Brussels, 1st March 2006
Background to the EGF
The Commission report from October 20th 2005 on 'European Values in a Globalised world' highlighted the benefits of more open trade but also underlined the need to help those who experience the negative consequences of globalisation through job losses. In this context before the Hampton Court Summit, in a letter to the Presidents of the EU and the Parliament on 20/10/05, President Barroso proposed a Globalisation Fund. This Fund would provide a European response to those adjusting to the consequences of globalisation, acting as a sign of solidarity from those who benefit from open trade to those who face the sudden shock of losing their job. The proposal was endorsed at the December 2005 European Council, where there was general agreement among European leaders on the need to address the adverse effects of changing trade patterns on workers.
What is the new European Globalisation Fund?
The EGF will provide up to 500 million euro each year to help reintegrate into the labour market workers made redundant due to changing global trade patterns.
Why do we need this Fund?
More open trade leads to overall benefits for growth and employment, but it can cost some jobs. All Member States, large and small, new and old, can be affected by these changes and will all therefore be eligible for EGF assistance. While the EU Structural Funds support the anticipation and management of change with activities such as life-long-learning with a strategic and long-term perspective, the new Fund will provide one-off, time limited individual support geared to helping workers who are 'severely and personally affected by trade-adjustment redundancies'.
When will it start?
The EGF can start as soon as the new regulation is in force. The Regulation will be presented by the Commission on March 1st. The Commission's objective is that the Fund be operational from Jan 1st 2007.
How many redundant workers will benefit from the EGF?
Between 35,000-50,000 workers in the EU would be eligible for the Fund every year, although it is clearly difficult to forecast sudden redundancies, and the actual numbers would depend on the eligible applications submitted by the Member States as well as the availability of budgetary resources. Provided there is a clear link, workers employed by sub-contractors or suppliers of a company where collective redundancies have been announced will also qualify for the Fund.
What concrete measures will the EGF fund?
The one-off, tailor-made services to be funded by the EGF include job search assistance, personalised retraining, promoting entrepreneurship, or assisting self employment. Equally, special temporary 'in-work supplements', such as allowances for those participating in training, may be available, as well as complementary wage allowances for workers over 50. The measures are designed to help workers laid off by multinational or national companies, including SMEs (small and medium sized enterprises), to find and retain a new job.
For how long can a worker be helped?
The EGF can support actions for redundant workers for up to 18 months.
What conditions trigger its use?
Firstly, the EGF will only be triggered when a Member State makes an application for funding. Member State must demonstrate the link between job losses and significant structural changes in global trade patterns. This can take the form of an economic relocation to a third country, a massive increase of imports or a given sector experiencing a progressive decline of its EU market share.
Second, the regulation stipulates that, to trigger the Fund, there must be a minimum of 1,000 redundancies in a given company or sector. At company level, this means that job losses must be in a region where the unemployment level (measured at NUTS III level) is above the national or EU average. At sectoral level, job losses must represent at least 1% of the regional employment level (measured at NUTS II level).
Who is not eligible for EGF support?
The EGF will provide support to individual workers through Member States, not to directly to companies, regions or local authorities. Furthermore, redundancies in companies and sectors undergoing restructuring will be eligible to the EGF only if they are demonstrably linked to structural changes in world trade patterns (Member States will have to provide a reasoned analysis of this link between the redundancies and trade).
Is there a ceiling for Member States/regions/sectors?
The EGF is open to all Member States under the same conditions. While there will be no national "quotas", there will be a fair distribution of the Funds so that EGF assistance is not too concentrated in one country.
Does it replace aid given by Member States in similar situations?
No. Member States are responsible in the first instance for tackling trade adjustment redundancies - the fund is therefore designed to add to national, regional and local assistance when the impact is on a European scale.
Is this a rapid reaction fund?
Rapid reaction financing is not the aim of the Fund: the EGF is about solidarity, not emergency or crisis. It will complement the Member States’ own immediate support to sudden trade-related redundancies. However, although the EGF will only intervene at the request of a Member State, the eligibility of actions initiated by the Member States to EGF funding will count from the moment redundancies are announced.
How will it work in practice? How will the budgetary authority decide on final allocations?
Once redundancies are announced, a Member State will need to demonstrate to the Commission that their claims are eligible under the rules of the EGF as laid out above. The Commission will then process the application through the Council and the European Parliament who, as the budgetary authority (according to Article 251 on co-decision), will decide whether and how much to allocate to the Member State concerned.
The Commission's proposal will be based on an analysis of the Member State’s application which includes elements to justify qualification for the Fund, as well as an explanation on how Funds are linked to globalisation. The burden of proof on eligibility is the responsibility of the Member State. If the budgetary authority approves a Member State application, it will decide on the final amount and the Commission will distribute the funds as soon as possible in one instalment.
Is this covered under the new EU budget?
No specific financial provision for the EGF is being made in the financial perspectives. The maximum amount available through the EGF will be €500 million per year. This will be financed through under-spending against the other budget ceilings and from Community Funds that have been de-committed.
What is the legal basis?
Like the Solidarity Fund, the EGF's legal basis is Article 159 paragraph 3.