28/02/2011

The European Globalisation Adjustment Fund

By Francesco Frapiccini, Italian Press Adviser

Why the Globalisation Adjustment Fund?

The European Globalisation Adjustment Fund (EGF), put in place by the EU in 2006, is a concrete response to unemployment resulting from globalisation and, as a temporary measure adopted in 2009, from the economic and social crisis.

The European Commission took the initiative of proposing the idea of this fund in 2005, stressing the need for an effective response, on a European scale, in dealing with the sometimes adverse effects of the opening to international competition of the EU economy. A more open economy does in fact mean that local, national and regional levels face increased competition which, in the less competitive sectors, can sometimes result in massive job losses.

What is the EGF?

The EGF is a financial tool aiming to help an effective re-entry into the labour market of those workers who have lost their jobs. The EGF provides individual support for a limited period of time to workers who are affected by trade-adjustment redundancies. All Member States can apply for support from the fund according to specific criteria.

The financial aid provided by the EGF was in 2006 given an annual ceiling of €500 million and is mainly allocated to: job-search assistance, tailor-made retraining, promoting entrepreneurship, aid for self-employment and special temporary "income supplements" such as job-search allowances, mobility allowances, training allowances and measures to stimulate disadvantaged or older workers to remain in or return to the labour market. The fund can pay up to 65% of the total cost of the project with the rest paid by the Member State, the region or the local authority. It is important to underline that the EGF does not finance passive social protection measures such as unemployment benefits or similar.

The EU already provides a general response, in terms of tackling and anticipating the challenges of globalisation, with the Europe 2020 Strategy and Structural Funds. The EGF was created in 2006 as another concrete response to tackle economic and social crisis, but focusing on the increasing unemployment resulting from it.

Report in the European Parliament

The Parliament, as one of the two EU budgetary authorities with the Council, has to consider and give its approval to each request for the mobilization of the EGF. Barbara Matera MEP is responsible for the EGF in the Budget Committee in the European Parliament. As Rapporteur she has worked to speed up procedures for the mobilisation of the fund, as well as for creating a specific budget line for the EGF.

"The EGF mechanism demonstrates flexibility in helping specific cases in several European regions and we are making all necessary efforts not only to accelerate the mobilisation of this instrument but also to make it more effective, especially given the role it is playing in combating the global economic crisis," Matera pointed out.

The future of the EGF

Following the adoption of a report on the funding and functioning of the EGF Fund in its Budget Committee, the European Parliament has proposed to the Commission several ideas on how to make the fund simpler and more efficient.

The Commission has taken steps to reduce the time taken to process applications by merging two procedures into one. Whereas in the past the Commission first concluded that an EGF application was eligible and then submitted a Proposal to the Budgetary Authority to mobilise the Fund, now these two processes happen together.

The most important proposal in the report concerns the prolongation of the amendment allowing the fund to help people who have lost their jobs as a result of the economic and financial crisis until the end of the current multi-annual financial framework (a 'financial perspective' that sets limits on EU spending for different categories of expenditure and on which annual EU budgets are based).

The consolidated Regulation (the 2006 original text and the 2009 amendment) sets out two deadlines for review of the current provisions. The first review will happen by 31 December 2011, after which the crisis amendment expires. If nothing changes, then the co-financing rate will revert back to the rate stipulated in the old Regulation of 50% and applications will only be able to be made on the basis of trade-related collective redundancies.

The second review must occur by 31 December 2013 and will decide the future of the fund within the multi-annual financial framework, including the option of making the EGF a permanent instrument.