Last December, as part of the European Economic Recovery Plan, the European Commission adopted a proposal to amend the Regulation on the European Globalisation Adjustment Fund (EGF). The fund aim is to provide aid for the professional reintegration of workers made redundant for reasons associated with globalisation. Presently, a Member State may apply for support from the fund if there is a link between the job losses suffered and major changes in the structure of international trade, such as economic relocation to third countries or a rapid decline of the EU market share in a given sector.
The Commission wants to strengthen solidarity consequently it has proposed to extend the scope of the EGF to provide also support, on a temporary basis, until the end of 2010, to workers made redundant as a result of the current financial and economic crisis but not covered by the existing Regulation.
The majority of the Member States are in favour of extending the scope of the EGF whilst some Member States have challenged it arguing that generalising access to the EGF would go against the fund’s original objective.
Jonathan Shaw has said to the European Scrutiny Committee that the Government believes that is not necessary to broaden the scope of the fund since the current regulation already allows the Community to respond to redundancies caused by the current global financial and economic crisis.
Presently, to trigger the fund the jobs lost should amount to at least 1 000 redundancies. The fund may cover up to 50 per cent of the Member State’s action reintegrating redundant people into the labour market by providing, for instances, job-search assistance and training. The period of validity of the fund is limited to 12 months from the date on which the Member State was presented the application.
The Commission has proposed to reduce the required number of redundancies from 1000 to 500 and to increase the co-financing rate for assistance from 50% to 75% as well as to prolong the period for the use of the financial contribution from 12 to 24 months. The UK Government believes that reducing the required number of redundancies and increasing the maximum rate of contribution are not compatible with the original aims of the Fund.
Member States such as the UK, Denmark, Germany, the Netherlands, and Sweden are concerned that such amendments would increase spending which will lead to a quick ‘meltdown’ of the fund Moreover, they believe that the EGF should complement, not replace, measures taken at national level. According to the EuropeanVoice Sven-Otto Littorin, the social affairs minister of Sweden has said “We want short but effective financial aid, not something that supports companies that really are not viable.”
Nevertheless, the draft regulation will be adopted by the Council since qualified majority is required and the majority of the member states support the proposal. Last April, in record time, the Czech presidency and the European Parliament reached a first reading agreement on the proposal. The European Parliament has recently endorsed such agreement. It will be then easier to release funds from the European Globalisation Adjustment Fund.
The European Parliament and the Council agreed to extend the scope of the fund which will provide support to workers made redundant as a direct result of the global financial and economic crisis. Member States will be, therefore, required to establish a "direct and demonstrable" link between the redundancies and the financial and economic crisis. Such derogation will apply to all applications presented from 1 May 2009 till 31 December 2011.
Moreover, the limit for the submission of requests for aid from the EGF has been lower from 1,000 to 500 redundancies. They also agreed to increase the share of financing by the EGF from the current 50 per cent to 65 per cent for applications presented before 31 December 2011. Moreover, the use of EGF funds will be extended from 12 to 24 months.
The Commission has proposed applying the amended Regulation to all applications presented after its entry into force. Nevertheless, several member states demanded transitional provisions to be included in the text to ensure the applicability of the new rules to applications presented before the entry into force of the new Regulation. The new rules will have, therefore, a retroactive effect. The Regulation will apply to all requests submitted to the European Commission since 1 May 2009.
The Council formally adopted the text on 11 June. Germany voted against and the UK and Latvia abstained.
There is no specific budget line for the EGF in the Community budget. It has a maximum annual budget of €500 million which comes from any margin existing under the global expenditure ceiling of the previous year, and/or from Community funds that have been de-committed. Since 2007, the fund has pay out €67.6 million euro to France, Portugal, Spain, Germany, Finland, Malta, Lithuania and Italy. Moreover, an application from Spain to help automotive industry workers has recently been approved by the European Parliament and the Council (Budgetary Authority). There are also further EGF applications from Germany, Portugal and Austria which are currently being analysed by the European Commission.
British taxpayer’s money is contributing to a fund to help workers made redundant elsewhere. Although the UK has the greatest number of redundancies involving 1000 or more workers there has not been a single application from the UK for EGF funds.
