EXPLANATORY MEMORANDUM

Point 28 of the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management[1] allows for the mobilisation of the European Globalisation Adjustment Fund (EGF) through a flexibility mechanism, within the annual ceiling of EUR 500 million over and above the relevant headings of the financial framework.

The rules applicable to the contributions from the EGF are laid down in Regulation (EC) No 1927/2006 of the European Parliament and of the Council of 20 December 2006 on establishing the European Globalisation Adjustment Fund[2].

On 11 March 2010, Austria submitted application EGF/2010/008 AT/AT&S for a financial contribution from the EGF, following redundancies in AT&S in Austria.

After a thorough examination of this application, the Commission has concluded in accordance with Article 10 of Regulation (EC) No 1927/2006 that the conditions for a financial contribution under this Regulation are met.

SUMMARY OF THE APPLICATION AND ANALYSIS

Key data: ||

EGF Reference no. || EGF/2010/008

Member State || Austria

Article 2 || (c) - exceptional circumstances

Primary enterprise || AT&S (Austria Technologie & Systemtechnik Aktiengesellschaft)

Suppliers and downstream producers || 0

Reference period || 1.9.2009 – 31.12.2009

Starting date for the personalised services || 15.9.2009

Application date || 11.3.2010

Redundancies during the reference period || 167

Redundancies before and after the reference period || 0

Total eligible redundancies || 167

Redundant workers targeted for support || 74

Expenditure for personalised services (EUR) || 1 806 658

Expenditure for implementing EGF[3] (EUR) || 72 000

Expenditure for implementing EGF (%) || 3,8

Total budget (EUR) || 1 878 658

EGF contribution (65 %) (EUR) || 1 221 128

1. The application was presented to the Commission on 11 March 2010 and supplemented by additional information up to 22 February 2011.

2. The application meets the conditions for deploying the EGF as set out in Article 2(c) of Regulation (EC) No 1927/2006, and was submitted within the deadline of 10 weeks referred to in Article 5 of that Regulation.

Link between the redundancies and major structural changes in world trade patterns due to globalisation or the global financial and economic crisis

3. In order to establish the link between the redundancies and major structural changes in world trade patterns due to globalisation, Austria argues that the production of printed circuit boards (PCBs)[4] in Europe has for some time followed the same trend as the European mobile phone sector, i.e. mass production is being transferred to low-wage economies, mainly Asia and more specifically China. A large part of mobile phones and devices are produced in Asia, and almost three quarters of the world's PCB volume is produced there (proximity factor). Austria further argues that by approving several EGF applications in the mobile phone sector, the Commission has already recognised in the past that such a transfer of production capacities represents a structural shift in world trade patterns.

4. Quoting a market analysis of the German-based Association of the Printed Circuit Board Industry (Verband der Leiterplattenindustrie VdL) in May 2009, Austria indicates that the European PCB production volume decreased in 2008 by 10,8 % compared to the previous year, while the decrease was less accentuated in South-East Asia including China (- 5,4 %) and world-wide (- 4,8 %). In terms of European PCB manufacturers, the number decreased from 333 in 2007 to 307 in 2008.

5. AT&S is one of the leading PCB manufacturers and among the largest producers in Europe, with several production sites in Austria (Leoben/Styria, Fehring/Styria, Klagenfurt/Carinthia), and in China (Shanghai plant since 2002), India (Nanjangud plant since 1999) and Korea (Ansan plant since 2006).

Following the drop in demand for circuit boards (- 40 % in the business year 2008/2009 as compared to the previous year), AT&S decided in November 2008 to transfer its entire PCB mass production from Leoben to Shanghai resulting in a far-reaching downsizing of the Styrian site and a chain of lay-offs over more than a year. Only small and medium-sized batch production for the European market remains in Austria, supplying mainly the EU's automotive and industrial sectors.

Demonstration of the number of redundancies and compliance with the criteria of Article 2(c)

6. Austria submitted the application under the intervention criterion of Article 2(c) of Regulation (EC) No 1927/2006. This provision allows applicants to derogate from the requirements of Articles 2(a) and 2(b) in small labour markets or in exceptional circumstances when redundancies have a serious impact on employment and the local economy. In this case the applicant must specify which of the main eligibility requirements its application fails to meet, and thus from which it is seeking a derogation.

The Austrian authorities specified that the application seeks to derogate from Article 2(a), where the normal threshold is at least 500 redundancies over a four-month period.

7. The application cites 167 redundancies in the AT&S Leoben site over the four-month reference period from 1 September 2009 to 31 December 2009, all calculated in accordance with the second indent of the second paragraph of Article 2 of Regulation (EC) No 1927/2006.

The longer chain of redundancies in the Leoben site is described in the application as follows: 298 workers were dismissed in mid-December 2008, 167 workers in the 4-month reference period from September to December 2009, 138 temporary workers, before expiry of their contracts, between November 2008 and August 2009. Together this makes 603 dismissals over 13 ½ months. Back in 2006, 200 further jobs were lost following the closure of the AT&S Fohndorf site, located at about 50 km from Leoben. AT&S notified their respective collective redundancy plans to the Austrian authorities at different moments, according to the specific notification deadlines stipulated by the Austrian 'Frühwarnsystem'/early warning system (§ 45a of Arbeitsmarktförderungsgesetz/AMFG). Because of the notification rules applicable under Austrian law, a combined EGF application covering all the workers was not possible.

8. According to the Austrian authorities, Leoben is in a very difficult situation. This district's unemployment rate increased by + 51,6 % in August 2009 compared to the previous year, and few jobs are available (1 746 people were registered as unemployed against only 180 vacancies). Austria argues that the redundancies in AT&S have a significant impact on the Leoben district and the surrounding NUTS III region Östliche Obersteiermark (Eastern Upper Styria) as the market does not offer sufficient employment options for the workers, many of whom are lower skilled people trained by the company. The NUTS III region further faces the challenges of an above-average decline in population and an above-average ageing population. Moreover, the applicant refers to the fact that long-term unemployment in Styria (NUTS II level) is generally higher than the national average, and that Styria's gross regional product remains below the national average.

9. Styria was also affected by other mass redundancies for which EGF applications were submitted to the Commission: 744 redundancies in a nine-month period related to the automotive sector (EGF/2009/009, approved by the Budgetary Authority in 2009, OJ L 347, 24.12.2009) and 476 redundancies in a nine-month period related to the basic metal sector (application EGF/2010/007 for which a separate Commission proposal is under preparation).

10. The Commission services consider that the 167 redundancies in question along with the redundancies due to the same cause before the four-month reference period have a serious impact on employment and the economy at local and NUTS III level, and that, in combination with the particularity in respect of the mass redundancy notification rules in Austria, the exceptional circumstances criterion of Article 2(c) of Regulation (EC) No 1927/2006 is met.

Explanation of the unforeseen nature of those redundancies

11. Austria states in the application that dismissals of this magnitude were not foreseeable despite the fact that the shift of PCB mass production to Asia has been a trend observed for some years. AT&S had intended initially to keep specific high-tech parts of PCB production in Austria, but this was not finally realised because of the aggravated financial and economic situation in 2008 and 2009 including increased pressure on purchasing prices, a weak US dollar against the Euro and an increase of salaries in the European plants.

Identification of the dismissing enterprises and workers targeted for assistance

12. The application cites 167 redundancies in the single enterprise AT&S (Austria Technologie & Systemtechnik Aktiengesellschaft) which occurred during the four-month reference period. Seventy-four of these workers (44,3 %) are targeted for assistance within 'AT&S-Unternehmensstiftung', a labour foundation of the enterprise type as defined in federal directive AMF/18-2010[5]. Of the remaining workers who did not enter the foundation, some found new employment while others were not interested in joining the foundation.

13. The break-down of the targeted workers is as follows:

Category || Number || Percent

Men || 43 || 58,1

Women || 31 || 41,9

EU citizens || 72 || 97,3

Non EU citizens || 2 || 2,7

15-24 years old || 2 || 2,7

25-54 years old || 65 || 87,8

55-64 years old || 7 || 9,5

> 64 years old || 0 || 0,0

14. There are no workers with longstanding health problems or disabilities among the targeted workers.

15. In terms of occupational categories, the break-down is as follows:

Category || Number || Percent

Technicians and associate professionals || 22 || 29,7

Office clerks || 3 || 4,1

Machine operators and assemblers || 49 || 66,2

16. In accordance with Article 7 of Regulation (EC) No 1927/2006, Austria has confirmed that a policy of equality between women and men as well as non-discrimination has been applied, and will continue to apply, during the various stages of the implementation of and, in particular, in access to the EGF.

Description of the territory concerned and its authorities and stakeholders

17. The redundancies concern at NUTS II level the Land of Steiermark (Styria, AT22), one of Austria's nine federal provinces, and at NUTS III level Östliche Obersteiermark (Eastern Upper Styria, AT 223) and more specifically the district of Leoben with its main municipality, the town of Leoben. Styria is an industry-dominated area[6], and its economy depends essentially on few large enterprises in the electronic and metal industries, such as AT&S and the voestalpine Group.

18. The main stakeholders are the office of Styria's provincial government (Amt der Steiermärkischen Landesregierung), the public employment services of Styria and of the district of Leoben (Landes- und Bezirksgeschäftsstellen des Arbeitsmarktservice/AMS), Styria's Economic Chamber (Wirtschaftskammer Steiermark), the metal-textile-food trade union (Gewerkschaft Metall-Textil-Nahrung) under the umbrella of Austria's Federation of Trade Unions (Österreichische Gewerkschaftsbund /ÖGB) and Regionalmanagement Obersteiermark Ost GmbH, one of Austria's regional management agencies which promote the development of sustainable regional policy.

Expected impact of the redundancies as regards local, regional or national employment

19. AT&S was until December 2008 the regions's largest employer. Austria argues that the 167 redundancies within four months along with the company's lay-offs in the months before the reference period (listed under point 7), put the local and regional labour market under severe pressure.

Quoting data from Statistik Austria and Leoben's public employment service, Austria argues that the redundancies in AT&S have a significant impact on the Leoben district and the surrounding NUTS III region as the markets do not offer sufficient employment options for the dismissed workers, many of whom are lower skilled people who had been trained by the company for specific work. The unemployment rate in Leoben increased by + 51,6 % in August 2009 compared to the previous year (1 746 people were registered as unemployed against only 180 vacancies) what represents a sharper unemployment increase than in Styria (+ 33,7 %) and at national level (+ 30 %). The NUTS III region further faces the challenges of an above-average decline in population and an above-average ageing population. Moreover, the applicant refers to the fact that long-term unemployment in Styria (NUTS II level) is generally higher than the national average, and that Styria's gross regional product remains below the national average (2006 figure)[7].

Co-ordinated package of personalised services to be funded and a breakdown of its estimated costs, including its complementarity with actions funded by the Structural Funds

20. The following types of measures are proposed, all of which combine to form a coordinated package of personalised services aimed at re-integrating the 74 targeted workers into the labour market. They will be provided to the workers through 'AT&S-Unternehmensstiftung', an enterprise-type labour foundation established in January 2009 as part of the company's social plan following negotiations between the social partners at the end of 2008. The body responsible for the delivery of the personalised measures is Team 4 Projektmanagement GmbH.

21. The measures for the 74 targeted workers enrolled in the foundation are controlled by a foundation council composed of Styria's public employment service ('AMS, Arbeitsmarktservice'), employer and employee representatives as well as the Land of Styria. The latter also assures the coordination with other regional labour market policies. The meaningfulness of each EGF co-funded measure for the labour market is assessed, and compliance with the foundation rules ('Stiftungsordnung') and other applicable sets of laws is assured. The development of the individual workers is monitored to ensure that the plans agreed in the initial phases of the programme are pursued. In line with § 18 of Arbeitslosenversicherungsgesetz (ALVG) the workers must involve themselves full-time.

– Information and admission to the labour foundation: General information for all dismissed workers with the possibility for the workers to apply for admission to the labour foundation. This has been budgeted for 74 workers.

– Occupational orientation (three modules): This has been budgeted for 73 workers. The activity lasts normally six weeks, with the possibility of extending it to a maximum of twelve weeks in particular cases. It consists of three modules: a compulsory screening/profiling, job matching with direct re-integration to vacant posts where possible, and for the other participants the development of a realistic occupational pathway plan. The arrangements of the latter are laid down in an agreement signed by the worker, the labour foundation and the regional AMS forming the basis for the participant's subsequent activities within the foundation.

– Active job search: This targets first of all participants who after the occupational orientation do not wish to obtain a higher qualification. It is scheduled for 18 workers. The active job search is carried out in close cooperation with the regional AMS, and its duration is normally 14 weeks, renewable to 22 weeks in particular cases, for instance participants aged over 50 or for people with a reduced working capacity. It is also available to workers after they have accomplished their training measures.

– Individual training: This is planned for 73 workers and can cover any training that has been approved by the Styrian public employment service in its catalogue of measures. Courses not contained in the catalogue can be approved by the AMS on an individual basis if they are in line with the worker's agreed pathway. Examples of the training on offer are: longer studies leading to advanced level qualifications (Fachhochschule, university, colleges), classical upskilling training in the workers' previous fields (e.g. foreman training) as well as initial vocational training to prepare a change of career to areas such as the health field. A part of the studies and vocational training will not need to be co-financed by the EGF because it is delivered free of charge within the Austrian educational system. In cases where an agreed training programme takes longer than the EGF implementation period, the additional financing will be jointly provided by AT&S, the public employment service and the Land of Styria[8].

– Training and job search allowance[9]: This allowance is paid to all 74 workers only for the duration of their participation in the qualification and active re-integration measures within the labour foundation. In the first six months each dismissed worker receives EUR 350 per month and subsequently EUR 70 per month. This allowance, combined with the subsistence allowance, may not exceed a worker's unemployment benefit assessment basis. Unemployment benefits are interrupted during the period these training allowances are granted.

– Subsistence allowance while on training and on job search measures[10]: This allowance is paid to all 74 workers only for the duration of their participation in the qualification and active re-integration measures within the labour foundation. It permits a serious full-time engagement of each dismissed worker in the measures. The costs per worker/month amount to EUR 950. This allowance, combined with the training and job search allowance, may not exceed a worker's unemployment benefit assessment basis. Unemployment benefits are interrupted during the period these subsistence allowances are granted.

22. The expenditure for implementing the EGF, which is included in the application in accordance with Article 3 of Regulation (EC) No 1927/2006, covers preparatory, information and publicity as well as control activities and the management of AT&S labour foundation. All partners involved in the measures are committed to communicating the EGF support. The foundation management costs will be calculated on a pro-rata basis for the actual participants and will not exceed EUR 271 per person.

23. The personalised services presented by the Austrian authorities are active labour market measures within the eligible actions defined by Article 3 of Regulation (EC) No 1927/2006. The Austrian authorities estimate the total costs of these services at EUR 1 806 658 and the expenditure for implementing the EGF at EUR 72 000 (3,8 % of the total amount). The total contribution requested from the EGF is EUR 1 221 128 (65 % of the total costs).

Actions || Estimated number of workers targeted || Estimated cost per worker targeted (EUR) || Total costs (EGF and national cofinancing) (EUR)

Personalised services (first paragraph of Article 3 of Regulation (EC) No 1927/2006)

Information and admission to the labour foundation || 74 || 300 || 22 200

Occupational orientation -3 modules ('Berufsorientierung – 3 Module') || 73 || 1 000 || 73 000

Continuous consultation & active job search ('laufende Beratung und aktive Jobsuche') || 18 || 1 000 || 18 000

Individual training ('Individuelle Qualifizierung') || 73 || 3 718 || 271 414

Training and job search allowance ('Zuschussleistung/Stipendium bei aktiver Beratung, Jobsuche oder Ausbildung') || 74 || 1 327,16 || 98 210

Subsistence allowance while on training and job search ('Schulungsarbeitslosengeld') || 74 || 17 889,65 || 1 323 834

Sub total personalised services || || 1 806 658

Expenditure for implementing EGF (third paragraph of Article 3 of Regulation (EC) No 1927/2006)

Preparatory activities || || 10 000

Management AT&S labour foundation (outplacement foundation) || || 20 000

Information and publicity || || 10 000

Control activities || || 32 000

Sub total expenditure for implementing EGF || || 72 000

Total estimated costs || || 1 878 658

EGF contribution (65 % of total costs) || || 1 221 128

24. Austria confirmed that the measures described above are complementary with actions funded by the Structural Funds and that double financing is excluded. The Austrian ESF Operational Programme under Objective 2 focuses on the long-time unemployed, whereas the EGF aims to help workers immediately after their lay-offs. Hence, there is no overlapping between the two funds.

Date(s) on which the personalised services to the affected workers were started or are planned to start

25. Austria started the personalised services to the affected workers included in the co-ordinated package proposed for co-financing to the EGF on 15 September 2009 which is the date when the first workers entered the labour foundation. This date therefore represents the beginning of the period of eligibility for any assistance that might be awarded from the EGF.

Procedures for consulting the social partners

26. The dialogue with social partners on how to alleviate the effects of the job losses for the concerned workers was started when AT&S notified the planned dismissals to the Austrian authorities, in line with the Austrian 'Frühwarnsystem'/early warning system. The implementation concept for the AT&S labour foundation was signed by Styria's Economic Chamber and the metal-textile-food trade union (5.2.2009 and 23.7.2009).

27. Austria explained that the Austrian social partnership cooperation is a voluntary arrangement of mostly informal nature and not regulated by law[11]. Only when companies decide to participate in specific labour policy measures are they subject to the applicable public employment service (AMS) rules. The redundancies concerned by this application are based on employer/works council agreements ('Betriebsvereinbarungen'), rather than collective agreements negotiated for the whole sector.

Information on actions that are mandatory by virtue of national law or pursuant to collective agreements

28. As regards the criteria contained in Article 6 of Regulation (EC) No 1927/2006, the Austrian authorities in their application and supplementary information:

· confirmed that the financial contribution from the EGF does not replace measures which are the responsibility of companies by virtue of national law or collective agreements;

· demonstrated that the actions provide support for individual workers and are not to be used for restructuring companies or sectors;

· confirmed that the eligible actions referred to above do not receive assistance from other EU financial instruments.

Management and control systems

29. Austria has notified the Commission that the national co-financing will be provided by AT&S (47 %), Styria's public employment services AMS (38,5 %) and the Land of Styria (14,5%). If the EGF contribution is granted, the financial contributions made by the targeted workers themselves (EUR 2 500 per worker) will be regarded as pre-financing and will be repaid to them by the labour foundation.

30. Austria confirmed that the financial contribution will be managed by the same body that manages the ESF: unit VI/INT/9 within the Federal Ministry for Labour, Social Affairs and Consumer Protection (BMASK Bundesministerium für Arbeit, Soziales und Konsumentenschutz) will act as managing authority and as payment service. The financial control authority for the EGF is different to that of the ESF: unit VI/S/5a within BMASK will assure this function for the EGF. The coordinated package of personalised measures is implemented by 'AT&S-Unternehmensstiftung'/'Team 4 Projektmanagement GmbH', monitored by the public employment service (AMS). Furthermore, the BMASK is supported by a technical assistance provider who will also act as first level control. All major arrangements and obligations are laid down in written agreements.

Financing

31. On the basis of the application from Austria, the proposed contribution from the EGF to the coordinated package of personalised services is EUR 1 221 128, representing 65 % of the total cost. The Commission's proposed allocation under the Fund is based on the information made available by Austria.

32. Considering the maximum possible amount of a financial contribution from the EGF under Article 10(1) of Regulation (EC) No 1927/2006, as well as the scope for reallocating appropriations, the Commission proposes to mobilise the EGF for the total amount referred to above, to be allocated under heading 1a of the financial framework.

33. The proposed amount of financial contribution will leave more than 25 % of the maximum annual amount earmarked for the EGF available for allocations during the last four months of the year, as required by Article 12(6) of Regulation (EC) No 1927/2006.

34. By presenting this proposal to mobilise the EGF, the Commission initiates the simplified trialogue procedure, as required by Point 28 of the Interinstitutional Agreement of 17 May 2006, with a view to securing the agreement of the two arms of the budgetary authority on the need to use the EGF and the amount required. The Commission invites the first of the two arms of the budgetary authority that reaches agreement on the draft mobilisation proposal, at appropriate political level, to inform the other arm and the Commission of its intentions. In case of disagreement by either of the two arms of the budgetary authority, a formal trialogue meeting will be convened.

35. The Commission presents separately a transfer request in order to enter in the 2011 budget specific commitment appropriations, as required in Point 28 of the Interinstitutional Agreement of 17 May 2006.

Source of payment appropriations

36. An amount of EUR 8 523 405 remains available on the EGF Budget line 04.0501 after adoption by both arms of the Budgetary Authority of two Decisions totalling an amount of EUR 777 390, and taking into account the four cases currently discussed by the Budgetary Authority for a total amount of EUR 38 308 155. This available amount will be used to cover the amount of EUR 1 221 128 needed for the present application.

Proposal for a

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the mobilisation of the European Globalisation Adjustment Fund in accordance with point 28 of the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management (application EGF/2010/008 AT/AT&S from Austria)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to the Interinstitutional Agreement of 17 May 2006 between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management[12], and in particular point 28 thereof,

Having regard to Regulation (EC) No 1927/2006 of the European Parliament and of the Council of 20 December 2006 establishing the European Globalisation Adjustment Fund[13], and in particular Article 12(3) thereof,

Having regard to the proposal from the Commission[14],

Whereas:

(1) The European Globalisation Adjustment Fund (EGF) was established to provide additional support for workers made redundant as a result of major structural changes in world trade patterns due to globalisation and to assist them with their reintegration into the labour market.

(2) The scope of the EGF was broadened for applications submitted from 1 May 2009 to include support for workers made redundant as a direct result of the global financial and economic crisis.

(3) The Interinstitutional Agreement of 17 May 2006 allows the mobilisation of the EGF within the annual ceiling of EUR 500 million.

(4) Austria submitted an application to mobilise the EGF, in respect of redundancies in the enterprise AT&S, on 11 March 2010 and supplemented it by additional information up to 22 February 2011. This application complies with the requirements for determining the financial contributions as laid down in Article 10 of Regulation (EC) No 1927/2006. The Commission, therefore, proposes to mobilise an amount of EUR 1 221 128.

(5) The EGF should, therefore, be mobilised in order to provide a financial contribution for the application submitted by Austria.

HAVE ADOPTED THIS DECISION:

Article 1

For the general budget of the European Union for the financial year 2011, the European Globalisation Adjustment Fund (EGF) shall be mobilised to provide the sum of EUR 1 221 128 in commitment and payment appropriations.

Article 2

This Decision shall be published in the Official Journal of the European Union.

Done at [Brussels/Strasbourg],

For the European Parliament For the Council

The President The President

[1] OJ C 139, 14.6.2006, p. 1.

[2] OJ L 406, 30.12.2006, p. 1.

[3] In accordance with the third paragraph of Article 3 of Regulation (EC) No 1927/2006.

[4] A printed circuit board (PCB) is an electronic component which is needed in many electronic industries such as the electronic and computer industries (mobile phones, digital cameras etc.), medical devices and the automotive industry.

[5] Austrian labour foundations are an active labour market policy instrument in Austria to improve the labour market position of job seekers. They are based on Arbeitslosenversicherungsgesetz (§ 18) and on implementing directives issued by the labour market service (AMS). Latest AMS directive: http://www.ams.at/_docs/001_ast_RILI.pdf.

[6] Austria's four industrial provinces are Styria, Lower Austria, Upper Austria and Vorarlberg.

[7] Information received in connection with application EGF/2010/007 AT Steiermark-Niederösterreich.

[8] According to § 18 of Arbeitslosenversicherungsgesetz (ALVG), a worker's participation in the foundation is limited to 156 weeks (three years) with the possibility to extend it to 209 weeks (four years) in particular cases (people aged over 50 or people on longer training programmes).

[9] Based on § 18 of Arbeitslosenversicherungsgesetz (ALVG).

[10] Based on § 18 of Arbeitslosenversicherungsgesetz (ALVG).

[11] ÖGB website http://www.sozialpartner.at/sozialpartner/Sozialpartnerschaft_mission_en.pdf

[12] OJ C 139, 14.6.2006, p. 1.

[13] OJ L 406, 30.12.2006, p. 1.

[14] OJ C […], […], p. […].