Commission staff working document
: THE ROLE OF THE EUROPEAN GLOBALISATION ADJUSTMENT FUND
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- 3.1: THE FUNCTIONING OF THE EGF
- 3.2: OVERVIEW OF APPLICATIONS RECEIVED IN 2009
- 3.3: NEXT STEPS
3: THE ROLE OF THE EUROPEAN GLOBALISATION ADJUSTMENT FUNDThe European Globalisation Adjustment Fund (EGF)90 was established in 2007 to help workers made redundant due to structural changes in world trade patterns, so that they can find alternative employment. The EGF can draw down funds from a maximum annual reserve of € 500 million, with which it can co-finance active labour market measures to benefit redundant workers, such as job-search assistance, training, incentives to take up alternative employment and the promotion of business creation. The EGF was designed as a means of reconciling the overall long-term benefits of open trade in terms of growth and employment with the short-term adverse effects which globalisation may have, in particular in relation to the employment of the most vulnerable and lowest-skilled workers. In addition to the EU’s Structural Funds, the programmes of which are carried out over multi-annual periods, the EGF was intended as an instrument to be available in situations where mass redundancies were caused by globalisation and were likely to have a severe impact on the local, regional or national economy. In its European Economic Recovery Plan of 26 November 2008, the Commission stated that it would revise the rules of the EGF so that workers affected by the global financial and economic crisis would also be in a position to benefit from EGF assistance; the rules of the EGF were amended accordingly in 2009. This resulted in a steep increase in the number of applications for EGF funding as well as a rise in the number of workers targeted for help. 3.1: THE FUNCTIONING OF THE EGFThe rules governing the EGF are laid down in Regulation (EC) No 1927/2006, which was adopted by the European Parliament and the Council on 20 December 2006. This Regulation states that a Member State (not a company or an individual) can submit an application for a contribution from the EGF when redundancies within one company and its suppliers and customers, or in an economic sector within one or two contiguous regions, have a significant adverse impact on the regional or local economy. Originally, the EGF could intervene only in cases where at least 1 000 workers had been made redundant because of structural changes in world trade patterns (eg a substantial increase of imports into the European Union, or a rapid decline of the EU market share in a given sector or a delocalisation to third countries). A consultation of stakeholders (the EGF national contact persons, social partners, and academics) in September 2008 showed that the threshold of 1 000 redundancies was considered too restrictive since mass redundancy events affecting fewer than 1 000 workers still have a European scale, which would justify the involvement of the EU as they can cause severe effects at the level of the regional or local labour market. In the light of the scale and the speed of development of the global economic and financial crisis, the Commission announced in its European Economic Recovery Plan91 its intention to extend the scope of the EGF as part of European response to the crisis and to transform it into an early, more effective intervention instrument in line with the fundamental principles of solidarity and social justice. The intention to improve the EGF resulted in an amendment92 to the 2006 EGF Regulation, which applied to new cases from 1 May 2009 and introduced both temporary and permanent modifications. The permanent changes focus in particular on: a reduction in the number of redundancies required to trigger EGF assistance (500 instead of 1 000); and the extension of the period in which the measures may be implemented (24 months instead of 12 months). The temporary provisions — until the end of 2011 — broaden the scope of the EGF to cover redundancies caused by the financial and economic crisis in addition to those due to world trade slowdown between 2008 and 2009, and they also increase the EGF co-financing rate from 50 % to 65 %. For an overview of the provisions contained in the EGF Regulation as amended, see table 3.2 below. Table 3.2: Main provisions of the 2009 EGF Regulation
An EGF contribution can be sought only for active labour market policy measures such as:
All of the above measures are eligible for EGF assistance, as long as they do not replace measures provided for under national law or collective agreements. Only the targeted workers can benefit from EGF assistance. The EGF does not co-finance the restructuring of companies or sectors. 3.2: OVERVIEW OF APPLICATIONS RECEIVED IN 2009A total of 29 applications for an EGF contribution were submitted to the Commission in 2009, of which 27 were received after 1 May 2009 when the amended rules of the EGF entered into force. By comparison, the EGF had received only 14 applications in its first two years of operation. The applications received in 2009 were submitted by 13 Member States (seven applications were from the Netherlands, four from Lithuania, three from Ireland, two from Portugal, Germany, Belgium, Spain, and Denmark, and one each from Italy, Sweden, Austria, France and Bulgaria) and aimed at helping almost 29 000 redundant workers for a total requested amount of € 164.7 million. These applications related to 17 different sectors, of which the printing industry (5 applications), the automotive sector (4) and the textiles industry (3) were the most prominent. It must be noted that the EGF Regulation does not restrict the scope of the EGF to specific economic activities, meaning that any worker from any type of enterprise — be it operating in industry, the services or in primary sectors — can benefit from its assistance, provided the intervention criteria are met. EGF applications by amount requested The Member State applying for EGF support must design a coordinated package of measures that best fits the targeted workers’ profile, and decide on the level of assistance to request. The EGF Regulation does not limit the amount requested per measure or per application, but the Commission’s assessment of an application may raise issues which cause the applicant Member State to revise its package of measures, thereby affecting the level requested. In 2009 the contributions requested from the EGF ranged from € 258 164 to € 56 385 144, with an average of € 5.5 million. In terms of categories of measures provided to the targeted workers, most of the expenditure relates to training and retraining, job-search assistance and allowances while workers are involved in an active labour market measure. In 2009, for instance, the breakdown of estimated costs per type of actions for the 10 applications approved by the Budgetary Authority that year is set out in table 3.3 below. Table 3.3: EGF co-financed measures approved in 2009 according to EUROSTAT classification
In qualitative terms, the feedback provided by the applicant Member States suggests that the EGF contributions they received allowed them to intensify the assistance provided to redundant workers and to extend the duration of support beyond what would have been available without the EGF. In other cases, the EGF made it possible to use successful new approaches (eg interaction in peer groups, increased guidance and counselling) specifically designed for low-skilled or older workers. EGF applications by workers targeted for assistance The number of workers affected by redundancies in an EGF application can differ from the number of workers actually being helped. Depending on the intervention criterion used, the applicant Member State has the possibility of including among the target group the workers made redundant because of the same global event, but before and/or after the reference period (ie the period during which the redundancies triggering the EGF application are being counted). Furthermore, the Member State can also decide to focus the EGF assistance on a reduced number of workers, for instance on those facing exceptional difficulty in remaining in the labour market or those who are deemed to be most in need of support. In 2009 the number of workers targeted for EGF support in individual cases ranged from 139 to 3 582, with an average of just under 1 000. EGF applications by amount requested per worker The package of individualised services that a Member State may propose to the redundant workers concerned is at its discretion, within the terms of the EGF Regulation. The amount requested per worker affected can therefore vary according to the scale of the redundancy event, the labour market situation in the region affected, the individual circumstances of the workers concerned, or even the general cost structures in the Member State or region affected. Applications received in 2009 were submitted under two consecutive sets of rules (ie an implementation period of 12 or 24 months, or a co-financing rate of 50 % or 65 %) depending on whether they were submitted before or after the entry into force of the revised EGF Regulation. This had an impact on the contents of the applications submitted. In 2009 the amount requested per worker varied from slightly above € 500 to over € 15 700, with an average of € 5 698. Box 3.8 below contains a summary of cases for which the EGF received final reports in 2009, following the original 12-month implementation period. These describe how the EGF has helped Member States to re-integrate redundant workers into employment, to intensify their assistance for these workers and to extend the duration of support beyond what would have been available without the EGF contribution. Box 3.8: Case studies of EGF funding in Member States EGF/2007/004 Perlos/Finland Of the 921 workers who benefited from the measures co-funded by the EGF, 56.9 % were in work again at the end of the implementation period. Training for new jobs with a future was a significant benefit not only for the workers but also for the region as a whole, which is remote and threatened with depopulation. The development and maintenance of a broad network of stakeholders supported the redundant workers and put them back into work more quickly. Early collaboration with the Commission allowed a more ambitious package of measures to be designed for the workers than would otherwise have been possible. The final report contained a SWOT analysis (strengths and weaknesses, opportunities and threats) of the case which may be helpful in planning future cases. The measures co-funded by the EGF enabled the North Karelia authorities to draw up contingency plans for future large-scale redundancies. EGF/2007/006 Piemonte/Italy Of the 1 298 workers who benefited from the measures co-funded by the EGF, 48.9 % were in work again at the end of the implementation period (including five who created their own businesses). The employment status of the other 51.1 % was not reported. The intervention paid special attention to incentives to women and workers older than 55 to participate and not leave the labour market. A high percentage of workers over 40 were able to find new employment, and the rate of re-employment of older workers achieved by these measures was especially high for the area. Thanks to retraining, workers were moved from the textile sector to other, more competitive, sectors of production. EGF/2007/008 Textiles/Malta Of the 672 workers who benefited from the measures co-funded by the EGF, 65.5 % were in work again at the end of the implementation period (including 24 who started their own businesses). The intervention meant that the workers affected received more personalised assistance to re-enter the labour market. Consequently, it also helped them to face fewer social and economic difficulties. Malta found occupational guidance very useful, as it enabled many workers who were unaware of job opportunities in other sectors to consider employment outside the textiles sector. Most of the workers had limited transferable skills, so the wage subsidy encouraged employers to give them job opportunities. The use of the start-up grant scheme was also considered an achievement. EGF/2007/010 Lisboa-Alentejo/Portugal Of the 558 workers who benefited from the measures co-funded by the EGF, 19.5 % were in work again at the end of the implementation period (including 11 who started their own businesses). This fairly low percentage should be seen in the light of the structural problems of the automotive sector, which pre-dated the global financial and economic crisis and were exacerbated by it. In the last quarter of 2008, when the measures ended, new car registrations in Europe fell by an average of 20 %. Despite this unfavourable situation, individual skills recognition and validation programmes for those workers with the lowest educational qualifications gave them a better start in finding a new job. The EGF measures were usefully complemented by other measures, including some co-funded by the European Social Fund. EGF/2008/002 Delphi/Spain Of the 1 589 workers who benefited from the measures co-funded by the EGF, 10.7 % were in work again at the end of the implementation period (including eight who started their own businesses). According to the final report, this low percentage should be seen against the rapid deterioration of the labour market in Andalusia at that time. In February 2009, when the implementation period ended, employment was 6.6 % lower than in February 2008. The Spanish authorities continued to provide training measures for specific target groups, using their own means, until 31 July 2009. Despite the unfavourable economic background, by the end of July 2009 there were thus good prospects of re-entering the labour market for about 600 of the dismissed Delphi workers. This information is taken from the report on the activities of the European Globalisation Adjustment fund in 2009, COM(2010) 464 final. 3.3: NEXT STEPSThe sharp increase in the number of applications submitted to the EGF shows that the improvements brought to the EGF Regulation in 2009 met the expectations of the stakeholders and provided the European Union with an additional instrument to mitigate the employment consequences of the economic crisis. The crisis derogation of the EGF will come to an end on 31 December 2011, while full economic recovery may take longer to achieve. The Commission is therefore considering proposing to the European Parliament and to the Council an extension of the temporary crisis derogation until the end of 2013 (which is when the EGF as set in the current Regulation must be reviewed). A review of the EGF Regulation will be necessary to coincide with the next multi-annual financial framework (2013-2020). Several options are currently being considered to streamline the functioning of the EGF, aiming in particular to simplify the budgetary procedure necessary to grant a contribution, with the possibility of converting it into a permanent fund with its own budget line under the multi-annual financial framework. These technical improvements could also be implemented together with a further extension of its scope to meet the objectives set in the Europe 2020 strategy.96 In this, the Commission explicitly referred to the EGF in its Flagship Initiative An industrial policy for the globalisation era: ‘At EU level, the Commission will work (…) to promote the restructuring of sectors in difficulty towards future oriented activities, including through quick redeployment of skills to emerging high growth sectors and markets and support from the EU’s state aids regime and/or the Globalisation Adjustment Fund.’ This means that the EGF could act in synergy with European industrial policy to mitigate its potential adverse effects and encourage the integration of redundant workers in sectors with a brighter future, just as it has been doing so far for those negatively affected by change in world trade patterns. The impact of restructuring on the EU regions is diverse, a trend which has continued during the recent crisis. The next part of this chapter looks in more detail at the impact, anticipation and management of restructuring in the EU regions. 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