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MEMO/09/221

Brussels, 6 May 2009

Revision of the European Globalisation Adjustment Fund (EGF)

Why did the Fund need to be revised?

In the current financial and economic crisis, Europe needs tools to react more quickly and more effectively. The European Commission proposed to change the scope of the European Globalisation adjustment Fund (EGF) to ensure that it would cover redundancies caused by the crisis and increase the solidarity aspect. To this end, some provisions of the EGF's founding Regulation (1927/2006) have been amended so that the Fund can intervene, inter alia, to co-finance training and job placements.

Why has the EGF been changed now?

In its European Economic Recovery Plan, published on 26 November 2008, the Commission announced its intention to make the EGF part of Europe's response to the crisis (IP/08/1771).

Also, last year's annual report on the operation of the EGF was part of the Commission's 'Renewed Social Agenda' package, adopted on 2 July 2008 (MEMO/08/464). In the Communication 'Solidarity in the face of change: The EGF in 2007 — review and prospects', the Commission announced its intention to amend the EGF Regulation before issuing the next annual report, which is due by mid-2009.

What is the role of the EGF?

The EGF is an expression of EU solidarity with European workers left vulnerable because of the impact of globalisation as well as the current financial and economic crisis.

Its objective is to keep workers in employment or help them back into jobs when they have been made redundant due to changing global trade patterns and the global financial and economic crisis. It has been assigned a budget of up to € 500 million each year.

The EGF contributes directly to the creation of a more dynamic and competitive European economy by:

  • improving the skills and employability of workers who have been made redundant;
  • generally improving the skills of the European workforce, leading to better quality and higher value-added work.

What are the main changes under the new EGF?

The performance of the Fund with respect to its solidarity objective is being improved by:

  • ensuring that the Fund can act as an effective crisis response instrument, on a temporary and exceptional basis, to help workers made redundant as a result of the crisis back into employment as quickly as possible;
  • increasing the EU funding rate from 50% to 65% until the end of 2011, as a special crisis measure;
  • lowering the eligibility threshold for EGF applications from 1 000 to 500 redundant workers in a sector, region or undertaking;
  • extending to 24 months (from the current 12 months) the duration of EGF support to leave sufficient time for the measures to be effective in re-integrating particularly the most vulnerable workers into new jobs.

How do these changes enable the EGF to become a more effective crisis response instrument?

The revised EGF will be able to intervene more effectively in support of workers made redundant, and ensure that these workers are reintegrated into employment as quickly as possible.

The scope of eligibility is being broadened from trade-related redundancies to include the financial and economic crisis, for a limited period until end of 2011. This will allow the Fund to respond more effectively in solidarity with the affected workers. The increase in the intervention rate (financial contribution) from 50% to 65% of the total cost, for the same crisis period, will encourage Member States, some already under budgetary pressure, to use the EGF more easily.

The other changes, including the lowering of the eligibility threshold from 1 000 to 500 workers, will allow a greater number of redundancy cases to be eligible, and therefore also a greater number of workers to be helped back into employment. The extension of the duration of support will ensure that the affected workers can be assisted with the most appropriate measures.

What has the EGF done so far?

Since entering into force at the start of 2007, there have been 17 applications for funding worth a total of €83 million. Twelve of those applications have been paid in full: €67.6 million in total, helping more than 15 000 workers. An additional application from Spain to help 588 automotive industry workers has just been approved by the Budgetary Authority and four EGF applications from Spain, Germany, Portugal and Austria, concerning 4 700 redundancies in the motor industry, textile and mobile phone sectors are being analysed by the European Commission.

In most cases, the funds are spent on training, counselling and advice, mobility allowances and assistance towards entrepreneurship.

How does the EGF actually help workers in practice?

The first final reports received show for instance that the EGF funded training and re-training, career counselling, entrepreneurship and employment incentives for 2 400 workers who were laid off at two German subsidiaries of mobile phone manufacturer BenQ because of a shift in production to Asia. At the end of the EGF implementation period, 74% of the workers had found sustainable employment, 4% of whom had created their own businesses.

And when, as a result of the increasing numbers of imports of small cars from Asia into the EU and greater competition in the world car market, several Renault and Peugeot suppliers in France experienced great difficulties that ended in large-scale redundancies, the EGF paid for personalised assistance for the 622 most disadvantaged workers, including support for entrepreneurship, counselling and help with job searching; and training and job-search allowances. At the end of the implementation of the EGF support in these two cases, 45% of the workers had found sustainable employment, of whom more than 10% had created their own businesses; while 17% of the workers were still involved in long-term training programmes.

These results highlight the added value of the EGF as it allowed both Member States to use successful new approaches (e.g. interaction in peer groups, high-intensity guidance and counselling) specifically designed for lower-skilled workers over 45 years of age, who are the most vulnerable categories in terms of employment prospects. In the case of Germany, the EGF made it possible to extend the duration of some training and counselling measures beyond the usual period and thus offered strengthened and more effective assistance.

Generally, in order to avoid extra bureaucracy, help provided by the EGF is steered through existing channels in the Member States, such as employment offices or agencies.

Where can I find more information about the EGF?

From the EGF website at

http://ec.europa.eu/egf


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