6 European Globalisation Adjustment Fund
| (a)
(31348)
6748/10
COM(10) 58
(b)
(31349)
6749/10
SEC(10) 53
(c)
(31350)
6750/10
COM(10) 56
(d)
(31351)
6751/10
SEC(10) 61
|
Draft Decision on the mobilisation of the European Globalisation Adjustment Fund for EGF/2009/016 LT/Manufacture of furniture submitted by Lithuania
Commission Communication on application EGF/2009/016 LT/Manufacture of furniture received from Lithuania for a financial contribution from the European Globalisation Adjustment Fund
Draft Decision on the mobilisation of the European Globalisation Adjustment Fund for EGF/2009/018 LT/Manufacture of wearing apparel submitted by Lithuania
Commission Communication on application EGF/2009/018 LT/Manufacture of wearing apparel received from Lithuania for a financial contribution from the European Globalisation Adjustment Fund
|
| Legal base
| (a) and (c) Articles 175 and 178 TFEU; co-decision; QMV
(b)and (d) —
|
| Documents originated
| (a) and (c) 19 February 2010
(b) 26 January 2010
(d) 29 January 2010
|
| Deposited in Parliament
| 25 February 2010
|
| Department
| HM Treasury
|
| Basis of consideration
| Two EMs of 4 March 2010
|
| Previous Committee Report
| None |
| To be discussed in Council
| 22 March 2010
|
| Committee's assessment
| Politically important
|
| Committee's decision
| Cleared |
Background
6.1 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 documents
6.2 The draft Decisions, documents
(a) and (c), are to approve applications from Lithuania for assistance
from the EGF. The Commission Communications, documents (b) and
(d), describe the detail of each application. The first case,
documents (a) and (c), concerns an application from Lithuania,
Case EGF/2009/016 LT/Manufacture of furniture, relating to 1,469
redundancies in 49 enterprises between 16 October 2008 and 15
July 2009, of whom 636 are targeted for assistance. It argues
that:
· these
redundancies are linked to the financial and economic crisis,
because the crisis has had a serious detrimental impact on domestic
consumer expenditure and in the industry's export markets, as
well as severely reducing the industry's access to financial credits;
· in
each of the quarters of the reference period the volume of furniture
production in Lithuania had decreased in comparison with the previous
year — by 5.90% in the fourth quarter of 2008, 17.33% in
the first quarter of 2009 and 7.23% in the second quarter of 2009,
with redundancies as a consequence;
· the
Lithuanian furniture industry exported over 50% of its production
in 2008, but exports dropped by 20.10% in value terms during the
first half of 2009;
· the
slow-down in the construction industry, domestically and abroad,
has had a direct effect on the sales of furniture;
· manufacture
of furniture at EU level has declined by 19.60% in the first quarter
of 2009 and 18.20% in April 2009;
· since
the furniture manufacturing industry was largely located in rural
districts with unemployment levels higher than the national average,
the redundancies will exacerbate the labour market problems of
these districts;
· at
national level unemployment has risen sharply since the start
of the economic and financial crisis;
· GDP
has contracted during the three quarters covered by the reference
period of this application — Eurostat data show that Lithuanian
GDP in the second quarter of 2009 was 20.20% lower than that of
a year earlier; and
· redundancies
in the furniture manufacturing industry amount to 0.10% of the
entire employed workforce and approximately 10% of the numbers
employed in this sector at the beginning of the crisis, adding
to a situation that is already causing social and budgetary difficulties
in Lithuania.
6.3 The Commission judges that the
application falls within the scope of the Regulation, that is
that a direct and demonstrable link has been provided that these
redundancies result from the global financial and economic crisis.
It therefore proposes that the application be accepted with a
proposed contribution from the EGF is €662,088 (£591,046),
for a coordinated package of eligible personalised services aimed
at re-integrating workers into the labour market. Lithuania has
confirmed that this contribution would not replace measures that
are the responsibility of companies, that the actions envisaged
are not receiving funding from other Community financial instruments
and that they would provide support for individual workers themselves.
6.4 The second case, documents (b)
and (d), concerns an application, Case EGF/2009/018 LT/Manufacture
of wearing apparel, relating to 1,154 redundancies in 45 enterprises
between 16 October 2008 and 15 July 2009, all operating in the
wearing apparel industry —491 redundant workers are targeted
for assistance. Lithuania argues that:
· the
global economic and financial crisis has had a serious impact
on demand for textiles and clothing in its domestic and export
markets;
· the
EU as a whole experienced declines in textile production in the
second half of 2008 and more accelerated declines in 2009;
· production
in the clothing sector was 20% lower in the first quarter of 2009,
compared to the same quarter in 2008;
· for
April 2009 the reduction in production continued to be over 20%;
· the
trade deficit in the third quarter of 2009 showed a sharp increase
of 19%, mainly due to a strong reduction in exports to all trade
partners, particularly to the most important ones, such as the
USA, Japan, Russia and Turkey —those countries represent
45% of the total EU exports of textiles and clothing products;
· this
effect was seen strongly in Lithuania where the change in added
value in the wearing apparel industry was -5.50% in 2007, -8.20%
in 2008 and -16.70% in the first quarter of 2009;
· the
entire territory of Lithuania is affected by the redundancies
in the wearing apparel industry;
· unemployment
in Lithuania is amongst the highest in the EU and has risen sharply
since the start of the economic and financial crisis, increasing
by 10.90% in a 12-month period to reach 16.70% in July 2009;
· the
wearing apparel industry lost 21.10% of its jobs in Lithuania
between the second half of 2007 and the second half of 2008 alone;
and
· the
economic crisis has exacerbated this, and because of the concentration
of women in this sector, has contributed to a doubling of the
female rate of unemployment in Lithuania during the year to July
2009.
6.5 The Commission judges that the
application falls within the scope of the Regulation, that is
that a direct and demonstrable link has been provided that these
redundancies result from the global financial and economic crisis.
It therefore proposes that the application be accepted with a
proposed contribution from the EGF is €523,481 (£467,311),
for a coordinated package of eligible personalised services (representing
65% of the total cost). Lithuania has confirmed that this contribution
would not replace measures that are the responsibility of companies,
that the actions envisaged are not receiving funding from other
Community financial instruments and that they would provide support
for individual workers themselves.
The Government's view
6.6 The Economic Secretary to the Treasury
(Ian Pearson) says that, as with all applications to the EGF,
the Government will seek to ensure that the intervention and eligible
actions criteria set out in EGF Regulation have been respected
in these applications ahead of the Council reaching a final decision
on them. On the financial implications the Minister says that:
· the
EGF is financed from in-year transfers from areas of expected
low implementation within the EU Budget and transfer proposals
have been presented to the Budgetary Authority (the Council and
the European Parliament), drawing on funds expected to be unspent
in the 2010 appropriations for the European Social Fund;
· unspent
funds in one year's Budget are used to finance the following year's,
thus reducing the amount of funding required from Member States
in that year;
· if
the Budgetary Authority agrees to these applications, and any
subsequent transfer, the amount required from Member States to
fund the 2011 EU Budget would be correspondingly higher;
· taking
these cases in isolation the net cost to the UK over the 2010
and 2011 period would be around €89,978 (£80,323) for
the first application and around €71,141 (£63,508) for
the second one; and
· if
approved by the Budgetary Authority, based on previous agreed
applications these current applications would bring total expenditure
under the EGF since its implementation in January 2007 to €128,757,710
(£114,942,008).
Conclusion
6.7 Whilst there are no questions
we wish to ask on them, in clearing these documents we draw them
to the attention of the House as further examples of how the EGF
is being used.
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