I will deal first with the motivation for this proposal and its origins. Its main thrust is the recognition of the impact of globalisation on the European labour market, a recognition that the positive effects of globalisation take a long time to manifest themselves, while effects of a negative kind, particularly in terms of redundancies, can have an immediate and high profile effect.
The proposal to establish a European globalisation fund was tabled by Commission President José Manuel Barroso at the European Council last December. That Council gave general assent to the proposal. Agreement was informed by the fact that the fund will comprise savings on the overall Community budget in any given year. No detailed discussions had taken place in advance of the European Council in December. However, at the Council the Commission President confined his remarks to giving a general outline of what the European Commission had in mind.
In affirming the proposal, the December European Council decided to establish a fund to cushion workers whose employment is terminated as a consequence of globalisation being defined as industrial relocations to countries outside the European Union, increased market penetration of goods and services sourced from such countries, including Asian countries, or because of the loss of market share within the European Union. In March this year the Commission advanced a draft regulation to effect the establishment of the European globalisation fund and to define its purposes and governing processes. It is intended that the regulations will enter force in January 2007. Overall, the proposal was welcomed for its expression of solidarity with EU workers who lose their jobs because of trade related redundancies. However, in respect of the specifics of the proposal and, in particular, the numerical thresholds set out in Article 2, concerns were expressed that the number of redundancies required before member states could benefit were of an order that would preclude some states from accessing the fund.
In justifying the need to establish a European globalisation fund, the Commission referred to studies which conclude that workers made redundant as a result of major structural change in world trade patterns are likely to be older and less educated, to lose more in earnings and to face greater challenges in finding new employment. Up to €500 million per year will be made available to the European globalisation fund from savings realised elsewhere in the EU budget.
At least 1,000 redundancies must be made, either in an enterprise, including suppliers or downstream producers, in a region where unemployment is higher than the EU or national average or over a period of six months in one or more enterprises within a sector which, taken together, represent at least 1% of regional employment levels. Partial funding to a maximum of 50% of costs can be provided to workers affected by trade related redundancies to assist them in retraining and job searches or to support special work supplements for a specific time period. Workers in companies which relocate elsewhere within the EU will not be eligible for support. No funding supports will be made available to companies per se because the sole focus is on the eligible workers affected by redundancy.
From an Irish perspective, the provisions of the draft regulation will, if unchanged, potentially allow larger countries to benefit disproportionately, if not exclusively, from the European globalisation fund. While an emphasis is placed on addressing economic dislocation and its impact on local, regional and national economies, the provisions proposed potentially benefit countries in which large-scale regional concentrations of manufacturing industry are declining due to a loss of competitiveness in local markets, relocation of companies to third countries with lower production costs or import penetration of more keenly priced goods from such countries. Accordingly, there is concern that the European globalisation fund will only benefit areas which experience at least 1,000 redundancies in an enterprise, including workers made redundant in suppliers or downstream producers and confined to regions where unemployment levels are higher than the EU or national average. Alternatively, the fund can be used where at least 1,000 redundancies occur over a period of six months in one or more enterprises in a sector and which add up to at least 1% of related regional employment. There is a wide gap between the minimum 1,000 redundancies threshold and the typical level of collective redundancies arising in this country and others.
The draft regulation emphasises that the purpose of the European globalisation fund is to complement rather than replace the efforts of member states to provide for those affected by trade related redundancies. However, if the EU is to achieve its objective of demonstrating EU solidarity with workers in all member states by actively addressing employment issues and thereby retaining popular support from EU citizens for the positive benefits of globalisation and free trade flows, provisions must be agreed which will support all countries, including those lacking regional concentrations of industry.
The European Council's social questions group is currently conducting a first reading of this proposal but substantive progress is unlikely during the current Austrian Presidency, although a progress report will probably be given to the Employment, Social Policy, Consumer Affairs and Health Council in early June. The preliminary reactions of member state representatives to the first reading of the draft regulation have been similar in a number of respects. A general welcome was given to the rationale underlying the Commission's decision to bring forward this proposal and the intention that all countries, irrespective of size or overall level of wealth, should have the possibility of support from the European globalisation fund. In that context, the redundancy thresholds and related considerations indicated in Article 2 were unacceptable to representatives and will have to be altered significantly if they are to reflect recent experiences in member states. Some representatives resisted the proposal for the payment of temporary wage supplements by the European globalisation fund to workers above the age of 50 who stand to earn less than they did prior to being made redundant. Concerns have been expressed that the proposed compliance procedures and processes could be burdensome and potentially limit the level of recourse to the fund.
The overall expectation is that, if the objectives agreed last year at the European Council are to be achieved, fundamental changes will be required to the central articles of the draft regulation. For its part, the European Commission has been engaging openly and the ultimate legal instrument will probably differ in significant respects from the original proposal.
The Commission's proposal envisages that the European globalisation fund will be operational by the beginning of 2007. Given the substantive issues to be resolved and the fact that eventual agreement on this proposal will be reached through the time consuming process of co-decision-making between the European Parliament and the European Council, that commencement date may be difficult to realise.