Explanatory Memorandum to COM(2024)30 - Globalisation Fund application from Germany - EGF/2023/003 DE/Vallourec - Main contents
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| dossier | COM(2024)30 - Globalisation Fund application from Germany - EGF/2023/003 DE/Vallourec. |
|---|---|
| source | COM(2024)30 |
| date | 29-02-2024 |
CONTEXT OF THE PROPOSAL
1. The rules applicable to financial contributions from the European Globalisation Adjustment Fund for Displaced Workers (EGF) are laid down in Regulation (EU) 2021/691 of the European Parliament and of the Council of 28 April 2021 on the European Globalisation Adjustment Fund for Displaced Workers (EGF) and repealing Regulation (EU) No 1309/20131.
2. On 15 November 2023, Germany submitted an application EGF/2023/003 DE/Vallourec for a financial contribution from the EGF, following displacements in Vallourec (Vallourec Deutschland GmbH (VAD)) in Germany.
3. Following its assessment of this application, the Commission has concluded, in accordance with all applicable provisions of Regulation (EU) 2021/691, that the conditions for awarding a financial contribution from the EGF are met.
SUMMARY OF THE APPLICATION
| EGF application | EGF/2023/003 DE/Vallourec |
| Member State | Germany |
| Region(s) concerned (NUTS2 level 2) | DEA1 (Düsseldorf) |
| Date of submission of the application | 15 November 2023 |
| Date of acknowledgement of receipt of the application | 15 November 2023 |
| Date of request for additional information | 29 November 2023 |
| Deadline for provision of the additional information | 20 December 2023 |
| Deadline for the completion of the assessment | 8 March 2024 |
| Intervention criterion | Article 4(2), point (a), of Regulation (EU) 2021/691 |
| Primary enterprise | Vallourec (Vallourec Deutschland GmbH (VAD)) |
| Number of enterprises concerned | 1 |
| Sector(s) of economic activity (NACE Revision 2 division)3 | Division 24 (Manufacture of basic metals) |
| Reference period (four months): | 26 April 2023 – 26 August 2023 |
| Number of displacements during the reference period | 1 518 |
| Total number of eligible beneficiaries | 1 518 |
| Total number of targeted beneficiaries | 835 |
| Budget for personalised services (EUR) | 4 783 057 |
| Budget for implementing EGF4 (EUR) | 191 322 |
| Total budget (EUR) | 4 974 379 |
| EGF contribution (60 %) (EUR) | 2 984 627 |
ASSESSMENT OF THE APPLICATION
Procedure
4. Germany submitted application EGF/2023/003 DE/Vallourec within 12 weeks of the date on which the intervention criteria set out in Article 4 (2), point (a), of Regulation (EU) 2021/691 were met, on 15 November 2023. The Commission acknowledged receipt of the application the same date and requested additional information from Germany on 29 November 2023. Such additional information was provided within 15 working days. The deadline of 50 working days of the receipt of the complete application within which the Commission should finalise its assessment of the application's compliance with the conditions for providing a financial contribution expires on 8 March 2024.
Eligibility of the application
Enterprises and beneficiaries concerned
5. The application relates to 1 518 displaced workers whose activity has ceased in Vallourec (Vallourec Deutschland GmbH (VAD)). This enterprise operates in the economic sector classified under the NACE Revision 2 division 24 (Manufacture of basic metals). The redundancies made by the enterprise are located in the NUTS 2 region of Düsseldorf (DEA1).
Intervention criteria
6. Germany submitted the application under the intervention criteria of Article 4(2), point (a), of Regulation (EU) 2021/691, which requires the cessation of activity of at least 200 displaced workers over a reference period of]four months in an enterprise in a Member State, including workers displaced in suppliers and downstream producers and / or self-employed persons whose activity has ceased.
7. The reference period of four months for the application runs from 26 April 2023 to 26 August 2023. There were 1 518 displaced workers in Vallourec during the reference period.
Calculation of displacements and of cessation of activity
8. Pursuant to Article 6, first paragraph, point (a), in conjunction with Article 5, first paragraph, point (c), of Regulation (EU) 2021/691, the cessation of activities of the 1 518 displaced workers during the reference period has been calculated as from the date on which the employer, in accordance with Article 3(1) of Council Directive 98/59/EC5, notified the competent public authority in writing of the projected collective redundancies. Germany confirmed prior to the date of the completion of the assessment by the Commission that these 1 518 redundancies have actually been effected.
Eligible beneficiaries
9. The total number of eligible beneficiaries is 1 518.
Description of the events that led to the displacements and cessation of activity
10. The events giving rise to these displacements are the closure of the enterprise’s production facilities due to globalisation.
11. The enterprise, Vallourec Deutschland GmbH (VAD), is the German subsidiary of Vallourec S.A, France. The enterprise manufactured seamless hot-rolled steel tubes at its two steel mills in Germany, namely in the neighbouring cities of Düsseldorf and Mülheim an der Ruhr. The steel mills, previously known as Mannesmannröhren-Werke AG, were founded in 1899 and 1966, respectively.
12. The enterprise had been reporting losses since 2014, and, as a consequence, responded by several restructuring and downsizing measures. In 2018, the VAD Recovery Plan was launched, with the aim of leading to substantial savings by 2020. Despite some success, the economic situation following the Covid-19 pandemic resulted in further difficulties for the German tube mills. Since 2015, more than 1 400 jobs were already lost due to restructuring.
13. On 17 November 2021, the supervisory board of Vallourec S.A. decided to sell the German tube mills, and to offshore production to Brazil.
14. Even though Vallourec S.A. received offers from potential buyers, none of the offers proved viable. On 18 May 2022, the supervisory board declared that all attempts to sell the production sites had failed. This meant the definitive closure of the sites, as no successor to operate the facilities could be found.
15. Production will continue until the offshoring process is completed. Therefore, it has been decided to close the sites in three phases. A first batch of workers has left the company by 1 January 2024, a second batch will leave by 1 July 2024, and the third batch by 1 January 2025.
16. The enterprise will continue activities in Germany, but only as a sales company.
Expected impact of the displacements as regards the local, regional or national economy and employment
17. The job displacements are expected to have a significant adverse effect on the local economy. The Rhine-Ruhr metropolitan region is the most highly populated metropolitan region in Germany, comprising both the Ruhr area, a traditional coal-mining and steel-producing region, as well as the cities along the Rhine. The local job markets within the region differ widely.
18. The city of Mülheim an der Ruhr forms part of the Ruhr area, an industrial region that has been facing structural changes since the 1960s. In the city, manufacturing employment is declining. The metal manufacturing sector experienced a loss of more than 21% of jobs over the past five years.6 The unemployment rate of 8.0% (December 2023) is high, also in comparison with other cities of the Ruhr area. About 74% of the unemployed do not possess any professional qualification, and more than 50% of the unemployed have been without employment for more than a year.
19. The neighbouring city of Düsseldorf is characterised by a very high degree of employment in the tertiary sector, boasting 88% of overall jobs. Only 11% of the workforce work in the secondary sector. These production jobs are in decline, especially in metal manufacturing. Unemployment in Düsseldorf concerns mostly persons without formal professional qualifications. About 60% of the unemployed fall into this category. More than a third of the unemployed were without employment for more than a year.
20. According to the projections of the Public Employment Services, based on unemployment figures of September 2023, the dismissals in VAD would cause the unemployment rate in Mülheim to rise by 11.6%, and in the far larger city of Düsseldorf, by 5.6%. The profiles of the displaced workers do not match the skills sought after on the job market. Most of the workers concerned are in an advanced stage of their professional careers, having worked for Vallourec for a long time, with low levels of formal qualifications and overall, rather outdated qualifications and skills. Up- and re-skilling the workers in line with labour market demands for qualified jobs will thus be a challenge, in particular considering the large number of people dismissed at the same time.
Application of the EU Quality Framework for anticipation of change and restructuring (QFR)
21. Germany has described how the recommendations set out in the EU Quality Framework for anticipation of change and restructuring have been taken into account: directly after the decision to close down the tube mills, the management of the enterprise and employee representatives started negotiations of a social plan, and in particular the creation of a transfer company.
22. According to the German authorities, there is no obligation on the part of the dismissing enterprise to create or contribute towards the creation of a transfer company. Without the participation of the dismissing enterprise, no transfer company would be set up. If the dismissing enterprise offers to participate, and if the social partners agree to the creation of a transfer company, German social law sets the legal frame (§§ 110 and 111,SGB III).
23. The negotiating parties agreed on setting up a transfer company for each batch of dismissals. A transfer agency was commissioned with the setting-up of these transfer companies. The transfer agency started its works on 17 April 2023. In preparation of the transfer of the workers to the transfer companies, the transfer agency started with initial profiling measures on 4 October 2023.
24. Regarding the activities undertaken to assist the displaced workers, Germany has reported that the enterprise also offered an early retirement plan for employees born 1966 or before, as well as a voluntary termination plans for people that might not need longer assistance in finding a new job.
Complementarity with actions funded by national or Union funds
25. Germany has confirmed that the measures described below receiving a financial contribution from the EGF will not also receive financial contributions from other Union financial instruments.
26. The coordinated package of personalised services complements actions funded by other national and private funds, namely those offered by the transfer company.
Procedures for consulting the targeted beneficiaries or their representatives or the social partners as well as local and regional authorities
27. Germany has indicated that the co-ordinated package of personalised services has been drawn up in consultation with the social partners, in compliance with Article 7 i of Regulation (EU) 2021/691. The third-party contractor commissioned with setting-up of the transfer company and the German authorities soon discussed avenues of intensifying and enlarging the suite of measures with the help of the EGF.
28. Since November 2022, the German EGF Managing Authority entered discussions with the dismissing enterprise, the third-party contractor commissioned with setting-up the transfer company, the Public Employment Service, as well as the respective authorities of the Federal State of North-Rhine Westfalia about a possible EGF application. On 13 February 2023, a common action plan was agreed upon during a round table discussion under the participation of the third-party contractor, the EGF Managing Authority, the Public Employment Service, the dismissing enterprise as well as employee representatives. Trade Union representatives were consulted and invited to the roundtable, but could not participate due to other commitments.
Targeted beneficiaries and proposed measures
Targeted beneficiaries
29. The estimated number of displaced workers expected to participate in the measures is 835. Pursuant to Article 8(7), point (f), of Regulation (EU) 2021/691, the provided breakdown of these workers by gender, age group and educational level is as follows:
| Category | Number ofContents | ||
| Gender: | Men: | 798 | (95,6 %) |
| Women: | 37 | (4,4 %) | |
| Non-binary | 0 | (0 %) | |
| Age group: | Below 30 years: | 53 | (6,4 %) |
| 30-54 years: | 614 | (73,5 %) | |
| Over 54 years: | 168 | (20,1 %) | |
| Educational level | Lower secondary education or less7 | 77 | (9,2 %) |
| Upper secondary8 or post-secondary education9 | 667 | (79,9 %) | |
| Tertiary education10 | 91 | (10,9 %) |
Proposed measures
30. Pursuant to Article 8(7), point (h) of Regulation (EU) 2021/691, the personalised coordinated package to be provided to displaced workers consists of the following measures:
- Upskilling Measures: These are offered following profiling and career guidance interviews, in line with personal career interests and job market demands. Courses can be provided individually or in groups. Considering that 30% of the displaced workers have a migratory background, German courses will be offered to participants with a poor command of German. For participants with a low level of digital skills, specialised basic digital skills courses will be offered. Those participants who take up employment can still participate in these measures.
- Guidance counseling and vocational orientation / activation measures: Based on the initial profiling interviews, guidance counsellors will inform about developments on the job market and possible career paths, and provide applicants with motivational and inspirational help and support. Workers shall be encouraged to upgrade their skills or to learn new skills and participate in education and training measures aimed at finding new employment. This is supported by the use of aptitude and personality tests. There will also be group fora in the form of peer groups and workshops, assisted by a facilitator, helping participants to exchange ideas and reflect on their experiences. Some peer groups focus on participants with a common background: single mothers or older participants. These offers will be accompanied by a specified digital package of assistance measures in the form of a smartphone app. A further focus will be on measures aiming at stabilising and improving the physical and mental health of participants.
- Business start-up advisory services: This will comprise a package of advisory services for those interested in starting their own businesses. These services will include individualised tailor-made coaching measures, as well as group coaching sessions.
- Business start-up grants: These grants will be offered to those that decide to start their own business. The grants can be used for investments in equipment, but also for the rent of business premises or further coachings or trainings during the start-up phase.
- Job search assistance: Professional job scouts will help to locate potential job vacancies that are not yet published, and which might suit eligible workers. Furthermore, a variety of job search events, like job fairs, will be organised.
- Upskilling incentives: These incentives can be paid upon successful participation in certain measures. Whether incentives will be used, and what amounts would be paid, will depend on the type, the level and the duration of a measure.
- Further incentives: These incentives will primarily focus on the integration of participants in the job market, and can be paid as a bonus for taking up employment during the duration of the transfer company or be paid in the form of salary top-ups. Such top-ups aim at offering an incentive to accept new employment, even if the salary of the new employment is lower than in the previous job.
- Training allowance: The payment starts from the date when the worker enters the transfer company and ends as soon as the person leaves the transfer company. Participation in active labour market measures is a prerequisite for receiving an allowance.
31. Digital basic skills (Digitale Grundqualifizierung): This measure caters for the dissemination of the skills required in the digital industrial age, as required by Article 7(2) of Regulation (EU) 2021/691. This measure particularly aims at those participants with no or very little digital skills. Participants will be provided with laptops so that they can follow the course and practise at home. Special attention will be paid to applied skills that help participants to use internet tools for job search.
32. As concerns the dissemination of skills required in a resource-efficient economy, also required by Article 7(2) of Regulation (EU) 2021/691, Germany declares that the external service provider commissioned with managing the transfer companies is obliged by contractual agreement to ensure the dissemination of such skills as a horizontal principle across the suite of measures offered. Further attention will be paid on the promotion of jobs that help catalyse the decarbonisation of the economy, such as locomotive engineers.
33. The proposed actions, here described, constitute active labour market policy measures within the eligible actions set out in Article 7 of Regulation (EU) 2021/691. These actions do not substitute passive social protection measures.
34. Germany has informed about activities already undertaken for the assistance of the displaced workers. The first batch of workers has effectively lost their jobs on 31 December 2023. Whereas first screening measures were offered before the dismissal, the displaced workers could benefit from the whole suite of measures offered by the transfer company as of 1 January 2024.
35. Germany has provided the required information on measures that are mandatory for the enterprise concerned by virtue of national law or pursuant to collective agreements. In accordance with Article 9(1) of Regulation (EU) 2021/691, Germany has confirmed that a financial contribution from the EGF will not replace such measures.
Estimated budget
36. The estimated total costs are EUR 4 974 379, comprising expenditure for personalised services of EUR 4 783 057 and expenditure for preparatory, management, information and publicity, control and reporting activities of EUR 191 322.
37. The total financial contribution requested from the EGF is EUR 2 984 627 (60 % of total costs).
38. Pursuant to Article 8(7), point (m), of Regulation (EU) 2021/691, Germany has specified that the national pre-financing and co-funding is provided by the Federal budget as well as by Bundesagentur für Arbeit (Public Employment Service).
| Measures | Estimated number of participants | Estimated cost per participant (EUR)11 | Estimated total costs (EUR)12 |
| Personalised services (measures under Article 7(2), second subparagraph, point (a), of Regulation (EU) 2021/691) | |||
| Upskilling measures (Qualifizierungsmaßnahmen) | 425 | 3 681 | 1 564 456 |
| Guidance counseling and vocational orientation / activation measures (Berufsorientierung und -beratung / Aktivierungsmaßnahmen) | 835 | 793 | 662 617 |
| Business start-up advisory services (Existenzgründungsberatung) | 18 | 2 187 | 39 369 |
| Business start-up grants (Existenzgründungsförderung) | 18 | 21 871 | 393 685 |
| Job search assistance (Beratung und Stellenakquise) | 835 | 538 | 449 649 |
| Sub-total (a): | – | 3 109 776 | |
| (65,02 %) | |||
| Allowances and incentives (measures under Article 7(2), second subparagraph, point (b), of Regulation (EU) 2021/691) | |||
| Upskilling incentives (Weiterbildungsprämien) | 250 | 787 | 196 843 |
| Further incentives (Weitere Prämien) | 120 | 3 280 | 393 685 |
| Training allowance (Transferkurzarbeitergeld) | 835 | 1 296 | 1 082 753 |
| Sub-total (b): | – | 1 673 281 | |
| (34,98 %) | |||
| Activities under Article 7 i of Regulation (EU) 2021/691 | |||
| 1. Preparatory activities | – | 28 698 | |
| 2. Management | – | 95 661 | |
| 3. Information and publicity | – | 9 566 | |
| 4. Control and reporting | – | 57 397 | |
| Sub-total (c): | – | 191 322 | |
| (3,85 %) | |||
| Total costs (a + b + c): | – | 4 974 379 | |
| EGF contribution (60 % of total costs) | – | 2 984 627 |
39. The costs of the measures identified in the table above as measures under Article 7(2), second subparagraph, point (b), of Regulation (EU) 2021/691 do not exceed 35 % of the total costs for the coordinated package of personalised services. Germany confirmed that these measures are conditional on the active participation of the targeted beneficiaries in job-search or training activities.
40. In accordance with Article 7(2), fourth subparagraph, of Regulation (EU) 2021/691, Germany confirmed that the costs of investments for self-employment, business start-ups and employee take-overs will not exceed EUR 22 000 per beneficiary.
Period of eligibility of expenditure
41. Germany started providing the personalised services to the targeted beneficiaries on 1 December 2023. The expenditure on the measures will therefore be eligible for a financial contribution from the EGF from 1 December 2023 until 24 months after the date of the entry into force of the Financing Decision.
42. Germany started incurring the administrative expenditure to implement the EGF on 1 January 2023. The expenditure for preparatory, management, information and publicity, control and reporting activities shall therefore be eligible for a financial contribution from the EGF from 1 January 2023 until 31 months after the date of the entry into force of the Financing Decision.
Management and control systems
43. The application contains a description of the management and control system required under Article 23 of Regulation (EU) 2021/691, which specifies the responsibilities of the bodies involved. Germany has notified the Commission that the financial contribution will be managed by the same bodies within the Federal Ministry for Labour and Social Affairs (Bundesministerium für Arbeit und Soziales) which manage the European Social Fund (ESF). Whereas the Gruppe Europäische Fonds für Beschäftigung acts as the managing authority, the organisationally independent Organisationseinheit Prüfbehörde is the control authority for these funds. These bodies also managed the previous EGF contributions to Germany. Some of the tasks of the EGF managing authority are permanently delegated to the PES by administrative agreement.
Commitments provided by the Member State concerned
- the principles of equality of treatment and non-discrimination will be respected in access to the proposed measures and their implementation,
- the requirements laid down in national and EU legislation concerning collective redundancies have been complied with,
- Vallourec, which has continued its activities after the lay-offs, has complied with its legal obligations and provided for its workers accordingly,
- any double financing will be prevented,
- the financial contribution from the EGF will comply with the procedural and material Union rules on State aid.
BUDGETARY IMPLICATION
Budgetary proposal
45. The EGF shall not exceed a maximum annual amount of EUR 186 million (in 2018 prices), as laid down in Article 8 of Council Regulation (EU, Euratom) No 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021 to 202713.
46. Having examined the application in respect of the conditions set out in Article 13(1) and (2) of Regulation (EU) 2021/691, and having taken into account the number of targeted beneficiaries, the proposed measures and the estimated costs, the Commission proposes to mobilise the EGF for the amount of EUR 2 984 627, representing 60 % of the total costs of the proposed measures, in order to provide a financial contribution for the application.
47. The proposed decision to mobilise the EGF will be taken jointly by the European Parliament and the Council pursuant to Article 15(1), first subparagraph, second sentence, of Regulation (EU) 2021/691 and, as laid down in point 9 of the Interinstitutional Agreement of 16 December 2020 between the European Parliament, the Council of the European Union and the European Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, as well as on new own resources, including a roadmap towards the introduction of new own resources14.
Related acts
48. At the same time as it presents this proposal for a decision to mobilise the EGF, the Commission will present to the European Parliament and to the Council a proposal to transfer to the relevant budgetary line the amount of EUR 2 984 627.
49. At the same time as it adopted this proposal for a decision to mobilise the EGF, the Commission adopted a decision on a financial contribution that constitutes a financing decision within the meaning of Article 110 of Regulation (EU, Euratom) 2018/104615. That financing decision will enter into force on the date on which the Commission is notified of the approval of the budgetary transfer by the European Parliament and the Council pursuant to Article 15(2), first subparagraph, of Regulation (EU) 2021/691.