Use of European Globalisation Adjustment Fund extended

On 16 December 2008, the European Commission announced changes to the European Globalisation Adjustment Fund (EGF). These will reduce the eligibility threshold for applications and extend the period of support for the fund. The changes were felt necessary to encourage greater use of the fund and to include a broader base. In recent years, the EGF has contributed to projects in Finland, France, Germany, Italy, Lithuania, Malta, Portugal and Spain.

Aims of fund

The European Globalisation Adjustment Fund (EGF) was launched two years ago at the beginning of 2007 under Regulation 1927/2006. Its principal objectives are to retain workers in – or reintegrate workers into – the labour market, where they have been made redundant due to changes in global trade patterns (EU0708039I). It has a potential budget of €500 million each year and, in the two years since its inception, it has assisted more than 15,000 redundant workers into work.

The current global economic crisis, which has hit all EU Member States, has prompted the introduction of changes to the operation of the fund. This was announced in the European Economic Recovery Plan (128Kb PDF) published by the European Commission on 26 November 2008. The plan concluded that the EGF needed to be revised, so that it could respond more quickly to job losses and assist more redundant workers into new jobs. In the words of the recovery plan, the EGF should be a ‘more effective intervention instrument, in line with the fundamental principles of solidarity and social justice’.

Details of changes

The exact details of the changes were announced on 16 December 2008 (COM(2008) 867/4) (Commission news release) and include the following measures (EU0901019I):

  • lowering the eligibility threshold for EGF applications from 1,000 to 500 workers;
  • extending EGF support to 24 months to allow sufficient time for the measures to be effective in reintegrating particularly the most vulnerable workers into new jobs; up to now, the support timeframe has been 12 months;
  • increasing the EU financial contribution for each application to 75%, with the Member State responsible for the remaining 25%;
  • applying the fund to cases where workers have been adversely affected by the economic and financial crisis, and not just workers who have lost their jobs due to changes in world trade patterns.

Use of the fund

The overall budget of the EGF remains at €500 million a year. However, this budget had not been fully utilised in the previous two years, with a total of €67 million being contributed by the fund for cases affecting just eight Member States – Finland, France, Germany, Italy, Lithuania, Malta, Portugal and Spain. Examples of projects that have used the funds include a case where a Lithuanian company went bankrupt after work had transferred to China. In that case, the EGF funded assistance to 600 workers, including job creation, help with job search and support for self-employment schemes. In Germany, 3,300 workers were assisted in training, job placement and career counselling when they lost their jobs after production was shifted to Asia. In Spain, the fund assisted 1,500 workers by providing training and assistance for redundant workers.

The changes are expected to apply until the end of 2010 and the higher financial contribution from the EU is intended to encourage more Member States to use its potential to assist workers back into employment. It was felt that the economic and financial crisis requires a response mechanism capable of taking action ‘on a temporary and exceptional basis to reintegrate workers into employment as quickly as possible’. Training and job placements will be co-financed by the European Commission, with it assuming significant financial responsibility for these costs (EU0902049I).

Growing interest in applications to the fund

Member States are already paying heed to the revised criteria for the EGF. For example, the Irish government has been in contact with the European Commission regarding the recent substantial job loss announcement at the Dell computer plant in the midwestern city of Limerick. Some 1,900 jobs are to be transferred to a manufacturing site in the city of Łódź in central Poland and at least another 1,500 jobs in Ireland are likely to be cut in suppliers to Dell and in local services (IE0901049I). However, the fact that the jobs in this case are being lost to another EU Member State is somewhat problematic for the Commission, as it could set a precedent for use of the EGF.

Views of social partners

The European Trade Union Confederation (ETUC) has favoured an extended use of the EGF taking account of the changed economic climate and adopted a resolution (129Kb PDF) on the European recovery programme at its Executive Committee on 3–4 December 2008.

Meanwhile, the Confederation of European Business (BusinessEurope) also welcomed the recovery plan, including the changes to the EGF. Nevertheless, the employer organisation expressed concern whether the plan offered enough to deliver economic stimulus measures.

Sonia McKay, Working Lives Research Institute

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