European ministers are proposing to stretch a fund for workers laid off as a result of globalisation to include those hit by the economic crisis, but want to slash its budget by two-thirds, says the MEP overseeing the fund.
The European Council of Ministers has proposed to set aside some €1 billion for the European Globalisation Fund (EGF) to run in tandem with the next multi-annual financial framework, the EU’s seven-year budget. This compares to the programme’s last budget of €3.5bn.
The European Commission had proposed €3bn for the EGF over 2014-2020.
Analysts say that expanding the EGF, originally devised to support workers laid off as companies moved abroad due to changing global trade patterns, to include workers left redundant by the crisis threatens to put too much pressure on an already paper-thin fund.
“More member states tend to use the crisis criterion … which means that I believe the numbers applying for EGF will increase, which could lead to a situation where there might not be enough money in the fund,” said Marian Harkin, the Irish Liberal MEP drafting the European Parliament’s report on the EGF. “So what they’ve done … is cut the fund significantly and increase its scope, which may indeed pose some difficulties where amount is concerned.”
Ministers are considering the inclusion of jobless young people from regions with high unemployment rates among under 25s as well as the “crisis derogation”, further diluting the fund.
“The Council have also proposed that it should be used for youth unemployment, a completely new departure,” Harkin said. “Where a member state is applying for EGF under normal criteria [it] could at the same time apply for funding for young unemployed persons up to the same number as is in their EGF application.”
“If a member state applies for funds for, let’s say, 483 redundant workers under the EGF, they may then apply for similar funding for 483 persons aged from 18 to 24 who are unemployed, with priority being given to those who have been made redundant but it’s not necessary. In other words, somebody could actually access the fund without ever having worked.”
EU added value
A recent report by the European Court of Auditors, the EU’s spending watchdog, said that the current EGF “delivers only limited EU added value”, and called for a replacement, perhaps within the European Social Fund.
Between March 2007 and December 2012, the EGF paid out over €600 million to workers laid off as a result of globalisation. Despite finding that the EGF offered most eligible workers “personalised” and “well-coordinated assistance”, the court found that 33% of the payments represented income support.
The issue is that the European fund may provide no added value at the EU level compared to national support schemes as furloughed workers from different member states simply receive money from one pot contributed to by those member states.
“Otherwise you’re just circulating EU money,” Harkin said.
But the EU executive does not see it that way. “The Commission, however, strongly rejects the conclusion communicated by the Court of Auditors that the EGF delivers only limited EU added-value,” a spokesperson said.
“The reality is that most redundant workers could not take up training offers or learn how to create their own business if they did not have some income support while doing so. However, in order to ensure that allowances do not prevail over active support, the Commission proposed to limit them at maximum 50% of the envelope in the future."
Harkin is proposing to put a ceiling of 25% of EGF funds for income support.
Member states' confusion over the EGF is nothing new. When the proposals for the next long-term budget first reached the Council, a number of ministers called for the scrapping of the fund despite having made use of it themselves.
“What we found was that member states who at the time were not supporting the continuation of the EGF were accessing it themselves,” Harkin said.
An overview of applications showed that the majority of beneficiaries actually originated from the countries blocking the proposal. The companies which received an EGF ‘bailout’ included Manroland, a German printing machinery manufacturer, Danish wind turbine manufacturer Vestas, Swedish automaker Saab and Finland's mobile phone manufacturer Nokia.
Rather than a failure, the Commission sees this as an indicator of the programme’s success. A spokesperson told EurActiv: “The Commission of course regrets the lack of support for its proposals by certain countries. It nevertheless welcomes the fact that some of these countries actively use the fund and thus consider its contribution useful.”
Irish Liberal MEP Marian Harkin said the Parliament would not oppose “in principle” widening the fund to include young people.
While EU countries have criticised the EU executive for failing to address youth unemployment, analysts wonder about the coherence of trying to slash the budget of a fund in which they have proposed to include aid for jobless young people.
“What I would say is that the proposals that they have put in place run counter to what they are saying about their emphasis on putting in place policies to deal with unemployment, in particular youth unemployment,” Harkin said.
Harkin added: “I would have concerns about the amounts in the EGF because if you go back to previous years, it was when we had a derogation for the crisis that the EGF amounts increased significantly because more and more member states were applying under that criterion, rather than under globalisation."
“The evidence gathered during the audit did not convince us that the Globalisation Fund is the best way to deliver this much-needed specific support,” said Ville Itälä, the member of the European Court of Auditors responsible for the report. “It would be more effective simply to adjust the Social Fund to deal with these problems".
Neither Harkin nor the EU executive believe that combining the EGF with the European Social Fund is an answer.
“In its Impact Assessment, [the Commission] decided against this otherwise attractive option, as the EGF is an emergency fund and it is impossible in advance to know when and where the emergencies will occur,” an EU Commission spokesperson said.