EU Plans Fund To Soften Globalization Blow | Business| Economy and finance news from a German perspective | DW | 20.10.2005
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EU Plans Fund To Soften Globalization Blow

The EU is proposing a special fund to cushion the impact of globalization within its borders in an effort to underline its commitment to a European social model.


Companies are attracted to low-cost Asian nations to set up shop

In response to the steady march of globalization, the European Commission was set Thursday to call for EU member states to approve a Globalization Adjustment Fund that would soften the phenomenon's social impact by supporting reforms that increase economic growth while maintaining the European social model.

European Commission President Jose Manuel Barroso was to present a 15-page document, replete with warnings about the challenges posed by globalisation but slight on concrete solutions, to the European Parliament.

One of its main suggestions, the creation of the new Globalisation Adjustment Fund, would complement the European Social Fund, a long-standing EU programme to invest in skills.

The new fund would be aimed at "providing a swift response, focused on people, to urgent problems which result from globalisation."

Questions remain over fund's feasibility

The document, which was obtained by AFP, provides no figures on how much money should be ploughed into the fund, although German newspaper Handelsblatt reported Wednesday that it could be in the double-digit billions of euros.

The idea for such an EU fund has long been mooted in Brussels, although member states, who would have to cough up the money for it, have so far shown little interest in making it become real.

The document also says the EU-level response to globalisation should include bolstering the EU's internal market, especially in services, telecommunications, energy and financial services. It calls for better application of competition and state aid rules, cutting red tape, boosting free-trade abroad and agreeing on the EU's long-term budget, an issue which member states are currently arguing over.

EU not doing enough to ease pain

The commission has come under fire recently for not doing enough to ease the pain caused by big restructurings as companies shift labour to countries outside of Europe with cheaper employees.

Frankreich Präsident Jacques Chirac

Chirac argued that the EU needs to do more to keep jobs in Europe

French President Jacques Chirac in particular chied the commission for not doing enough in the case of a big restructuring of the European operations of US computer maker Hewlett Packard's European operations that will result in the loss of thousands of jobs across Europe, including at least 1,200 in France.

The commission responded by noting its authority to intervene in the matter is legally limited.

Investements could lower unemployment

Neue Südharzautobahn Autobahnbau

Improved infrastructure would help attract private investors

Even if the fund is approved, the EU "should not expect any miracles if we cannot stimulate internal demand," European Employment Commissioner Vladimir Spidla told reporters on Wednesday.

As a way of making the deal more enticing to the countries that would have to foot the bill, Spidla said the massive fund could also curb unemployment across the 25-nation bloc. The EU endured 9 percent unemployment with some 19 billion people out of work across the bloc, according to a report presented Wednesday.

"Since 1998 the EU employment policy has created 12 million jobs," Spidla said.

"We need to make another 20 million to reach full employment."

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