WIREDGOV

The European Commission has proposed to extend the temporary crisis-related derogation that allows European Globalisation Fund (EGF) to be used for workers made redundant as a result of the current financial and economic crisis in addition to those losing their job because of changes in global trade patterns. This derogation is currently due to expire on 30 December 2011, but the Commission's proposal would extend it until 31 December 2013, i.e. until the end of the implementation period of the EGF Regulation. The proposal reflects the fact that a large number of workers across the EU have been badly affected by the consequences of the current crisis. The aim is to improve the use of the EGF by offering job support measures to those most in need. The Commission proposal will be submitted to the EU's Council of Ministers and the European Parliament for approval.

"The EU is built on solidarity and our response to those experiencing difficulties is to offer support and to work with the Member States in tackling job losses." said László Andor, EU Commissioner for Employment, Social Affairs and Inclusion. He added: "Although there are signs of economic recovery, the number of Europeans still looking for work is not following the same trend. The EGF is a key way to help people find new opportunities and today's proposal would benefit the lives of many workers."

. The proposal would make it possible for Member States to continue to present applications for EGF support in favour of workers still made redundant as a consequence of the financial and economic crisis and to benefit from an EGF co-funding rate of 65 %.

In 2009, as part of Europe's crisis response, the rules of the EGF were revised so that it could be able to respond more effectively to the economic crisis. A number of permanent changes were introduced in order to enhance the effectiveness of the EGF namely a reduction of the threshold triggering an application for EGF support from 1000 to 500 redundancies and a doubling of the EGF intervention period from 12 to 24 months.

The main crisis related objectives of the revision were to include within the scope of the EGF support for workers made redundant as a consequence of the global financial and economic crisis and to reduce the financial burden of support measures for Member States by increasing the EGF co-funding rate from 50 to 65 %. The crisis related changes were introduced for a limited period until the end of 2011. At that time the latest available forecasts (autumn 2008) indicated that the negative effects of the crisis on European economies and their translation into job losses would be overcome by 2011. The latest Commission Economic Forecast (spring 2011) indicates that the prospects for economic and especially labour market recovery for 2011 and 2012 are worse than those broadly expected in autumn 2008 (see IP/11/565).

While the European economy is recovering, Gross Domestic Product (GDP) growth is not having a proportionate effect on job creation. This demonstrates that structural adjustment continues to take place across sectors and enterprises and consequently further job losses due to closure of enterprises should be expected to continue for a certain time as a result of the crisis. In order to avoid the risk of a return to growth without sufficiently dynamic job creation, it is essential to tackle unemployment and prevent long term exclusion from the labour market.

The crisis has resulted in a large reduction in economic activity, a substantial increase in unemployment, a steep fall in productivity, and badly weakened public finances. This is a particularly difficult context for Member States to provide tailor-made support to a large number of workers simultaneously made redundant as a result of the crisis. An extension of the increased EGF co-financing rate of 65 % would make it possible to alleviate to some extent the burden on Member States' public finances.

The proposed extension of the crisis-related EGF derogation is necessary because of the expected continued impact of the crisis on company closures and the need for fiscal consolidation in Member States.

Background

There have been 77 applications to the EGF since the start of its operations in January 2007, for a total amount of about €353 million, helping over 75,000 workers.

Since the introduction of the temporary crisis-related derogation there has been a sharp increase (over four-fold) in the number of applications for EGF support and 46 application for EGF support were submitted under the temporary crisis derogation, what indicates that the role of the EGF as a crisis intervention instrument in case of large scale redundancies resulting from the financial and economic crisis is genuinely being accepted.

EGF applications relate to the following sectors: automotive (France, Spain, Portugal, Poland, Austria, Germany, Sweden and Belgium); textiles (Italy, Malta, Lithuania, Portugal, Spain and Belgium); mobile phones (Finland and Germany); domestic appliances (Italy); computers and electronic products (Ireland, Portugal and the Netherlands); shipbuilding (Denmark); mechanical/electronic (Denmark, Poland and Germany); repair and maintenance of aircraft and spacecraft (Ireland); crystal glass (Ireland); ceramics and natural stone (Spain); construction (Netherlands, Italy, Ireland and Lithuania); carpentry and joinery (Spain); electrical equipment (Lithuania) publishing and printing industry (Netherlands), furniture (Lithuania), shoe manufacture (Portugal), retail trade (Czech Republic, Greece and Spain) and wholesale trade (Netherlands). Final reports from the earlier cases supported by the EGF show strong results in helping workers stay in the labour market and find new jobs.

The EGF, an initiative first proposed by President Barroso to provide help for people who lose their jobs due to the impact of globalisation, was established by the European Parliament and the Council at the end of 2006. In June 2009, the EGF rules were revised to strengthen the role of the EGF as an early intervention instrument. It forms part of Europe's response to the financial and economic crisis. The revised EGF Regulation entered into force on 2 July 2009 and applies to all applications received from 1 May 2009 onwards.

Further information

EGF website: http://ec.europa.eu/egf

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