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European Globalisation adjustment Fund (EGF)

14 December 2006
by eub2 -- last modified 14 December 2006

The European Globalisation adjustment Fund (EGF) is a new instrument which will provide personalised support to workers who have been made redundant as a result of trade liberalisation, so that they can either remain in employment or find quickly a new job.


1) Background

What is the new European Globalisation adjustment Fund (EGF)?

The opening of economies to international competition brings new opportunities in terms competitiveness and the creation of high-quality jobs. However, trade openness can also have negative consequences for the most vulnerable and least qualified workers in some sectors and areas of the European Union.

The European Globalisation adjustment Fund (EGF) is a new instrument which will provide personalised support to workers who have been made redundant as a result of trade liberalisation, so that they can either remain in employment or find quickly a new job.

The EGF will thus express the Union's solidarity in complement to the support provided by the Member States at national, regional and local levels.

The new Fund will specifically and directly support people, not companies or institutions, through active labour market measures such as: counselling; job search and mobility allowances; new ICT skills and other forms of training; entrepreneurial support, including micro-credits.

What conditions will trigger assistance from the EGF?

The fund will be activated, upon a request introduced by a Member State, when one or more companies (national, multinational or SMEs) announce a number of collective redundancies due to structural changes in world trade patterns. The Fund will intervene only in cases where the redundancies have a significant impact on a region or a sector and therefore there is an EU dimension in terms of scale and impact.

What will the new Fund do?

The EGF is planned to provide up to 500 million euro each year, to retain workers in, or reintegrate workers into the labour market who have been made redundant due to changing global trade patterns. The Fund is foreseen to complement the support provided by the Member States and companies concerned in favour of redundant workers who are actively looking for work. It will fund only active employment measures to keep people in employment such as counselling, but not passive social protection measures such as retirement pensions or unemployment benefits, which are the competence of the Member States. The EGF plans to cover up to 50% of the overall costs of support, the other half being the responsibility of the Member State.

The Fund is foreseen to offer: job search and mobility allowances; counselling; new ICT skills and other forms of training, entrepreneurial support - including micro credits - to workers who have been made redundant. It will help individual workers: companies would not receive support from the Fund.

When will it start functioning?

The EGF will be operational as soon as the new regulation is in force. Redundancies that have actually taken place in 2006 or earlier, however, cannot be counted.

Why do we need this Fund? Are the Structural Funds and in particular the European Social Fund (ESF) not enough?

The EU Structural Funds, in particular the European Social Fund (ESF), consist of multi-annual programmes in support of strategic, long-term anticipation and management of change and restructuring in the 2007-2013 period, with activities such as life-long-learning. The EGF is a response to a specific, European scale crisis; it will provide one-off, time limited individual support geared directly to helping workers who have suffered trade-related redundancies.

2) Criteria for Intervention

What are the precise conditions of intervention, and how can Member States determine the link between redundancies and world trade patterns?

Subsequent to a proposal by President Barroso, the European Council agreed: that the criteria must be strict; that the scope of intervention of the Fund must be dependent on the existence of a link between the redundancies and changing world trade patterns; and that the Fund's activation and eligibility must be specifically related to the scale and the territorial impact of the redundancies (i.e. without any pre-condition that would establish ex-ante priorities between Member States).

It is foreseen that the EGF will only be triggered when a Member State makes an application for funding on behalf of the workers concerned. (There is the possibility for Member States to make a joint application when more than on country is concerned.)

Within clear and transparent criteria, the burden of proof on the fulfilment of intervention criteria rests with the applicant Member State, on grounds of subsidiarity (Member States are best placed to judge the situation on the ground), as well as of efficiency and better regulation.

First, a Member State must demonstrate the link between job losses and significant structural changes in world trade patterns. This can, for example, take the form of, a substantial increase of imports or a given sector experiencing a rapid decline of its EU market share; or economic relocation to third countries. Member States in their applications would need to provide a reasoned explanation of such link.

Second, the regulation foresees that, to trigger the Fund, there must be a minimum of 1,000 redundancies in a given company or sector. At company level (Art. 2a), the geographical reference is a Member State. The count of redundancies includes workers made redundant in suppliers or downstream producers. The period in which redundancies can occur is 4 months. At sector level (Art. 2b), job losses must occur particularly in small and medium-sized enterprises in an economic sector (as defined in the Community's "NACE2" nomenclature by Eurostat), either in one region (i.e. the "NUTS II" level EU regions of Cohesion policy; see examples in annex), or in 2 neighbouring regions. The period in which redundancies can be counted is 9 months. In small labour markets or in exceptional circumstances (Art. 2c), the Fund can intervene even if the criteria of 2a) and 2b) are not entirely met. To qualify for the Fund, redundancies must have a serious impact on employment and the local economy. Not more than 15% of the Fund's expenditure can be spent on exceptional circumstances.

3) EGF – Types of actions and implementation

What actions will the EGF fund?

The aim of the EGF is to retain workers in, or reintegrate workers into, the labour market. It will provide support for up to 12 months to fund personalised support services such as job-search assistance, career guidance, outplacement assistance, tailor-made training and retraining and the promotion of entrepreneurship.

It will also provide special time limited measures, such as job search allowances, mobility allowances, or allowances to those participating in lifelong learning and training activities.

This means that the EGF does not finance passive social protection measures, such as pension, invalidity or unemployment benefits: they belong to the Member States' responsibility).

Member States who have successfully applied for an EGF intervention will be able to fund with EGF money information and communication activities highlighting the role of the Fund in their interventions to support workers.

Who is eligible to the Fund's support?

It is foreseen that the EGF is open to all those persons who work legally in the EU, whose redundancy has been announced or who have been made redundant due to changing global trade patterns. It would be open under the same conditions to the workers living in all 27 EU Member States.

How will the implementation of the EGF work?

The EGF Regulation clearly states that no new administrative structures will be required for the operation of the new Fund. The EGF will operate under the principle of subsidiarity, and in a system of shared management between the Commission and the Member State. Responsibility for implementing the EGF lies with the authorities of the Member States concerned. A Member State will be required to present a report justifying the use of the Fund. The Commission will carry out a mid-term evaluation on the results achieved.

How will the Fund's budget work?

The maximum amount available through the EGF is foreseen to be €500 million per year. This would be financed through under-spending against the other budget ceilings, and from Community Funds that have been de-committed.

Each deployment of the Fund, as well as the amount deemed necessary for each application, would be decided by the budgetary authority – i.e. the Council and the European Parliament - following a Commission proposal.

Source: European Commission, December 2006