In The Netherlands this is the main reason why big companies use agencies as intermediaries. It makes it easy to get rid of people when required. I suspect the contracted developers are often of higher quality than your average dev, since they feel safe finding work without the security of a permanent job. Therefore, if the need arises to let people go, I doubt the contractors will be the first to leave unless absolutely required.

Disclaimer: I'm a Dutch contractor and while I don't think I'm an über developer, I do notice I'm more passionate about the job as most of my (ex-)colleagues with permanent contracts.