EXPLANATORY MEMORANDUM

1.CONTEXT OF THE PROPOSAL

•Reasons for and objectives of the proposal

The aim of this proposal is to enable the European Globalisation Adjustment Fund ('the EGF') to support workers made redundant as a result of the likely economic disruptions caused by a withdrawal of the United Kingdom of Great Britain and Northern Ireland (the ‘United Kingdom’) from the Union without a withdrawal agreement.

The United Kingdom submitted on 29 March 2017 the notification of its intention to withdraw from the Union pursuant to Article 50 of the Treaty on European Union (TEU). Following a request by the United Kingdom, the European Council (Article 50) agreed on 11 April 2019 to extend further the period provided for in Article 50(3) TEU until 31 October 2019. Unless the United Kingdom ratifies the Withdrawal Agreement by 31 October 2019 or requests a third extension, to which the European Council (Article 50) agrees by unanimity, the United Kingdom will leave the Union without an agreement and then become a third country as of 1 November 2019. In the absence of a withdrawal agreement, such withdrawal is likely to have significant negative effects on some industries and services leading to people working in those sectors made redundant.

The purpose of the EGF is to support workers made redundant and self-employed persons whose activity has ceased as a result of major structural changes in world trade patterns due to globalisation or as a result of a global financial and economic crises.

Under the globalisation criterion, the scope of the EGF covers redundancies caused by offshoring of jobs to third countries, a serious shift in Union trade in goods or services, or a rapid decline of the Union market share in a given sector. This proposal specifies that the scope of the EGF includes workers made redundant in areas, sectors, territories or labour markets suffering serious economic disruption due to the withdrawal of the United Kingdom from the Union without a withdrawal agreeement. Such a withdrawal will constitute an important change in the trade relations of the EU and the composition of the internal market, and can therefore be expected to have a significant impact on trade patterns, growth and jobs.

•Consistency with existing policy provisions in the policy area and other Union policies

This proposal is part of the Union preparedness and contingency plan to mitigate the most significant disruptions caused by a withdrawal of the United Kingdom from the Union without a withdrawal agreement.

2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

•Legal basis

The legal basis is the Treaty on the Functioning of the European Union (TFEU), and in particular the third paragraph of Article 175.

If specific actions prove necessary outside the Structural Funds and without prejudice to the measures decided upon within the framework of the other policies of the Union, Article 175(3) allows the European Parliament and the Council to take action in accordance with the ordinary legislative procedure and after consulting the European Economic and Social Committee and the European Committee of the Regions.

•Subsidiarity (for non-exclusive competence)

Funding from the Union budget concentrates on activities whose objectives cannot be sufficiently achieved by the Member States alone, and where the Union intervention can bring additional value compared to action of Member States alone. The mobilisation of the EGF to fund measures aimed at assisting redundant workers find new employment respects the principle of subsidiarity, and it creates European added value. It is standard practice for national labour market programmes to assist redundant workers, and the EGF does not aim to replace such programmes. In case of unexpected restructuring events that have a significant impact on the labour market, the regular national programmes are put at test. Therefore, because of the scale and effects of unexpected large-scale restructuring and as the EGF is an expression of solidarity across and between Member States, assistance can be better delivered at Union level. The support from EGF will make Union solidarity in exceptional circumstances more tangible for workers affected and for Union citizens in general. The mobilisation of the EGF creates additional value by increasing the overall number of services offered to redundant workers, as well as the variety of services offered and their level of intensity. The EGF also allows to test innovative ideas, identify best practices and incorporate them into the national support package. EGF co-financed measures also contribute in general to improving the delivery of the support to the redundant workers.

•Proportionality