Managing restructuring through a European framework

László ANDOR — European Commissioner responsible for Employment, Social Affairs and Inclusion

Brussels, 19-11-2012 — / — Economic and social context

Allow me to begin with a few numbers to illustrate the importance of the subject. Since 2002 we registered more than 15,000 restructuring operations, with a net job loss of over 2.2 million. The number and employment consequences of restructuring operations recorded in the second quarter of 2012 show 335 cases with a net job loss of 25,339. Along the same quarter in 2007, the overall result amounted to a net job creation of 23,537 for the same number of restructuring cases.

Restructuring is therefore a very topical issue that affects every country in Europe and which is a major source of concern.

The Commission’s Employment Package aims at responding to this challenge through better designed policies. The Package develops instruments that re-dynamise the labour market in the light of the new and more difficult economic and social situation and forecasts.

Integrating the European labour market, encouraging geographical, sectoral and occupational mobility, facilitating job transitions in a framework of security and enabling positive reallocation of resources from declining to emerging activities are key objectives of current and future employment policies both at European and national levels.

Not only managing, but also anticipating restructuring in the most productive possible way is a crucial element of this new labour market dynamism.

Building on previous work

While the European economy and welfare depend on successful businesses, the speed and magnitude of the current challenges may hinder businesses’ and sectors’ capacity to remain competitive and hence require them to anticipate and adapt more quickly. If not managed properly, restructuring operations can have negative consequences for the surrounding economy and incur high social costs across regions.

Looking at the structural changes that are taking place in the EU economy, the Commission believes that certain principles and best practices of restructuring activities within companies need to be better recognised and followed throughout Europe – in particular those that facilitate anticipation, transparency, investment in human capital within companies and eventually the reallocation of human resources to different sectors.

How to achieve this goal?

Over the past ten years, a number of initiatives have contributed to the EU level debate on management of anticipation of change and restructuring. The Commission’s recent Green Paper has identified successful practices and policies in the field of restructuring and adaptation to change.

The main lessons can be summarised as follows:

  • With regard to temporary internal flexibility taken during the crisis, we can conclude that short-term working schemes and similar mechanisms play a useful role in emergency situations, but they are not adequate instruments to deal with the on-going challenges of structural change;
  • A very broad consensus exists on the crucial importance of anticipative and proactive stances, especially at company level, but also at national, regional and sectoral levels, as well as at EU level;
  • Social dialogue and transparency in decision-making are major factors in building trust and consensus amongst all the stakeholders, thereby facilitating change and making restructuring both more economically efficient and socially accepted.
  • It is essential to invest in human capital through training and skills enhancement as a permanent feature of working lives, in order to increase companies’ competitiveness and the employability of workers.
  • Even if the central role of companies in anticipation and management of restructuring must be acknowledged, there is also an important part to be played by public authorities at all levels.
  • Even if the Green Paper did not ask stakeholders’ views whether they believe any further EU level initiative would be justified, still some of the social partners’ organisations expressed diverging opinions on this issue.

Building on that work, I believe that we need a common European framework on anticipation and management of change and restructuring in the light of the lessons learned from the economic crisis, the deep changes in the economic and competitive contexts worldwide and the structural reform agenda currently implemented in the EU.

Why an EU framework?

An industrial policy issue

As highlighted in recent policy papers, including the updated Industrial Policy Flagship, an important priority of the new industrial policy must be to help EU industry to recover swiftly and to make the necessary adjustments after the economic crisis. This also means supporting reallocation of labour to the real economy with high growth and job creation potential.

In this process, good anticipation of skills needs and socially responsible restructuring can help employees and companies to adapt to transitions imposed by excess capacities and by modernisation and structural adjustment, and can also curtail the negative social impact of any restructuring.

An employment policy and labour market issue

Restructuring activities have a direct bearing on the integration of labour markets throughout the EU, especially with regard to mobility and employment transitions, as well as to skills enhancement and development of training as established in the Employment Package.

The EU has built over decades a strong system of employment and social protection that, combined with a relatively high level of education, has been the basis for its economic and social prosperity in the past.

However, in times like the present and future with fast-changing business environments, that system is making it more difficult to ensure the rapid and smooth reallocation of resources, especially human, from declining activities to emerging ones.

Moreover, that system was designed to support job stability and is less and less capable of giving individual workers a real chance of a professional future when their jobs are at risk, because it does not cultivate their ability to adapt to change.

The economic and financial crisis and the concomitant acceleration of change make it more important than ever for Europe to address these two realities. Good anticipation and management of restructuring will greatly contribute to this.

A crucial issue for SMEs

A European framework would also prove to be useful for Small and Medium-sized Enterprises (SMEs) as they encounter similar issues in the planning and anticipation of change.

However, due account should be taken of their specificities and notably of their need for a predictable and stable environment allowing them to be competitive on both local and global markets.

Therefore, the framework should propose solutions to allow SMEs, which have less human and financial resources, to develop their own planning strategies and to anticipate their skills need through an appropriate training of their employees.

Re-inforced economic coordination and governance

An EU framework on restructuring should also be seen as an instrument that facilitates to the attainement of the central objective of reinforcing economic policy coordination in the EU. No sound economic governance can be developed without clear guidance and certainty and without fully involving the economic and social actors, including when it comes to building the frameworks that concern them the most.

Furthermore, this objective is in line with the Europe 2020 Strategy and allows a full integration of businesses and worker representatives in the completion of these objectives.

The supporting role of public policies

Companies are major actors of restructuring, but they cannot be seen as the only actors involved in the restructuring processes and in the management of their consequences. Policy interventions should accompany the restructuring operations to avoid social hardship and promote new skills and jobs.

The potential heavy costs for European societies can hamper the recovery of the European economies while also diminishing the economic, social and territorial cohesion within the EU.

In this view, a common European perspective on the restructuring processes could help preventing the appearance of such costs or distribute their burden over the various stakeholders involved in restructuring operations.

EU on-going financial support

Finally, the role of EU funds in support of restructuring processes, which is already very important, could be reinforced through appropriate management of the resources available and their integration into the general policy orientations defined at European level.

All these arguments speak in favour of an EU reference framework that guides the action of all parties concerned, in line with the broad economic, political and social orientations coming from the Europe 2020 Strategy and all our other major policy papers.

Sectoral initiatives

We focus in particular on two sectors in difficulty. One is the automotive sector which experiences major problems mainly due to overcapacity and this is also the sector in which restructuring activities with severe job losses are happening. You may be aware of the Commission’s Cars2020 Action Plan which was adopted last week for a more competitive and sustainable car industry in Europe. This contains concrete medium term measures also to invest in human capital via training and reskilling, and also encourage anticipation and good restructuring.

As regards the steel sector, Vice-President Tajani and I launched a High-level Roundtable on the future of the European Steel Industry. The objective of the roundtable is to facilitate the dialogue between the European Commission, industry representatives and trade unions on the competitive situation of the steel industry in the EU and to identify concrete recommendations to the Commission. The recommendations will provide a basis for the preparation of a long-term policy strategy (Action Plan for the European Steel Industry). This Action Plan is scheduled to be adopted by the Commission by the end of June 2013.

Ladies and gentlemen,

Without prejudging what could come next in policy terms when dealing with anticipation and restructuring, I insist that this domain should remain at the centre of the European agenda. I remain of course ready to listen to you and work with you, and I thank you for your attention.


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