European Globalisation Fund to assist redundant workers

Since January 2007, employees affected by restructuring resulting from increased international competition can seek financial support from the European Globalisation Adjustment Fund (EGF) to help them regain employment. In June 2007, the European Commission announced that the first EGF applications – those made by the French government on behalf of two car suppliers – had been forwarded to the European Parliament and the European Council for ratification.

In June 2007, the European Commission approved the first two European Globalisation Adjustment Fund (EGF) applications – those submitted by the French government on behalf of two suppliers affected by restructuring at Peugeot-Citroen and Renault. The applications involve sums of €2,558,250 and €1,258,000 respectively. Having classed both requests as valid, the Commission forwarded the applications for ratification to the two relevant budgetary authorities, the European Parliament and the Council of the European Union.

Objective of EFG

Although acknowledging the positive effects that globalisation can have on employment, Regulation (EC) No 1927/2006 (73Kb PDF) on establishing the EGF notes that increased international competition ‘may also have negative consequences for the most vulnerable and least qualified workers in some sectors’. While other EU funding channels exist, such as the European Social Fund, this new fund differs in that it involves ‘specific, one-off support’ to help re-integrate workers into the labour market.

This new funding source can be traced back to the European Commission’s 2005 Communication, European values in the globalised world (285Kb PDF). The communication was presented to an informal summit of government heads in October 2005 (EU0511204F). At the summit – at which heads of government had gathered to discuss the future of the European social model – ministers agreed that proposals for a global adjustment fund should be considered. However, not all countries were supportive of such measures: some of the new Member States, which joined the EU in May 2004, were fearful that such a fund might be deducted from aid promised to them.

Areas of EFG intervention

The EFG has been in place since January 2007 and is worth €500 million a year until 2013. Article 3 of the EGF outlines that redundant employees can be assisted through the following strategies:

• job-search assistance, career guidance, tailor-made training and re-training in areas such as information and communication technologies (ICT) skills, certification of acquired experience, outplacement assistance and entrepreneurship promotion or aid for self-employment;

• special time-limited measures, such as job-search allowances, mobility allowances or allowances for individuals participating in lifelong learning and training activities;

• measures targeting disadvantaged groups or older workers, aimed at enabling them to remain in or return to the labour market.

However, the EGF regulation clearly stipulates that the fund will not act as a substitute for welfare benefits provided by the Member States. Instead, the financial support aims to help individuals become more proactive in boosting their chances of re-entering the labour market.

Application procedure

The regulation is quite specific in stating that only workers affected by redundancy can avail of this new funding channel. Nonetheless, the EGF acknowledges that globalisation can affect employees indirectly, as production often involves an integrated network of producers. For this reason, the EGF clearly states that suppliers can benefit from such funding.

In terms of applying for EGF funding, Article 5 of the regulation stipulates that any application has to be submitted by Member States within 10 weeks of redundancies occurring. Furthermore, because restructuring can have cross-border impacts, Member States are allowed to submit joint applications. The success of an application will depend on the extent to which it provides provide relevant information. This includes:

• demonstrating the link between planned redundancies and economic global structural changes;

• identifying the affected enterprise and workers;

• identifying the territory affected and the impact that redundancies will have on local and regional employment;

• submitting a detailed description of the programme to be funded, as well as information on other structural funds used to finance such actions;

• stating the date at which the programme began or will begin;

• outlining procedures used to consult social partners;

• giving information on who will manage the programme.

Moreover, the application must demonstrate that the accredited authority has designed a programme of support. After positively assessing the validity of an application, the budgeting authorities can agree to finance up to 50% of a programme’s overall costs.

Commentary

The EGF represents an important attempt to help lessen the negative consequences of globalisation, as experienced for instance at the Electrolux site in Nuremberg, Germany (DE0603039I). Nevertheless, the fund by itself will not be able to stem the negative effects associated with increased international competition. Rather, the EGF must be part of a range of measures designed to protect employees.

For example, the EU Trade Commissioner, Peter Mandelson, is in favour of introducing ‘anti-dumping duties’ on products for which evidence exists of anti-competitive practices. In the past, the Commissioner has targeted Chinese shoe manufacturers on this basis. In addition, although it welcomes the EGF, the European Trade Union Confederation (ETUC) argues that the success of such a fund is largely dependent on employees being informed of possible redundancies well in advance (see ETUC statement). Evidence shows that such advance notice improves the chances of affected employees finding a new job more rapidly.

Michael Whittall, Technical University Munich