# EUR-Lex - 52013SA0007 - EN

Important legal notice

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# 52013SA0007

**Special Report No 7/2013 ‘Has the European Globalisation Adjustment Fund delivered EU added value in re-integrating redundant workers?’ **

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GLOSSARY

DG Budget : Directorate-General for the Budget

DG Employment, Social Affairs and Inclusion : Directorate-General for Employment, Social Affairs and Inclusion

ECA : European Court of Auditors (or "the Court")

EGF : European Globalisation Adjustment Fund

ESF : European Social Fund

EU added value : The EU added value is the value that an EU action adds to the value that would otherwise have been created by Member States acting alone.

OECD : Organisation for Economic Cooperation and Development; 21 EU Member States are currently members of the OECD.

Workers’ income support : Cash expenditure compensating for unemployment. This includes redundancy payments out of public resources as well as pensions to beneficiaries before they reach the "standard" pensionable age if these payments are made because they are out of work or otherwise for reasons of labour market policy. See "An interpretative guide to the OECD social expenditure database", OECD, 2007.

EXECUTIVE SUMMARY

I. The European Globalisation Adjustment Fund (EGF) was established in 2006 to show EU solidarity towards workers affected by mass redundancies. The EGF should facilitate the reintegration into employment of those workers by providing financial contributions for time-limited and coordinated packages of personalised services. Such packages include active labour market measures such as training, aid for self-employment, coaching and outplacement. They also often include income support and other allowances paid to workers.

II. The European Social Fund (ESF) also supports redundant workers, mainly through lifelong learning programmes. However, whereas the purpose of the ESF is to address long-term structural imbalances, the EGF was designed to address short-term and ad hoc emergency situations.

III. Until 31 December 2012, EGF aid packages represented 627 million euro for 89 approved Member State applications. The EGF co-finances measures at a rate of 50 % or 65 %, with the balance being provided by the Member State concerned.

IV. The Court concluded that:

(a) Nearly all EGF eligible workers were offered personalised and well-coordinated measures.

(b) Each EGF measure may also be eligible for the ESF and some Member States preferred to use the ESF rather than EGF.

(c) No quantitative reintegration objectives were set. Moreover, existing data are not adequate to assess the effectiveness of the measures in reintegrating workers into employment.

(d) The EGF delivered EU added value when used to co-finance services for redundant workers or allowances not ordinarily existing under Member States’ unemployment benefit systems.

(e) However, in all the audited cases, the Court identified measures to provide workers with income support, which would have been paid by the Member States anyway. Sixteen of the 19 Member States that benefited from the EGF included income support measures in their packages. Globally, income support measures represented 33 % of the costs refunded for all EGF cases.

(f) The EGF approval procedure, requiring the need for an ad hoc budgetary procedure, is very long. This hampers EU solidarity with the redundant workers targeted.

V. The Court recommends that:

(a) the Member States and the Commission take the necessary steps to ensure the availability of up-to-date and reliable data in order to monitor the achievement of objectives, as well as to compare the outcome of the various measures;

(b) the European Parliament, the Council and the Commission consider limiting EU funding to measures likely to provide EU added value, rather than funding already existing national workers’ income support schemes;

(c) the European Parliament, the Council and the Commission consider, as an alternative to the current EGF scheme, the possibility of adapting the ESF framework and its funding allocations in order to support more rapidly workers affected by mass redundancies.

INTRODUCTION

1. The European Globalisation Adjustment Fund (EGF) was established in 2006 to show EU solidarity towards workers affected by mass redundancies. The EGF should facilitate the reintegration into employment of those workers by providing financial contributions for time-limited and coordinated packages of personalised services [1]. Such packages include active labour market measures such as training, aid for self-employment, coaching and outplacement. They also often include income support and other allowances paid to workers.

2. The EGF is outside the multiannual financial framework. As a result each application for EGF support submitted by a Member State has to pass a thorough assessment by the Commission and obtain approval from the EU budgetary authority (Council and European Parliament). The Commission shares the management of the EGF with the Member States.

3. Redundant workers can also benefit from the European Social Fund (ESF), mainly through lifelong learning programmes. However, whereas the purpose of the ESF is to address long-term structural imbalances, the EGF was designed to address short-term and ad hoc emergency situations.

4. The EGF supports workers made redundant as a result of major structural changes in world trade patterns due to globalisation (500 dismissals or more [2] in one or more enterprises in the EU) where those redundancies have a significant adverse impact on the regional or local economy (the "trade criterion"). In this respect, applicant Member States must demonstrate that the redundancies are linked to a substantial increase of imports into the EU, the rapid decline of the EU market share in a given sector or a delocalisation to third countries.

5. By way of derogation, from 1 May 2009 to 31 December 2011, the EGF was also applicable to workers made redundant as a direct result of the global financial and economic crisis (the "crisis criterion") [3].

6. For instance, when the effects of the crisis devastated the Danish shipbuilding industry, there were redundancies as a consequence. In that Member State, the EGF supported redundant workers of the last Danish shipyard (see Picture 1). Another example is the German automotive supply industry, which was particularly hit in the regions of Lower Saxony and North Rhine-Westphalia (see Picture 2).

7. From 9 March 2007 (date of the first application) to 31 December 2012, total EGF aid approved amounted to 627 million euro (379 million euro from the EU budget and 247 million euro from the Member States) for 89 approved applications [4] from a maximum yearly budgetary ceiling of 500 million euro during the 2007–13 period. The EGF co-finances measures at a rate of 50 % or 65 % [5], with the difference coming from the Member State concerned.

8. The EGF is currently scheduled to run until 31 December 2013. The Commission has however proposed continuing with a new EGF regulation until 31 December 2020 [6].

Picture 1

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© Lindø Industrial Park A/S.

Picture 2

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© European Court of Auditors.

AUDIT SCOPE AND APPROACH

9. The overall objective of the audit was to assess the contribution made by the EGF, in the form of EU added value, to enabling redundant workers to return to the labour market as soon as possible. The Court examined in particular the following questions.

(a) Did all affected workers benefit from personalised EGF measures, and were EGF co-financed active labour market measures coordinated with other similar measures (i.e. ESF and Member State measures)?

(b) Was the EGF effective in terms of labour market reintegration?

(c) Is the nature of the EGF measures likely to deliver EU added value?

(d) Was the EGF approval procedure implemented in a timely manner?

10. Eight cases in four Member States (two each in Denmark, Germany, Ireland and Lithuania) in which the EGF was deployed were audited on the spot. They amounted to 67 million euro out of 627 million euro (10,7 %) of EGF aid committed until 31 December 2012. The sample of eight cases only comprised implemented cases and reflected the different sizes of EU economies, the diversity of the economic sectors affected and important differences between the EGF intervention criteria (see Table 1).

TABLE 1

OVERVIEW OF AUDITED EGF CASES [1001]

Source: European Commission.

Member State | Case name | Case number | Sector | Criterion | Payment month |

Germany | Nokia | EGF/2009/002 | Telecommunications | Trade | 12/2009 |

Karmann | EGF/2009/013 | Automotive | Trade | 6/2010 |

Denmark | Danfoss Group | EGF/2009/015 | Mechanics | Crisis | 11/2010 |

Odense Steel Shipyard (I) | EGF/2010/025 | Shipbuilding | Crisis | 8/2011 |

Ireland | Dell | EGF/2009/008 | Computer appliances | Crisis | 3/2010 |

SR Technics | EGF/2009/021 | Aeronautics | Crisis | 12/2010 |

Lithuania | AB Snaige | EGF/2009/010 | Domestic appliances | Crisis | 6/2010 |

"Construction" | EGF/2009/017 | Construction | Crisis | 6/2010 |

11. The audit covered the period from 1 January 2007 to 31 December 2012. The audit was carried out through interviews, the examination of documents held by the Commission and the four audited Member State authorities, and an analysis of the data on reintegration rates.The audit in the Member States also included the organisation of eight focus group meetings at which the various local EGF stakeholders (academics, administrations and social partners) could share their views (see Picture 3).

12. In addition to the above, the results of the Commission’s mid-term evaluation of the EGF were analysed [7]. The mid-term evaluation report of December 2011 covered the first 15 cases [8] co-financed by the EGF in eight Member States. One of these (Nokia, Germany) was included in the sample audited on the spot by the Court.

13. Finally, the Court carried out a survey by addressing questionnaires to Member States (Bulgaria, Estonia, Cyprus, Latvia, Luxembourg, Hungary, Slovakia and the United Kingdom) in order to identify the reasons why they did not use the EGF.

Picture 3

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© European Court of Auditors.

OBSERVATIONS

NEARLY ALL WORKERS WERE OFFERED PERSONALISED AND WELL-COORDINATED MEASURES

14. In order to demonstrate solidarity with all affected workers, personalised measures should be offered not only to the workers made redundant in the main enterprise affected, but also to those employed by suppliers of that enterprise.

15. In the audited cases nearly all affected workers could benefit from EGF measures. No instances of the intentional exclusion of potential beneficiaries were identified.

16. However in the cases of Karmann and Dell, the Court found that an unknown number of redundant workers formerly employed by the affected enterprises’ suppliers were not included in any EGF support measure [9].The main reasons for non-inclusion lay in the difficulties faced by Member States in assessing which suppliers were affected.

SERVICES WERE PERSONALISED

17. Services offered to the potential beneficiaries were generally tailored to their needs and therefore most likely to get results. This positive aspect already reported by the mid-term evaluation was confirmed by the Court’s assessment of the eight EGF cases audited. Concrete examples of personalised services are provided in Box 1.

18. In Ireland, the applications did not always establish the link between personalised services and actual labour market needs. As a result, at this stage, it was not identified whether the measures put forward were best suited to supporting the reintegration of the redundant workers.

EGF MEASURES WERE GENERALLY WELL-COORDINATED WITH NATIONAL MEASURES AND THE ESF

19. In order to maximise the effects of EGF measures, the EGF regulation states that they should always take the form of a coordinated package of personalised services. What is meant is coordination with measures preceding or concomitant to the personalised services co-financed by the EGF [10]. Member States should also coordinate their interventions with the Structural Funds [11], in particular the ESF.

20. The Court observed that, generally, the Member States effectively coordinated the EGF with ESF and national labour market measures. Existing ESF measures were usually complemented by additional EGF measures specifically designed to address workers’ needs.

21. Moreover, for the eight audited cases, the Court did not detect instances of overlap between the different measures, or double funding of individuals.

BOX 1

THREE CASES OF PACKAGES OF PERSONALISED SERVICES IN IRELAND AND DENMARK

In the case of Dell, the Irish authorities provided child care support and distance learning services. County and city enterprise boards delivered special courses for redundant Dell workers ("Start your own business"), as well as mentoring to cope with administrative procedures.

In the case of SR Technics, some courses, such as aeronautics courses with the Irish Aviation Authority, had been specifically designed. Where relevant courses could not be provided specifically for redundant workers, grants were released to allow them to take part in appropriate courses delivered to a larger population (80 % were technical courses or aviation industry-related). For the first time ever in Ireland, the Training and Employment Authority worked together with the Department of Defence and the Department of Education and Skills to set up apprenticeships for civilians.

In Denmark (Odense Steel Shipyard (I)), the EGF facilitated the implementation of high-quality training measures. These measures were of a more long-term and personalised nature and leading to qualifications superior to those which were normally offered to unemployed persons, and the possibility of sectoral reconversion. According to several participants in the focus group organised by the auditors, the personalised services went well beyond the scope of national personalised measures and were perceived as a unique opportunity, as they gave redundant workers ownership of their personal reintegration project.

SOME MEMBER STATES PREFERRED THE ESF OVER THE EGF

22. Although the ESF is not expected to address unforeseeable events, all measures under the EGF regulation may equally be applied under the ESF [12]. Whether or not the ESF may co-finance support for workers subject to a mass redundancy caused by an unforeseeable event essentially depends on the national eligibility rules and the content of operational programmes.

23. The Court’s survey of Member States having never used the EGF intervention concluded that the following were the main reasons for preferring the ESF over the EGF:

(a) The higher co-financing rate for the ESF (up to 85 %) than for the EGF (up to 65 %) is a disincentive to apply for the latter. This was stated by six Member States [13] and had already been recognised by the Commission in 2010 [14].

(b) The ESF can be implemented more swiftly than the EGF, or national administrations are more familiar with the ESF [15].

(c) The lack of EGF pre-financing [16].

(d) The length of the procedure for approving EGF applications [17].

24. The more restrictive EGF conditions, in particular the trade criterion, are another reason why the ESF is preferred over the EGF. After a mass redundancy, some Member States may find it easier to redirect ESF funding towards support for redundant workers rather than applying for EGF funding. For instance, the British authorities never requested EGF assistance in spite of having identified 18 cases that might have qualified for such support [18].

REINTEGRATION INTO EMPLOYMENT OF EGF- SUPPORTED WORKERS CANNOT BE RELIABLY ASSESSED

25. In order to assess the performance of a fund it is necessary to monitor and evaluate its results and impacts and to compare them to other schemes having similar objectives. Taking into account its objective, the EGF’s most relevant performance indicator is its capacity to reintegrate redundant workers.

26. The Court verified that the reintegration rates calculated as a percentage of the reintegrated workers out of the affected workers were available for all eight audited cases. Table 2 shows these percentages for different standard cut-off periods.

TABLE 2

REINTEGRATION RATES FOR THE EIGHT AUDITED CASES

Notes:

- All data based on Member State data. Reintegration data are not precise.

- Reintegrated participants are either self-employed or employed in the labour market at the time in question.

- NA = Number or percentage of workers not available.

Source: Member States.

| Nokia | Karmann | Danfoss | Odense | Dell | SR Technics | AB Snaige | "Construction" |

DE | DE | DK | DK | IE | IE | LT | LT |

Number | % | Number | % | Number | % | Number | % | Number | % | Number | % | Number | % | Number | % |

Affected workers, of whom: | 1337 | | 2476 | | 1021 | | 1358 | | 2840 | | 1135 | | 751 | | 1612 | |

Participants in EGF measures | 1305 | 98 % | 1740 | 70 % | 385 | 38 % | 568 | 42 % | 2606 | 92 % | 756 | 67 % | 457 | 61 % | 773 | 48 % |

Cumulative reintegration of participants: | | | | | | | | | | | | | | | | |

at the end of the EGF | 385 | 30 % | 636 | 37 % | 89 | 23 % | 198 | 35 % | 560 | 21 % | NA | NA | 162 | 35 % | 453 | 59 % |

between 3 and 12 months after the end of the EGF | 627 | 48 % | NA | NA | NA | NA | NA | NA | 1272 | 49 % | 334 | 44 % | 159 | 35 % | 410 | 53 % |

12 months after the end of the EGF | NA | NA | 1178 | 68 % | 136 | 35 % | NA | NA | NA | NA | NA | NA | 191 | 42 % | 458 | 59 % |

27. Whilst reintegration data at the end of the EGF measures were available for all employers except in the case of SR Technics, data were often not available ("NA") for the other cut-off periods shown in Table 2. In the case of Odense Steel Shipyard (I), due to the timing of the EGF measures [19], there were no data available about the situation of affected workers after 1 year. A complete overview was possible only for Lithuania. The table shows that the EGF made a certain contribution to the reintegration of redundant workers.

28. In the most successful example ("Construction" case, Lithuania), 59 % of all the redundant workers were reintegrated at the end of the EGF measures. The lowest rate of reintegration at that stage was 21 % of workers immediately reintegrated after the end of the EGF assistance (Dell case, Ireland). Taking the situation 12 months after the end of the EGF measures, the highest reintegration rate reported was 68 % (Karmann case, Germany); however, in only four of the eight cases were any data available at that stage.

LACK OF REINTEGRATION OBJECTIVES AND SPECIFIC EGF PERFORMANCE DATA

29. A multiplicity of factors adversely affected the quality and availability of reintegration data. Firstly, the Member States generally did not set quantitative reintegration objectives. Out of the eight cases audited only one [20] included such an element. As a result, it is not possible to assess the measures’ effectiveness in terms of achieving their objectives.

30. Secondly, in Germany, Denmark and Ireland, the public or private employment services, when collecting reintegration data, did not systematically differentiate between the EGF, the ESF and other national measures specifically designed for workers affected by mass redundancies.

31. For instance, in Germany, the combination of several ESF and EGF-funded training modules made it difficult to isolate the impact of individual measures, or groups of measures, on reintegration [21]. External factors (overall economic situation, involvement of Volkswagen in the case of Karmann, employment subsidies) also had an important impact on reintegration.

32. Thirdly, Member State authorities audited generally did not distinguish between the two main kinds of EGF measures:

(a) active labour market measures such as training, aid for self-employment, coaching and outplacement;

(b) income support paid to workers.

33. Whilst this significant distinction was absent in Germany, Denmark and Ireland, the Lithuanian managing authority went so far as to provide reintegration data that distinguished between the workers participating in each of the various measures.

34. In addition, there is no specific information allowing the identification of the ESF co-financed projects that could actually have met the EGF intervention criteria. This identification would have been useful in order to make comparisons between the reintegration rates achieved by funds with different budgetary, legal and operational arrangements. In turn, this would have contributed towards measuring the impact of the EGF. The insufficient quality (inaccuracy, incompleteness and inconsistency) of ESF monitoring information available has already been highlighted in previous performance audits by the Court. In particular, the Commission does not have consistent and reliable performance data on EU-supported targets, and its assessment and supervision are currently not oriented towards performance [22].

REINTEGRATION DATA WERE DIFFICULT TO COMPARE

35. Comparing reintegration data is a difficult exercise under any circumstances. As stated in the EGF mid-term evaluation, both supply-side (the qualifications of redundant workers) and demand-side (local economic and labour market conditions) factors influenced the reintegration results [23].

36. However, in the context of the EGF an additional element hampered this comparison. This refers to the differences between the timing of the EGF and that of other labour market actions, as those workers in greater need of help were left to the EGF, which is relatively slower to implement (see Box 2 and paragraph 42).

37. In particular, given that the ESF and EGF both support the training and reintegration of the unemployed, such a comparison is necessary with respect to sound financial management as it could highlight potential structural problems. The example below (Box 2) illustrates this.

38. The above example shows that timeliness is one of the most important criteria when a fund including reintegration objectives aims at some degree of success. The Nokia case also shows that the EGF and ESF both supported the same target group, but for reasons diametrically opposed to the purpose for which each fund was designed. The ESF, a structural fund, alleviated an emergency; the EGF, an emergency fund, supported those whom it was more difficult to reintegrate.

39. In fact the EGF and ESF intervene as complementary funds which provide either long-term strategic help, or act as a one-off time-limited and specific response to a single restructuring emergency.

BOX 2

NOKIA’S TRANSFER COMPANIES — UNEQUAL PERFORMANCE OWING TO DIFFERENCES IN TIMING

The mobile phone company Nokia closed its Bochum (North Rhine-Westphalia) site on 30 June 2008. Three transfer companies (as they are called under German law) were successively set up to accommodate temporarily redundant workers.

The first transfer company (exclusively supported by ESF funding) was set up in June 2008, 7 months before Germany even applied for the EGF. That company yielded a reintegration rate of 66 %. The third and last transfer company was only set up when EGF funding was applied for, in February 2009; it achieved a reintegration rate of 4,35 %.

The Nokia case speaks volumes — not because ESF funding performed so much better than the EGF, but because the ESF proved quicker to mobilise than the EGF and thus delivered better reintegration results. Indeed, the EGF alone had to cater for persons with more difficult cases and who could not be successfully reintegrated by the previous transfer companies.

GERMANY

40. The managing authority did not consider a comparison between different sets of reintegration data to be feasible. As a result, it neither identified a comparable statistical population group for the group of EGF beneficiaries, nor made a comparison with overall reintegration rates at federal level.

DENMARK

41. Due to missing data, no comparison was possible between the reintegration results of EGF project participants and general reintegration rates outside the audited cases.

IRELAND

42. Surveys conducted by the managing authority concluded that, within the same time frame, the employment rate for redundant workers who did not benefit from the EGF was higher than the employment rate for EGF beneficiaries. The difference in employment rates can be partially explained by the fact that some persons did not finalise training or education pathways.

43. Nonetheless, according to the managing authority, a probable cause of the EGF’s lower reintegration rate in Ireland would be differences between the profiles of redundant workers, the most skilled workers finding a job without EGF help.

LITHUANIA

44. EGF reintegration results varied significantly from one EGF project to another, depending on the measures implemented and the target group addressed, which made a straightforward comparison impossible.

THE COMMISSION

45. Monitoring information was only available to the Commission in the form of the EGF final reports, 6 months after the end of the implementation period. However, as a result of the inconsistency and unreliability of the reintegration data (see paragraphs 25 to 44), these reports prevent any reasonable comparison between different EGF cases, or between the measures applied in each case.

46. In particular, the final reports do not provide an in-depth analysis of the nature and the percentage of allowances paid or committed for all the EGF cases approved so far. Furthermore, the Commission’s database did not allow the identification and fund allocation of the individual EGF measures nor performance indicators like participation figures or reintegration rates. Also, no information is provided on the individual ESF or national measures having preceded or complemented the EGF ones.

ONE THIRD OF EGF FUNDING COMPENSATES NATIONAL WORKERS’ INCOME SUPPORT SCHEMES, WITH NO EU ADDED VALUE

47. The EU added value goes beyond the concept of simple added value. It can be defined as the value that an EU action adds to the value that would otherwise have been created by Member States acting alone. In particular, expenditure from the EU budget must offer clear and visible benefits for the EU and its citizens which, by reason of the scale or effects of the proposed action, are better achieved at Union level [24].

48. The Court refers in particular to the OECD definition of active labour market programmes. [25] Accordingly, measures aiming at the improvement of the beneficiaries’ prospect of finding gainful employment or otherwise increasing their earnings capacity are qualified as active and therefore are considered to meet the conditions for an EU added value. These measures include not only services such as training, aid for self-employment, coaching and outplacement, but also mobility allowances and educational grants, as well as allowances granted in the context of the EGF and not ordinarily existing under the Member State’s unemployment benefit system.

49. By contrast, workers’ income support measures, consisting of unemployment benefits and programmes for early retirement, cannot be considered as delivering EU added value. Indeed, workers’ income support does not represent an "active" labour market measure [26] and moreover this reduces the share of these measures in the EGF package. In the mid-term evaluation, the Commission had already reported that on average only 26 % of EGF spending consisted of training measures [27].

50. As can be seen in Table 3 below, a common pattern among the eight audited cases is that they included EGF measures to provide income support, which would have been paid by the Member States anyway, irrespective of EGF intervention. The impact of this type of EGF intervention is to compensate part of the cost of the Member States’ unemployment benefit system, and there is no added value in such an intervention other than EU additional funding for the Member States.

TABLE 3

BREAKDOWN OF EGF FUNDING BY TYPE OF PERSONALISED MEASURES IN THE EIGHT EGF CASES AUDITED

Source: ECA, based on available data from DG Employment, Social Affairs and Inclusion and Member State authorities.

| Nokia | Karmann | Danfoss | Odense | Dell | SR Technics | AB Snaige | "Construction" |

DE | DK | IE | LT |

Euro | % | Euro | % | Euro | % | Euro | % | Euro | % | Euro | % | Euro | % | Euro | % |

Active measures | Training/ retraining | 1926538 | 20 % | 2324115 | 24 % | 2368478 | 31 % | 6877045 | 33 % | 6596330 | 50 % | 2307271 | 52 % | 70283 | 19 % | 96040 | 9 % |

Job search assistance and general information | 661139 | 7 % | 1126894 | 12 % | 100256 | 1 % | 1530203 | 7 % | 192412 | 1 % | 24748 | 1 % | - | - | - | - |

Employment and recruitment incentives | - | - | - | - | - | - | 612081 | 3 % | - | - | - | - | 17073 | 5 % | 51426 | 5 % |

Supported employment and rehabilitation | - | - | - | - | - | - | - | - | - | - | - | - | 136407 | 37 % | 450720 | 43 % |

Entrepreneurship and start-up incentives | 22159 | 0 % | 7198 | 0 % | 2488 | 0 % | 1369129 | 7 % | 3283375 | 25 % | 586570 | 13 % | 33963 | 9 % | 322552 | 31 % |

Other measures | - | - | - | - | - | - | - | - | 218090 | 2 % | 27420 | 1 % | - | - | 661 | 0 % |

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Income support | 7117315 | 73 % | 6076406 | 64 % | 5294117 | 68 % | 10485906 | 50 % | 2940682 | 22 % | 1464435 | 33 % | 109457 | 30 % | 135123 | 13 % |

|

Total | 9727151 | 100 % | 9534613 | 100 % | 7765339 | 100 % | 20874364 | 100 % | 13230889 | 100 % | 4410444 | 100 % | 367182 | 100 % | 1056480 | 100 % |

WORKERS’ INCOME SUPPORT MEASURES REPRESENT THE MAJORITY OF THE CO-FUNDED EXPENDITURE FOR HALF OF THE CASES AUDITED

51. For each of the cases of the audited sample the Court calculated the amounts of EGF funding committed to the different types of measures and in particular to workers’ income support (see Table 3).

52. In six of the eight cases shown in Table 3, the EGF packages included a relatively high proportion of income support. Indeed, in Germany and Denmark, one case in Ireland and one in Lithuania, more than a third of the total value of the respective packages of personalised measures was composed of income support.

53. In the particular cases audited in Germany and Denmark, training measures meant to reskill or upskill redundant workers represented only a third or less of the respective EGF packages. On the other hand, income support measures in the form of unemployment benefits or the equivalent represented 50 % to 73 %. In those cases, moreover, the link between a redundant worker’s income support and his/her effective participation in an EGF-funded labour market measure such as training could not systematically be established.

GLOBALLY, WORKERS’ INCOME SUPPORT MEASURES ACCOUNT FOR ONE THIRD OF REFUNDED COSTS

54. In the absence of a satisfactory EGF database of cases, the Court examined the Member State application data collected by the Commission for each of the 89 EGF cases for which information was available and relevant. It was found (see Table 4) that 33 % of EGF support for workers (thus excluding technical assistance to Member States) was composed of income support measures such as unemployment benefits.

55. Six Member States have been allocated 29 % of the total EGF co-financing and 89 % of all the income support measures approved to date. As well as Germany and Denmark, the six included Austria, Italy, France and Malta [28].

56. The Court also notes that the Commission’s proposal for the next multiannual financial framework seeks to limit EGF support in the form of allowances, which include workers’ income support, to a maximum of 50 % of any EGF package [29].

TABLE 4

BREAKDOWN OF EGF FUNDING BY TYPE OF PERSONALISED MEASURES AND BY MEMBER STATES

Notes:

- All amounts in euro as of 31 December 2012.

- Rejected and withdrawn cases have been excluded.

Source: ECA, based on Commission data available for 89 approved applications.

Member State | EGF measures |

Active measures | Income support | Total |

Euro | % | Euro | % | Euro |

Austria | 8234726 | 23 % | 27602090 | 77 % | 35836816 |

Germany | 26038835 | 36 % | 46985923 | 64 % | 73024758 |

Italy | 26736900 | 36 % | 46753250 | 64 % | 73490150 |

France | 25857836 | 42 % | 35239500 | 58 % | 61097336 |

Malta | 792920 | 62 % | 476942 | 38 % | 1269862 |

Denmark | 59405375 | 68 % | 27871817 | 32 % | 87277192 |

Czech Republic | 353171 | 74 % | 121292 | 26 % | 474463 |

Lithuania | 3273610 | 77 % | 969200 | 23 % | 4242810 |

Spain | 61810966 | 88 % | 8288900 | 12 % | 70099866 |

Poland | 1637795 | 92 % | 137050 | 8 % | 1774845 |

Ireland | 86027249 | 92 % | 7153436 | 8 % | 93180685 |

Greece | 3956000 | 93 % | 310000 | 7 % | 4266000 |

Romania | 4036200 | 93 % | 310000 | 7 % | 4346200 |

Sweden | 29242680 | 93 % | 2151000 | 7 % | 31393680 |

Portugal | 13739582 | 97 % | 464000 | 3 % | 14203582 |

Finland | 3783575 | 98 % | 94500 | 2 % | 3878075 |

Netherlands | 35500765 | 100 % | - | - | 35500765 |

Belgium | 27864008 | 100 % | - | - | 27864008 |

Slovenia | 3325370 | 100 % | - | - | 3325370 |

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Total | 421617563 | 67 % | 204928900 | 33 % | 626546463 |

DIFFERENT EGF CO-FUNDING IN SIMILAR ECONOMIC CIRCUMSTANCES

57. The Court notes inconsistent outcomes in similar economic circumstances with respect to workers’ income support measures in the case of Germany as compared to Austria [30], which are the two most intensive users of this kind of EGF support.

58. Germany considered for EGF funding purposes that the duration of the training or qualification measures represents slightly less than half of workers’ normal working time [31]. By contrast, Austria considered that similar measures represented 100 % of the normal working time. This is due to the fact that the Austrian short-term allowance scheme provides for a definition of full-time occupation to be as low as 50 % of the normal working time.

59. As a consequence of these different national decisions, EGF co-funding of short-term allowances represented proportionally twice as much in Austrian cases when compared to German cases. The Court notes however that this difference in the EGF funding decision did not ultimately affect the individuals as they received in full the allowances foreseen in the national schemes.

THE EGF APPROVAL PROCEDURE IS TOO LONG FOR AN EMERGENCY FUND

60. In order to maximise its impact the EGF should be able to provide its financial contribution rapidly in order to allow the affected workers to benefit from the funded measures as soon as possible after having been made redundant.

61. After having established the average length of the approval procedure, the Court assessed to what extent it can be made shorter taking into account the different legal provisions and rules to be respected.

62. The EGF approval procedure is the process from the moment a Member State officially applies until the Commission and the budgetary authority commit the financial contribution to an EGF case. It can be divided into consecutive stages (called later assessment procedure, budgetary procedure and empowerment procedure), which last together on average 41 weeks.

GRAPH

SCHEMATISED VIEW OF THE EGF APPROVAL PROCEDURE

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THE ASSESSMENT PROCEDURE COULD BE SHORTENED

63. The assessment procedure is composed of the appraisal procedure and the Commission’s internal consultation procedures leading to the adoption of the proposal for a decision by the budgetary authority. It takes on average 30 weeks.

64. The appraisal procedure takes on average 15 weeks when taking as a starting point the date of the official application of the Member State, but it is much longer when taking into account the informal exchange of information between the responsible Member State authority and the Commission.

65. One of the factors contributing to the length of the appraisal procedure is the possibility foreseen in the EGF regulation to supplement Member State applications any time after they officially applied. Introducing a time limit to this possibility as well as taking stock of learning curve benefits may reduce the length of time of 15 weeks necessary to appraise applications of Member States which are in emergency situations. The subsequent internal consultations within the Commission also take 15 weeks on average.

THE BUDGETARY AND EMPOWERMENT PROCEDURES HAVE A FURTHER IMPACT ON TIMELINESS

66. As the EGF operates outside of the multiannual financial framework, each EGF case is subject to a specific budgetary procedure in order to make available the related appropriations. In practice, this means that once the Commission has identified sufficient margins and/or cancelled commitments, the decision to deploy them has to be taken by the budgetary authority [32]. This budgetary procedure requires an additional and incompressible period of approximately 7 weeks.

67. The empowerment procedure then completes the approval procedure, leading to the adoption of the formal decision to pay a financial contribution. Its length, an average of 4 weeks, is closely linked to the provisions of the Commission’s rules of procedure [33]. Finally, once agreed, the financial contribution is paid to the Member State concerned.

THE EGF APPROVAL PROCEDURE IS NOT TIMELY

68. To conclude, the approval procedure is very long, especially considering that the EGF is supposed to be an emergency fund. In the mid-term evaluation report, evaluators already pointed out to the Commission in 2011 that the long EGF approval procedure could be considered too slow to offer a genuinely "rapid response" mechanism in times of crisis.

69. The length of the entire approval procedure is of an average of 11 weeks longer than for an ordinary financing decision of the Commission.

IN THE END, THE BUDGETARY AUTHORITY APPROVED ALL THE PROJECTS SUBMITTED BY THE COMMISSION

70. The budgetary authority has approved all proposals submitted by the Commission. Only one out of 114 applications has ever been rejected. This is probably due to the Commission’s very effective support for Member States during the application stage. Indeed, in all of the eight audited cases the Court found sufficient evidence of effective support for the Member States.

71. Furthermore, not one audited or surveyed Member State authority expressed dissatisfaction with respect to the Commission service responsible for the EGF, but pointed instead to issues concerning the EGF procedure as a whole rather than the quality of support.

CONCLUSIONS AND RECOMMENDATIONS

72. The Court is aware of the need to show EU solidarity towards workers affected by redundancies resulting from changes in world trade patterns. However, the Court is not convinced that all the features of the current EGF mechanism are the most appropriate to deliver specific support with EU added value to redundant workers.

NEARLY ALL ELIGIBLE WORKERS WERE OFFERED PERSONALISED AND WELL-COORDINATED MEASURES

73. Nearly all eligible workers could benefit from personalised EGF measures. However, in some cases redundant workers formerly employed by the suppliers of an affected enterprise were not included in EGF support (paragraphs 14 to 18).

74. In general, EGF support was well coordinated with ESF and national labour market measures, in that existing measures were complemented by additional EGF measures specifically designed to address workers’ needs (paragraphs 19 to 21).

75. Whereas the ESF is intended to address long-term structural imbalances, the EGF was designed to address short-term and ad hoc emergency situations. Although the ESF is not expected to address unforeseeable events, all measures under the EGF regulation may equally be applied under the ESF. Some Member States have preferred to deploy the ESF rather than the EGF owing to the higher co-financing rate, quicker implementation and the availability of pre-financing, as well as the lengthy approval procedure and more restrictive conditions under the EGF (paragraphs 22 to 24).

REINTEGRATION INTO EMPLOYMENT OF EGF- SUPPORTED WORKERS CANNOT BE RELIABLY ASSESSED

76. Reintegration data exist but are not sufficiently accurate, consistent or detailed for any conclusions to be drawn. As a result, no useful comparisons or benchmarking could be made between EGF measures within an EGF case, between individual EGF cases and between EGF cases and other active labour market programmes. No quantitative reintegration objectives were set (paragraphs 25 to 46).

RECOMMENDATION 1

In order to improve the quality of the information on the achievements of the different cases and on the effectiveness of measures supporting redundant workers, the Member States and the Commission should take the necessary steps to ensure the availability of up-to-date and reliable data in order to monitor the achievement of objectives, as well as to compare the outcome of the various measures.

ONE THIRD OF EGF FUNDING COMPENSATES NATIONAL WORKERS’ INCOME SUPPORT SCHEMES, WITH NO EU ADDED VALUE

77. When used to co-finance services for redundant workers or allowances not ordinarily existing under Member State unemployment benefit systems, the EGF delivered EU added value. This refers in particular to active measures aiming at the improvement of the beneficiaries’ prospect of finding gainful employment or otherwise increasing their earnings’ capacity such as training, aid for self-employment, coaching and outplacement, mobility allowances and educational grants (paragraphs 47 to 49).

78. However, in all the audited cases the Court identified measures to provide workers with income support which would have been paid by the Member States anyway. Consequently, the Court considers that only training and direct active support measures for redundant workers have an EU added value other than additional funding for the Member States. Sixteen of the 19 Member States which benefited from the EGF included income support measures in their packages. Income support measures represented 33 % of the costs refunded for all EGF cases (paragraphs 50 to 56).

79. The Commission did not sufficiently monitor the weight of workers’ support measures (paragraphs 45 to 46). In addition, different Member State decisions may result in different EGF co-funding for similar income support measures (paragraphs 57 to 59).

RECOMMENDATION 2

The European Parliament, the Council and the Commission should consider limiting EU funding to measures likely to provide EU added value, rather than funding already existing national workers’ income support schemes.

THE EGF APPROVAL PROCEDURE IS TOO LONG FOR AN EMERGENCY FUND

80. The EGF approval procedure is very long. This has a deterrent effect as regards the use of the EGF and consequently hampers EU solidarity with the redundant workers targeted.

81. In addition, the need for a budgetary procedure adds to the overall length of approval (paragraphs 60 to 69).

RECOMMENDATION 3

The European Parliament, the Council and the Commission should consider, as an alternative to the EGF scheme, the possibility of adapting the ESF framework in order to support more rapidly workers affected by mass redundancies.

This Report was adopted by Chamber II, headed by Mr Harald NOACK, Member of the Court of Auditors, on 10 June 2013.

For the Court of Auditors

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Vítor Manuel da Silva Caldeira

President

[1] Regulation (EC) No 1927/2006 of the European Parliament and of the Council of 20 December 2006 on establishing the European Globalisation Adjustment Fund (OJ L 406, 30.12.2006, p. 1), as amended by Regulation (EC) No 546/2009 of the European Parliament and of the Council of 18 June 2009 (OJ L 167, 29.6.2009, p. 26) — together the "EGF regulation". See Article 3 "Eligible actions".

[2] Until 30 May 2009, the threshold was 1000 redundant workers.

[3] Articles 1 and 2 of the EGF regulation. The crisis criterion effectively only applied, under Regulation (EC) No 546/2009, from 18 June 2009 to 31 December 2011.

[4] Until 31 December 2012, Member States introduced 114 applications, out of which 10 were unsuccessful (one was rejected by the Commission and nine withdrawn by the applicant Member State) and 15 were still under the EGF approval procedure.

[5] Under Articles 1 and 10 of the EGF regulation, the EGF co-financing rate was 65 % for all applications submitted from 1 May 2009 to 31 December 2011. Before and after that period, the co-financing rate was 50 %.

[6] COM(2011) 608 final of 6 October 2011.

[1001] All the EGF case names mentioned above were strictly assigned by the Commission. They are featured on the EGF webpage of the Commission’s DG Employment, Social Affairs and Inclusion website (http://ec.europa.eu/social/), and also in the EGF Statistical Portrait (2007–11) issued publicly by the Commission. If EGF case names refer directly or indirectly to names of undertakings, the reader should not link these undertakings to any statement in this special report or any statement issued by the Court and related to this special report. The undertakings named are neither EGF beneficiaries, nor managers of the EGF cases audited.

[7] "Mid-term evaluation of the European Globalisation Adjustment Fund: final report", submitted by GHK to DG Employment, Social Affairs and Inclusion, 2011 (http://.ec.europa.eu/social).

[8] BenQ (Germany), Nokia (Germany), Castilla y Leon and Aragon (Spain), Catalonia (Spain), DELPHI (Spain), Perlos (Finland), PSA Suppliers (France), Lombardy (Italy), Piedmont (Italy), Sardinia (Italy), Tuscany (Italy), Alytaus Tekstile (Lithuania), Textiles (Malta), Lisbon-Alentejo (Portugal) and North-Centre (Portugal).

[9] Some difficulties in reaching redundant workers of affected suppliers had already been identified by the mid-term evaluation. See mid-term evaluation, p. 100.

[10] See Article 5 of the EGF regulation on the coordination information required at the application stage, and Article 6 on complementarity and coordination.

[11] Articles 5(3) and 6(2) of Regulation (EC) No 1927/2006.

[12] Answer given on 19 April 2010 by the Commissioner for Employment and Social Affairs to parliamentary question E-1230/2010.

[13] Bulgaria, Estonia, Cyprus, Latvia, Hungary and Slovakia. The higher national contribution was seen as a clear impediment to applying for the EGF. Replies to the ECA survey of Member States that have not used EGF funding, October 2012. See also the Issues Paper concerning the permanent changes made in 2009 to Regulation (EC) No 1927/2006, "Procedural changes", 25 and 26 January 2011.

[14] Answer given on 19 April 2010 by the Commissioner for Employment and Social Affairs to parliamentary question E-1230/2010.

[15] Bulgaria, Cyprus and Hungary.

[16] Bulgaria, Estonia, Cyprus, Latvia, Hungary and Slovakia.

[17] Mentioned by Estonia, Latvia and Hungary. See also the Issues Paper concerning the permanent changes made in 2009 to Regulation (EC) No 1927/2006, "Procedural changes", 25 and 26 January 2011.

[18] According to the Commission, the United Kingdom ESF has been redirected towards providing training for redundant workers after mass redundancies.

[19] The EGF was applied for on 6 October 2011 and the final report would not be due before 5 March 2014.

[20] Odense Steel Shipyard (I) case: This observation was confirmed by the Court’s audit of a sample of individual beneficiaries having benefited from the EGF. The objective was that 25 % of the participants should be in employment 6 months after expiry of the EGF measures. That objective was almost met 11 months in advance.

[21] This observation was confirmed by the audit’s analysis of a sample of individual beneficiaries having benefitted from the EGF in Germany, as well as by an evaluation of 16 September 2012 commissioned by the managing authority, p. 4; Bundesministerium für Arbeit und Soziales, "Der Europäische Globalisierungsfonds in Deutschland: Eine Untersuchung und Bewertung seiner Umsetzung und Potenziale", October 2012, pp. 2, 9, 10, 72, 88 (http://www.bmas.de).

[22] See paragraph 51 of Special Report No 17/2009 concerning vocational training actions for women co-financed by the European Social Fund; paragraphs 63 and 64 of Special Report No 25/2012 "Are tools in place to monitor the effectiveness of European Social Fund spending on older workers?" (http://eca.europa.eu).

[23] Mid-term evaluation, pp. 101–102.

[24] ECA Opinion No 1/2010 "Improving the financial management of the European Union budget: Risks and challenges" (http://eca.europa.eu).

[25] Active labour market programmes — contains all social expenditure (other than education) which is aimed at the improvement of the beneficiaries‘ prospect of finding gainful employment or to otherwise increase their earnings capacity. This category includes spending on public employment services and administration, labour market training, special programmes for youth when in transition from school to work, labour market programmes to provide or promote employment for unemployed and other persons (excluding young and disabled persons) and special programmes for the disabled ("An interpretative guide to the OECD social expenditure database", OECD, 2007, p. 14).

[26] This means all cash expenditure compensating for unemployment. This includes redundancy payments out of public resources as well as pensions to beneficiaries before they reach the "standard" pensionable age if these payments are made because they are out of work or otherwise for reasons of labour market policy ("An interpretative guide to the OECD social expenditure database", OECD, 2007, p. 15).

[27] See mid-term evaluation report, 8 December 2011, p. 42. Produced for the Commission, the mid-term evaluation was based on a sample of 15 cases approved before the 2009 amendment to the EGF regulation came into force.

[28] See also Table 4.

[29] Article 7(1) of COM(2011) 608 final.

[30] Steiermark case.

[31] This rate was a coefficient calculated on the basis of a telephone survey that was conducted for the Nokia application. The coefficient was subsequently applied to all other EGF cases in Germany.

[32] Paragraph 28 of the Interinstitutional Agreement between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management, 2006/C 139/01.

[33] See Articles 13 to 15 of the Commission’s Rules of Procedure (C(2000) 3614 of 8 December 2000), as amended by Commission Decision 2010/138/Euratom of 24 February 2010 (OJ L 55, 5.3.2010, p. 60).

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