Opinion of the Committee of the Regions on establishing the European globalisation adjustment fund
Date: 2009-04-22
Institutions: European Committee of the Regions
Subjects: CoR opinion, European Globalisation Adjustment Fund, dismissal, economic recession, financial management, globalisation, integration into employment, principle of proportionality








C_2009200EN.01007001.xml










25.8.2009   


EN


Official Journal of the European Union


C 200/70





Opinion of the Committee of the Regions on establishing the European globalisation adjustment fund
(2009/C 200/13)
THE COMMITTEE OF THE REGIONS ISSUES THE FOLLOWING RECOMMENDATIONS:






—


calls on the Commission and the Member States to work together with local and regional authorities and other stakeholders and to observe the subsidiarity and proportionality principles whenever implementing the EGF;










—


is aware of the cyclical occurrence of economic crises and thus proposes that the EGF time limit be adjusted to the multi-annual financial framework in order to increase planning security;










—


notes that measures eligible for funding under the EGF can also be funded at a co-financing rate of 85 % by the European Social Fund (ESF). Consequently, many cities, regions, and local and regional authorities have no reason to look to the EGF at a co-financing rate of 50 % or even 75 %. It is therefore suggested that the EGF co-financing rate be raised to at least 85 %;










—


notes that Article 28 of the Interinstitutional Agreement between the European Parliament, the Council and the Commission of 17 May 2006 on budgetary discipline and sound financial management (1) provides that the EGF may not exceed a maximum annual amount of EUR 500 million; welcomes the announcement in the Communication on the European Economic Recovery Plan that the Commission will review the budgetary means available for the EGF in the light of the implementation of the revised rules.












Rapporteur



:


Dr Silberg (EE/UEN-EA), Chairman of Kose Municipal Council




Reference document
Regulation of the European Parliament and of the Council amending Regulation (EC) No 1927/2006 on establishing the European Globalisation Adjustment Fund COM (2008) 867 final.
I.   POLICY RECOMMENDATIONS
THE COMMITTEE OF THE REGIONS,
as the European institution that, in accordance with the Treaty on European Union, represents the local and regional authorities of the Member States,
General comments






1.


welcomes the European Commission's proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1927/2006 on establishing the European Globalisation Adjustment Fund (hereinafter ‘EGF’) and calls on the Commission and the Member States to work together with local and regional authorities and other stakeholders and to observe the subsidiarity and proportionality principles whenever implementing the EGF;










2.


notes that the planned measures are aimed at amending the EGF Regulation and thus showing solidarity towards workers who have lost their jobs as a consequence of major changes brought about by globalisation, and at introducing a temporary provision to support workers made redundant as a result of the global economic and financial crisis; is aware of the cyclical occurrence of economic crises and thus proposes that the time limit be adjusted to the multi-annual financial framework in order to increase planning security;










3.


recalls that the opinion of the Committee of the Regions on the Proposal for a Regulation of the European Parliament and of the Council establishing the European Globalisation Adjustment Fund (OJ C 51, 6.3.2007, p. 1), pointed out that local and regional authorities play an active role in responding to major redundancies, and that the following suggestions have already been made: the maximum annual spending under the Fund should be set at EUR 1 bn, if this is compatible with the provisions of the financial perspective for 2007-2013; the EGF should not undermine the responsibility of Member States to find their own response to economic restructuring; the EGF should intervene following at least 500 redundancies at a company in a region where unemployment, measured at NUTS III level, is higher than the national average, or following at least 500 redundancies over a period of 12 months in one or more enterprises in a sector, measured at NACE 2 level, which represents at least 1 % of regional employment or where regional employment measured at NUTS II level has fallen by at least 10 % over the same period;










4.


points out that the EGF came into effect in 2007 and 2008 only very slowly (only 7,3 % of the available funds were used), which clearly shows that the use of the funds is limited under the criteria that currently apply for submitting applications;










5.


supports the Commission's intention to revise the rules of the EGF so that it can intervene rapidly in key sectors, for example through co-financing vocational training measures and job placements for workers who are made redundant as a result of the economic crisis;










6.


believes that the problems that have arisen from the current economic and financial crisis are growing into a social crisis and a crisis of confidence, and that local and regional authorities must inevitably shoulder much of the impact of this crisis and the responsibility for overcoming it. For this reason, the EGF, its new objectives and the involvement of local and regional authorities are more important than ever;










7.


stresses that achieving the EGF objective must make a clear contribution to the Lisbon strategy goals: increased employment, reduction in unemployment and inactivity, improving quality and productivity at work, improving the attractiveness of jobs and strengthening social and territorial cohesion;










8.


believes that, from an employment policy point of view, SMEs also represent untapped potential for creating and maintaining jobs; further believes that the EGF can offer additional opportunities and strengthen public confidence in the business sector in Europe;










9.


is concerned that, in the light of the global economic and financial crisis, the outermost regions and the economically weaker regions and countries are not able to meet the conditions for access to the EGF, particularly the requirement for co-financing of 50 %, and that it is therefore the risk exists that use of the EGF will further increase disparities between the centre and the periphery;










10.


notes that measures eligible for funding under the EGF can also be funded at a co-financing rate of 85 % by the European Social Fund (ESF), which principally funds the active ESF labour market measures (including projects to deal with the consequences of redundancies). Consequently, many cities, regions, and local and regional authorities have no reason to look to the EGF at a co-financing rate of 50 % or even 75 %. It is therefore suggested that the EGF co-financing rate be raised to at least 85 %;










11.


shares the view that the global financial crisis has already led to mass redundancies in an increasing number of sectors of the economy and is continuing to do so, as the situation is being driven by the limited availability of credit and a reduction in consumer purchasing power; this development will continue in the near future; supports the European Commission's intention to adopt measures to make the EGF an instrument that is better placed to respond to such problems;










12.


notes that Article 28 of the Interinstitutional Agreement between the European Parliament, the Council and the Commission of 17 May 2006 on budgetary discipline and sound financial management (1) provides that the EGF may not exceed a maximum annual amount of EUR 500 million; welcomes the announcement in the Communication on the European Economic Recovery Plan that the Commission will review the budgetary means available for the EGF in the light of the implementation of the revised rules;










13.


stresses the positive overall impact of globalisation on economic growth in the Community and therefore emphasises that a fund to soften the negative impact of globalisation should be provided with appropriate funding;










14.


is concerned that in a number of countries, co-financing of EU programmes including European Globalisation Fund falls to local and regional authorities, who are at the same time facing budget cuts;




Specific comments on the proposal






15.


accepts that it is necessary to reduce the minimum number of redundancies from 1 000 to 500 and thus to deal with the questions raised about the intervention criteria and take on board a definition arising from case law of the event constituting redundancy, but considers a more precise definition of the event constituting redundancy and its unambiguous application in the Member States to be necessary (2);










16.


supports the proposed change that aims to ensure equitable and non-discriminatory treatment of those workers whose redundancy occurred before or after the 4-month reference period but can be clearly linked to the same redundancy event;










17.


welcomes the proposed amendments that clarify the basis for calculating the amount available for technical assistance and the range of activities that can be funded under Article 13;










18.


supports the proposed change whereby the implementation period of an EGF contribution is to be increased from 12 to 24 months and believes that this measure will help workers who have lost their jobs to complete retraining programmes, which in the current economic climate will probably take longer, and to obtain new qualifications;










19.


shares the view that, on the basis of the mid-term evaluation provided for in Article 17(1)(a), the European Parliament and the Council should be able to review the EGF Regulation, including the temporary derogation provided for in Article 1, paragraph 1a, on the basis of a proposal from the Commission.




II.   SPECIFIC SUGGESTIONS FOR IMPROVEMENT
Regulation of the European Parliament and of the Council amending Regulation (EC) No 1927/2006 on establishing the European Globalisation Adjustment Fund.






Wording proposed by the Commission


CoR amendment










(5)


In order to ensure that the intervention criteria are applied transparently, a definition of the event constituting redundancy should be introduced. Seeking to give more flexibility to the Member States to present applications and to meet better the solidarity objective, the redundancy threshold should be lowered.












(5)


In order to ensure that the intervention criteria are applied transparently, a more precise definition of the event constituting redundancy should be introduced and applied unambiguously in the Member States. Seeking to give more flexibility to the Member States to present applications and to meet better the solidarity objective, the redundancy threshold should be lowered.








Reason
The aim should be to harmonise the concept of redundancy and its application in the Member States.






Wording proposed by the Commission


CoR amendment




Article 1
Regulation (EC) No 1927/2006 is amended as follows:






1.


In Article 1 a new paragraph 1a is inserted:
‘(1a)   By way of derogation from paragraph 1, the EGF shall also provide support to workers made redundant as a result of the global financial and economic crisis, provided applications comply with the criteria set out in Article 2(a), (b) or (c).
This derogation shall apply to all applications submitted before 31 December 2010.’






Article 1
Regulation (EC) No 1927/2006 is amended as follows:






1.


In Article 1 a new paragraph 1a is inserted:
‘(1a)   By way of derogation from paragraph 1, the EGF shall also provide support to workers made redundant as a result of the global financial and economic crisis, provided applications comply with the criteria set out in Article 2(a), (b) or (c).
This derogation shall apply to all applications submitted before 31 December 2010
2013.’








Reason
The purpose of adjusting the time limit to the multi-annual financial framework seems necessary in order to enable the adequate planning of the EGF.






Wording proposed by the Commission


CoR amendment




Article 2 is replaced by the following:

‘Article 2
Intervention criteria
A financial contribution from the EGF shall be provided where major structural changes in world trade patterns lead to a serious economic disruption, notably a substantial increase of imports into the European Union, or a rapid decline of the EU market share in a given sector or a delocalisation to third countries, which results in:’



Article 2 is replaced by the following:

‘Article 2
Intervention criteria
A financial contribution from the EGF shall be provided where major structural changes in world trade patterns lead to a serious economic disruption, notably a substantial increase of imports into the European Union, or a rapid decline of the EU market share in a given sector or a delocalisation to third
lower-cost countries, which results in:’














Wording proposed by the Commission


CoR amendment




Article 2 is replaced by the following:

‘Article 2
Intervention criteria






(b)


at least 500 redundancies over a period of 9 months, particularly in small or medium-sized enterprises, in a NACE 2 division in one region or two contiguous regions at NUTS II level, or










(c)


in small labour markets or in exceptional circumstances, where duly substantiated by the Member State concerned, an application for a contribution from the EGF may be considered admissible even if the conditions laid down in points a) or b) are not entirely met, when redundancies have a serious impact on employment and the local economy. The Member State shall specify that its application does not entirely meet the intervention criteria set out in point a) or point b). The aggregated amount of contributions in exceptional circumstances may not exceed 15 % of the EGF each year.’







Article 2 is replaced by the following:

‘Article 2
Intervention criteria






(b)


at least 500 redundancies over a period of 9 months, particularly in small or medium-sized enterprises, in a NACE 2 division in one region or two contiguous regions at NUTS II level, or










(c)


in small labour markets or in exceptional circumstances, where duly substantiated by the Member State concerned, an application for a contribution from the EGF may be considered admissible even if the conditions laid down in points a) or b) are not entirely met, when redundancies have a serious impact on employment and the local economy. The Member State shall specify that its application does not entirely meet the intervention criteria set out in point a) or point b). The aggregated amount of contributions in exceptional circumstances may not exceed 15 % of the EGF each year.’









Reason






(c)


Whereas ESF funding is planned for the long term and under a fairly rigid system, problems could be addressed more flexibly on a case-by-case basis under the more flexible EGF intervention model.










Wording proposed by the Commission


CoR amendment




Article 5 is amended as follows:
In paragraph 2 point a) is replaced by the following:






‘(a)


a reasoned analysis of the link between the redundancies and major structural changes in world trade patterns or the financial and economic crisis, a demonstration of the number of redundancies, and an explanation of the unforeseen nature of those redundancies. Redundancies which occurred before or after the period provided for in Article 2(a) or in Article 2(c) in case an application under the latter derogates from the criteria set out in Article 2(a), may be covered by the co-financed measures, provided that the redundancies occurred after the general announcement of the projected redundancies and a clear functional link can be established with the event which triggered the redundancies during the reference period;’






Article 5 is amended as follows:

Paragraph 1 is formulated as follows:

1.   In consultation with the relevant local and/or regional authorities and with the social partners, the Member State shall submit an application for a financial contribution from the EGF to the Commission within ten weeks of the date on which the conditions set out in Article 2 for intervention under the EGF are fulfilled. Additional applications may subsequently be submitted by the Member State(s) concerned.
In paragraph 2 point a) is replaced by the following:






‘(a)



a reasoned analysis of the link between the redundancies and major structural changes in world trade patterns or the financial and economic crisis, a demonstration of the number of redundancies, and an explanation of the unforeseen nature of those redundancies. Redundancies which occurred before or after the period provided for in Article 2(a) or in Article 2(c) in case an application under the latter derogates from the criteria set out in Article 2(a), may be covered by the co-financed measures, provided that the redundancies occurred after the general announcement of the projected redundancies and a clear functional link can be established with the event which triggered the redundancies during the reference period;’








Reason






(1)


Local and regional authorities and their populations will be affected by the consequences of business relocations and closures and should be involved in the drafting of strategies for dealing with such situations. They should therefore be involved in the process of applying for funds — not least to ensure complementarity between measures at local, regional, national and European level.










(2)


The wording of the first sentence of Paragraph 2(a) is incomprehensible and makes its meaning unclear.










Wording proposed by the Commission


CoR amendment




Article 10(1) is replaced by the following:

‘1.   The Commission shall, on the basis of the assessment carried out in accordance with Article 5(5), particularly taking into account the number of workers to be supported, the proposed actions and the estimated costs, evaluate and propose as quickly as possible the amount of financial contribution, if any, that may be made within the limits of the resources available. The amount may not exceed 75 % of the total of the estimated cost referred to in Article 5(2)(d).’



Article 10(1) is replaced by the following:

‘1.   The Commission shall, on the basis of the assessment carried out in accordance with Article 5(5), particularly taking into account the number of workers to be supported, the proposed actions and the estimated costs, evaluate and propose as quickly as possible the amount of financial contribution, if any, that may be made within the limits of the resources available. The amount may not exceed 75
85% of the total of the estimated cost referred to in Article 5(2)(d).’





Reason
If one looks into redundancies whilst bearing in mind the current intervention criteria and those proposed in the amendment, it becomes clear that a small number of redundancies does not have a significant impact on the ability of outlying regions to apply for financial resources from the fund.
Although the number of mass redundancies and the number of workers made redundant is rising due to the economic downturn, the figure of 500 redundancies remains a very high threshold in relation to the small labour markets of such regions. For this reason, outlying regions are tending to apply only for ESF funding, but this could start to dwindle more quickly than anticipated if the crisis spreads.
At the same time, poorer outlying regions are not as able to provide co-financing. Consequently there is a danger that governments that are weakened by the economic crisis will not give regions and/or local and regional authorities that do not have much lobbying clout the attention they deserve.

Brussels, 22 April 2009


The President of the Committee of the Regions

Luc VAN DEN BRANDE





(1)  OJ C 139, 14.6.2006, p. 1.

(2)  The Committee of the Regions thinks it is also essential that the European Globalisation Adjustment Fund take account of the general fall in wages and salaries across the employment areas in the sectors hit most by the crisis.