Changes to EU fund hope to tackle rising unemployment

ANDREW WILLIS

02.06.2009 @ 18:05 CET

EUOBSERVER / BRUSSELS – Unemployment is continuing its rise in the European Union, with new data released by the region's statistics office, Eurostat, showing the figure reached 8.6 percent in April, up from 8.4 percent in March.

The data released on Tuesday (2 June) show an even greater jump for the 16-country euro area, with unemployment reaching 9.2 percent in April compared to 8.9 percent in March.

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But European commission economy spokeswoman Amelia Torres says this does not necessarily mean EU27 unemployment will exceed a recent commission forecast of an average rate of 9.4 percent for 2009.

"The economy seems to be bottoming out and in the coming months, although we are expecting unemployment to increase, it is possible that it will not increase as strongly as it has done in the past few months," she told EUobserver.

Eurostat now estimates that close to 21 million people in the EU27 were unemployed in April, highlighting the severity of the problem despite recent talk by economists about the green shoots of recovery.

Greater flexibility for the European social fund

The news comes on the eve of a European Commission publication that will outline a list of possible new measures to tackle the growing jobs crisis and will be discussed by EU leaders when they meet for a European summit on 18-19 June.

The document's main proposal is to increase member state access to money in the European social fund by providing 100 percent funding for projects in 2009-10, up to a total of €19 billion.

At present, member-state governments must contribute to projects receiving funds from the ESF within their borders, a process known as "match-funding", designed to ensure governments do not simply replace national funds with EU funds.

The measure to frontload ESF monies has been prompted by concerns that some member states would not be able to produce the match funding due to the current credit shortage.

"So even those [member states] with tight budgets will be able to use ESF money for retraining during short-time work initiatives for example [under the new proposals]," the commission social policy spokeswoman Katharina von Schnurbein told EUobserver.

As no new money is available, member states that take up the offer of 100 percent financing for some projects in 2009/10, would then receive less money throughout the rest of the financial period that is due to end in 2013.

Wednesday's announcement on 100 percent financing under the ESF will shortly be followed by similar measures under other EU structural funds.

The second main proposal is the creation of a €500 million micro-credit fund by the European investment bank and the commission, providing funding for small businesses that currently can not get access to credit.

It would also provide funding for unemployed people looking to set up a new business.