10 European Globalisation Adjustment
Fund
| Committee's assessment
| Politically important |
| Committee's decision | Not cleared from scrutiny; further information requested
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| Document details | Nine draft Council Decisions to authorise payments from the European Globalisation Adjustment Fund to Poland, Belgium (four), Germany and Greece (two)
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| Legal base | Article 12(3) of Regulation (EC) No. 1927/2006 (based on Article 159 TEC) and documents (Article 15(4) of Regulation (EU) No. 1309/2013 (based on Article 175 TFEU), in conjunction with point 13 of the Interinstitutional Agreement of 2 December 2013 on budgetary discipline, on cooperation in budgetary matters and on sound financial management; co-decision; QMV
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| Department
Document numbers
| HM Treasury
(a) (36617), 5523/15, COM(15) 13; (b) (36618), 5525/15, COM(15) 9; (c) (36619), 5529/15, COM (14) 725; (d) (36620), 5532/15, COM(14) 735; (e) (36621), 5534/15, COM(14) 734; (f) (36622), 5537/15, COM(14) 726; (g) (36646), 5893/15 +ADD 1, COM(15) 40; (h) (36648), 5895/15 + ADD 1, COM(15), 37; (i) (36659), 6121/15, COM(15) 47
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Summary and Committee's conclusions
10.1 The European Globalisation Adjustment Fund, established in
2006, was designed to provide support for workers made redundant
as a result of major structural changes in world trade patterns
due to globalisation, where these redundancies have a significant
adverse impact on the regional or local economy. In 2013 the programme
was renewed for the 2014-20 budgetary. The annual budgetary ceiling
for the fund is €150 million (£120 million) in 2011
prices.
10.2 The Government does not apply for finance from
this fund. (It opposed its renewal in 2013, an opposition we endorsed.)
There is a fairly steady stream of successful applications from
other Member States.
10.3 These draft Decisions are to approve applications
from Poland, Belgium (four), Germany and Greece (two) for contributions
from the fund.
10.4 The Government comments in familiar terms, including
saying that:
· it
is essential that EU expenditure is closely scrutinised on the
basis of value for money; and
· in line
with this approach, it will seek to ensure that all fund criteria
have been respected in proposals for assistance.
10.5 We do not normally report substantively on
European Globalisation Adjustment Fund applications. However we
have become increasingly concerned about the steady stream of
applications assessed by the Commission as eligible for assistance
from the fund. Accordingly, we take this opportunity to ask the
Government:
· to
what extent its efforts to ensure that all fund criteria are respected
have resulted in limits to or even rejections of applications
by the Council;
· whether
these efforts are supported by any other Member States;
· whether
there is any evidence that multinational companies, such as Caterpillar,
choose to implement redundancies within the EU, rather than elsewhere,
because of the availability of support for redundant workers from
the fund;
· what
significance might be attached to the apparent differences in
the cost per redundant worker in different cases; and
· whether
the Government is satisfied that continued use of the fund is
value for money.
10.6 Meanwhile these documents remain under scrutiny.
Full details of
the documents: (a)
Draft Decision on the mobilisation of the European Globalisation
Adjustment Fund in accordance with point 13 of the Interinstitutional
Agreement of 2 December 2013 between the European Parliament,
the Council and the Commission on budgetary discipline and sound
financial management (application EGF/2013/009 PL/Zachem from
Poland): (36617), 5523/15, COM(15) 13; (b) Draft Decision on
the mobilisation of the European Globalisation Adjustment Fund
in accordance with point 13 of the Interinstitutional Agreement
of 2 December 2013 between the European Parliament, the Council
and the Commission on budgetary discipline and sound financial
management (application EGF/2013/011 BE/Saint-Gobain Sekurit from
Belgium): (36618), 5525/15, COM(15) 9; (c) Draft Decision on
the mobilisation of the European Globalisation Adjustment Fund
in accordance with point 13 of the Interinstitutional Agreement
of 2 December 2013 between the European Parliament, the Council
and the Commission on budgetary discipline and sound financial
management (application EGF/2013/007 BE/Hainaut steel (Duferco-NLMK)
from Belgium): (36619), 5529/15, COM(14) 725; (d) Draft Decision
on the mobilisation of the European Globalisation Adjustment Fund
in accordance with point 13 of the Interinstitutional Agreement
of 2 December 2013 between the European Parliament, the Council
and the Commission on budgetary discipline and sound financial
management (application EGF/2014/011 BE/Caterpillar): (36620),
5532/15, COM(14) 735; (e) Draft Decision on the mobilisation of
the European Globalisation Adjustment Fund in accordance with
point 13 of the Interinstitutional Agreement of 2 December 2013
between the European Parliament, the Council and the Commission
on budgetary discipline and sound financial management (application
EGF/2014/012 BE/Arcelor/Mittal): (36621), 5534/15, COM(14) 734;
(f) Draft Decision on the mobilisation of the European Globalisation
Adjustment Fund in accordance with point 13 of the Interinstitutional
Agreement of 2 December 2013 between the European Parliament,
the Council and the Commission on budgetary discipline and sound
financial management (application EGF/2014/014 DE/Aleo Solar:
(36622), 5537/15, COM(14) 726; (g) Draft Decision on the mobilisation
of the European Globalisation Adjustment Fund in accordance with
point 13 of the Interinstitutional Agreement of 2 December 2013
between the European Parliament, the Council and the Commission
on budgetary discipline and sound financial management (application
EGF/2014/015 GR/Attica Publishing activities): (36646), 5893/15
+ ADD 1, COM(15) 40; (h) Draft Decision on the mobilisation of
the European Globalisation Adjustment Fund in accordance with
point 13 of the Interinstitutional Agreement of 2 December 2013
between the European Parliament, the Council and the Commission
on budgetary discipline and sound financial management (application
EGF/2014/018 GR/Attica Broadcasting): (36648), 5895/15 + ADD
1, COM(15), 37; (i) Draft Decision on the mobilisation of the
European Globalisation Adjustment Fund (application EGF/2014/016
IE/Lufthansa Technik): (36659), 6121/15, COM(15) 47.
Background
10.7 The European Globalisation Adjustment Fund (EGF),
established in 2006 for the period 2007-13, was designed to provide
support for workers made redundant as a result of major structural
changes in world trade patterns due to globalisation, in situations
where these redundancies have a significant adverse impact on
the regional or local economy. It was renewed for the 2014-20
budgetary period by Regulation (EU) No. 1309/2013 (the EGF Regulation),
which sets out the rules governing the use (mobilisation) of the
EGF. The annual budgetary ceiling for the EGF is €150 million
(£120 million) in 2011 prices.
10.8 The Government does not apply for finance from
this fund. (It opposed its renewal in 2013, an opposition we endorsed.)
There is a fairly steady stream of successful applications from
other Member States.
The documents
10.9 These draft Decisions are to approve applications
from Poland, Belgium (four), Germany and Greece (two) for contributions
from the EGF.
10.10 Case EGF/2013/009 PL/Zachem Auto from Poland,
document (a), relates to 615 redundant workers in the chemical
industry who will benefit from support with a proposed EGF contribution
of €115,205 (£89,731) — 50% of the total budget.
The Commission accepts the Polish authorities' justification for
the application, that is:
· the
EU has undergone a significant loss of market share in the chemical
industry;
· from
1992 to 2012, the EU share in the world market for chemicals drastically
declined, from 35.2% in 1992 to 30.5% in 2002 and 17.8% in 2012;
· by comparison,
China's market share increased from 8.7% in 2002 to 30.5% in 2012;
and
· the
shift in market share from Western Europe to the Far East has
resulted in widespread redundancies in the chemical manufacturing
sector in Europe, including at Zachem.
10.11 Case EGF/2013/011 BE/Saint-Gobain Sekurit from
Belgium, document (b), relates to 257 redundant workers in manufacture
of safety glass for the automotive industry who will benefit from
support with a proposed EGF contribution of €1,339,928 (£1,043,639)
— 50% of the total budget. The Commission accepts the Belgian
authorities' justification for the application, that is:
· the
sector for the manufacture of safety glass for the automotive
industry, in which Saint-Gobain Sekurit (SGS) Benelux is active,
has undergone serious economic disruption as a result of several
factors;
· between
2007 and 2012, the production of passenger cars in the EU-27 decreased
from 21.9 million units to 19.5 million units, whereas, in the
rest of the world, it increased from 47.5 million units to 60.6
million units;
· Ford,
Volvo and BMW, which were the main direct clients of SGS, recorded
decreases in sales of 12%, 10% and 2% respectively; and
· in addition
to changes in global trade patterns, high production costs, overcapacity
due to the reduction of production levels and low levels of productive
investment have all led to redundancies in the automotive industry,
and in enterprises in associated sectors, for example SGS.
10.12 Case EGF/2013/007 BE/Hainaut steel (Duferco-NLMK)
from Belgium, document (c), relates to 708 redundant workers in
the steel industry who will benefit from support with a proposed
EGF contribution of €981,956 (£764,823) — 50%
of the total budget. The Commission accepts the Belgian authorities'
justification for the application, that is:
· the
steel production sector has undergone serious economic disruption,
in particular a rapid decline in the EU's market share;
· between
2006 and 2011, the production of crude steel in the EU-27 decreased
from 206.9 million tonnes to 177.7 million tonnes, whereas at
worldwide level, production increased from 1,249 million tonnes
to 1,518.3 million tonnes;
· in the
same time period, the EU-27's market share decreased from 16.6%
to 11.7%, while China's market share increased from 33.7% to 45%;
· changes
in world trade patterns have been exacerbated by other factors,
such as the decrease in demand in steel in the automotive and
construction sectors in the EU as a result of the economic crisis
and an increase of production costs; and
· together,
these factors have led to a large number of redundancies in the
steel sector, including at Hainaut steel.
10.13 Case EGF/2014/011 BE/Caterpillar from Belgium,
document (d), relates to 1,030 redundant workers in the mine construction
and operating equipment sector who will benefit from support with
a proposed EGF contribution of €1,222,854 (£952,453)
— 60% of the total budget. The Commission accepts the Belgian
authorities' justification for the application, that is:
· the
demand in Europe for the production of machines and accessories
necessary for the construction and operation of mines has declined
in recent years;
· Caterpillar's
products are exclusively directed at the European construction
and mining sectors;
· steel
and metal products in Europe have suffered from intense competition
from emerging economies and the years 2009 to 2013;
· the
decline in demand for steel and metal products has had a knock-on
effect on the construction and mining sectors — the main
customers of the Caterpillar group; and
· in 2011
these factors led to a 40% reduction in the amount of new orders
made to Caterpillar, in turn resulting in a high number of redundancies.
10.14 Case EGF/2014/012 BE/AcelorMittal from Belgium,
document (e), relates to 1,285 redundant workers in the steel
industry who will benefit from support with a proposed EGF contribution
of €1,591,486 (£1,239,572) — 60% of the total
budget. The Commission accepts the Belgian authorities' justification
for the application, which is the same as that for the Hainaut
steel case.
10.15 Case EGF/2014/014 DE/Aleo Solar from Germany,
document (f), relates to 657 redundant workers in the solar panels
sector who will benefit from support with a proposed EGF contribution
of €1,094,760 (£852,683) — 60% of the total budget.
The Commission accepts the German authorities' justification for
the application, that is:
· the
sector for the production of solar panels has undergone serious
economic disruption, in particular a rapid decline in the EU's
market share;
· between
2005 and 2011, the revenue share of China increased from 11% to
45%, while that of Germany fell from 64% to 21%;
· the
build-up of overcapacity in solar modules in China, coupled with
the worldwide decline in demand has led to a collapse in prices;
· locally
available financial support for manufacturers in China has meant
that Chinese companies have been able to survive and grow by selling
their output cheaply in markets abroad; and
· Aleo
Solar had a turnover of €550 million in 2010, and a profit
of €43 million. This declined rapidly from 2011 and by 2013
has reached losses of €92 million, in turn resulting in a
large number of redundancies.
10.16 Case EGF/2014/015 GR/Attica Publishing activities
from Greece, document (g), relates to 705 redundant workers in
the solar panels sector who will benefit from support with a proposed
EGF contribution of €1,094,760 (£852,683) — 60%
of the total budget. The Commission accepts the Greek authorities'
justification for the application, that is:
· for
the sixth year, the Greek economy is in recession;
· between
2008-2013, public consumption has decreased by 21% and private
consumption by 32.3 %;
· the
decrease in public and private consumption has been exacerbated
by measures taken by the Greek government, for example streamlining
public expenditure and decreasing public sector pay;
· in this
context, enterprises in Greece's publishing and mass media sector,
including Attica, experienced a 60% decrease in sales between
2009-2013, leading to widespread redundancies; and
· according
to the Greek Institute of Labour, employment levels in the publishing
sector decreased by 28.7% between 2010-2013.
10.17 Case EGF/2014/018 GR/Attica Broadcasting from
Greece, document (h), relates to 928 redundant workers in the
broadcasting sector who will benefit from support with a proposed
EGF contribution of €5,046,000 (£3,789,995) —
60% of the total budget. The Commission accepts the Greek authorities'
justification for the application, which in addition to the general
points made in relation to the previous case, say that:
· enterprises
in Greece's broadcasting sector, including Attica, experienced
a 40% decrease in turnover between 2010-2013, leading to widespread
redundancies;
· in addition,
advertising income for Greek broadcasting companies decreased
by 34.3%; and
· according
to the Greek Institute of Labour, employment levels in the broadcasting
sector decreased by 29.3% between 2010-2013.
10.18 Case EGF/2014/016 IE/Lufthansa Technik from
Ireland, document (i), relates to 424 redundant workers in aircraft
component production who will benefit from support with a proposed
EGF contribution of €2,490,758 (£1,870,781) —
60% of the total budget. The Commission accepts the Irish authorities'
justification for the application, that is:
· the
EU market for aircraft component production has undergone serious
disruption as a result of major structural changes in world trade
patterns due to globalisation;
· the
proportion of the future global aircraft fleet is likely to be
dominated by narrow body aircraft;
· the
growth in demand for narrow body aircraft is predicted to emanate
primarily from Asia and the Far East;
· over
the past five years substantial numbers of the classic aircraft
types have been retired which were powered by engine types that
formed the base of Lufthansa Technik Airmotive Ireland Ltd's (LTAI)
portfolio; and
· in order
to provide capacity and services at a lower cost than Lufthansa's
main bases in the EU, and to help cater for the rapid growth of
the aviation industry outside the EU, Lufthansa Technik has transferred
many of its operations to the APAC region including China and
the Philippines, leading to the decision to close LTAI and dismiss
the entire workforce.
10.19 The Commission says that after a thorough examination
of the applications and in accordance with all applicable provisions
of the EGF Regulation, the conditions for a financial contribution
from the EGF are met.
The Government's view
10.20 In his Explanatory Memorandum of 3 February
2015 the Financial Secretary to the Treasury (Mr David Gauke)
on the first six applications says in familiar terms that:
· the
Government has been clear that it wants to see real budgetary
restraint in the EU;
· the
2014-20 Multiannual Financial Framework delivers important progress
— this secured a very substantial reduction in the size
of the EGF over the period 2014-20;
· the
Government is committed to continue to work hard to limit EU spending,
reduce waste and inefficiency, and deliver the best possible deal
for taxpayers — as part of this, it is essential that EU
expenditure is closely scrutinised on the basis of value for money;
and
· in line
with this approach, the Government will seek to ensure that all
EGF criteria have been respected in proposals for EGF assistance.
10.21 In his Explanatory Memoranda of 16 February
and 23 February 2015 on the two Greek applications and the Irish
one the Minister repeats his comments.
Previous Committee Reports
None.
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