15 EUROPEAN GLOBALISATION ADJUSTMENT
FUND
(31066)
15079/1/09
COM(09) 602
| Draft Decision on the mobilisation of the European Globalisation Fund
|
| Legal base |
Article 159 EC; co-decision; QMV |
| Document originated | 28 October 2009
|
| Deposited in Parliament |
29 October 2009 |
| Department | HM Treasury
|
| Basis of consideration |
Minister's letter of 22 November 2009 and EM of 24 November 2009
|
| Previous Committee Report |
None |
| To be discussed in Council
| 30 November 2009 |
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
15.1 Regulation (EC) No 1927/2006 established a European
Globalisation Adjustment Fund (EGF) designed to counterbalance
negative impacts of globalisation. Calls on the fund by Member
States can be made where major structural changes in world trade
patterns lead to serious economic disruption, notably a substantial
increase of imports into the Community or a rapid decline in Community
market share in a given sector or a delocalisation to third countries.
Applications must meet a number of criteria related to demonstrating
a link between world trade patterns and redundancies, to the number,
location and impact of redundancies and to avoidance of undermining
existing national policies or overlapping with other Community
funding streams. Regulation (EC) No 546/2009 of June 2009 extended
the scope to include negative impacts from the current economic
downturn and to lower, in certain circumstances, the threshold
for applications. The new criteria apply to applications received
after 1 May 2009.
The document
15.2 This draft Decision is to approve applications
from Sweden, Austria and the Netherlands for assistance from the
EGF. The first, Swedish, application is in relation to workers
in the automotive sector made redundant in the period 1 December
2008 to 31 March 2009 and concerns 4,687 redundancies in 26 production
sites.
15.3 The link made between these redundancies and
major structural changes in world trade patterns, based on the
evidence supplied by the Swedish authorities, relates to the global
crisis in the automotive sector and the difficulties at present
of access to credit. The Swedish authorities set out the significant
impact of redundancies on a labour market in which the automotive
industry is the single most important industrial cluster at national
level. 73% of the redundancies occurred in the NUTS II region
of Vastsverige, with redundancies made by Volvo Cars, Saab, Volvo
AB and their suppliers. The number of unemployed workers in March
2009 was 60% higher than 12 months before. In addition, the Swedish
authorities estimate that job losses in the automotive industry
lead to a higher number of further, indirect redundancies in business,
trade, transport, construction, private services, and haulage
sectors.
15.4 The second, Austrian, case is also in relation
to workers in the automotive sector made redundant, in the period
27 August 2008 to 27 May 2009, and concerns 744 redundancies in
nine enterprises. The link made between these redundancies and
major structural changes in world trade patterns, based on the
evidence supplied by the Austrian authorities, relates to the
global crisis in the automotive sector. The Austrian application
points to EUROSTAT trade figures concerning road vehicles exports,
which show that from January 2008 to January 2009 the export of
road vehicles from Member States to third countries decreased
by 47.7% and by 52.5% for passenger cars. For the same period,
Austrian exports of road vehicles decreased by 51.3% and of passenger
cars by 59.4%. Increasing difficulty in accessing credit further
exacerbates the situation, as well as rising uncertainty caused
amongst other factors by the volatility of fuel prices. The Austrian
authorities explain the significant impact of redundancies in
the Land of Styria, where they occurred and which has a high dependence
on demand in the automotive sector. In 2008 the sector represented
2.8% of employment (compared to 1.4% for Austria as a whole),
rising to 7.5% its downstream suppliers and producers. Most of
the enterprises making redundancies are in the area around Graz,
which had an average number of unemployed of 11,318 in 2008. The
744 redundancies in the Austrian application represent an increase
of about 7%.
15.5 The third, Dutch, case is in relation to 570
workers in the construction company Heijmans NV made redundant
in the period 29 January to 29 May 2009. The Dutch authorities
argue that:
- the construction sector was one of the first
to be affected by the global economic and financial crisis;
- the cost of raw materials has substantially increased
since 2008, increasing the need for construction firms to secure
project financing through loans, which have become subject to
very strict rules;
- at the same time declining consumer confidence,
low house prices and high mortgage costs have led to decreased
demand for new houses and offices; and
- the Dutch Economic Institute for the Construction
Industry estimated in January 2009 that the construction of new
houses would decline by 10.5% in 2009 and by 11% in 2010, with
the number of new utility building projects decreasing by 6% in
2009 and by 10% in 2010.
The Dutch application notes that the redundancies
will impact at the national level, as workers have been made redundant
from Heijmans NV subsidiaries in ten different locations. At the
regional level, about 40% of the redundancies occurred in the
Noord-Brabant province. At local level, 15% occurred in Rotterdam.
Both Noord-Brabant and Rotterdam were already suffering from an
above-average rate of decline in economic activity in 2008.
15.6 In all three cases the assistance requested
would be used to provide support for a coordinated package of
eligible personalised services. The applications state that such
assistance would not replace measures that are the responsibility
of companies and no assistance will be received from other Community
financial instruments for the same purpose.
15.7 The Commission declares itself content with
the evidence provided and proposes contributions to Sweden of
€9,839,674 (£8,794,701), to Austria of €5,705,635
(£5,099,697) and to the Netherlands of €386,114 (£345,109).
The Government's view
15.8 The Economic Secretary to the Treasury (Ian
Pearson) says that the Government is working, as it does with
all EGF applications, to ensure that careful consideration is
given to whether the criteria for approving such grants have been
met. The Minister also tells us that, if the applications are
approved, they would be financed by drawing on unspent funds in
the 2009 appropriations for the European Social Fund and in total
the net cost to the UK in 2009 and 2010 would be around €673,614
(£602,076).
15.9 The Minister tells us in his letter that:
- the Swedish Presidency has requested an urgent
procedure to enable agreement to be reached between Council and
the European Parliament before 30 November 2009 and before the
Lisbon Treaty enters into force, under which a new adoption procedure
would have to be followed and could therefore significantly delay
the implementation of the proposal and the delivery of support
to the potential beneficiaries;
- the Presidency has therefore asked Member States
to lift reserves by then if possible; and
- in the circumstances the Government agrees with
the assessment of urgency.
Conclusion
15.10 Whilst there are no questions we wish to
ask on it, in clearing this document we draw it to the attention
of the House as examples of how the EGF is being used.
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