TABLE OF CONTENTS

COMMISSION STAFF WORKING DOCUMENT Eurostat Report on the annual adjustment of remuneration and pensions of EU officials................................................................................................................. 4

Executive Summary....................................................................................................................... 4

Introduction.................................................................................................................................. 5

1........... Evolution of the purchasing power of national officials...................................................... 6

1.1........ Specific Indicator............................................................................................................ 6

1.2........ Control Indicator............................................................................................................ 6

2........... Changes in the cost of living in Brussels (Brussels International Index).............................. 7

3........... Adjustment of remuneration and pensions in Belgium and Luxembourg............................. 8

4........... Adjustment of remuneration and pensions outside Belgium and Luxembourg..................... 9

4.1........ Correction coefficients for staff outside Belgium and Luxembourg.................................... 9

4.2........ Correction coefficients for pensioners outside Belgium and Luxembourg......................... 13

1........... Evolution of purchasing power of national officials.......................................................... 18

1.1........ General remarks on the calculation of the specific indicator............................................ 18

1.1.1..... Elements of remuneration.............................................................................................. 18

1.1.2..... Net remuneration.......................................................................................................... 18

1.1.3..... Reference period.......................................................................................................... 18

1.1.4..... Reference population.................................................................................................... 19

1.1.5..... Sample of family types.................................................................................................. 19

1.1.6..... Function groups............................................................................................................ 19

1.1.7..... Sample of grades.......................................................................................................... 19

1.1.8..... Sample of countries...................................................................................................... 20

1.1.9..... Calculation of country specific indicator......................................................................... 20

1.2........ Specific indicator - results by functional groups.............................................................. 21

1.3........ Remuneration and taxes................................................................................................ 21

1.4........ Cumulative specific indicators........................................................................................ 22

1.5........ Control Indicators......................................................................................................... 23

2........... Changes in the cost of living in Brussels......................................................................... 24

3........... Equivalence of purchasing power of EC officials in the Member States........................... 26

3.1........ Economic parities and correction coefficients................................................................. 26

3.2........ Rents and rent parities................................................................................................... 27

3.3........ Purchasing power parities - analysis of results................................................................ 35

3.3.1..... Major changes in the economic parities from 2011 to 2012........................................... 35

4........... Equivalence of purchasing power of EC pensioners in the Member States...................... 40

4.1........ Economic parities and correction coefficients for pensioners........................................... 40

4.2........ Purchasing power parities for pensioners – analysis of results......................................... 44

4.3........ Comparison of correction coefficients for staff and pensioners........................................ 45

COMMISSION STAFF WORKING DOCUMENT

Eurostat Report on the annual adjustment of remuneration and pensions of EU officials

Accompanying the document

Proposal for a Council Regulation

adjusting with the effect from 1 July 2012 the remuneration and pensions of the officials and other servants of the European Union and the correction coefficients applied thereto

Executive Summary

The report presents all the information required for the annual adjustment of remuneration and pensions in Belgium/Luxembourg and in other places, including:

- evolution of the purchasing power of national officials;

- changes in the cost of living in Brussels;

- correction coefficients for staff and pensioners.

For the period July 2011 – July 2012 the global specific indicator (average change in real net remuneration in the sample of 8 countries) is 98.9 (-1.1 %). Details are provided in Table 1.

For the same period, the Brussels International Index (cost of living measured for the EU officials) is 102.8 (+2.8%). Details are provided in Table 3.

As a consequence the adjustment of the nominal net remuneration and pensions of European officials in Belgium and Luxembourg which is necessary to maintain a parallel development of purchasing power with the national civil servants in the Member States is equal to +1.7%.

The correction coefficients which apply to remuneration and pensions outside Belgium and Luxembourg in order to maintain equality of purchasing power, are provided in Tables 5 and 7 respectively.

Introduction

In accordance with the Articles 64, 65 and Annex XI of the Staff Regulations applicable to officials and other servants of the European Communities, Eurostat hereby presents its report for the twelve months to July 2012.

Article 64, 65 and Annex XI of the Staff Regulations, which are in force since 1 May 2004, define the method for the annual adjustment of remuneration and pension of Community officials. The annual adjustments shall accordingly be determined by the following factors:

· average change in the purchasing power of salaries of national civil servants in central government (global specific indicator);

· change in the cost of living in Brussels (Brussels International Index);

· economic parities between Brussels and the other places of employment in the Member States (correction coefficients).

The value of the annual adjustment is equal to the product of the global specific indicator and the change in the Brussels International Index. Changes in the cost of living in places of employment other than Brussels and Luxembourg are derived indirectly from the value of the adjustment for Brussels and any changes in the economic parities between Brussels and those other places.

Chapters 1 to 4 of this report examine respectively:

· Evolution of the purchasing power of national officials in the central governments,

· Changes in the cost of living in Brussels,

· Adjustment of remuneration and pensions in Belgium and Luxembourg, and

· Adjustment of remuneration and pensions outside Belgium and Luxembourg.

All figures and calculations contained in this report are based on data supplied by the responsible authorities in the Member States. More information on methodology, detailed results and statistical analysis is available in the annexes to this report and detailed procedural manuals. For any information concerning this report, please contact Eurostat in Luxembourg:

Eurostat, Unit C3

Statistics for Administrative Purposes

BECH – A2/004,

Bâtiment Jean Monnet

L-2920 Luxembourg

Tel.: (352) 4301-34792

Email: estat-a64ia65@ec.europa.eu

1. Evolution of the purchasing power of national officials

1.1. Specific Indicator

Article 1.4 of the Annex XI says that to establish a global specific indicator for the European Union, Eurostat shall use a sample composed of the following 8 Member States: Belgium, Germany, Spain, France, Italy, Luxembourg, the Netherlands and the United Kingdom.

Table 1 shows the changes in the net remuneration, both in nominal and real terms, in each of the above mentioned eight Member States. Changes in the harmonized consumer price indices (inflation rates) during the period June 2011 to June 2012 have been used to transform nominal changes in the remunerations into movements in real terms. In order to get the global specific indicator the results per country have been weighted in proportion to their national GDP for the year 2011 expressed in purchasing power parities. The global specific indicator (average change in real net remuneration) for the year 2012 is 98.9 (-1.1%).

1.2. Control Indicator

In accordance with Article 1.4 (c) of Annex XI of the Staff Regulations, Eurostat compiles data concerning the real per capita emoluments in central government. These data serve as control indicators for individual countries and a weighted average is also calculated. As the control indicator is expressed in gross terms, it is compared with the gross specific indicator.

Table 2 compares the changes in real gross specific indicator to July 2012 with those of per capita real wage bills for 2011, where the respective values for 2011 are taken as 100. The table also shows the differences (in percent) between these two indicators.

Relatively big differences are apparent for some Member States. They result from conceptual and statistical differences between the gross specific indicator and the control indicator.

2. Changes in the cost of living in Brussels (Brussels International Index)

Article 64 and Annex XI of the Staff Regulations state that Eurostat shall draw up an index, based on the data provided by the Belgian authorities, to measure the changes in the cost of living for officials of the Communities in Brussels. This index, known as Brussels International Index, shall take into account the changes between June of the previous year and June of the current year and shall be based on the methodology defined by the Working Group on Article 64 of the Staff Regulations.

The details of the calculation of this index corresponding to the 2012 annual salary adjustment are set out in table 3. The table shows that the cost of living for the EU officials in Brussels during the period June 2011 – June 2012 has increased, on average by 2.8%.

3. Adjustment of remuneration and pensions in Belgium and Luxembourg

Taking into account the figures reported in chapter 1 and 2 the adjustment of the nominal net remuneration of EU officials in Belgium and Luxembourg, necessary to maintain a parallel development of purchasing power with the civil servants in the Member States, is equal to:

4. Adjustment of remuneration and pensions outside Belgium and Luxembourg

4.1. Correction coefficients for staff outside Belgium and Luxembourg[1]

The object of the economic parities is to compare the relative costs of living of EU officials in Brussels (reference city) with each of the European capitals and other places of employment for which a correction coefficient has been set. The method used is to compare the price of a "basket" of goods and services in Brussels with the prices of similar goods and services in each of the other places of employment. The weighted average of all the price ratios is the "economic parity". The average consumption expenditure pattern of EU officials are used as weights, identified by means of periodic surveys of household expenditure. In places of employment outside Brussels with very few officials, a common structure pooling all the questionnaires from similar locations is derived instead.

The changes in the cost of living in the places of employment outside Belgium and Luxembourg are measured by the implicit price indices which are calculated as the product of the Brussels International Index and the changes in the economic parities between Brussels and those other places. Table 4 shows these changes.

The correction coefficients applicable to the salaries of the European institution officials working in the capitals and places of employment other than Brussels and Luxembourg are determined on the basis of the relationships between the economic parities and the exchange rates for the month of July.

The correction coefficient operates as a percentage adjustment to salaries to take account of the cost of living differences between Brussels and the various duty stations. Table 5 shows the calculation of the correction coefficients for July 2012 for places of employment situated in the European Union territory for which correction coefficients have been set.

The value of the adjustment outside Belgium and Luxembourg derives from the value of the adjustment for Belgium/Luxembourg and from the changes in the economic parities between Brussels and those other places.

4.2. Correction coefficients for pensioners outside Belgium and Luxembourg

The Staff Regulations, which are in force since 1 May 2004 stipulate the creation of correction coefficients for pensioners separate from those used for staff remuneration. The difference is that instead of being based on capital city price comparisons they relate to national comparisons, with Belgium as the base country.

This section presents the calculated values of the economic parities and the correction coefficients for pensioners, with a reference date of July 1st, 2012. The changes in the cost of living in Member States other than Belgium and Luxembourg are measured by the implicit indices which are calculated as the product of the Brussels International Index and the changes in the economic parities between Belgium and the Member States. Table 6 shows these changes.

Table 7 shows the correction coefficients for all member States (relative to Belgium) calculated for the pensioners. Their use is subject to specific rules set out in the Staff Regulations.

ANNEX

Appendix 1 to the

Eurostat Report on the Annual Adjustment of Remuneration and Pensions Explanations and statistical analyses

Reference period:

Year to 1 July 2012

Introduction

This document is an appendix to the 2012 Eurostat report on the annual adjustment of remuneration and pensions. While the principal results concerning specific indicators and correction coefficients for staff and pensioners are presented in the main report, the purpose of this appendix is to give some explanations and statistical analyses of the results as well as detailed tables with statistical information.

Articles 64 and 65 and Annex XI of the Staff Regulations, which are in force since 1 May 2004, define the method for the annual adjustment of the remuneration and pension of Community officials.

The value of the adjustment is equal to the product of the specific indicator and the change in the cost of living index in Brussels. Changes in the cost of living in places of employment other than Brussels and Luxembourg are derived indirectly from the value of the adjustment for Brussels and changes in the economic parities between Brussels and those other places.

Chapters 1, 2, 3 and 4 of this document examine respectively:

· the changes in the purchasing power of salaries of central government civil servants in the eight Member States belonging to the sample: Belgium, Germany, Spain, France, Italy, Luxembourg, Netherlands and United Kingdom (specific indicator);

· the changes in the cost of living for Brussels;

· the economic parities and correction coefficients for staff;

· the economic parities and correction coefficients for pensioners.

In Chapter 5 some information about working time in Central Governments of the eight sampled Member States is given.

All figures and calculations contained in this report are based on data supplied and validated by the responsible authorities in the Member States. For any information concerning this appendix, please contact Eurostat in Luxembourg:

Eurostat, Unit C3

BECH – A2/004

Bâtiment Jean Monnet

L-2920 Luxembourg

tel.: (+352) 4301-34792

Email: estat-a64ia65@ec.europa.eu

1. Evolution of purchasing power of national officials

1.1. General remarks on the calculation of the specific indicator

The specific indicator is a measure to represent the average change in the purchasing power of central government civil servants in Member States of the European Communities. It is measured by the real net salary increase in the central government civil service.

One of the basic elements of the annual salary adjustment procedure is the principle of parallel development of the salaries, in terms of purchasing power of national central government civil servants and of officials of the European Communities. The specific indicator is the methodological tool allowing the implementation of this principle of parallelism.

Article 65 and Annex XI determine the basic principles of the method, but these have to be complemented with practical procedures[2]. Therefore, we provide here a set of commonly agreed basic definitions. If a specific situation in a given country makes it meaningful to deviate from these definitions to ensure a better application of the spirit of the method, then Eurostat, in agreement with that country may do so.

1.1.1. Elements of remuneration

All elements of remuneration that affect the purchasing power of civil servants should be taken into account in calculating the gross remuneration. All general bonuses and premiums, which are part of the salary, should be reported. In general the following elements should be taken into account:

· basic salaries,

· all allowances and bonuses (e.g. general premiums, child benefit, family allowances),

· non-pensionable lump-sum payments (e.g. annual holiday pay, Christmas bonus).

Not to be included:

· regional allowances granted to compensate for 'cost-of-living' differences,

· increase due to promotion or seniority,

· person-specific special allowances, for example individual bonuses for exceptional performance.

1.1.2. Net remuneration

In order to get the net remuneration the following elements should be deducted from the gross remuneration:

· the amount of compulsory social deductions (social security and occupational pension scheme contributions),

· general taxes on income and

· other compulsory deductions (mutual assistance contribution, temporary contribution, etc.).

Not to be included:

· voluntary contributions.

1.1.3. Reference period

In order to calculate the specific indicators for the year (t) the remuneration of central government civil servants on a fixed month of the year (t-1) is to be compared with the remuneration on the same date of the year (t).

The method is based on the comparison of a snapshot of a national remuneration system in the month of July of the current year with the equivalent snapshot in the month of July of the previous year. A snapshot of the system, however, does not simply mean the remuneration grid in a particular month; rather, the remuneration level of the reference population employees in that month, including 1/12 of all annually paid elements such as Christmas bonuses, annual holiday pay, lump-sum payments etc.

If Member States report remuneration data of a given month/year again (e.g. data concerning remuneration of July 2011 sent in 2011 and re-sent in 2012), the data should be exactly the same. If not, they have to provide Eurostat with a clear justification (e.g. change in the structure of grades and categories in the public administration).

1.1.4. Reference population

The reference population relates to permanent statutory staff of the sub-sector “central governments” (S.1311 of ESA95) of Member States. It should be noted that the sub-sector S.1311 in ESA 95 is defined as follows:

“The sub-sector central government includes all administrative departments of the State and other central agencies whose competence extends normally over the whole economic territory, except of the administration of social security funds.”

The reference population should however exclude the following groups:

· regional/state and local governments

· the armed forces, security forces, police forces, frontier guards, etc.;

· teachers, staff of national health services;

· ministers of religion, if directly paid by central government;

· diplomats and magistrates.

1.1.5. Sample of family types

The specific indicator for each country is calculated on the basis of remuneration data of officials of two different family statuses - single and married with two dependent children, and each with a weight of 50%.

1.1.6. Function groups

According to Annex XI Eurostat is obliged to provide a specific indicator for each of the two function group: Administrator (AD) and Assistants (AST). Therefore, the posts in the national reference population should be classified, according to the nature of the duties to which they relate, in these two function groups – each should comprise several grades.

· Function group AD relates to staff engaged in administrative, advisory, linguistic and scientific duties that require university education or equivalent professional experience.

· Function group AST relates to staff engaged in executive, technical and clerical duties that require an advanced level of secondary education or equivalent professional experience.

1.1.7. Sample of grades

Out of the reference population the Member States may select a sample of the more important grades in terms of staff numbers for each of the above mentioned function groups. Grades having only a small proportion of the total number of staff may be excluded from the sample.

The sample should be representative of the reference population. The ratio between the number of staff in the grades covered by the sample and the number in the reference population should normally be more than 75%.

1.1.8. Sample of countries

Article 1.4 of Annex XI specifies that to establish a global specific indicator for the European Union, Eurostat shall use a sample composed of the following 8 Member States: Belgium, Germany, Spain, France, Italy, Luxembourg, Netherlands and United Kingdom.

1.1.9. Calculation of country specific indicator

On receipt of the data from the Member States Eurostat calculates specific indicators for each of the countries separately. The steps leading to these calculations are:

· For each grade, Eurostat will calculate average gross and net remunerations for the available steps (eg. minimum, maximum, median) and the family types.

· Average gross and net remunerations for each grade are then aggregated to two function groups (AD and AST). They are calculated by taking weighted averages of the grades belonging to these groups. The sample size (number of civil servants in the sample of each grade) is taken as weight.

· The average gross and net remunerations for the two function groups are then aggregated to overall gross and net remunerations in the central government civil service by taking the weighted average of the remunerations of these two groups, where the total actual number of civil servants in each of the groups is taken as weights.

· For each of the function groups as well as for the overall remunerations the following changes for the period July – July are calculated:

o Gross nominal

o Net nominal

o Gross real

o Net real

· The increases in real terms are calculated by taking into account the increase in the harmonized index of consumer price (HICP) for this period.

· The overall real net increase in remuneration is called the country specific indicator.

1.2. Specific indicator - results by functional groups

Table 1.1 sets out the gross and net specific indicators both in nominal and real terms for each of the two function-groups.

1.3. Remuneration and taxes

Table 1.2 provides comparative information on gross and net remuneration as well as on the HICP inflation rate over 12 months.

1.4. Cumulative specific indicators

Table 1.3 illustrates the changes in the remuneration of central government civil servants since 2003. This table shows the evolution of gross and net specific indicators at current prices, the development in consumer price indices as well as gross and net specific indicators in real terms. Over the period 2003-2012 the real net specific indicator for the European Union has decreased by 4.7%.

1.5. Control Indicators

Annex XI mentions explicitly, between the possible control indicators, the real per capita emoluments in central government. Eurostat measures the variation, at constant prices, in the per capita wage bill in sub-sector S.1311 of the national accounts (per capita salary of central government). As this indicator is expressed in gross terms, it is compared with the real gross specific indicator.

The gross specific indicator and the control indicator are different by definition and it is natural to expect them to show some differences. Indeed, changes in the control indicator are determined not only by variations in collective labour agreements but also by intrinsic factors (changes in the average age of the reference population, promotion to higher categories, etc.) and by changes in incidental salary components such as overtime payments, productivity incentives, and early retirement compensation.

Furthermore, there are certain factors which distort the statistical comparability of the two indices (the quality of the sample used to calculate the specific indicator, differences in the reference populations, part-time work, employers' social contributions, etc.). The deflator used for the control indicator is the consumers' expenditure deflator in the national accounts; the deflator for the specific indicator is the consumer price index (until 2004, the national index; since 2005 the harmonized index). In addition, control indicator values for the reference period are often estimates.

Eurostat identifies differences between the two indicators during the reference period, and therefore puts a greater emphasis on the medium-term trend analysis. For some Member States there are in fact divergences. However, if the conceptual and statistical differences between the gross specific indicator and in the control indicator are netted out, they show a parallel development.

Table 1.4 presents the changes in these two indicators for the period 2003-2012.

2. Changes in the cost of living in Brussels

Article 64 and Annex XI of the Staff Regulations state that Eurostat shall draw up an index, based on the data provided by the Belgian authorities, to measure the changes in the cost of living for officials of the Communities in Brussels.

This index, known as Brussels International Index (BII), shall take into account the changes between June of the previous year and June of the current year and shall be based on methodology defined by the Working Group on Article 64 of the Staff Regulations.

The following price indices are used to calculate Brussels International Index:

1) For all 80 basic headings except for those stated in points 2) and 3) the Belgian harmonised indices of consumer prices (HICP).

2) In order to take account of the specific situation in Brussels, for the following 9 basic headings the Brussels specific consumer price indices are used. These indices are provided by the “Service public federal Economie, P.M.E.”

· Water supply

· Electricity

· Gas

· Other services in respect of personal transport equipment

· Passenger transport by road

· Combined passenger transport

· Restaurants, cafes and the like

· Accommodation services

· Hairdressing salons and personal grooming establishments

3) The basic headings figures for accommodation costs for tenants (rents index) and owner-occupiers (imputed rents index) are replaced in the Brussels International Index by an index calculated by Eurostat based on the results of an annual survey carried out among EC staff employed in Brussels.

The weights used to aggregate the 80 basic headings of this index are derived from surveys of household expenditure (SHE) carried out among EU officials in Brussels. The details of the calculation of the BII corresponding to this annual review are given in the Eurostat Report. Table 2.1 shows both the annual and cumulative changes in the Brussels cost-of-living index since 2004 (ie. 2003 = 100).

3. Equivalence of purchasing power of EC officials in the Member States

3.1. Economic parities and correction coefficients

The object of the economic parities is to compare the relative cost of living of European officials in Brussels (reference city) and in each of the capitals and other places of employment for which a correction coefficient has been set. The method used is to compare the price of a "basket" of goods and services purchased by the average official in Brussels with the price of the same basket in each of the other places of employment. The average of all the price ratios is the "economic parity".

The system works as follows: the total range of goods and services constituting the consumption of the average European institution official is divided into 80 basic headings (such as meat, footwear, motor cars, books). A price ratio between the place of employment and Brussels is established for each of these headings; this is called the basic parity. Price surveys are conducted on products selected to represent the basic heading and specified in the necessary detail to enable prices in a sufficiently narrow range to be collected.

The Staff Regulations require each basic parity to be checked by direct survey at least once every five years. In practice checks are carried out at shorter intervals as part of the European Comparison Programme (ECP). At each annual salary review around one third of the basic price parities are replaced by new parities produced by the latest price surveys.

For the 2012 annual review, new parities obtained from price surveys have been integrated for the following groups:

· Services (survey 2011-1)

· Furniture & Health (survey 2011-2)

The 80 basic parities are then updated using the price index ratio between the place of employment and Brussels.

Housing is dealt with differently. Special rent surveys of estate agents are carried out each year at each place of employment, including Brussels, to calculate an economic parity for the basic heading "accommodation costs for tenants". The calculation follows a methodology that has been developed by Eurostat in collaboration with the national statistical institutes of the Member States, based on the principle that the parity used should be calculated in such a way to allow European institution officials outside Brussels to live in dwellings of comparable quality to those occupied by European institution officials in Brussels. The basic parity "accommodation costs of owner-occupiers" is calculated by reference to the rent the owner-occupiers would pay if they were tenants (these are known as "imputed rents").

In order to calculate the overall economic parities weights have to be applied to each basic heading according to its relative importance in the consumption basket. These weights are calculated directly from the results of the special family budget surveys conducted among European and international civil servants every five to seven years. The resulting structure reflects the consumption of the average international civil servant in Brussels and in each country or place of employment.

Using the 80 basic parities and the specific weights the overall parity is calculated in two ways: the first uses the consumption pattern for the reference city (Brussels) (this is a type of Laspeyres index); the second uses the consumption pattern for the place of employment (this is a type of Paasche index). In accordance with the standard practice for international comparisons both types of index are calculated and the geometric mean of the results (the Fisher index) is used as the economic parity.

The correction coefficients applicable to the salaries of the European institution officials working in the capitals and places of employment other than Brussels and Luxembourg, which are calculated for the month of July, are determined on the basis of the relationships between the economic parities and the exchange rates fixed by the Commission and specified in the Staff Regulations for the relevant countries. The correction coefficient operates as a percentage adjustment to salaries to take account of the cost of living differences between Brussels and the various duty stations.

The details of the economic parities calculation, at the level of 12 main consumption groups, are shown in table 3.1 for all capitals and other places apart from Brussels and Luxembourg. This table also includes information about the consumption weights by country and by expenditure groups.

3.2. Rents and rent parities

Changes in the rent parities are provided in the Table 3.2 which shows also the average rents by type of dwelling on which the calculation is based. The average rents used to compute the rent parities are in fact weighted moving averages, based on a six-year model, to take into account the average occupancy length, which is estimated to be six years. Any annual updating of rents during the life of the typical lease is included in the model by using the appropriate adjustment indices.

3.3. Purchasing power parities - analysis of results

3.3.1. Major changes in the economic parities from 2011 to 2012

The calculation of correction coefficients used for salary adjustment in places other than Brussels and Luxembourg involves the revision of some elementary parities each year. For the 2012 salary adjustment two new price surveys have been incorporated: Services (conducted in Spring 2011), and Furniture & Health (conducted in Autumn 2011). The weighting structure used to aggregate the parities has not been updated. The weighting structure used to aggregate the rent parities have been updated in Brussels and in twenty eight duty stations. The rent parities have been calculated for 2012 according to the moving average model approved by the Article 64 Working Party.

The introduction of new prices from the latest consumer price surveys this year affects 32 (out of 80) elementary parities, which together account for about 37% (EU average) of the consumption weight.

Moreover, rent surveys are carried out every year in all Member States. A six-year moving average model is used for calculating rent parities: the rent parities for 2012 are based on the relative trend in the real-estate markets in Brussels and other places of employment between 2007 and 2012. These parities are, therefore, affected by the following factors:

· introduction of rent data for year 2012,

· deletion of the rent data for 2006,

· price indices used for updating the rents for 2007 - 2011 to price of 2012.

All these effects, as well as the total change in rent parities, are shown in table 3.4.

Details of the changes in the rent parities from 2011 to 2012, including a decomposition of all the effects, are given in table 3.4. The largest increases in the rent parity could be observed in London (+2.9%), Munich (+2.7%) and Helsinki (+1.1%). The largest decreases in the rent parity were recorded in Sofia (-14.8%), Bucharest (-8.6%), Vilnius (-8.0%), and Athens (-7.9%).

Changes in the global parities from one year to the next come mainly from survey prices and rent revisions, but may also be affected by the trend in the price indices used to update the elementary parities at the date of the adjustment (1.7.2012) and by changes in the consumption structures (updated every five to seven years by the introduction of new SHE results)[3]. Details of the changes in the economic parities from 2011 to 2012, including a decomposition of all the effects, are given in table 3.3.

The biggest increases in global economic parities during the period under review can be observed in Munich (+3.1%) and Tallinn (+2.9%), London, The Hague and Riga (+2.5%), Berlin (+2.2%), and Karlsruhe and Culham (+1.8%). The biggest decreases in the parities can be observed in Sofia (-3.6%), Athens (-1.9%) and Vilnius (-1.7%).

As regards price indexation, the impact of official indices for the year to July 2012 on the PPP at the level of total consumption were lower than Brussels in 22 places (23 if Croatia is included) and higher than Brussels in the remaining 8 places. Here it should be recalled that there are important differences between HICP and PPP methodologies (e.g. use of different weights for aggregation purposes). For this reason, the "price updating effect" presented in the table cannot be directly compared with the relative movement of the all-items HICP published separately on the Eurostat website – although other things being equal that movement should also give an indication of the likely magnitude and direction of change.

3.3.2 Major changes in the economic parities from 2011 to 2012

The rent and imputed rent parities, due to their associated high consumption weights (around 22% on average across the EU) influence in a quite significant way the global parities and consequently the correction coefficients. The analysis of correction coefficients calculated with and without the rent element for the same place of employment makes it easier to isolate the effect of rent differences separately from differences arising from other causes.

The correction coefficient for rents (compared to Brussels =100) is very high in London (325.6), Paris (179.7), Stockholm (171.5), and Copenhagen (160.6), whereas they are quite low in Sofia (50.0), Nicosia (60.1), Valletta (75.3), Lisbon (76.5) and Tallinn (76.8).

For the overall correction coefficient, however, the range is smaller: London (147.8), Copenhagen (135.3), and Stockholm (131.9) compared to Sofia (58.4), Bucharest (68.8) and Vilnius (71.5).

When rents are added to the computation, the correction coefficient is increased by 10% or more in London (+35.8%), Bucharest (+14.9%), Paris (+14.2%), Budapest (+12.7%), Warsaw (+12.6%) and Prague (+10.0%). By contrast the impact is negative in Nicosia (-8.5%), Sofia (-4.3%),

Karlsruhe (-3.5%), Varese (-3.3%), Bonn (-2.9%), Valletta (-2.8%) and Lisbon (-2.7%) and the impact is near zero in Berlin and Tallinn.

More details on the effect of rent on the 2012 correction coefficients are given in table 3.5.

4. Equivalence of purchasing power of EC pensioners in the Member States

4.1. Economic parities and correction coefficients for pensioners

The correction coefficients for pensioners with a reference date of 1 July 2012 have been calculated in accordance with the agreed methodology on the basis of the following information:

Ø Parities for all goods and services, except for rents, as used for the calculation of the correction coefficients for active staff. These parities are based on bilateral comparison of prices of about 3000 goods and services between different capital cities and Brussels (for more details see point 3.1 above).

Ø Country rent parities: For calculating country rent parities the following procedure has been applied in most of the countries. Calculate a spatial adjustment factor in the form of national/capital ratio of market rents derived from an official database like CPI, household budget survey, housing register, etc. With the help of this adjustment factor transform the capital city rent parity from Article 64 estate agency rent surveys to the country rent parity. The following exceptions to this general rule were agreed with the respective NSIs:

1. Netherlands: No such adjustment factors were available for Netherlands, for which average country rents were compared directly with the average rents in Belgium (all derived from ECP-PPP rent surveys). A similar approach is used in Bulgaria and Romania.

2. Germany: As information on rents for four German cities (Berlin, Bonn, Karlsruhe and Munich) is available the ratio between the average of those cities and Berlin is used.

3. Denmark: Due to the specificities of the rental market in Copenhagen, which is completely different from the market in the rest of the country, an estimate of the Copenhagen rent parity different from the one for staff is used as basis for the spatial adjustment factor. The new estimate is obtained averaging the staff rent parity with a rent ratio for the general population obtained from the NSI.

4. Malta and Estonia: As no reliable information on the adjustment factors were available for Malta and Estonia a ratio equal 1 was used.

Each National Statistical Institute is required each year to check and, if possible, to update their spatial adjustment factor.

Ø Consumption weights for the pensioners calculated on the basis of a wide scale family budget survey carried out in 2002. Consumption weights for Croatia have been estimated as the average of the values for duty stations outside Brussels, adjusted for rents (this is a similar method to the estimation of values for staff duty stations with insufficient individual sample response).

The details of the economic parities calculation, at the level of 12 main consumption groups, are shown in table 4.1 for all countries apart from Belgium and Luxembourg. This table also includes information about the consumption weights by country and by expenditure groups. Table 4.2 presents the rent ratios used in 2011 and 2012.

The correction coefficients applicable to the EC pensioners are determined on the basis of the relationships between the economic parities and the exchange rates fixed by the Commission and specified in the Staff Regulations for the relevant countries. The correction coefficient operates as a percentage adjustment to pensions (only for the pension rights acquired before 1 May 2004; being the correction coefficient 100% for the pension rights acquired from that date) to take account of the cost of living differences between Belgium and the Member States, except Luxembourg where, according to the Staff Regulations, a correction coefficient of 100% is applied.

4.2. Purchasing power parities for pensioners – analysis of results

In 2012, for 14 out of 25 member states (i.e. excluding BE and LU), the rent correction coefficient (ratio between the rent parity and the exchange rate) is under 100. This means that the average rents are lower in these places than in Belgium. For the remaining 11 countries, the rent correction coefficient is greater than 100.

Moreover, for 12 Member States, the rent correction coefficient is lower than the correction coefficient without rent. This means that, for these places, the rents lead to a reduction of the global correction coefficient.

4.3. Comparison of correction coefficients for staff and pensioners

Table 4.5 compares the pensioners’ correction coefficients with those for active staff. Among all Member States, Denmark has the highest country-based CC, London the highest capital-based CC. The biggest differences between capital city CCs and country CCs can be observed in the United Kingdom, Hungary, Romania, France, Finland, Sweden and Denmark. By contrast, in Germany, Estonia, Malta, and Portugal the two CCs are nearly at the same level.

In all countries except Germany, Estonia, Cyprus, and Malta the country CCs are lower than the capital city CCs. Without rents, the two sets of CCs are closer – and the country CC without rent is slightly higher than the capital city CC in 11 out of 25 Member States.

It should be mentioned that the Staff Regulations set out specific rules for the application of the pensioner CC.

5. Information about working time

Through the standard remuneration questionnaire, Eurostat also collects statistical information on differences in the working hours of national officials in all Member States. Information about statutory or contractual weekly working hours in central governments (Table 5.1), number of days of annual leave (Table 5.2) and number of public holidays per year (Table 5.3) are shown below. In all these tables the situation in July 2012 has been compared with that in July 2011.

Similarly, information is also collected about retirement age in central government. The situation at July 2012 is shown in Table 5.4.

[1] A separate report is prepared concerning correction coefficients for duty stations outside the European Union, to which the additional provisions of Annex X to the Staff Regulations apply.

[2] The latest version of the relevant methodology manuals are available as documents A65/08/08, A64/11/27, and A64/11/28.

[3] The periodicity of SHE ("Survey of Household Expenditures"), formerly known as FBS ("Family Budget Survey"), is set by Article 64 Working Group decision.