Report from the Commission to the European Parliament on the implementation of budget heading B5-504 "Measures to assist the phasing-in in the general budget of the activities financed through the ECSC"
Date: 2002-04-10
Institutions: European Commission
Subjects: Belgium, France, Germany, United Kingdom, budgetary reserve (EU), coal industry, development region, general budget (EU), industrial restructuring, iron and steel industry

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 10.04.2002
COM(2002) 154 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT

on the implementation of budget heading B5-504 "Measures to assist the phasing-in
in the general budget of the activities financed through the ECSC"

TABLE OF CONTENTS

Executive Summary.................................................................................................................. 3

1.

1.1

1.2

1.3

1.4

Introduction ................................................................................................................ 4

Legal basis.................................................................................................................... 4

Objectives and expected results ................................................................................... 4

Budgetary aspects......................................................................................................... 5

Human resources .......................................................................................................... 5

2.

Project Development .................................................................................................. 5

2.1.

Initial implementation analyses.................................................................................... 5

2.2

2.3

2.4

3.

3.1

3.2

4.

4.1

4.2

4.3

5.

5.1

5.2

New approach and finding of project partners ............................................................. 6

Feasibility of the "EUROFER Guarantee Fund" project.............................................. 6

Stages of implementation of the "EUROFER Guarantee Fund".................................. 8

Project Partners.......................................................................................................... 8

EUROFER.................................................................................................................... 8

Financial Intermediaries (FIs) ...................................................................................... 9

Implementation Instruments................................................................................... 11

Fiduciary and Management Agreement with EUROFER.......................................... 11

Guarantee Agreements between EUROFER and the FIs........................................... 11

Guarantees (Letters of Guarantee) ............................................................................. 12

Project Monitoring and Reporting by the Commission ....................................... 12

Monitoring.................................................................................................................. 12

Reporting.................................................................................................................... 13

Annex: Comments of the budgetary authority on budget heading B5-504 ............................ 14

2

EXECUTIVE SUMMARY

Budget heading B5-504  ("Measures to assist the phasing-in in the  general  budget of
the  activities  financed  through  the  ECSC"  -  see  Annex)  provides  €  2  million  for  a
pilot project to test the feasibility of measures in favour of regions "where industrial
restructuring is taking place in the coal  and steel  industries".  It  was  implemented  in
2001  by  setting  up  a  guarantee  fund  to  support  job  creation  by  innovative  SMEs  in
these regions.

The  guarantee  fund  is  being  managed  as  a  trust  on  behalf  of  the  Commission  by
EUROFER, the European Confederation of Iron and Steel Industries. EUROFER will
issue guarantees partially covering loans and equity investments made by specialised
financial  intermediaries  to  innovative  SMEs,  including  start-ups,  in  regions  "where
industrial restructuring is taking place in the coal and steel industries".

In order to ensure  the  feasibility  and economic  efficiency of the  pilot  project within
the  budgetary  ceiling  of  €  2  million,  it  was  considered  necessary  to  limit  its
geographical  coverage  to  certain  EU  Member  States  and  regions.  These  regions  are
situated  in  Belgium  (Wallonia),  France,  Germany  (Dortmund)  and  the  United
Kingdom.

As the majority of the traditional hard coal regions in  Belgium,  France and  the  UK,
and  also  the  "Ruhrgebiet"  (Dortmund),  fall  within  the  regional  coverage  of  the
project,  the  interests  of  the  EU  hard  coal  industry  have  also  been  served  by  this
approach.

The  SMEs  benefiting  from  these  guarantees  will  normally  belong  to  the  "new
economy" or other innovative industries or service sectors in which SMEs and start-
ups are typically active.

A guarantee fund was considered the most suitable instrument for implementing this
budget heading, as it has greater leverage than direct loans or grants. The purpose of
these guarantees is to support the creation of new jobs by facilitating access by SMEs
in these regions to investment capital (loans and/or equity investments).

The main objective of the new instrument is to give continuing redevelopment support
to coal and steel regions after the expiry of the ECSC Treaty in July 2002. Most of the
target  regions  defined  in  the  comments  on  the  budget  heading  as  regions  "where
industrial restructuring is taking place in the coal and steel industries" were formerly
ECSC regions benefiting from conversion loans under Article 56 of the ECSC Treaty.

Cooperation with experienced external partners (financial intermediaries) specialised
in the field of SME support and job creation should further contribute to the success
of  this  pilot  project.  If  the  pilot  project  demonstrates  that  this  instrument  meets  a
corresponding  market  need,  a  follow-up  programme  on  a  wider  scale,  including  all
EU Member States and candidate countries, could be envisaged.

3

1.

INTRODUCTION

1.1.

LEGAL BASIS

the
The  report  is  submitted 
requirement  stated  in  the  comments  of  the  budgetary  authority  in  1999  to
budget  heading  B5-504N  of 
the  European
Communities for the year 20001.

the  European  Parliament  following 

the  general  budget  of 

to 

In  accordance  with  Point  37(a)(i)  of  the  Interinstitutional  Agreement  of  6
May  1999  between  the  European  Parliament, 
the
Commission  on  budgetary  discipline  and  improvement  of  the  budgetary
procedure2, no specific legal basis is required for the implementation of this
budget heading, because it is a pilot project.

the  Council  and 

1.2

OBJECTIVES AND EXPECTED RESULTS

1.2.1 General objective

The general  objective  of  the  measures  envisaged under budget heading B5-
504  was  to  finance  measures  to  facilitate  the  transition  from  activities
traditionally financed from the ECSC budget to programmes existing in the
general budget, particularly the Structural Funds and research. It has the aim
of  promoting  the  establishment  of  innovative  enterprises  (SMEs)  linked  to
the industrial conversion of the coal and steel industries.

1.2.2

Specific objective

The specific objective of the pilot project is to stimulate job creation in EU
regions  where  industrial  restructuring  is  taking  place  in  the  coal  and  steel
industries by supporting the investment activities of innovative SMEs.

1.2.3

Desired results:

– 

– 

– 

regions  where 
investment  by 
restructuring is taking place in the coal and steel industries;

innovative  SMEs 

in 

industrial

creation of new jobs;

verification of the practical feasibility of an SME guarantee fund of this
kind.  On  the  basis  of  the  next  report  in  2003,  a  similar  project  on  a
wider scale could be envisaged.

1 see Annex
2 OJ C 172, 18.6.1999, p. 1

4

                                                
1.3

BUDGETARY ASPECTS

Commitments in € million:

Year

2001

2002

2003 and
subsequent years

TOTAL

2.0

0.0

0.0

2.0

Payments in € million:

Year

2001

2002

2003 and
subsequent years

TOTAL

1.5

0.5

0.0

2.0

Calculation of cost:

The amount of € 2 million is a maximum amount. The exact total cost, which
must not exceed € 2 million, is expected to be lower than that amount; it is
unlikely that the majority of guarantees issued will be called on.

1.4

HUMAN RESOURCES

Since the Guarantee Fund itself will be managed by EUROFER, monitoring
by  the  Commission  does  not  require  any  additional  staff.  Staffing
requirements can be met by  employing Commission  staff formerly  engaged
in the management of the ECSC loan scheme.

2.

2.1

PROJECT DEVELOPMENT

INITIAL IMPLEMENTATION ANALYSES

Following  contacts  between  several  Directorates-General  (e.g.  DG  ECFIN,
DG  EMPL,  DG  ENTR,  DG  REGIO,  DG  RTD,  DG  BUDG,  DG  FC),  the
implementation  of  the  budget  heading  was  entrusted  to  DG  ECFIN-FOS  in
November 1999.

The  initial  implementation  analyses  made  in  late  1999  and  in  spring  2000
came  to  the  conclusion  that  it  was  not  possible  to  implement  the  budget
heading  within  the  budgetary  ceiling  of  €  2  million  and  still  cover  the  full
range of  all EU Member States  plus  all  candidate  countries  as  proposed  by
the EP Committee on Budgets.

In  practice  this  would  have  meant  losing  the  "additionality"  of  the  EU
contribution. Moreover, it was not feasible with a budget of this size to cover
all  of  the  objectives  mentioned  in  the  comments  of  the  Committee  on
Budgets.

5

There  also  was  no  possibility  of  linking  this  budget  heading  to  already
existing Community instruments. Furthermore, any launch of an autonomous
new  financial  instrument  within  these  budgetary  limits  would  have  led  to
inadequate cost/benefit ratios.

2.2

NEW APPROACH AND FINDING OF PROJECT PARTNERS

For  the  reasons  outlined  above,  a  new  approach  had  to  be  found  to  make
implementation  of  this  budget  heading  feasible.  Firstly,  the  geographical
coverage was reduced to a few selected EU Member States and regions, and
the kind of instrument to be created was changed. Instead of establishing an
autonomous main instrument (such as loans or grants), it became clear that a
complementary 
for
reinforcing 
supporting SMEs, was more cost-effective.

the  existing 

instruments 

instrument, 

It was finally decided to set up a special SME guarantee fund for this purpose
by  analogy  with  already  existing  guarantee  funds,  such  as  the  SME
Guarantee  Facility  (managed  by  the  European  Investment  Fund)  in  the
framework of the Growth and Employment Initiative.3

Discussions with the EIF and the EIB concerning the management of a small
pilot or test fund indicated that these institutions were reluctant to take over
the  management  of  a  specialised  fund  of  this  size.  Therefore,  a  primarily
non-profit  oriented  partner  was  sought  who  was  both  able  and  willing  to
accept the Commission's special conditions for managing such a fund. Apart
from  the  EIF  and  the  EIB,  several  associations  and  companies  in  the  coal
sector4 were contacted and they also declined this cooperation offer.

In  September  2000  an  initial  provisional  agreement  concerning  the
management  of  the  guarantee  fund  was  reached  with  EUROFER,  the
European  Confederation  of  Iron  and  Steel  Industries,  which  has  its
headquarters in Brussels.

EUROFER  was  the  best  available  and  most  realistic  option  owing  to  its
broad  representation,  its  long  experience  in  handling  major  projects,
including those co-financed by the European Commission, and its ability  to
cooperate with experienced intermediaries in the very specific field covered
by the project.

2.3

FEASIBILITY OF THE "EUROFER GUARANTEE FUND" PROJECT

The arguments for the feasibility of the pilot project "EUROFER Guarantee
Fund" can be summarised as follows:

3 Council Decision 98/347/EC of 19.5.1998, OJ L 155, 29.5.1998, p. 43.
4 e.g. CESCO (European Solid Fuel  Association),  Gesamtverband des deutschen Steinkohlebergbaus,

Essen and RAG Coal International, Essen.

6

                                                
1.

It  complies  with  the  terms  of  Point  37(a)(i)5  of  the  Inter-Institutional
Agreement (IIA) of 6 May 19996, in that

a)

b)

c)

it meets the criteria of a "pilot scheme of an experimental nature
aimed at testing the feasibility of an action and its usefulness";

the relevant commitment appropriations have been entered in the
budget for one financial year only (two financial years being the
maximum  period for  that  purpose  according  to  Point  37(a)(i)  of
the IIA) and

their total amount of € 2 million does not exceed the limit of € 32
million stipulated in Point 37(a)(i) for such pilot schemes.

2.

It is consistent with the Commission's policy on SMEs in general and
with the preparations for the expiry of the ECSC as regards:

a)

b)

c)

d)

the aim of creating jobs by supporting innovative SMEs;

the instruments used for that purpose (guarantee facility);

the  management  method  used  (framework  agreement  with  one
single institution acting as an interface with specialised financial
intermediaries);

its compatibility with the objectives of winding up  the  activities
of the ECSC and of phasing them in into the general budget.

3.

4.

It  is  compatible  with  the  principle  of  subsidiarity:  Contacts  with
specialised institutions in the field of economic redevelopment of coal
and  steel  regions  have  shown  that  there  is  no  national  or  Community
instrument of the same kind and for the same regions.

It  corresponds  to  the  principles  of  economy  and  sound  financial
management  as  stated  in  Article  2  of  the  Financial  Regulation  of  21
December  1977  applicable  to  the  general  budget  of  the  European
Communities:

a)

The outsourcing of the fund management limits the management
obligations of the Commission mainly to monitoring duties, thus
these  measures;
allowing  a  good  cost-benefit 

ratio 

for 

5 This article deals with "pilot schemes of an experimental nature aimed at testing the feasibility of an

action and its usefulness".

6 see above, 1.1; OJ C 172, 18.6.1999, p. 1

7

                                                
b)

c)

The  mechanisms  of  limited  guarantees7,  risk  sharing8  and
additionality9  ensure  optimal  leverage  of  the  Community  funds
used for the budget heading;

An  initial  report  on  the  implementation  of  the  project  was
prepared in 2001, a further report will follow in 2003 and a final
report  will  be  made  after  the  winding-up  of  the  guarantee  fund,
i.e. approximately in 2011.

5.

It  saves  Commission  administrative  and  management  resources  and
does not require any additional staff (see above, 1.4).

2.4

STAGES OF IMPLEMENTATION OF THE "EUROFER GUARANTEE FUND"

this 

the  formal  approval  of 

implementation  proposal  by
Following 
Commission  Decision  PE/2000/2821  of  22  Dec.  200010,  the  Fiduciary  and
Management  Agreement  (FMA)  between  the  Commission  and  EUROFER
was signed on 29 March 2001. In April 2001 the Commission transferred the
first  tranche  of  the  funds  (€  1.5  million)  to  the  EUROFER  trust  account
established  for  this  purpose.  The  remaining  tranche  of  €  0.5  million  is
scheduled to be paid, subject to budgetary availability, as soon as this can be
justified by the progress of the project.

Under the provisions of the FMA, EUROFER has agreed to issue guarantees
to  partially  cover 
investments  made  by  Financial
Intermediaries  (FIs)  to  innovative  SMEs  in  regions  where  industrial
restructuring  is  taking  place  in  the  coal  and  steel  industries.  Four  FIs  have
been selected by EUROFER and accepted by the Commission. They are:

loans  or  equity 

1.

2.

3.

4.

SODIE France

SODIE S.A. Belgium

UK Steel Enterprise Limited

Venture Capital Dortmund GmbH ("Dortmund Project")

The framework agreements between EUROFER and these FIs were signed in
October/November  2001.  The  first  guarantees  have  been  issued  by
EUROFER in February 2002.

7 The EUROFER Guarantees are limited by risk and by portfolio.
8 Each risk has to be shared with the Financial Intermediary.
9 The  use  of  EUROFER  Guarantees  is  restricted  to  those  cases  where  other  and,  in  particular

commercial, guarantees are not available.

10 not published in the OJ

8

                                                
3.

PROJECT PARTNERS

The good reputation of EUROFER and the successful track record of the FIs
involved contributed to the Commission's decision to implement the project
in this way and with these partners.

3.1

EUROFER

The  European  Confederation  of  Iron  and  Steel  Industries  (EUROFER)  was
founded in 1976. Members and Associate Members are steel companies and
national steel federations throughout the European Union and the Central and
Eastern European Countries.

In 2000, 155 million tonnes of crude steel were produced by the EU Member
companies of EUROFER. This represents 95% of the total productions in the
EU.  The  Associate  members  in  Central  and  Eastern  European  Countries,
with  28  million  tonnes  of  crude  steel,  account  for  95%  of  the  total  steel
production in this region.

The  objectives  of  EUROFER  are  cooperation  between  the  national
federations and  companies  in  all matters that  contribute to  the development
of  the  European  steel  industry,  and  the  representation  of  the  common
interests  of  its  members  vis-à-vis  third  parties,  notably  the  European
institutions and other international organisations.

EUROFER  possesses  considerable  experience  and  proven  qualifications  in
handling major projects, such as:

"Business Support Program"

(Adaptation  support  to  Central  and  Eastern  European  steel  federations  in
view of their countries' accession to the European Union)

Period:

July 2000 to June 2002

Total budget:

€ 1.1 million

EC contribution: € 880 000

"Management of Change and Human Resources"

(Study in cooperation with the main  European  steel producers  investigating
the processes of change that have taken place in the industry and how these
processes  have  constructively  influenced  dialogue  between  employers  and
the workforce in the European steel industry)

Period:

December 1996 to June 2000

Total budget:

> € 450 000

EC contribution: € 300 000

9

3.2

FINANCIAL INTERMEDIARIES

3.2.1

SODIE France

SODIE11 France, created in 1983, is a subsidiary of USINOR. At present it is
owned  55%  by  USINOR12  and  45%  by  a  bank.13  Its  business 
is
redevelopment, i.e. the granting of financial and practical advisory support to
mainly  SMEs/start-ups  and  training  and  qualification  support  to  employees
or  the  unemployed.  Since  1983  SODIE  has  supported  about  8  000
companies, i.e. on an average 450 companies per year, and these companies
have created more than 100 000 jobs. In parallel, almost 20 000 employees or
unemployed persons have been assisted in their mobility and training efforts.

Today,  SODIE  is  cooperating  in  France  and  Belgium  with  a  number  of
government authorities at all levels and with companies of all sizes in more
than 30 employment regions. It has a long list of customers, including cities,
ministries and well-known major companies such as ALCATEL and IBM.

3.2.2

SODIE Belgium

SODIE  Belgium  is  a  recently  established  branch  of  SODIE  France.  It  was
founded  following  the  acquisition  of  75%  of  the  share  capital  of
COCKERILL-SAMBRE SA by USINOR. Its mission is to create 4 000 new
jobs in Wallonia. This is to be achieved mainly by supporting SMEs, e.g. by
granting loans with interest rebates.

3.2.3

UK Steel Enterprise Limited (UKSE)

UK  Steel  Enterprise  Limited  (UKSE)  is  a  private  incorporated  company
specialised  in  redevelopment  support.  It  is  a  wholly-owned  subsidiary  of
CORUS Group plc and was  established in 1975 by the former British Steel
plc.

For over 25 years it has provided 2 400 SMEs with over £ 50 million (€ 80.6
million) of finance of which £ 39 million (€ 62.9 million) have been in  the
form of loans or share capital, with the balance provided in other forms.

Altogether  more  than  3 700  businesses  have  been  directly  assisted  with
finance or workspace, and in some cases with both. It is estimated that these
businesses have created more than 60 000 new jobs. In addition, businesses
assisted by organisations set up by UKSE in the early 1980s are estimated to
have created at least another 50 000 jobs.

3.2.4

Venture Capital Dortmund GmbH ("Dortmund Project")

The Dortmund Project is a public-private partnership financed and run by the
in  cooperation  with  private  companies  such  as
city  of  Dortmund 

11 Société pour le développement de l'industrie et de l'emploi
12 via SODISID, which is a wholly-owned subisidiary of USINOR
13 Caisse des Dépôts et Consignations, via its subsidiary SCET

10

                                                
ThyssenKrupp, venture capital firms, "business angels" and consulting firms.
Its aim is the redevelopment of Dortmund and its surroundings from a centre
of  traditional  heavy  industry  into  a  centre  of  the  New  Economy  (E-
commerce, IT, microsystem technology).

The measures envisaged and started (in 2000) include the encouragement of
existing and new companies by making loans, venture capital, premises and
highly  skilled  personnel  available  to  them,  inviting  foreign  companies  to
invest  and  set  up  firms  in  the  region,  improving  the  infrastructure  and
providing management and logistical support.

Venture  Capital  Dortmund  GmbH  is  a  limited  liability  company  and
subsidiary  of  Stadtsparkasse  Dortmund,  which  acts  as  one  of  the  banking
partners of the  Dortmund Project. Although  only  founded  in  2000,  Venture
Capital Dortmund (VCD) GmbH can draw on the experience in the field of
SME  financing  of  Stadtsparkasse  Dortmund  gained  during  more  than  30
years of operation. Since the start of its business activities in 2000, VCD has
invested about € 7.7 million (DM 15 million) in some 10 companies.

All companies financed by VCD have to correspond to the usual definition of
SMEs;  particular  attention 
the  field  of  IT,
telecommunication,  microsystems  technology,  robotics  and  biotechnology.
The average size of equity investments made by VCD is between € 256 000 -
€ 511 000 (DM 500 000 and DM 1 000 000).

to  SMEs 

is  given 

in 

4.

4.1

IMPLEMENTATION INSTRUMENTS

THE  FIDUCIARY  AND  MANAGEMENT  AGREEMENT  (FMA)  BETWEEN  THE
EUROPEAN COMMISSION AND EUROFER

EUROFER will have full discretionary power to reject or approve individual
guarantee  applications.  Each  risk  partially  covered  by  a  EUROFER
Guarantee  has  to  be  shared  with  the  FI.  EUROFER  has  to  report  to  the
Commission  concerning  its  activities  related  to  the  Guarantee  Fund,
including  the  delivery  of  copies  of  all  relevant  documents  and  of  the  Trust
Account statements.

The initial availability period for the guarantees will be two years, ending in
September  2003.  The  Commission  will  remunerate  EUROFER  for  the
services provided under the FMA by paying a flat management fee calculated
on the basis of the guarantees committed. The Guarantee Fund will be wound
up at the latest by 2011.

The FMA contains provisions on reporting, auditing, monitoring and control,
including the right of the Court of Auditors of the European Communities to
carry  out  its  audits  both  in  EUROFER's  premises  and  in  those  of  all  final
beneficiaries.

11

4.2

THE  GUARANTEE  AGREEMENTS  BETWEEN  EUROFER  AND  THE
FINANCIAL INTERMEDIARIES (FIS)

These  agreements  are  framework  agreements  establishing  the  terms  and
conditions  of  the  partnership  and  cooperation  for  this  project  between
EUROFER and the FIs. Among other things determined in these agreements
are the Guarantee Rate, the Guarantee Cap and the maximum (loan or equity
investment) portfolio partially covered by EUROFER Guarantees.

In 2002 the maximum size of this portfolio partially covered by EUROFER
guarantees  should  be  approximately  €  3  333  000  per  FI.14  The  EUROFER
Guarantee Fund is available to the FIs free of charge.

If a Financial Intermediary  (FI) is not able to  use  all  its guarantee  portfolio
within  the  first  two  years  after  the  signature  of  the  Guarantee  Agreement,
EUROFER will either distribute the unused portfolio among the other FIs or
search for a new FI, even in another region.

4.3

THE GUARANTEES (LETTERS OF GUARANTEE)

In order to receive guarantee cover for loans granted to or equity investments
made  in  eligible  SMEs,  the  FIs  have  to  submit  guarantee  applications  to
EUROFER.  EUROFER  will  issue  the  guarantees  in  its  own  name  but  on
behalf  of  the  Commission  on  a  trust  basis.  It  will  be  in  principle  free  to
approve or reject individual applications. All projects for which applications
have  been  submitted  will  be  regularly  reported  to  the  Commission,  which
will  also  receive  regular  copies  of  the  Trust  Account  statements.  All
guarantees  will  expire  at  the  latest  seven  years  after  the  date  of  the  loan
agreement or the date when the equity investment was made, and in any case
not later than March 2010.

In order to be eligible for EUROFER guarantees, loans or equity investments
have to meet the following criteria:

a)

b)

c)

The final beneficiary has to be an SME.15

The SME has to be established in an EU Member State.

The  SME  has  to  be  established  in  a  region  where  industrial
restructuring is taking place in the coal and steel industries.

14 This  amount  is  calculated  on  the  basis  of  the  Guarantee  Cap  of  €  500  000  per  FI.  Since  the
Guarantee  Cap  is  defined  in  the  Guarantee  Agreements  as  15%  of  the  Portfolio,  the  Portfolio  is
calculated by dividing the amount of € 500 000 by 15 (= 33 333.33) and multiplying the result by
100 (= 3 333 333).
"Guarantee Cap" means the total amount of the EUROFER payment obligations under EUROFER
Guarantees,  expressed  as  a  percentage  of  the  Portfolio  and  as  a  nominal  amount.  The  amount  of
€ 500 000 is obtained by dividing the total amount of € 2 000 000 by 4, thus allotting one quarter
thereof to each of the four FIs.
"Portfolio" means the aggregate amount of the principal of the loans or equity investments which
are made by an FI to SMEs and which are covered by EUROFER Guarantees.

15 as defined in annex to Commission Recommendation 96/280/EC (OJ L 107, 30.4.1996, p.4)

12

                                                
d)

e)

f)

The SME must demonstrate a high degree of innovation.16

The  financing  which  is  ultimately  covered  by  the  EUROFER
Guarantee  has  to  be  used  for  a  new  project  or  new  investment.
Eligibility for any kind of financial rescheduling is explicitly ruled out.

The  purpose  of  the  financing  which  is  ultimately  covered  by  the
EUROFER  Guarantee  must  be,  directly  or  indirectly,  to  create  new
jobs  within  the  period  of  validity  of  the  EUROFER  Guarantee
concerned.

g)

The minimum duration of the loan or equity investment is three years.

5.

PROJECT MONITORING AND REPORTING BY THE COMMISSION

5.1

MONITORING

The Commission is monitoring EUROFER's fund management activities on
the  basis  of  a  monitoring  programme  set  up  in  line  with  the  monitoring
programmes for existing comparable funds. Such comparable  funds are  e.g.
the SME Guarantee Facility of the Growth and Employment Initiative or the
ETF  Start-up  Facility,  which  are  both  managed  by  the  EIF17.  In  addition  to
the  screening  of  the  reports  and  Trust  Account  statements  received  from
EUROFER, the Commission will carry out audit missions to EUROFER, the
FIs and selected final beneficiaries.

5.2

REPORTING

The  Commission  will  monitor  and  verify  EUROFER's  compliance  with  its
contractual  obligations.  The  number  of  SME  loans  or  equity  investments
covered by EUROFER Guarantees is estimated at as many as 200 during the
whole life cycle of the Guarantee Fund.

The  exact  influence  or  contribution  of  these  guarantees  on  the  creation  of
new  jobs  cannot  yet  be  estimated.  It  will  be  evaluated  on  the  basis  of
questionnaires and reports from the FIs and the final beneficiaries and on on-
site missions.

A further  report on the implementation  of this project  is  to  be  submitted  to
the EP in 2003. That second report should be based on the experience gained
from the issuing by EUROFER of the bulk of the initially available guarantee

16 "High degree of innovation" means that priority will be given to SMEs that

a)  intend  to  enter  into  knowledge-based  production  or  the  production  of  knowledge-based
products/services or
b) are characterised by a substantial innovation and not only by incremental innovation in current
business or
c) focus their efforts on the production of high-added-value products/services.
17 see 2.2; Council Decision 98/347/EC of 19.5.1998, OJ L 155, 29.5.1998, p. 43

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sum.  A  final  report  will  follow  after  the  winding-up  of  the  EUROFER
Guarantee Fund, i.e. at the latest in 2011.

14

B5-504 Measures to assist the phasing-in  in the  general  budget  of  the  activities

financed through the ECSC18

Annex

Remarks

New article

European  Parliament  resolution  of  15  November  1996  on  the  integration  of  ECSC
activities into the budget of the Union (OJ C 362, 1.12.1996, p. 327).

Resolution  of  the  Council  of  21  June  1999  concerning  the  expiry  of  the  Treaty
establishing the European Coal and Steel Community (OJ C 190, 7.7.1999, p. 1).

This appropriation is intended to finance measures to facilitate the transition between
the  activities  traditionally  financed  from  the  ECSC  budget  and  the  programmes
existing  in  the  general  budget,  particularly  the  Structural  Funds  and  research.  It  is
intended, in particular, to support measures for which, on account of their specificity,
there is as yet no corresponding item in Community programmes.

It has the aim of promoting, particularly by means of European  Information Centres
or  Information Outlets,  the establishment of innovative businesses (SMEs) linked to
the  industrial  conversion  of  the  coal  and  steel  industries  (business  incubators,
provision  of  industrial  tools  and  financing  facilities  for  employees  undergoing
retraining), particularly in the fields of the environment and health and safety at work.

It  is  also  intended  to  promote  initiatives,  if  possible  pursued  in  a  bipartite  context
(involving  employers  and  employees),  in  the  fields  of  information,  training  and
stimulation in businesses, especially with regard to  the  adjustment  of  working  times
resulting from restructuring.

In selecting the beneficiaries of these projects, the Commission will assign priority to
regions where industrial restructuring is taking place in the coal and steel industries,
including in the applicant countries.

In  2001,  the  Commission  will  submit  to  Parliament  a  report  on  the  results  of  its
projects and on the activities which have received funding from these appropriations.

18 OJ L 40, 14.2.2000, p. 980-981: European Parliament 2000/81/EC, ECSC, Euratom, Final adoption

of the general budget of the European Union for the financial year 2000

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