EurWORK European Observatory of Working Life

European Globalisation adjustment Fund

The European Globalisation Adjustment Fund (EGF) provides support to Europeans who lose their jobs as a result of major structural changes in world trade patterns due to globalisation – when a large company shuts down or production is moved outside the EU – or as an outcome of the global economic and financial crisis. It was set up by the European Commission in an attempt to stem the negative effects sometimes associated with globalisation – which could put into question what is commonly referred to as the European Social Model.

The EGF comes under Article 175 of the Treaty on the Functioning of the European Union. While it complements other existing policies and financial instruments to address problems associated with globalisation (such as the structural funds), the objective of the first EGF Regulation (EC) No 1927/2006 is unique. Unlike the European Social Fund (ESF) , for example, the EGF is not designed as an annual programme to ensure the anticipation, adaptation and positive management of change in a global economic environment. It represents instead a one-off, specific funding opportunity for individual employees adversely affected by globalisation due to economic delocalisation, a high increase in imports or a decline in EU exports.

In operation since January 2007, the Fund is currently established by Regulation (EU) No 1309/2013 which has extended the scope of the EGF, covering the period from 1 January 2014 to 31 December 2020. Since January 2014, the EGF has had a budget of roughly €150 million per year.

According to the European Commission, ‘the EGF is designed to supplement national and European labour market instruments in situations where the regular measures are not sufficient to cope with the scope and nature of a mass layoff’. To benefit from the EGF, however, certain conditions have to be fulfilled. For example, Article 4 (1.a) of the current regulation states that a minimum of 500 employees must have been made redundant or 500 self-employed persons’ activity must have ceased in a company or Member State (including employees in suppliers or downstream producers) over a period of four months. The period of redundancy increases to nine months under Article 4 (1.b) where this involves small and medium-sized enterprises (SMEs) in a NACE 2 sector or in one or two regions at NUTS II level. In addition, where the above criteria are not fulfilled, Article 4 (2) will consider funding programmes in the case of small labour markets and exceptional circumstances.

When applying for funding, the Member State has to provide certain information, for instance, an analysis of the link between planned redundancies and economic global structural changes, as well as drawing up a relevant programme to support the reentry of workers into the labour market. After accepting the validity of an application, the budgeting authorities can agree to finance up to 60% of a programme’s overall costs (compared to a maximum of 50% in the 2006 Regulation).

Although the Commission originally estimated that the EGF budget could support between 35,000 and 50,000 workers per year, first assessments of the Fund published in 2008 demonstrated that it had a more modest impact. As a result, changes have been made to raise the Fund’s profile. Between 2007 and 2014, the European Commission approved 134 applications from Member States, representing support of €561.1 million to 122,121 redundant workers.

The EGF can only be used to support active labour market measures such as:

  • tailor-made training and retraining, job-search assistance, occupational guidance, mentoring, outplacement assistance, entrepreneurship promotion, the support of self- employment, business start-ups and employee takeovers, etc.
  • special time-limited measures, such as job-search allowances, employers’ recruitment incentives, mobility allowances, subsistence or lifelong learning allowances
  • measures to stimulate in particular disadvantaged, older and young unemployed persons to remain in or return to the labour market

Published in December 2016, the mid-term evaluation of the EGF , based on applications received in 2014 and 2015, showed clearly that for the 13 cases that had completed implementation by October 2016, the average reemployment rate achieved was 56%. This was higher than assessed in the previous period (2007–2013), though it was based just on short-term data. It also demonstrated the reasons for the use or non-use of the EGF by Member States. The main issue mentioned in this regard was the eligibility criteria, specifically the threshold of 500 redundant employees (as large companies are not prevalent in many Member States).

On 30 May 2018, the European Commission issued a new proposal for a Regulation of the EGF which would apply from 1 January 2021 to 2027. The proposal reaffirms the usefulness of the EGF in the context of globalisation and digitisation, and suggests lowering the threshold of displaced workers to 250 and widening the scope of significant restructuring events eligible to receive funding from the EGF. One of the main aims is to cover major restructuring due to the transition toward a low-carbon economy or due to digitisation and automation.

See also: Digital Agenda; digitisation; Social Policy Agenda; solidarity principle

Please note: the European industrial relations dictionary is updated annually. If errors are brought to our attention, we will try to correct them.

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