Euro law offers hope on jobs
Feb 20 2008 by Paul James, The Journal
Thousands of Northern Rock staff are being told that European competition law will signal the arrival of their P45s. But chief reporter Paul James discovers that the European Commission may not be the harbinger of doom that some expect.
IN the wake of its nationalisation, new Northern Rock boss Ron Sandler and Chancellor Alistair Darling have both acknowledged that any restructuring has to be done under the European Union’s guidelines governing state aid.
We are more used to hearing the work “restructuring” when companies try to justify job losses. But in Northern Rock’s case it could have many other meanings.
In fact “restructuring” is defined both in EU law and in the rules drawn up with the aim of preventing job losses and helping to turn around businesses in need – be they in Poland, Greece or Gosforth.
Nationalisation, and the overseeing eye of the European Commission, have been widely interpreted as a signal that jobs will be shed in their thousands in the North East.
But in the case of Northern Rock, European legislation could more easily read as offering the region genuine optimism.
The EU guidelines are precise in only one major way when discussing the future of Northern Rock – and that is that nothing is set in stone. Competition rules place an obligation on the Government to, in some way level out the banking playing field, so the benefits of being an HM Treasury-backed Rock don’t mean that other banks suffer.
This “avoidance of undue distortions of competition” is the only part of the law to include the word “must”.
The European Commission, the rules say, “may” impose conditions on state aid, while restructuring “normally” results in a smaller business.
It isn’t the case that jobs “must” be lost and Mr Sandler said on Monday that the Rock would “compete vigorously” within the EU rules.
The question for the EC’s competition commissioner Neelie Kroes is how she interprets and implements this law, but the EC’s basic principle on restructuring aid is helpful here.
The EC approved the use of taxpayers money before nationalisation, satisfied the bank needed help and that the Government was right to intervene, and there are unlikely to be voices of dissent from our European neighbours, whose own banks are also receiving state assistance.
EC rules say that aid will be approved if it is clear that any perceived competition “distortions” arising from, in this case, a Government-backed bank, are offset by the benefits of the Rock surviving.
For public money to back the Rock is fine – including cases, the EC says, “where it is clear that the net effect of redundancies resulting from the firm’s going out of business, combined with the effects on its suppliers, would exacerbate employment problems”.
Any “compensatory measures” against the bank, or in favour of its competitors, will take into account the size of Northern Rock’s share in the market, which is evaluated on a case-by-case basis.
The Competition Commission yesterday told The Journal that while nationalisation is not in itself a trigger to restrictions on the bank’s activity, new rules will come into effect when nationalisation is accompanied further by state aid in the form of guarantees, capital injections or loans.
These would need to be approved by the EC, but next to nothing is set in stone by the European rules.
Northern Rock and the Government have to come up with a plan, and those proposals must plan for an end to the state aid and a business that is successful in the future.
In the meantime, Europe will decide if its rivals are being disadvantaged, and any decisions will be balanced by the presence of 6,000 good jobs in the North East.
How many of them will go is open to question. What cannot be disputed is that they do not have to go.
Page 2: Staff must be at front of bank’s future
