2011 report on European Globalisation Adjustment Fund

05 September 2012
by eub2 -- last modified 05 September 2012

More than 21,000 workers dismissed due to the economic crisis and the effects of globalisation were helped to find new job opportunities by the European Globalisation Adjustment Fund (EGF) in 2011, according to a report adopted on 4 September by the European Commission. The EU's Globalisation Fund paid out a total of €128 million in 2011 to assist these workers in twelve Member States (Austria, Belgium, Czech Republic, Denmark, France, Germany, Greece, Ireland, Italy, The Netherlands, Poland and Portugal).

What are the objectives of the EGF?

The EGF, an initiative proposed by European Commission President José Manuel Barroso, was established by the European Parliament and the EU's Council of Ministers at the end of 2006 to show solidarity with, and provide support to, workers made redundant as a consequence of major changes in world trade patterns.

It was designed as a means to reconcile the overall long-term benefits of open trade in terms of growth and employment with possible short-term adverse effects, particularly on employment, of the most vulnerable and lowest skilled workers. The measures typically supported by the EGF include intensive personalised job-search assistance, a variety of training and up-skilling measures, entrepreneurship promotion as well as various financial incentives/allowances during the support period.

In June 2009, the EGF rules were revised to strengthen the role of the EGF as a crisis intervention instrument forming part of Europe's response to the financial and economic crisis. The 2009 amendment of the EGF Regulation included temporary modifications applicable from 1.5.2009 until 30.12.2011 (eligibility of workers made redundant as a result of the crisis and increased co-funding rate of 65% instead of 50%), as well as several permanent modifications (threshold reduced to 500 redundancies, implementation period increased to 24 months from the date of application etc.). In the absence of an agreement in the Council, the temporary modifications (expanded eligibility and increased co-funding rate) were not prolonged beyond the end of 2011.

As part of its proposal for the next Multi-Annual Financial Framework beyond 2013, the Commission proposed in October 2011 that the EGF should continue over 2014-2020 and that its scope should be expanded to workers made redundant because of an unexpected crisis and to new types of workers e.g. temporary and self-employed workers, including farmers.

Who qualifies for EGF support and how does the Fund work?

The EGF is for workers, not for companies. It aims to complement the support provided by Member States and companies concerned to help redundant workers actively looking for work. Member States must make an application for funding and must fulfil the criteria as set out in the EGF Regulation.

The maximum amount available through the EGF is currently €500 million per year. Each deployment of the Fund, as well as the amount deemed necessary for each application, is decided by the Council and the European Parliament on the basis of a Commission proposal.

The EGF will only fund active employment measures to keep people in the labour market such as counselling, training and business creation, but not passive social protection measures such as retirement pensions or unemployment benefits, which are the competence of the Member States. The EGF currently covers up to 50% of the overall costs of support (after the expiry of the temporary increase to 65%), the other half being the responsibility of the Member State.

The Commission made a proposal to extend the temporary 'crisis derogation' beyond 2011 - what happened to this proposal?

The temporary modifications brought about by the 2009 amendment of the EGF Regulation applied from 1.5.2009 until 30.12.2011. In June 2011, the Commission adopted a proposal to extend the so-called 'crisis derogation' until the end of 20131. This was fully endorsed by the European Parliament on 21 September 2011. In the Council, however, despite extensive debates and various compromise solutions tabled under the Polish and Danish Presidencies, the Commission proposal did not receive the necessary qualified majority.

Since a political agreement on the extension of the crisis criteria was not reached, current applications for EGF support can be justified only on the grounds of structural changes in world trade patterns, and the co-funding rate has been brought back to the original 50 % of total eligible costs.

However, from 2012 until the end of the current programming period (end of 2013), the permanent changes in the amended Regulation (threshold reduced to 500 redundancies, implementation period increased to 24 months from the date of application) will continue to apply, facilitating applications from Member States related to redundancies as a consequence of major structural changes in world trade patterns.

Have Member States used the temporary 'crisis derogation' introduced in 2009 to apply for EGF assistance?

The temporary 'crisis derogation' applied to all applications received from 1 May 2009 to 30 December 2011. In this period, a total of 80 applications were submitted by 18 Member States.

65 applications (81.3 %) targeted workers who lost their jobs as a result of the financial and economic crisis, and 15 applications (18.7 %) were submitted for workers dismissed because of changes in world trade patterns due to globalisation.

In terms of EGF amounts requested and in terms of workers targeted for assistance, the applications submitted under the 'crisis derogation' represent more than 84 % of the total over the same period.

The report covers 2011. What can we say about that year specifically?

In 2011, the Commission received 26 applications for EGF support. These were submitted by 10 Member States for a total of € 77 546 044 in EGF support to target 16 870 redundant workers in some 20 sectors. Two Member States applied for the first time in 2011: Greece and Romania.

In terms of paid-out funding, the European Parliament and the EU's Council of Ministers took 22 decisions in 2011 to deploy EGF funding (5 of these were in response to applications made in 2011, 16 concerned applications received in 2010 and one was in response to an application received in 2009). These decisions targeted 21 213 workers dismissed in twelve Member States (Austria, Belgium, Czech Republic, Denmark, France, Germany, Greece, Ireland, Italy, Netherlands, Poland, Portugal) and awarded over € 128 million from the EGF.

The €128.2 million paid out represent a 54.1 % increase in terms of EGF co-financing compared with 2010 (€83.2 million for 30 contributions granted in 2010, not counting one paid case which was later withdrawn and reimbursed by the applicant Member State, EGF 2010/023 ES/Lear, €0.4 million).

This steep rise reflects the impact of the global financial and economic crisis which had led to a dramatic increase in applications in 2009.

In 2011, what kind of measures have been taken to help workers made redundant?

Similarly to previous years, the measures for which the Member States requested EGF assistance included intensive, personalised job-search assistance and guidance, including placement research with potential employers, a variety of vocational training, up-skilling and retraining measures, temporary financial incentives and allowances during the support period, and other types of support such as business creation and public employment schemes.

The EGF complements the European Social Fund (ESF), which is the major EU instrument for supporting employment in the EU. While the EGF provides tailor-made assistance to redundant workers in response to a specific, European-scale mass redundancy event, the ESF supports strategic, long-term goals (e.g. increasing human capital, managing change) through pre-programmed multi-annual programmes, the resources of which cannot normally be reallocated to deal with crisis situations caused by mass redundancies.

Specific examples of good complementarity between the Structural Funds and the EGF is a case submitted by Denmark (EGF/2010/025 DK/Odense Steel Shipyard) and three cases from Ireland related to the construction sector (EGF/2010/019, EGF/2010/020, EGF/2010/021)

What has the EGF achieved since its launch at the end of 2006?

The EGF contributions aim to co-finance active labour market policy measures proposed and organised for the workers by the Member States' authorities.

Since 2007 when the Fund became operational, the Commission has received 101 applications for assistance amounting to €440.5 million from 20 Member States (situation on 16.7.2012, see Annex). Some 91 000 redundant workers have already benefited from, or are about to receive EGF assistance. Most applications (17) originate from Spain, followed by The Netherlands (16).

The applications cover 33 industrial sectors: 65% of all applications concern manufacturing, out of which the automotive industry represents the biggest share (16 applications targeting about 21 000 workers, assistance worth €113 million), followed by textiles (10% of all applications), machinery and equipment (10%) and the printing industry (9%). A further 10% of all applications were linked to the construction industry and another 10% to services (wholesale and retail trade, ICT services, road transport, social work, warehousing/storage and call centre communication services).

What are other important results?

Member States have reported over the past years a series of interesting facts and encouraging information indicating that the personal situation, self-confidence and employability of the workers concerned visibly improved thanks to the tailor-made EGF assistance and services, even if not all of them found new work immediately.

The EGF enabled Member States to act more intensively in the areas affected by redundancies, in terms of the numbers of people assisted and the duration, type and quality of support, than would have been possible without EGF funding. The EU funds enabled countries to respond more flexibly to the current employment challenges, to devote more attention to lower skilled people and harder-to-help job seekers, and to include innovative actions in their measures as well. The EGF has proved to be a useful instrument at a time of budget deficits and public sector cuts, when national resources had become scarce and when Member States and companies were struggling to recover from the global crisis.

The outcomes of the skills enhancement measures implemented by Member States with the help of the EGF and the other 'softer' benefits for the workers indicate that the EGF supports Member States effectively in their efforts to prepare for future employment challenges (e.g. response to demographic ageing, greener and knowledge-based economy etc.).

As more and more results of cases with the longer implementation period (24 months, as a result of the amendment of the EGF Regulation) become available, the EGF's impact will be assessed in more detail, including in the ex-post evaluation which is due by 31 December 2014.

What will happen to the EGF in the future?

Building on the experience acquired with the EGF since 2007 and its value added for the assisted workers and affected regions, the Commission has proposed to maintain the Fund during the 2014-2020 multiannual financial framework2. It has proposed to enable it to provide assistance also to additional categories of workers not eligible at present, such as the self-employed and temporary workers. In addition to supporting workers made redundant as a result of major structural changes due to the increasing globalisation of production and trade patterns, the Commission proposal would allow the EGF to also react to large-scale redundancies resulting from a serious disruption of the local, regional or national economy caused by unforeseen crises as well as to negative effects of trade agreements on the agricultural sector through transitory support to farmers to facilitate their adaptation.

For more information see the 2011 EGF Annual Report and also the EGF Statistical Portrait 2007-2011

Source: European Commission