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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 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.
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.