average hours worked over the period Q1 2013-Q4 2019.

Source: Eurostat, ING Research calculations

While the reasons for the slow productivity and average hours worked are not clear-cut, it does look like this has happened in a time of significant labour hoarding. Businesses afraid of losing good workers have held on to them at lower output or lower hours worked to make sure that they don’t have to replace them in a labour market that is so overheated. In the US, there was anecdotal evidence about retention bonuses being given to keep people on board. For Europe, you could argue that fewer hours and lower output are like a retention bonus-in-kind at the moment.

Besides that, the public sector has increased expenditure significantly since the pandemic, which has resulted in rapid growth of employment in the (semi-) public sector. Employment in the sector is now about 7% larger than before the pandemic, while private employment is just 3% above the level of the fourth quarter of 2019. This adds to the labour shortages experienced in the private sector, and given that the (semi-) public sector, on average, works fewer hours and has lower productivity, it seems to have contributed to the breaks in trend mentioned before through a compositional effect.

(Semi-) public employment has far outpaced private employment growth since late 2019

Source: Eurostat, ING Research calculations

Strong profit growth has been key to recent labour market developments

The extraordinary increase in labour shortages has happened at a time when profit growth soared thanks to the high inflation environment. This has allowed businesses to absorb the extra costs of hoarded labour in their margins as margin growth was very strong anyway. In that light, labour hoarding looks like a sign of luxury that companies could “afford” due to the inflation shock.

With inflation normalising and the economy slowing, profit growth has again come under pressure. At this point, growth in companies’ gross operating surpluses has fallen from over 10% in early 2023 to less than 1% now. This has already coincided with a lower vacancy rate in the same period, but employment has remained high. Worries about labour availability, also related to ongoing and accelerating demographic change, remain, but with profit growth close to zero, the affordability of labour hoarding looks very different to that in 2022 or 2023.

Profit growth has faltered as inflation normalised making further wage bill increases much more painful

Source: Eurostat, ING Research

What's going to give?

Even though profit growth has dropped to levels close to zero, wage demands continue to come in high. When looking at different countries, Germany and the Netherlands still stand out with high wage demands, while others seem to moderate more quickly. From a union perspective, this difference is understandable as the Netherlands and Germany have not yet seen their real wage growth catch up with pre-inflation shock levels.

Still, with profit growth already falling quickly and a series of negative headlines from industrial companies, particularly in Germany, the question is what is going to give. Will corporates take this in their margins? Will they lay off workers? Or will they negotiate wage growth down?

Real wage growth is still returning to pre-inflation shock levels

Calculated using nominal compensation per employee and quarterly seasonally adjusted HICP data.

Source: ECB, ING Research calculations

Our expectation? All of the above. Unions will likely start to worry more about possible unemployment now that real wage growth is approaching or has exceeded levels seen before the inflation shock. The rise of China as an industrial competitor and the broader debate about Europe’s weakening competitiveness will also enter the equation of both unions and employers. As a result, wage growth should clearly slow down over the course of next year. The alternative is an increase in redundancies and bankruptcies, although we don’t expect this to be dramatic.

At the same time, governments are starting to tighten their belts. While this is happening at different speeds and with differing effects on employment, we do think that the pace of employment growth in the (semi-) public sector will be under pressure because of it.

All of this means that the current labour market situation is not a new normal. We expect a period of normalisation to start with the end of high inflation and profit growth as the trigger. In fact, we already see some of this happening right now. But, we do expect the impact on unemployment and bankruptcies to become more visible in 2025, with a modestly increasing unemployment rate as a result. Similarly, with real wage growth recovering to pre-crisis levels, we expect a drop in wage growth also to occur in 2025.

Some 70% of Malaysian consumers believe that the health and retirement benefits provided by their employers are insufficient to meet their future financial and medical needs, indicating heightened concerns over rising healthcare costs and the ability to achieve retirement savings goals, according to a survey done by Manulife. 

Manulife’s Asia Care Survey 2024, conducted among 1,038 local consumers, found that these concerns are shaped by the widening gap between Malaysians’ long-term savings aspirations and their actual savings expectations. “While Malaysia’s increasing life expectancy is a positive sign, it also highlights the growing need for comprehensive health protection and financial resilience for our ageing population,” said Manulife Malaysia chief agency officer Lee Tat Fatt in a media briefing session titled “Are Malaysians Ready for Retirement?”.

The survey also revealed that there has been a shift in family financial dynamics among Malaysians, as 40% of respondents do not expect their children to provide for them in their old age. 

Another 49% of Malaysian couples among the respondents said they do not plan to start a family or do not want to have children. More than half of the respondents, or 66% of them, stated that they are looking to delay their retirement age due to financial responsibilities.

To address these growing concerns, Manulife Malaysia launched a comprehensive health protection plan designed for the growing ageing population in Malaysia, named Manulife Future Shield.

With a short-term payment period of five years and targeted at Malaysians aged 45 to 55 years old, the whole life insurance plan provides coverage for death, total and permanent disability, accidental death, and old age disability.

“Life insurance is to protect your assets and savings. We work very hard to save, and we know that there will be medical expenses as we grow older. So, that is the reason why we are looking at someone at 45-55 [years old], because they can relate to the future [needs], as 60-70 [years old] is not too far away,” said Manulife Malaysia chief marketing officer Marilyn Wang. 

“Medical needs are not just about the hospitalisation. They include age care, physiotherapy, wheelchair, crutches; these are things that we don’t think about, but it does cost quite a bit as we grow older,” she added. 

The life insurance plan features a withdrawal benefit from the policy for any unexpected healthcare needs, while ensuring continued coverage up to age 99.  

This withdrawal benefit allows policyholders to make withdrawals due to medical-related expenses such as hospitalisation and surgical expenses, treatment of critical illness, traditional chinese medicine, alternative registered medical treatments, nursing home expenses and medical equipment. 

After the five-year premium payment term and before age 70, policyholders are entitled to withdraw an amount up to 5% of the total basic premium paid each year, subject to a maximum withdrawal of 50% of total basic premium paid.

After the age of 70, policyholders are entitled to withdraw an amount up to 10% of the face amount each year, subject to a maximum withdrawal of 50% of the face amount. 

“We understand that as people age, their healthcare needs become more complex. Future Shield is our commitment to ensuring that Malaysians have the protection they need to navigate their health journey throughout their golden years,” Lee added. 

Source: The edge markets

Mauritania has once again become a crucial departure point for migrants risking the treacherous Atlantic journey to Spain’s Canary Islands, capturing renewed attention from the European Union. This small West African nation is witnessing a significant uptick in migrants using its shores as a launchpad for their quest to reach Europe through the Spanish archipelago, with many tragically losing their lives along the way. 

The period between January and March 2024 saw a significant surge in undocumented migration to the Canary Islands, with over 12,393 migrants arriving compared to just 2,178 during the same period the previous year. This alarming increase underscores the growing role of Mauritania as a transit route for migrants despite the inherent dangers associated with the sea passage. This trend persists even in light of a recent financial agreement between the EU and Mauritania aimed at reducing migrant arrivals.

The Sahel is currently experiencing one of the most complex upheavals in its history

Mauritania’s turbulent neighborhood

The country’s location accounts for part of the story. Positioned in the western end of the Sahel, Mauritania lies between Mali and the Atlantic Ocean, bordered on the north by Western Sahara (a territory claimed by Morocco, with Algeria supporting its independence) and Senegal to its south. The Sahel is currently experiencing one of the most complex upheavals in its history, marked by numerous military coups affecting several countries: Mali, Niger, Burkina Faso, Chad and Sudan. Peace remains elusive at the gates of the Sahara.

Mauritania also connects the Maghreb with the rest of Africa. Freed from French rule in the 1960s, the country was governed mainly by a military oligarchy with an Islamic regime, which kept it on the periphery of international politics for many years. It was only in the new millennium that Mauritania began to cautiously engage with its neighbors and Europe, culminating in the Cotonou Agreement (2000-2023), which was later succeeded by the Samoa Agreement signed in November 2023. This comprehensive treaty governs the EU’s relations with African, Caribbean and Pacific states, establishing shared principles in areas such as democracy, human rights, security, social and economic development, environment, climate change and migration.

The EU’s heightened interest

Over the years, numerous European leaders have visited Mauritania, fostering cordial relations even during the military coups of 2005 and 2008. The goal has been to counter the growing threat of jihadist terrorism within the country.

However, Europe’s primary concern remains curtailing migration flows. In March 2024, European Commissioner for Home Affairs Ylva Johansson visited Mauritania’s capital, Nouakchott, to launch a “partnership and dialogue on migration.” She signed a joint declaration with Mauritanian Minister of Interior Mohamed Ould Lemine, which established a partnership that includes substantial humanitarian aid, amounting to 210 million euros for Mauritania over the coming years.

The agreement followed a dramatic rise in migration, with 7,270 people from West Africa attempting to land on the Canary Islands in January 2024 – a 1,000 percent increase from the previous year. However, three months after its signing, the situation had not significantly improved, as 1,800 more arrivals were recorded in the first two weeks of April. That brought the total landings for the first half of 2024 to nearly 19,000, accounting for 78.5 percent of all irregular entries into Spain during that period.

The most alarming consequence of the surge in migration is the sharp increase in fatalities. From January to June 2024, at least 5,054 people, including women and children, lost their lives attempting the dangerous sea crossing. 

Migrants’ ocean route

The Atlantic route to the Canary Islands is nothing new. As early as the 1980s, thousands of African migrants, primarily from Guinea, Mali, Ivory Coast, Gambia and Mauritania, attempted the risky trek from the Atlantic beaches of Senegal and Mauritania. Over the following decades, migration routes shifted within Africa, with the notorious Niger-Libya, Burkina Faso-Algeria-Libya, Ethiopia-Sudan-Libya and Egypt-Libya routes gaining prominence. That was due to the fact that Mediterranean crossing is significantly shorter, even if one had to cross much desert before reaching its shores. But migration is an ever-changing phenomenon and lately, the trend has shifted again.

Mauritania has not experienced any jihadist terrorist attacks since 2011, and this stability is a crucial strategic factor for its partners.

Several factors contribute to this, including the harsh conditions of desert crossings and the brutal realities of Libyan prisons, as well as new agreements between European and African nations such as Libya, Tunisia and Egypt that have made it harder to cross there. Notably, the increase in ocean migration contrasted with a 60 percent drop in landings on Italian shores in the first half of 2024.

Mauritania’s domestic politics

Mauritania, with a population of 4.9 million (nearly three-quarters of whom are under 35), has faced recurring political instability, including six successful or attempted military coups since 1980. In the June 2024 presidential election, incumbent Mohamed Ould Ghazouani secured a second term with over 56 percent of the vote, despite accusations of fraud by opponents.

As is typical for leaders in the Maghreb-Sahel area, President Ghazouani (aged 67) has a military background. However, he has established good relations with neighboring countries and the EU. 

Mauritania has not experienced any jihadist terrorist attacks since 2011, and this stability is a crucial strategic factor for its partners. Nouakchott was home to the now-defunct G5 Sahel, a regional organization uniting Mauritania, Mali, Niger, Burkina Faso and Chad. In 2010, Mauritania’s stringent anti-terrorism law came into force, empowering military units to combat active terrorist cells. Its Islamic society has assisted in the effort.

Foreign factors 

For years now, Moscow has been expanding its influence across the Mediterranean, primarily through Africa, operating on two fronts: political and economic (official) and military and security (unofficial), often utilizing private military contractors. This dual strategy, coupled with aggressive disinformation tactics, has contributed to the disengagement of Western Europe and the United States from several countries governed by coup juntas. Mauritania may be the next target for Russian influence, as evidenced by Russian Foreign Minister Sergei Lavrov’s visit in February 2023 – the first in over 50 years – following similar trips to Morocco, Tunisia and Mali. This visit likely aimed not only to improve conditions for Russian fishermen in Mauritanian waters, but also to bolster support against terrorist cells operating in the Gulf of Guinea.

Russia and Europe are not the only players interested in Mauritania. China and Gulf states, particularly Saudi Arabia and the United Arab Emirates, are also keenly engaged. Between 2022 and 2023, China’s President Xi Jinping met with President Ghazouani twice to sign cooperation agreements and provide national debt relief of $21 million, partly thanks to Mauritania’s membership, since 2018, in Beijing’s Belt and Road Initiative.

The number of migrants to Europe will likely increase, even if their country of departure is not Mauritania.

NATO, for its part, has activated military collaborations aimed at territorial control and training local security forces in Mauritania. The country’s invitation to the Madrid summit in June 2022 underscored this commitment, followed by the August 2024 series of agreements with Spain to stem the surge in migrants. The World Bank Group emphasizes the need to “maximize the return on human capital in Mauritania for increased wealth and shared prosperity.” This highlights the root causes of migration that the country is grappling with: the lack of investment in youth and educational facilities, compounded by ongoing conflict and climate change.

Source: GIS