10.10.87 Official Journal of the European Communities No C 272/3 
II 
(Preparatory Acts) 
COMMISSION 
COMMISSION COMMUNICATION TO THE COUNCIL 
STEEL POLICY 
COM(87) 388 final/2 
(Submitted by the Commission to the Council on 18 September 1987) 
(87/C 272/04) 
PRESENTATION 
This communication fulfils the Commission's undertaking at the Council meeting on industry 
of 1 June 1987 to present comprehensive proposals covering all aspects of steel restructuring 
and designed to restore the industry to lasting competitiveness. 
The Commission insists that all the proposals in this communication form an indivisible whole: 
the industrial aspects (restructuring and market controls through the quota system) cannot be 
separated from the social and regional aspects stemming from the restructuring process. 
The Commission feels duty-bound to ensure that the industry will be restored to health in an 
orderly manner and that at the end of the period of adjusting production capacities to the 
markets the industry will again be competitive overall. This is why the Commission is not 
prepared to prolong the quota system — which everyone recognizes must be updated — unless 
it is accompanied by closure incentives and firm commitments from the firms and governments 
concerned. 
The Commission considers that in a period of severe job losses it must do its utmost in the 
form of social backup measures and its contribution in this respect must be maintained, despite 
budget difficulties, at the level of previous years. For the regions and with the prospect of 
reform of the structural funds — in particular the second objective of conversion of declining 
industrial areas — a new ERDF Community programme is proposed. 
It is clear, however, that the Community's readiness to make a significant effort on the social 
and regional fronts is brought up short by inadequate resources (for 1988 at least) both under 
the structural funds (especially the Regional Fund) and under the ECSC operational budget. 
The Commission is therefore obliged, until the funds have been reformed and their resources 
increased under Article 130D of the EEC Treaty, to appeal to the Council to face up to its 
responsability and agree to a limited transfer in 1988 from the general budget of the 
Community to the ECSC. 
INTRODUCTION 
Despite the efforts made under the auspices of the 
Commission since the beginning of the 1980s, there is 
still excess capacity in the steel industry which, in line 
with the general objectives for 1990, is estimated by all 
the experts to total about 30 million tonnes (20 million 
tonnes for flat products and heavy sections). As a result, firms are attempting to achieve financial 
viability by, among other things, shedding jobs; on a 
conservative estimate, 80 000 jobs will be lost in the next 
three years. 
Such a reduction in employment in the steel industry 
(and in the sectors dependent on it) will have enormous 
regional consequences, especially in the declining 
industrial regions. Conversion of these areas is one of the 
No C 272/A Official Journal of the European Communities 10.10. 87 
priority objectives on which the Commission plans to 
concentrate aid from the Regional Fund (ERDF) and the 
Social Fund (ESF) in the context of the reform of the 
structural funds made necessary by the entry into force 
of the Single European Act (cf. COM(87) 100 final). 
For this reason, the further restructuring of the steel 
industry requires that social and regional flanking 
measures be adopted as a matter of urgency, since 
adoption by the Council of the proposals for reform of 
the structural funds cannot take place immediately and 
will therefore primarily constitute a medium-term 
response to the problems posed. 
It is therefore necessary to examine both the contribution 
that the structural funds can make to solving the 
problems described in the context of the planned reform 
and the intrinsic merits of certain specific ECSC in­
struments (e.g. redeployment aid, early retirement 
schemes), and what can be done during the period 
before the reform of the structural funds takes effect. 
At the same time, the Commission must help the industry 
to speed up the current restructuring process with the 
aim of soon eliminating the surplus capacities which are 
exerting heavy pressure on the market and preventing 
the recovery of the sector. Eurofer recently tried to 
introduce a set of measures aimed at achieving a 
significant reduction in capacity, and asked the 
Commission and the Member States to support this 
initiative by maintaining the quota system and by 
assuming the social and regional costs of the operation. 
Since Eurofer's efforts were not successful, the 
Commission has decided to take the initiative again and 
is proposing a coordinated approach to the industry's 
problems. 
It must be stressed, however, that a quota system based 
on Article 58 of the Treaty is not an end in itself. Its 
purpose is to control market developments and 
temporarily balance supply and demand in order to 
prevent cut-throat competition; it does not in itself act as 
an incentive to closures and may even, in some cases, 
have the opposite effect. 
Although crisis conditions persist for flat products and 
heavy sections, the Commission, aware that the quota 
system itself can be an impediment to the restructuring 
of the industry, will implement such a system only if it 
receives firm commitments from companies for a satis­
factory level of closures carried out over a period not to 
exceed three years. The objective of any new initiative must be the continued 
restructuring of the industry in order to eliminate excess 
capacity and improve the balance between supply and 
demand. This is essential if firms are to benefit, firstly, 
from the higher prices they will be able to obtain from a 
market in which supply is more in line with demand and, 
secondly, from lower costs as a result of the 
concentration of production in fewer plants. This 
objective can be attained in an orderly and equitable 
manner by adopting an approach coordinated at 
Community level. In view of the financial, socio-regional 
and, indeed, political situation of many firms, it is 
unlikely that capacity cuts in the flat products and heavy 
sections sectors can be carried out on the scale required 
without both specific encouragement and appropriate 
social and regional back-up measures. 
In accordance with the Council's conclusions of 1 June 
1987, the Commission considers that financial incentives 
from the Community are the most appropriate for the 
purpose. 
The Community therefore has to do two things. Firstly, 
it must soften as far as possible the social and regional 
impact of this inevitable development and, secondly, it 
must ensure that the capacity cuts and plant closures 
needed, if the industry is to regain profitability, take 
place in a reasonably orderly manner. 
Consequently, it is now proposed that an incentive be 
offered to firms for plant closures, backed up by 
enhanced social and regional measures without which 
an extension of the quota system for certain product 
categories is not contemplated. 
THE INDUSTRIAL ASPECTS 
As the Commission pointed out at the Council meeting 
on industry on 1 June 1987, a quota system, whatever 
form it may take, must therefore of necessity be coupled 
with Community closure incentives. 
Although, as in previous decisions, the quota system 
proposed could include provisions encouraging firms to 
reduce capacity and eliminate production (see Annex I), 
past experience shows that this method is not sufficient. 
Closures not only mean social costs for the firm, in the 
form of redundancy payments, they also affect a firm's 
balance sheet in that assets corresponding to the value of 
the plants closed vanish. 
Additional financial incentives are therefore needed to 
encourage firms to give up producing when closing 
down plant. For products still covered by quotas (see 
10.10.87 Official Journal of the European Coihmunities No C 272/5 
point VII) for which capacity of the order to 20 million 
tonnes is to be closed, adequate incentives should be 
planned, which would come on top of what the firm 
could obtain by selling the quotas relating to the plant 
closed down. The Commission considers that a fund of 
the order of 600 million ECU constituted under Article 
58 (2) of the ECSC Treaty would meet the target. 
I. Closure incentives 
The financial incentive would consist of: 
— a premium paid against the irrevocable and 
permanent closure of hot-rolling capacities in cate­
gories I a (wide strip), II (heavy plate) and III (heavy 
- sections). Of the funds generated, 70 % would be 
earmarked for this purpose. The premium would be 
paid (to the company closing down capacity) only if 
the closure involved ceasing equivalent production 
upon the sale of the reference quotas, that equivalent 
production being transferred to the firms which had 
bought the quotas. Should no firm wish to purchase, 
it would be possible for the Commission itself to 
purchase the quotas offered. In that event, the quotas 
would be annulled and all competing firms would 
thereby gain advantage, and 
payment by the Commission of part of the 
expenditure incurred by firms required to shed a 
large proportion (about 10 %) of jobs in the product 
categories concerned. These sums (30 % of the funds 
generated) would be allocated either to financing 
grants or allowances to workers being redeployed or 
made redundant, or to financing measures to 
promote their re-employment. 
The financial incentive system would be combined with 
the quota system itself, as provided for in Article 58 (2) 
of the ECSC Treaty. The output of products under 
quota arrangements (categories I a, I b, II and III) would 
be subject to the payment of levies above a certain 
reference level (e.g. 70 % of the quotas allocated). These 
levies (which could be at different rates for different 
categories) would be increased appreciably once the 
undertaking exceeded the quotas allocated to it. 
Deliveries for export would benefit from a reduced levy. 
During the period of application of the quota system, 
these levies should bring in enough funds (about 600 
million ECU) for sufficient closures to have been made 
on termination of the system. 
The closure premium (paid only if the closure results in a 
real cut in output) will be fixed at a level where the closure impact on the liquid phase is taken into 
consideration. It will also depend on the volume of 
quotas corresponding to the plant closed and given up by 
the firm. 
In order to speed up the timetable of closures, the 
closure premium will be higher at the beginning of the 
quota system and on a declining scale thereafter. 
In accordance with the spirit of the second subparagraph 
of Article 58 (2) of the ECSC Treaty, 30 % of the funds 
generated will be earmarked for the social, measures 
referred to above, which need not necessarily be in 
a restructuring context but could also be aimed at 
rationalization (see point IX). 
In addition to the financial incentives, closure incentives 
could also result from the limited additional quotas 
which the Commission would grant in cases where a firm 
found itself obliged to reduce its output following a 
closure (see Annex I). 
II. Complementarity with the industry's initiatives 
It should be noted that the sums paid to firms under the 
system proposed should not be the only financial 
resources mobilized to bring about closures, since the 
quota arrangements, like the previous systems, will 
encourage the sale between firms of the references 
relating to the closed,plants. 
The Commission considers that to this system should be 
added a voluntary system similar to that proposed by 
Eurofer, which would be set up by the firms and should 
remain the principal incentive to restructuring. It was 
only because the system gave rise to a large number of 
applications to purchase quotas and few proposals to sell, 
particularly in category I, that the Commission found it 
necessary to accompany this initiative by an additional 
incentive to firms giving up production and quotas. 
III. Relations with non-Community countries 
The Commission is aware of the increase, albeit limited, 
in the financial burden on undertakings arising from the 
proposed financial incentives. However, it realises that as 
prices become steadier undertakings may find that they 
are not bearing this cost alone. 
For this reason, great care will be taken to ensure that 
goods are not imported under terms which adversely 
affect the level of domestic prices, and hence there are 
plans to reinforce anti-dumping measures as soon as 
possible. The Commission will make sure that under the 
arrangements in force no distortion occurs which could 
penalize the Community's steel industry. 
No C 272/6 Official Journal of the European Communities 10.10.87 
IV. Consulting the industry 
Once this communication has been sent to the Council, 
the Commission will start consulting the industry before 
finally deciding on the terms and figures in the proposed 
formula. Close collaboration with the industry will be 
necessary in particular to determine the level of incentive 
deemed acceptable to secure the closures envisaged, and 
this level may differ according to the type of plant closed 
(product made at the plant, utilization rate, simultaneous 
closure of crude-steel making facilities). 
V. Conditions and duration of the quota system 
As stated above, the Commission considers that the 
quota system is not an end in itself in the conditions of 
structural crisis now obtaining; it is solely a means to 
bring about orderly restructuring. That is why the 
Commission will put it into effect only where it receives 
a firm commitment from firms to carry out sufficient 
closures while the system is in operation, a period which 
in principle will be three years. However, the Com­
mission reserves the right to interrupt it if restructuring 
does not advance at a steady pace. In particular: 
— the Commission will review its position concerning 
the continuation of the quota system either before 
the new system enters into force or immediately 
afterwards if it finds that no new commitment has 
been given by the firms, 
— it will terminate the system in the course of 1988 if 
by 1 August 1988 the firms have not made an 
additional effort: their commitment concerning 
closures to be carried out must reach a level which 
the Commission can consider satisfactory as a whole 
for the products remaining subject to quotas. 
VI. Updating the quota system (see Annex I) 
The quota system will be much simpler than the present 
arrangements. Updating the references, which is essential 
after the six or seven years of the system's operation, will 
itself simplify matters, numerous relaxations having been 
introduced to enable firms to adapt within the system to 
market trends. 
The Commission proposes to base the references on 
company performance in 1985 and 1986. 
VII. Coverage of the quota system 
As the Commission pointed out earlier in its communi­
cations to the Council in 1986, it must also be realized that the quota system cannot any longer include wire rod 
and merchant bars. In the case of these categories of 
products, as with reinforcing bars (already excluded 
from the system), it is up to the undertakings concerned 
to work out their own strategies both with regard to 
production methods (integrated or electric steelworks) 
and with regard to commercial policy according to the 
market. Under these conditions, a quota system would 
not achieve its objective and would constitute an obstacle 
to technical progress in these categories of products. A 
quota system must thus cover only categories la, lb, II 
and III. 
SOCIAL AND REGIONAL ASPECTS 
VIII. The social and regional context 
The whole range of difficulties that will be created for 
workforces and for the regions by the measures to re­
structure the steel industry must be countered by 
back-up measures, whatever the subsector of the steel 
industry (quota or non-quota) in which jobs are being 
lost. The Commission considers that it must provide as 
much assistance as possible here. As already indicated, a 
conservative estimate suggests that over the three years 
ahead there will be 80 000 job losses, 50 000 of which 
will be due to restructuring proper and accordingly 
eligible for Community social aid under Article 56 (2) 
(b). 
The Commission's analysis of the regional consequences 
of restructuring clearly shows that the areas which will 
be worst affected are for the most part located in the 
major steel-producing areas which have already been 
in a state of crisis for many years. The decline in 
employment in the steel industry — down by about a 
third since 1980 — has resulted in high levels of 
structural unemployment and in some cases the 
migration of young people especially, which is liable to 
weaken the social fabric of the areas generally. The 
deepening of the crisis stemming from further capacity 
cuts of 30 million tonnes and the loss of another 80 000 
jobs will worsen the socio-economic situation in the 
regions, the more so in that the closures could be 
permanent, meaning the total disappearance of a sector 
which for a very long time was an integral part of the 
economic base of these regions. The creation of alterna­
tive employment is more difficult when it becomes 
necessary to find a new economic future and new 
regional vocations. The concentration of negative effects, 
compounded by the indirect consequences for suppliers 
and other related industries, will have an effect in the 
medium term on the entire economy of the areas 
concerned. The decline in services in both private and 
public sectors risks starting a vicious circle in which 
potential investment is discouraged and thereby every 
attempt at conversion. 
10.10.87 Official Journal of the European Communities No C 272/7 
The fresh crisis will affect not only the major steel-
producing areas but also several smaller, isolated areas 
which have survived so far on specific location 
advantages which are now disappearing. The problems of 
conversion in these areas are no less thorny, since their 
economic and social structure tends to be dominated by 
one large firm and they are too isolated to be able 
to draw support from any favourable economic 
environment. 
The combined problems of all the steel-making areas will 
certainly leave their mark at macro-economic level. In 
the 1960s, these areas were often the launch-pad for 
economic take-off, both regional and national, and they 
were the hard core of the industrial base. They now 
account for about 19 °/o of unemployment in the 
Community. 
This situation points up the scale of the regional 
problems which the Commission emphasized in its 
communication COM(87) 100 under objective No 2 of 
the Community's structural policies, namely the 
conversion of declining industrial regions. 
If the urgency of the regional problems tied up with steel 
conversion demands an immediate response on a scale to 
match, the measures proposed must also be seen in the 
context of the reform of the structural funds and in 
particular objective No 2. In the initial stage, pending a 
doubling of the funds' resources, such a response can be 
planned only by harnessing the Community's present 
instruments. The Commission has therefore sought to 
make the most effective use of these instruments, on the 
understanding that in due course the action can be taken 
over by broader measures like those envisaged under the 
reform of the structural funds. It will then be possible, 
on the basis of regional conversion programmes and the 
resulting Community support frameworks, to give added 
force to the coordinated action for the industrial regions 
in question. This will come about after discussions 
between the Commission, the Member States and the 
territorial authorities concerned. 
IX. Social back-up measures to restructuring 
The social back-up measures to steel restructuring in the 
period 1988 to 1990, to assist workers whose jobs will be 
affected from 1 January 1988, fall into three parts. 
1. Conventional redeployment aids (Article 56 (2) (b)) 
By using the system of conventional aids to 
redeployment, the Community will continue to bear 
part of the cost of redundancy measures. This system, 
under which aids are granted on the basis of bilateral 
agreements so that the diversity of national social 
back-up measures can be fully taken into account, is being increasingly used to promote the retraining and 
re-employment of workers. The aids are of three main 
types: 
— income support grants in the event of 
unemployment, re-employment or early retirement 
(first 18 months), 
— vocational training grants, 
— mobility grants. 
The total outlay for workers who will be affected by 
restructuring measures carried out from 1988 to 1990 
will be 168 million ECU. To this must be added 44 
million ECU for workers affected by measures carried 
out in 1986 and 1987 or taking part in redeployment 
programmes not connected with the latest wave of 
restructuring operations. 
(million ECU) 
Year 
Cost 1988 
76 1989 
68 1990 
68 Amount 
212 
2. The additional social aid programme (Article 56 (2) (b)) 
At a time when redundancies are again expected to 
peak, the Commission considers it necessary to 
strengthen its conventional assistance, as it did over 
the period 1981 to 1984 and in 1987 under the 
interim programme of social back-up measures 
exceptionally financed by the Commission with ECSC 
own resources. The Commission is proposing an 
additional programme of social aids for the period 
1988 to 1990 which will be directed at strengthening 
two important and costly types of measure: aid to 
early retirement and aid to genuine re-employment. 
This will double the Community's direct payment of 
the social cost per job lost (average cost in the 
Community estimated at about 30 000 ECU), which 
will thus increase from about 10 % to 20 %. 
As shown by the expansion of national provisions for 
social back-up measures, aid to early retirement will 
continue to be a major aspect of action taken by all 
steel-producing Member States, because it has proved 
to be the only 'realistic' measure enabling a massive 
and rapid reduction in the work-force. The additional 
Community contribution (18 months over and above 
the period covered by the conventional aids) to the 
financing of some 33 000 early retirements during the 
No C 272/8 Official Journal of the European Communities 10.10.87 
period of the programme will obey the same 
conditions as those applying under the earlier social 
measures scheme. The minimum age will remain set at 
55 years; but it will be lower for certain special cat­
egories of worker (those engaged on arduous work). 
The additional assistance will bring the total period of 
Community assistance up to 36 months, and will 
increase the average ECSC contribution for each 
beneficiary from 3 000 ECU to 6 000 ECU. 
Marking its determination to stimulate re­
employment, the Commission will grant re­
employment premiums and other allowances on the 
same lines to some 17 000 workers affected by re­
structuring but unable to benefit from retirement 
measures. The Commission will thus contribute to the 
new measures launched by some Member States for 
organizing the re-employment of workers in other 
sectors of the economy. These new aids will 
strengthen and combine with conventional re­
employment and vocational retraining' grants. The 
average additional Community contribution for each 
beneficiary under this programme will be 2 000 ECU. 
The cost breakdown of the additional programme for 
the whole period is as follows: 
(million ECU) 
Year 
Early retirement 
Re-employment 
Total 1988 
33 
11 
44 1989 
33 
11 
44 1990 
33 
11 
44 Amount 
99 
33 
132 
Expenditure on social measures from 1988 to 1990 
under Article 56 (2) (b) of the ECSC Treaty will thus 
total 344 million ECU. 
For 1988 the total appropriation for the 
'redeployment' chapter under ECSC own resources in 
the preliminary draft ECSC operational budget 
amounts to 174 million ECU, of which 70 million 
^ECU is for steel workers. But the requirements to 
cover all social aid granted to this sector under Article 
56 (2) (b) stands at 120 million ECU (76 million ECU 
in the form of conventional grants and 44 million 
ECU under the additional programme). The shortfall 
will be made up by transferring 50 million ECU from 
the general budget of the European Communities to 
the ECSC. 
For 1989 and 1990 the requirements for covering all 
social aids granted under Article 56 (2) (b) are estimated at 224 million ECU, i.e. 112 million ECU 
per year. The shortfall in this case will depend both 
on availabilities from own resources under the ECSC 
operational budget and on opportunities for reducing 
the burden in the context of a reform of the structural 
funds under objective No 2. 
3. Social aids under the financial mechanism in Article 
58(2) 
The purpose of using the financial provision available 
under Article 58 (2) for social aids is to ensure that 
the level of social protection is maintained for 
workers affected either by closures under the re­
structuring process or by any other major 
employment-reducing measure, and to ease the cost 
burden of social protection for firms. 
The appropriation available under this mechanism 
(180 million ECU for the whole period 1988 to 1990) 
can be used even in cases where the conditions of 
Article 56 are not met, for examle to help a firm with 
social charges to which there is no government contri­
bution or a firm that is sharply reducing its work­
force without necessarily cutting back its activity. 
In this way it will be possible to cover social measures 
that cannot be taken into account under Article 56 of 
the ECSC Treaty such as redundancy payments or 
part-time working or suspension allowances when 
these measures can be used to stagger the effect of job 
losses over time, and early retirement. 
This mechanism could also cover the internal training 
measures needed where workers are transferred 
within firms. Finally, it could be used to cover the 
expenditure incurred by firms to facilitate the re­
employment of steel workers in other economic 
sectors, except investment expenditure proper, 
primarily within the framework of measures like those 
of the Saar Stahl Stiftung or conversion training leave 
or job promotion funds and under activities to 
promote re-employment financed by redevelopment 
corporations. 
10.10.87 Official Journal of the European Communities No C 272/9 
In cases where the assistance is used to cover the cost 
of job losses not connected with a lower level of 
activity by the firm, the job losses scheduled must be 
on a large scale — for example 10 % of the work­
force of a firm or plant at 1 July 1987. 
X. Regional measures proposed 
In this context, regional policy has a quite specific role: 
the aim is not so much to give direct assistance to those 
losing their jobs (which is a matter for social measures) 
but rather to make an overall contribution to the 
redevelopment and revitalizing of the areas concerned. 
This has consequences both for the quantified targets 
and for the specific choice of measures. The jobs target 
is all-embracing: the aim is to generate alternative 
employment by endeavouring to make up for all the jobs 
lost in the region, including the contraction in 
employment following early retirement. As in most cases 
new jobs will not come into being spontaneously, 
preparatory measures for both the physical and the 
intangible environment are essential. 
1. ECSC conversion loans 
One specific means used for the conversion of steel 
areas is the instrument of conversion loans carrying 
interest rate subsidies under Article 56 (2) (a) of the 
ECSC Treaty. The Commission has repeatedly urged 
its importance, especially because of the direct link 
which can be established between the grant of interest 
rate subsidies and the creation of permanent jobs. The 
Commission considers that for 1988 60 million ECU 
is needed under the ECSC budget for continuing the 
conversion measures, including 40 million ECU from 
new appropriations. The resources under the 
Community programme proposed pursuant to Article 
7 of the ERDF Regulation will help mobilize larger 
financial resources to meet the deepening crisis in the 
steel industry. 
2. The Community programme Resider (see Annex II) 
The principal measure proposed under regional policy 
is a Community programme known as Resider under 
Article 7 of the ERDF Regulation whose aim is to 
develop indigenous resources outside the sector in 
crisis. In view of their individual capacity to adapt and 
their scope for development, it is small and medium-
sized enterprises (SME) which are the main target of 
the business stimulation measures. This seems to be 
the best approach for mobilizing the possibilities of 
regional redeployment. Besides the incentives needed for investments by SME, the programme provides for 
a range of back-up measures such as economic 
enterprise encouragement, the expansion of 
management and organization advisory services, the 
encouragement of services shared by several firms, the 
promotion of product and technology innovation in 
SME, easier access to risk capital and to market 
intelligence surveys covering national, Community 
and non-Community markets. To this range of 
measures is added a proposal to reserve a given 
amount for interest rate subsidies on global loans for 
small industrial projects granted under Article 56 of 
the ECSC Treaty. 
Apart from providing direct aid to SME, there is also 
a need for action to improve certain types of infra­
structure, particularly industrial sites which have 
fallen into disrepair as a result of industrial decline 
and the closure of undertakings (industrial 
wasteland), and to upgrade the infrastructure used in 
other manufacturing activities. As these site are often 
in inner city areas, investment costs are relatively high 
and require some external assistance. 
The Community's Resider programme has been 
formulated in the context of reform of the funds, 
since the contribution form the Community budget 
(55 % of the total cost, or 300 million ECU) will 
cover only the first three years of the programme. If 
the structural funds are doubled, the total ERDF 
allocation will increase from 3 500 million ECU to 
7 000 million ECU a year. This means that the sum 
earmarked for declining industrial areas will amount 
to 1 400 million ECU by 1992. If necessary, the 
allocations to the Community programme could 
therefore be increased substantially. Furthermore, the 
selection of areas will be based on objective criteria 
compatible with those listed for objective No 2. Thus 
areas eligible to benefit from the Community 
programme will be decided upon as the need arises on 
the basis of job losses and the regional situation. This 
approach will have the advantage of forging a close 
link between restructuring activities and regional 
conversion measures. It will also underline the 
preventive nature of Community action. Finally, the 
Commission will give the Member States the technical 
assistance they need to draw up action programmes 
for incorporation into the relevant Community 
support frameworks. It will also ensure that the 
Member States establish coordination committees to 
monitor and evaluate action programmes and to 
change them if necessary. 
No C 272/10 Official Journal of the European Communities 10.10. 87 
Summary of financial requirements for regional measures 
Article 56 of the ECSC Treaty: 60 million ECU/year (see doc. COM(86) 422) 
Community programme Resider 
1. Job losses 1986 to 1989: 215 million ECU (2 500 ECU per job lost) 
2. Reserve for ECSC interest rate subsidies: 60 million ECU (1988 to 1990) 
3. Launch of regional conversion in the new Member States: 25 million ECU 
Total: 300 million ECU (1988 to 1990) 
XL Structural funds: use and reform 
It is clear from the foregoing that the social and regional 
proposals are not only compatible with the Commission's 
proposals concerning the reform of the structural funds 
(doc. COM(87) 100) but also provide a clear example of 
the need for such an approach. The action proposed for 
the regional measures falls within objective No 2 as 
regards both its scale and the selection of areas (see 
point X 2). 
In particular, it is planned that the total appropriation 
for the Resider programme will be increased as the total 
budget of the structural funds is expanded under their 
reform pursuant to Article BOD of the EEC Treaty. 
Generally, as the Commission presents specific proposals 
to the Council for the reform of the structural funds, it 
will detail its proposals for their use, including, as 
applicable, proposals for the Resider programme. 
The action proposed will be implemented on the basis of 
the principles set out in communication COM(86) 422 
on the strengthening of structural measures to assist 
steelmaking areas. 
As regards the social measures, the changing pattern of 
redeployment expenditure (point IX 2) reflects the 
possibility of reducing its impact on the ECSC oper­
ational budget as a result of the reform of the structural 
funds under objective No 2. in the table in point IX (appropriations: about 70 million 
ECU), nor will they provide the 44 million ECU to be 
committed under the additional social aid programme. 
The Commission could not contemplate cutting back on 
expenditure on ECSC research (which is vital in order to 
maintain steel's competitiveness and secure its future role 
as a raw material) or alter its policy concerning reserves 
(which, since 1986 following a review at the request of 
the budgetary authority, are set in accordance with 
objective criteria recommended by independent 
consultants, and are in fact kept virtually constant). 
There is only one possible solution for meeting these 
additional requirements, and that is to transfer from the 
EEC budget to the ECSC in 1988, and until the reform 
of the structural funds makes such an operation 
superfluous by 1989, an amount of 50 million ECU for 
aids to redeployment in the steel sector (including the 
additional programme). 
A proposal for a Council decision is attached (Annex 
IV). The cost to the general budget in 1988 will be 
4 million ECU (see financial statement in Annex IV) to 
be financed in due course by transfer. 
XIII. Inclusion of Spain and Portugal 
XII. ECSC budget (see Annex III) 
In view of the foreseeable stagnation in revenue accruing 
from the levy at a constant rate and given the increased 
social aid commitments which the Commission will try to 
meet under the agreements already signed to assist 
workers in the steel and coal industries, there is virtually 
no further room for manoeuvre within the ECSC budget. 
As stated in points IX, 1 and 2, the appropriations 
entered in the draft ECSC budget for 1988 will not 
cover the probable volume of applications under 
traditional redeployment aids (70 million ECU) set out The Spanish steel industry, which is covered by 
transitional arrangements until the end of 1988, poses a 
particular problem with regard to the industrial measures 
envisaged. The transitional arrangements expire at the 
end of 1988, and extending them would require a 
unanimous decision by the Council and an amendment 
of the Accession Treaty which was ratified by 12 
national parliaments. At the end of the transition period, 
on 1 January 1989, Spain njust be included in the quota 
system. However, in 1988 it will already benefit from the 
social and regional measures envisaged, and, in the 
Commission's view, from the improvement in prices 
brought about by the restructuring undertaken by its 
partners using their own financial resources. 
10.10.87 Official Journal of the European Communities No C 272/11 
Spain is therefore urged to participate in the new re­
structuring effort as from 1 January 1988, but without 
this entailing any shortening of the three-year transition 
period provided for in Article 52 of the Act of Accession. 
The Commission is offering Spain the option of par­
ticipating in the restructuring on a voluntary basis in 
1988 and is willing to work out, in conjunction with the 
Spanish steel industry, appropriate reference figures 
under the quota system. 
For Portugal, the industrial aspects are different. Only a 
very small part of its output would be affected by the 
quota and closure premium systems proposed. Moreover, 
the transition period during which, under the Accession 
Treaty, the Portuguese steel industry is authorized to 
receive national aids lasts until the end of 1990. 
The sections of this paper on industry would therefore 
not concern Portugal. 
On the other hand, Portugal is obviously very closely 
concerned by the social and regional aspects of the 
proposals, which should obviously take account of the 
special situation of Portuguese industry. Portugal, like 
Spain, is therefore invited to join in the policy. 
PROPOSALS 
Within the limits set out above, the Commission is 
responding to the Council's request to present a set of 
coherent measures and again take the initiative in the restructuring of the steel industry, which is still the 
ultimate objective. 
The Council is therefore requested: 
— to give its assent to the introduction of a quota 
system including a system for financing premiums for 
categories I a, I b, II and III, for three years in 
principle, subject to the provisions set out in point V, 
— to authorize the Commission to endeavour to 
determine, in conjunction with Spain and Portugal, 
an arrangement for their participation as from 1988 
in the measures proposed as indicated in point XIII, 
— to adopt the Community programme for steel areas 
(Resider) under Article 7 of the Regional Fund Regu­
lation, 
— to take a unanimous decision to transfer 50 million 
ECU from the general budget to the ECSC in 1988 
for social measures. 
Annexes: 
I. Quota system under Article 58 of the ECSC Treaty 
II. The Resider programme 
III. Information memo on the ECSC budget and on 
ECSC reserves 
rV\ Proposal for a Council Decision concerning a 
contribution to the ECSC from the general budget 
No C 272/12 Official Journal of the European Communities 10.10.87 
ANNEX I 
Article 58 quota system 
The Commission proposes to introduce, with effect from 1 January 1988, a quota system designed both to 
facilitate the further restructuring of the industry and also to create stable market conditions in which that 
restructuring can take place. The introduction of this quota system is conditional upon the Commission 
receiving from the industry, before 30 November, firm commitments in respect of a substantial closure of 
hot-rolling capacity. The duration of the quota system is envisaged as being, as a maximum, three years, 
but if the Commission finds, by 1 August 1988, that the initial commitments plus additional engagements 
given in the interim period cannot be regarded as sufficient to give reasonable assurance of the future 
viability of the industry, the Commission may decide to terminate the quota system at an earlier date. 
The essential elements of the proposed new quota system are given below: 
The product coverage would be limited to categories I a, I b, II and III. The definition of the product 
categories would be as at present, with the exception that hot-rolled coils supplied to other ECSC 
producers for transformation to cold reduced coils would be excluded from the quota system. The 
current quota system for categories IV and VI would therefore terminate at the end of this year. 
The quota references of the steel undertakings would be based on the annual average of actual 
production and actual delivery in the Community of the products in question during the years 1985 
and 1986, subject to undertakings having paid fines levied for excess production or excess deliveries to 
the Common Market. In cases where the possible imposition of fines is still under examination, a 
provisional fine will be levied pending final decision. 
It is envisaged that undertakings which produce only one of the quota products, or where the 
production of one product exceeds 80 % of the total of quota products, would have their references 
adjusted, if need be, to ensure that their share of the references for the product would be at least 
equal to their share arising from the references established on 1 January 1986. Similarly, the 
Commission would adjust the Community delivery references of producers to incorporate additional 
quotas accorded during 1987 under the terms of Decision No 1433/87/ECSC (adjustment of ratio 
I:P). This latter provision will be re-examined in light of the development of market conditions and 
also to take account of the ruling which may be given by the Court of Justice in connection with the 
complaints which have been introduced concerning this matter. 
The proposed quota system would have an article giving the Commission powers to grant sup­
plementary quotas to producers facing exceptional difficulties caused by the existence of the quota 
system, but the total of such supplements would be limited to a ceiling of 1 % of quotas accorded, 
since the updating of the references will have resolved many difficulties. Provision would continue to 
be made for supplements accorded to meet exceptional export opportunities, although it is envisaged 
that this provision would be less necessary in future, again because of the change in the references. 
In category I a, tonnage would be made available to satisfy fully demand arising from the manufacture 
of small welded tubes. 
No further provision for supplementary tonnage is envisaged with the notable exception of a quota 
bonus which would be granted to undertakings which close hot-rolling capacity and subsequently 
transfer the associated references to another undertaking. The amount of the bonus would reflect the 
extent of the closure and would take into account associated reductions in liquid steel capacity. The 
provisions in the current quota system which serve to facilitate the restructuring of the industry will be 
retained, with the exception of the provision which permits an undertaking to transfer references from 
one of its products to other products subsequent to the closure of an installation. 
In the case of an undertaking being declared bankrupt, the Commission would reserve the right, 
having taken all circumstances into account, to prohibit the transfer of all or part of the product 
references to a new owner. 
The Commission is of the view that the preservation of the traditional flows of trade in steel products 
between Member States is inconsistent with the Community objective of achieving an open internal 
market by 1992. It is therefore proposed that the current monitoring procedures introduced under 
Decision No 3717/83/ECSC (accompanying documents and certificates of production) should be 
discontinued at the end of this year. 
The special provisions now applying to Greece and Ireland would be retained. 
Official Journal of the European Communities No C 272/13 
Category la 
— hot-rolled wide strip for direct use and export, 
— medium and heavy plate with a thickness of 3 mm or more, obtained by cutting hot-rolled wide strip, 
— hot-rolled strip less than 600 mm wide, including tube strip. 
Category I b 
— cold-rolled sheet cut or coiled, with a thickness of less than 3 mm, 
— cold-rolled plate of 3 mm and over (cut or coiled), 
— hot-rolled sheet in cut lengths, with a thickness of less than 3 mm. 
Category II 
— reversing mill plate and wide flats. 
Category III 
— heavy sections. 
No C 272/14 Official Journal of the European Communities 10.10.87 
ANNEX II 
Resider programme 
Explanatory memorandum 
1. The attached proposal for a Community programme is based on Article 7 of the ERDF Regulation. The 
purpose of this type of programme is to help in solving serious problems affecting the socio-economic 
situation of the regions by providing 'a better link between the Community's objectives for the structural 
development or conversion of regions and the objectives of other Community policies'. The measure 
under consideration is intended to assist, in tandem with the social measures, the efforts being made to 
restructure the steel industry, by contributing to the development of new economic activities. It thus 
serves directly one of the major objectives of the Community's structural policies, as defined by the 
Commission in its communication to the Council entitled 'Making a success of the Single Act; a new 
frontier for Europe' ('), namely, the conversion of declining industrial areas. 
2. In the case of the steel industry, it has to be said that, despite the major restructuring efforts carried out 
in recent years, notably under Commission Decision No 2320/81/ECSC on the steel aids code, the 
problem of over-capacity is far from being solved. According to the estimates made in connection with 
the general objectives for steel for 1990, capacity cutbacks of some 30 million tonnes are still needed, 
and this could mean a loss of around 80 000 jobs between 1987 and 1989, and this on top of the 
180 000 jobs lost between 1980 and 1985 and the 26 000 in 1986 alone. 
3. The Commission is aware of the serious implications of this trend and has drawn up a number of social 
and regional measures to alleviate them. In particular, it has put forward, in its communication on 
stronger Community structural measures to assist steel restructuring areas (2), an action programme that 
includes the launching of a Community programme within the meaning of Article 7 of the ERDF 
Regulation. 
4. The Community programme proposed is in two parts: 
— first, it is designed to allow the new Member States, once the Council has adopted the 
corresponding regulation, to participate fully in the regional conversion effort under way at 
Community level under conditions comparable to those already enjoyed by the other Member 
States, 
— second, it is designed to back up Member States' regional conversion efforts in cases where re­
structuring up to the end of 1989 entails a deterioration in the socio-economic situation in the main 
areas affected, notably those defined by the Commission in its communication COM(86) 422; this 
measure will make it possible to step up, by mobilizing additional resources, and at the same time to 
extend to 1992 special programmes which are at present being carried out with financial assistance 
from the ERDF under the former non-quota section and to which a total of 285 million ECU has 
been allocated ('). 
5. The measures put forward in this Community programme are focused on the development of 
indigenous potential, the approach best suited to renewing the economic fabric and exploiting the 
dynamism to be found in the regions and areas concerned. They correspond, in fact, to the various 
operations advocated by the Commission in its communication COM(86) 422 and which combine 
improvement of the infrastructure and of the physical and social environment in the areas concerned 
with the development of small and medium-sized enterprises (SME), notably through the provision of 
business advisory services, improvements in management, the development of common services, the 
promotion of innovation, access to risk capital, the preparation of sectoral studies, and investment aid. 
On top of these measures is aid in the form of interest subsidies on global loans granted to small 
industrial projects under Article 56 of the ECSC Treaty. The purpose of the latter mechanism, as 
announced in COM(86) 422, is to permit mobilization of resources for SME in steel areas over and 
above those available from the ECSC budget. 
(') COM(87) 100 final, 15. 2. 1987. 
O COM(86) 422 final, 24. 7. 1986. 
O Council Regulation (EEC) No 2616/80, as amended by Regulation (EEC) No 216/84, (OJ No L 271, 15. 10 1980 
p. 9, and OJ No L 27, 31. 1. 1984, p. 9.) 
10.10. 87 Official Journal of the European Communities No C 272/15 
6. The provisional financial allocations deemed necessary by the Commission for the attached proposal 
amount to 300 million ECU. This provisional amount, concentrated on the first three years of the 
programme, could be increased as a result of the reform of the structural funds. 
The financial breakdown for the first part of each programme concerns Spain only, with the areas to 
benefit being specified in the proposal. As for the second part, the breakdown by Member State will 
depend on the number of jobs lost in the steel industry up to the end of 1989. It will be determined as 
and when the Commission, at the request of the Member States concerned, adopts the decisions 
specifying the areas that will be assisted. 
The programme will cover the period 1988 to 1992. The estimated schedule for commitments is as 
follows: 
Resider programme: Schedule for commitments 
* •"---—~-_^^ Year 
Country •—^^^^ 
Part one (Spain) 
Part two (all Member States) 
Total 1988 
5 
55 
60 1989 
10 
110 
120 1990 
10 
110 
120 1991 
— 
— 1992 
— 
— Total 
25 
275 
300