REPORT FROM THE COMMISSION TO THE COUNCIL on the exception clause (Article 10 of Annex XI to the Staff Regulations)
Date: 2012-08-31
Institutions: European Commission
Subjects: European official, derogation from EU law, economic recession, regulations for civil servants, remuneration of work

EUROPEAN COMMISSION 

Brussels, 31.8.2012  
COM(2012) 476 final 

REPORT FROM THE COMMISSION TO THE COUNCIL 

on the exception clause (Article 10 of Annex XI to the Staff Regulations) 

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REPORT FROM THE COMMISSION TO THE COUNCIL 

on the exception clause (Article 10 of Annex XI to the Staff Regulations) 

EXECUTIVE SUMMARY 

In  this  report  the  Commission  presents  the  third  assessment  (since  2011)  on  the 
conditions of the exception clause. The Commission recalls the principles underlying 
the method and the legal interpretation of the exception clause based on the judgment 
of  the  Court  of  Justice  in  Case  C-40/10.  Afterwards,  the  Commission  assesses  the 
economic  and  social  situation  of  the  Union  from  1  July  2011  until  mid-May  2012, 
when the 2012 Spring European Economic Forecast was issued. 

In  the  judgment  rendered  on  24  November  2010  in  Case  C-40/10,  the  Court  of 
Justice  stressed  that  the  exception  clause  enables  account  to  be  taken  of  the 
consequences  of  a  deterioration  in  the  economic  and  social  situation  which  is  both 
serious and sudden where, under the ‘normal method’, the remuneration of officials 
would  not  be  adjusted  quickly  enough.  The  Court  clarified  that  the  procedure  laid 
down in Article 10 of Annex XI to the Staff Regulations constitutes the only means 
of  taking  account  of  an  economic  crisis  in  the  adjustment  of  remuneration  and 
therefore of disapplying the criteria laid down in Article 3(2) of that Annex. 

The method thoroughly measures, through the  principle of parallelism,  the relevant 
economic and social situation within the Union, as reflected in decisions of Member 
States  on  the  salaries  of  national  civil  servants.  The  legislator  carefully  chose  the 
criteria  to  be  taken  into  account  for  the  adjustment  of  remuneration  and  pensions; 
these criteria can be applied during both an upswing and a downturn in the economy.  

The exception clause is not an economic cycle clause: it is therefore to be used only 
when there are extreme developments in the EU and only if the method is not able to 
measure them. It is not to be used whenever the EU is in the downward phase of the 
economic cycle. 

The Commission has used 15 indicators to assess whether it is necessary to use the 
exception  clause  in  2012.  The  last  forecasts  of  DG  ECFIN  show  that  the  EU 
economy  is  likely  to  stagnate  in  2012  (0.1  GDP  growth)  and  the  economic  growth 
will gain momentum in 2013 (1.3% GDP growth). Salaries in the total economy are 
expected to increase by 2.1% in 2012 and 2013. National officials and EU staff are 
expected  to  lose  purchasing  power  in  2012.  Until  the  end  of  May,  none  of  the 
Member States had forecast a salary cut in the second half of 2012. The Commission 
has also addressed the Council's request to examine the number of the Member States 
in  an  ongoing  excessive  deficit  procedure  and  assessed  the  link  of  this  indicator  to 
government deficit and public debt. 

The report concludes that there has been no sudden and serious deterioration in the 
economic and social situation within the Union which could not  be reflected  under 
the normal application of the method during the reference period of 1 July 2011 to 
mid-May  2012,  and  that  it  is  not  justified  to  submit  a  proposal  under  Article  10  of 
Annex XI to the Staff Regulations.  

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The Commission recalls that, in reply to the difficult general economic context, it has 
already submitted a draft proposal to the European Parliament and the Council which 
would lead to significant savings in the next years and to even higher savings in the 
long term. The proposal includes a new and revised method as well as amendments 
to the mechanism of the exception clause. 

1. 

INTRODUCTION 

In March 2012, the Council issued the following request to the Commission1: 

‘THE COUNCIL 

RECALLS that the interpretation of the exception clause of Article 10 of Annex XI of 
the  Staff  Regulations  as  regards  the  adjustment  of  remunerations  and  pensions  of 
officials and other servants with effect from 1st July 2011 is currently the subject of 
proceedings before the European Court of Justice. 

NOTES that the economic and social situation within the EU continues to give rise to 
concern. 

REQUESTS  therefore  the  Commission,  in  conformity  with  Article  241  TFEU,  to 
monitor closely the evolution of the economic and social situation as well to present, 
on  the  basis  of  Article  10  of  Annex  XI  of  the  Staff  Regulations,  a  report  assessing 
whether, in the light of objective data supplied by the Commission, there is a serious 
and sudden deterioration in the economic and social situation within the EU and to 
submit appropriate proposals whenever that is case, but in any case in time for the 
European Parliament and the Council to examine and adopt them before the end of 
2012. 

REQUESTS the Commission, in addition to the data used in its 2011 report to take 
into  account,  inter  alia,  the  number  of  Member  States  with  an  ongoing  excessive 
deficit procedure.’ 

Under  Article  241  TFEU,  the  Council,  acting  by  simple  majority,  may  request  the 
Commission  to  undertake  any  studies  the  Council  considers  desirable  for  the 
attainment of the common objectives, and to submit to it any appropriate proposals. 
If  the  Commission  does  not  submit  a  proposal,  it  must  inform  the  Council  of  the 
reasons. 

This  report  addresses  the  request  of  the  Council  and  complies  with  Article  241 
TFEU.  Moreover,  in  2011  the  Commission  committed  to  examine  once  again  the 
application  of  the  exception  clause  in  2012.  This  is  the  third  assessment  of  the 
conditions  laid  down  in  the  exception  clause.  The  two  previous  assessments  were 
presented  on  13  July  2011  (COM  (2011)  440)  and  on  13  December  2011  (COM 
(2011) 829). 

This assessment covers the period starting from the effective date of the last annual 
adjustment  of remuneration and pensions (1 July  2011) until  the  moment  when the 

1 

Council Document 7421/12 of 12 March 2012. 

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latest  data  were  made  available  for  the  purposes  of  this  report  (mid-May  2012). 
Moreover,  it  provides  an  outlook  of  the  economic  and  social  situation  in  2012  and 
2013  based  on  forecasts.  In  its  request,  the  Council  specifically  asked  the 
Commission  to  take  into  account  the  number  of  Member  States  with  an  ongoing 
excessive deficit procedure. The Commission addresses this particular request in the 
light of its general assessment on public finances. 

2. 

LEGAL BASIS 

Under Article 65 of the Staff Regulations, ‘… [t]he Council shall each year review 
the remuneration of the officials and other servants of the Union. This review shall 
take place in September in the light of a joint report by the Commission based on a 
joint  index  prepared  by  the  Statistical  Office  of  the  European  Union  in  agreement 
with the national statistical offices of the Member States; the index shall reflect the 
situation as at 1 July in each of the countries of the Union.  

During  this  review  the  Council  shall  consider  whether,  as  part  of  economic  and 
social  policy  of  the  Union,  remuneration  should  be  adjusted.  Particular  account 
shall  be  taken  of  any  increases  in  salaries  in  the  public  service  and  the  needs  of 
recruitment.’ 

Pursuant to Article 65a of the Staff Regulations, the rules for implementing Articles 
64 and 65 are set out in Annex XI. 

Article 3(1) and (2) of Annex XI to the Staff Regulations states: 

1. Under Article 65(3) of the Staff Regulations, the Council, acting on a Commission 
proposal and on the basis of the criteria set out in Section 1 of this Annex, shall take 
a  decision  before  the  end  of  each  year  adjusting  remuneration  and  pensions,  with 
effect from 1 July. 

2.  The  amount  of  the  adjustment  shall  be  obtained  by  multiplying  the  Brussels 
International Index by the specific indicator. The adjustment shall be in net terms as 
a uniform across-the-board percentage. 

Article 10 of Annex XI to the Staff Regulations (the exception clause) stipulates: 

If  there  is  a  serious  and  sudden  deterioration  in  the  economic  and  social  situation 
within the Union, assessed in the light of objective data supplied for this purpose by 
the  Commission,  the  latter  shall  submit  appropriate  proposals  on  which  the 
European Parliament and the Council shall decide in accordance with Article 336 of 
the Treaty on the Functioning of the European Union. 

The  relationship  between  Article  3  of  Annex  XI  and  the  exception  clause  was 
analysed  by  the  Court  of  Justice  in  its  judgment  in  Case  C-40/10  Commission  / 
Council. The Court pointed out that the exception clause ‘… makes it possible, in an 
extraordinary  situation,  to  disregard  on  an  ad  hoc  basis  the  method  laid  down  in 
Article 3 of Annex XI to the Staff Regulations, without amending it or repealing it for 
the following years’ (paragraph 74, underlining added). 

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In addition, the Court explained that ‘… as the Commission considered in its report 
of  27  June  1994  on  the  applicability  of  the  exception  clause  (SEC(94)  1027  final, 
point II.3, pp. 5 and 6), that clause enables account to be taken of the consequences 
of  a  deterioration  in  the  economic  and  social  situation  which  is  both  serious  and 
sudden where, under the ‘normal method’, the remuneration of officials would not be 
adjusted quickly enough’ (paragraph 75, underlining added). 

The Court of Justice made clear that: ‘… the procedure laid down in Article 10 [of 
Annex XI to the Staff Regulations] constitutes the only means of taking account of an 
economic crisis  in  the adjustment  of remuneration and therefore of disapplying the 
criteria laid down in Article 3(2) of that annex' (paragraph 77, underlining added).  

That  finding  cannot  be  invalidated  by  the  fact  that  the  application  of  Article  10  of 
Annex XI to the Staff Regulations is dependent on a proposal from the Commission. 
It is clear inter alia from Article 17(2) TEU that that situation is consistent with the 
institutional  balance  envisaged  by  the  Treaties  which,  in  principle,  grant  the 
Commission,  in  respect  of  legislative  procedures,  the  sole  power  to  initiate 
proposals’ (paragraph 78). 

3. 

OBJECTIVES AND UNDERLYING PRINCIPLES OF THE METHOD 

The Commission considers it appropriate to recapitulate the objectives and principles 
underlying the method for salary and pension adjustments. 

It  is  worth  mentioning  that  the  scope  and  application  of  the  exception  clause  is 
currently subject to the judicial review in Case C-66/12 pending before the Court of 
Justice.  

The provisions of the current method for adjusting remuneration and pensions apply 
from 1 July 2004 until 31 December 2012 and are laid down in Articles 64, 65 and 
65a of and Annex XI to the Staff Regulations. 

The main objectives of the method are: 

–  automatic  salary  adjustment  in  order  to  avoid  that  the  work  of  all  Union 
Institutions and agencies is disrupted by annual negotiations and possibly strikes; 

–  transparent,  efficient,  relatively  straightforward  rules 

to  determine  salary 
adjustments  for  officials  and  other  servants  of  all  EU  Institutions  based  on 
political decisions taken by Member States for national civil servants. 

In order to ensure that the method functions properly, the following principles have 
been laid down: 

–  equality of purchasing power among EU civil servants in different duty stations; 

–  parallelism with national officials in terms of changes in purchasing power. 

Two aspects of the method should be examined more closely: 

–  the principle of parallelism; 

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–  the time-lag. 

3.1. 

The principle of parallelism 

In  accordance  with  Article  1(4)  of  Annex  XI,  the  (global)  specific  indicator  is 
calculated to reflect the average change in the net remuneration of national officials 
in  central  government  in  real  terms,  i.e.  after  taking  account  of  inflation  in  the 
country where they work. Then, as laid down in Article 3(2) of Annex XI, consumer 
price inflation in Brussels, which is the reference location where most EU officials 
work,  is  measured  by  the  Brussels  International  Index  (BII).  Finally,  the  BII  is 
multiplied by the global specific indicator to calculate the nominal annual adjustment 
to the basic salaries of EU officials, which may be either positive or negative. 

Therefore, the change in the purchasing power of EU officials is fully determined by 
the  global  specific  indicator,  which  ensures  equivalence  with  developments  in  the 
purchasing power of national officials. This is the principle of parallelism. 

3.2. 

The time-lag inherent in the method 

In line with Articles 1(2) and (4) of Annex XI to the Staff Regulations, the Brussels 
International  Index  is  to  take  into  account  the  changes  in  consumer  prices  between 
June  of  the  previous  year  and  June  of  the  current  year,  and  Eurostat  is  to  calculate 
specific  indicators  reflecting  changes  in  the  real  remuneration  of  civil  servants  in 
central government, for the countries in the sample, between 1 July of the previous 
year  and  1  July  of  the  current  year.  Under  Article  3(1)  of  Annex  XI  to  the  Staff 
Regulations,  the  Council,  acting  on  a  Commission  proposal,  has  to  take  a  decision 
before  the  end  of  each  year  adjusting  remuneration  and  pensions,  with  effect  from 
1 July. Therefore, the annual adjustment applies with a maximum delay of one year. 
There  is  then  a  further  delay  of  up  to  six  months  until  adoption  of  the  salary 
adjustment 
is  applied 
retrospectively. 

required  before  31  December,  which 

regulation, 

The legislator considered that the method could function with this time-lag, and EU 
officials and other staff would be able to bear the impact of yearly inflation. That is 
why  Article  65  lays  down  only  one  annual  deadline  for  the  adjustment  of 
remuneration. There is, however, the possibility to make an intermediate adjustment 
of remuneration, provided for in Articles 4-8 of Annex XI to the Staff Regulations, if 
there is a substantial change in the cost of living between June and December. 

4. 

EXCEPTION CLAUSE 

The  legislator  adopted  an  exception  clause  as  an  integral  part  of  the  Method.  This 
clause  sets  a  number  of  triggering  preconditions  that  have  to  be  met  before  any 
action is taken: 

–  the  deterioration  has  to  be  both  serious  and  sudden,  it  must  affect  the  economic 
and social situation at Union level, and it must be assessed in the light of objective 
data provided by the Commission; 

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–  the  deterioration  has  to  be  such  that  the  method  would  not  be  able  to  take  it 
properly  into  account  due  to  its  exceptional  nature  in  terms  of  timing  and 
magnitude. 

The  exception  clause  provides  that,  if  there  are  objective  reasons  for  it  to  be 
triggered,  the  Commission  is  bound  to  submit  appropriate  proposals  on  which  the 
European  Parliament  and  the  Council  are  to  decide  in  accordance  with  Article  336 
TFEU. As the European Court of Justice ruled in case  C-40/10 the exception clause 
makes it possible, in an extraordinary situation, to disregard on an ad hoc basis the 
method laid down in Article 3 of Annex XI to the Staff Regulations, without amending 
it  or  repealing  it  for  the  following  years.  In  addition,  according  to  its  wording, 
Article 10 of Annex XI to the Staff Regulations is intended to enable the institutions 
to react in the face of sudden events which require an ad hoc reaction rather than a 
comprehensive amendment of the ‘normal’ method of adjusting remuneration. 

4.1. 

Conditions for triggering the exception clause 

The wording of the exception clause should be carefully examined since, in order to 
trigger the clause, all the conditions laid down in Article 10 of Annex XI to the Staff 
Regulations must be met. 

‘Deterioration’  is  a  term  used  to  describe  a  worsening  of  the  economic  and  social 
situation. Whether a ‘serious’ deterioration of the economic and social situation has 
occurred should be determined with reference to both the magnitude and duration of 
the identified economic and social impacts. Whether a ‘sudden’ deterioration of the 
economic and social situation has taken place has to be considered with regard to the 
speed  and  predictability  of  the  economic  and  social  impacts.  In  this  context  it  is 
particularly important to distinguish normal fluctuations of the economic cycle from 
those caused by external events. 

The legislator empowered the Commission to determine the objective data to be used 
in  the  Commission's  assessment  as  to  whether  the  conditions  for  applying  the 
exception clause are met. The Commission considers that this assessment should be 
based on a variety of objective indicators, covering both the economic and the social 
domains.  These  indicators  should  comply  with  the  following  set  of  relevant  and 
widely accepted principles2: 

–  An  indicator  should  capture  the  essence  of  the  problem  and  have  a  clear  and 

accepted normative interpretation. 

–  An indicator should be robust and statistically validated. 

–  An indicator should be timely and susceptible to revision. 

2 

Most  of  them  are  principles agreed  for  the  Open  Method of  Coordination  (OMC)  on  social  inclusion 
and  protection.  The  OMC  is  used  by  Member  States  to  support  the  definition,  implementation  and 
evaluation of their social policies and to develop their mutual cooperation. A tool of governance based 
on common objectives and indicators, the method supplements the legislative and financial instruments 
of  social  policy.  It  is  part  of  the  implementation  of  the  process  of  coordination  of  social  policies, 
particularly in the context of the Lisbon Strategy (and now Europe 2020). 

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–  The  focus  of  indicators  should  be  on  the  EU  as  a  whole  and  not  on  individual 

Member States. 

–  The indicators should be mutually consistent. 

–  The  set  of  indicators  should  be  as  transparent  and  accessible  as  possible  to  EU 

citizens. 

–  Recourse should be made to existing indicator sets wherever possible. 

In accordance with these principles, the following 15 indicators are appropriate:  

–  Economic  activity:  GDP  growth,  domestic  demand,  inventories,  net  exports, 
private consumption, public consumption, total investment, and inflation (HICP) 
within the Union; 

–  Public  finances:  general  government  balance  and  public  debt  within  the  Union; 
Labour  market:  total  employment,  unemployment  rate  and  compensation  of 
employees within the Union; 

–  Sentiment 

indicators:  Economic  Sentiment 

Indicator  and  employment 

expectations within the Union. 

In order to assess whether the criteria laid down in the exception clause are currently 
met, the analysis of the economic and social situation should be carried out for the 
period from July 2011 to mid-May 2012 (subject to the availability of relevant data 
or forecasts), as the 2011 annual adjustment already covered the period until 1 July 
2011.  This  is  in  line  with  the  definition  of  a  ‘sudden’  deterioration,  referred  to  in 
Article  10  of  Annex  XI  to  the  Staff  Regulations.  However,  a  longer  period  is 
presented to provide a global overview where appropriate. 

4.2. 

Retaining the principle of parallelism 

The method thoroughly measures, through the principle of parallelism, the relevant 
economic and social situation within the Union, as reflected in decisions of Member 
States  on  the  salaries  of  national  civil  servants.  The  legislator  carefully  chose  the 
criteria  to  be  taken  into  account  for  the  adjustment  of  remuneration  and  pensions; 
these criteria can be applied during both an upswing and a downturn in the economy.  

The  method  for  adjusting  remuneration  and  pensions  has  been  in  force  for  almost 
forty  years.  During  this  long  period  of  time,  the  EU  economy  has  experienced 
periods of rapid growth as well as periods of economic downturn. 

The principle of parallelism with national officials in terms of changes in purchasing 
power,  which  has  been  enshrined  in  the  Staff  Regulations  since  1962,  has  to  be 
maintained also at a time of economic downturn in the European Union. This is fully 
in  line  with  Article  65,  which  states  that  particular  account  is  to  be  taken  of  any 
increases in salaries of the public service during the annual review. 

However, if there is a sudden and serious deterioration that the method would not be 
able  to  take  properly  into  account,  due  to  its  exceptional  nature  in  terms  of  either 
timing or magnitude, the exception clause should be used. 

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A  different  interpretation  would  lead  to  incoherent  results:  despite  the  method’s 
ability to capture properly economic and social developments within the EU through 
their effect on salaries of national civil servants, the legislator would have to adopt 
exceptional  measures  with  respect  to  the  annual  adjustment  of  EU  civil  servants’ 
remuneration  and  pensions.  Such  an  interpretation  would  fall  outside  the  economic 
and  social  policy  of  the  European  Union,  as  referred  to  in  Article  65  of  the  Staff 
Regulations. 

The  same  applies  to  the  time-lag  inherent  in  the  method.  The  reference  period,  by 
definition, entails a maximum delay of one year in salary adjustments (although the 
delay  in  practice  is  likely  to  be  smaller).  While  the  legislator  considered  that  the 
method should work with this time-lag, the exception clause clearly makes it possible 
to decrease it, if Member States were to take extreme measures to adjust the salaries 
of national officials, which should be applied to EU civil servants without waiting for 
the following annual adjustment exercise. 

Therefore,  the  appropriate  proposals,  where  necessary,  should  be  such  as  to  reflect 
the  exceptional  developments  that  have  not  been  properly  captured  by  the  method. 
These  proposals  should  not  go  beyond  the  implementing  rules  laid  down  in 
Annex XI to the Staff Regulations: there is no objective reason to apply criteria other 
than  the  change  in  purchasing  power  in  the  Member  States’  civil  services,  because 
that  would  undermine  the  effects  of  the  method  and  would  impose  additional 
measures on EU staff which had not been applied to staff in the Member States. 

Lastly, the exception clause is not an economic cycle clause. As explained above, the 
legislator carefully chose the economic and social criteria to be taken into account for 
salary and pension adjustments; these criteria can be applied at a time of economic 
growth  as  well  as  at  a  time  of  economic  downturn.  The  method  can  be  applied 
equally when salaries in Member States increase or decrease, and the gain or loss in 
the  purchasing  power  of  national  civil  servants  will  be  directly  reflected  in  the 
salaries and pensions of EU civil servants. Hence, the exception clause is to be used 
when there are extreme developments in the EU and only if the method is not able to 
measure them. It is not to be used whenever the EU is in the downward phase of the 
economic cycle. 

5. 

THE ECONOMIC AND SOCIAL SITUATION IN THE EU 

5.1. 

The preceding period  

5.1.1.  Annual adjustment in 2011 

Over the period July 2010 – July 2011, five out of the eight Member States used in 
the  sample  adopted  increases  in  nominal  salaries  (see  Table  1).  On  average,  this 
amounted  to  a  1.1 %  increase  in  nominal  salaries.  Due  to  inflation  (2.9 %),  this 
resulted in a drop of the purchasing power of national officials (-1.8%). This loss of 
purchasing power had to be automatically applied to the salaries of EU civil servants 
and,  with  a  high  inflation  rate  in  Brussels  measured  by  the  Brussels  International 
Index  (3.6 %),  it  resulted  in  a  1.7 %  nominal  increase  in  salaries  for  EU  staff  (see 
Table 2).  

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However,  the  Council  decided  not  to  adopt  the  Commission  Proposal  on  the  2011 
annual  adjustment  and  thus  breached  the  principle  of  parallelism  enshrined  in  the 
Staff Regulations. This resulted in a further deterioration of the purchasing power of 
European officials (-3.6%) compared to national officials (-1.8%).  

Table 1: Change in net remuneration over July 2010 – July 2011, representative sample (%)

Nominal change

Inflation (HICP)

Real change

BE

3,6

3,4

0,2

DE

1,3

2,4

-1,1

ES

-0,6

3,0

-3,5

FR

2,0

2,3

-0,3

IT

-0,2

3,0

-3,1

LU

-0,8

3,8

-4,4

NL

2,0

2,5

-0,5

UK

1,3

4,2

-2,8

EU8

1,1

2,9

-1,8

Sourc e: Eurostat

Table 2: Annual adjustment in 2011 (%)

Annual adjustment (Nominal change)

BII (Brussels inflation)

Specific indicator (Real change)

Annual adjustment (Council Decision)

Change in purchasing power

EU officials

1,7

3,6

-1,8

0

-3,6

5.1.2.  Departure from the principle of parallelism 

Sourc e: Eurostat

In order to apply the principle of parallelism laid down in the method for adjusting 
the  remuneration  of  EU  officials,  the  change  in  the  salaries  of  national  officials  is 
monitored, and the average change in their purchasing power is applied to determine 
developments in the purchasing power of EU officials’ salaries. However, the annual 
adjustment calculated by reference to a given 12-month period is taken into account 
to  adjust  salaries  in  the  EU  civil  service  during  the  following  year.  Therefore,  the 
purchasing  power  of  EU  civil  servants  follows  the  average  purchasing  power  of 
national  officials  within  the  Member  States  making  up  the  representative  sample, 
with a systematic time-lag inherent in the method. 

Nevertheless,  as  already  pointed  out  by  the  Commission  in  20083,  the  principle  of 
parallelism is partially invalidated, at the potential expense of EU officials, for two 
reasons.  Although  their  salaries  are  affected  by  changes  in  national  social 
contributions via the specific indicator, the social contributions paid by EU officials 
are  periodically  adjusted  on  an  independent  basis.  The  special  levy,  which  is  an 
additional  deduction  from  the  remuneration  of  EU  officials,  introduces  another 
element  of  double-counting.  In  order  to  make  a  proper  comparison  between  the 
purchasing  power  of  national  and  EU  officials,  these  items  should  be  taken  into 
account (see Tables 3 and 4). 

3 

Report from the Commission to the European Parliament and to the Council on Annex XI to the Staff 
Regulations, COM(2008) 443 final, 10.7.2008. 

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Table 3: Annual percentage change in purchasing power of national and EU officials including the 
combined effect of increases in pension contributions and special levy

Year

2004

2005

2006

2007

2008

2009

2010
2011

2012

Annual % change in 
purchasing power of 
national officials

Annual % change in 
pension contributions 
and special levy

Annual % change in 
purchasing power of 
EU officials

-1,2 

0,0

0,2

0,0

-1,3 

2,7

-2,2 
-1,8 

-

0,3

0,5

0,2

0,2

0,5

0,4

0,3
0,0

-

(cid:11)

-1,5 

-0,5 

0,0

-0,2 

-1,8 

2,3
-2,5 

-3,6 

Comment: the figures for 2011 and 2012 take into account the Council decisions not to adopt the 2011 Commission 
Proposals on the annual adjustment and the adjustment of the pension contribution rate. Due to these decisions, EU officials 
are losing 3,6% of their purchasing power in 2012.

Source: Eurostat

Table 4: Evolution of purchasing power of national and EU officials including the combined effect of 
increases in pension contributions and special levy

Year

2003

2004

2005

2006

2007

2008

2009

2010
2011
2012

Evolution of 
purchasing power of 
national officials

Cumulative im pact of 
increases in pension 
contributions and 
special levy

Evolution of 
purchasing power of 
EU officials

(2003=100)

(2003=100)

100,0

98,8

98,8

99,0

99,0

97,7

100,3

98,1
96,4
-

100,0

100,3

100,8

101,0

101,2

101,7

102,1

102,4
102,4
-

(2004=100)
(cid:11)

100,0

98,5

98,0

98,0

97,8

96,1

98,3
95,8
92,4

Comment: the figures for 2011 and 2012 take into account the Council decisions not to adopt the 2011 Commission 
Proposals on the annual adjustment and the adjustment of the pension contribution rate. Due to these decisions, EU officials 
are losing 3,6% of their purchasing power in 2012.

Source: Eurostat & DG HR

As  a  consequence,  the  cumulative  purchasing  power4  of  national  officials  fell  by 
3.6 %  over  the  8  years  between  2003  and  2011,  while  that  of  EU  officials  fell  by 
4.2%  over  the  corresponding  7  years  between  2004  and  2011  –  and  the  Council 
Decision  of  December  2011  refusing  to  apply  the  method  resulted  in  an  even 
stronger  slump  of  the  purchasing  power  of  European  officials,  i.e.  a  7.6 %  drop 
altogether between 2004 and 2012 (see Figure 1). 

4 

This is computed by compounding the year-on-year change in purchasing power from 2004 to 2011. 

EN 

11 

   EN 

 
 
 
                                                 
Figure  1: Change s in purchasing powe r of EU officials compare d to national officials in 
ce ntral gove rnme nt (2004 – 2011) including pe nsion contributions and spe cial le vy

1,00%

0,00%

-1,00%

-1,2%

-1,2%

-1,0%

-1,0%

-2,0%

-2,0%

-2,2%

-2,3%

-3,9%

r
e
w
o
p
g
n
i
s
a
h
c
r
u
P

-2,00%

-1,5%

-3,00%

-4,00%

-5,00%

-6,00%

-7,00%

-8,00%

0,4%

-1,7%

-1,8%

-3,6%

-4,2%

-5,9%

-7,6%

2004

2005

2006

2007

2008

2009

2010

2011

EU officials

National officials
Additional loss due to the 2011 Council Decision not to adjust salaries

The  principle  of  parallelism  should  be  maintained  through  economic  cycles.  This 
stems from the assumption that Member States would take appropriate measures in 
respect of their national civil servants, which would have a direct impact on salaries 
of EU officials. Despite this principle, the remuneration of EU officials has largely 
diverged from the remuneration of national officials since 2004, at the expense of the 
EU civil service. 

5.2. 

Assessment of the EU economic and social situation during the reference period  

5.2.1.  Towards slow economic growth  

For the EU as a whole the recession ended in autumn 2009 and set the scene for a 
recovery in 2010. Overall, GDP increased by 2.0% in the EU for the whole of 2010. 

In 2011, the EU yearly figure showed visible growth, mainly owing to a good start in 
the  first  quarter.  Overall,  GDP  increased  by  1.5%  both  in  the  EU  for  the  whole  of 
2011. The recovery  has shortly  stumbled in the last quarter of 2011, with the GDP 
turning slightly negative. 

Eurostat's  flash  estimate  for  2012  first  quarter  shows  stabilisation  in  the  GDP  (the 
GDP  rate  in  the  EU  compared  to  the  previous  quarter  will  be  0 %)  and  the  DG 
ECFIN forecast5 indicates a path towards a slow growth until the end of the year in 
the EU. 

5 

2012 Spring European Economic Forecast. 

EN 

12 

   EN 

 
 
 
                                                 
Table 5: Profiles of quarterly GDP, volume (percentage change from previous quarter)

2011/1

2011/2

2011/3

2011/4

2012/1

2012/2

2012/3

2012/4

0.6

0.2

0.3

-0.3

0.0

0.0

0.2

0.2

Source: Eurostat (2011/1 – 2012/1); DG ECFIN (2012/2 – 2012/4)

The Eurostat flash estimate released on 15 May 2012 announced that that GDP grew 
slightly  in  2012  in  the  EU  (0.1 %  growth)  compared  to  the  first  quarter  of  2011. 
Based  on  the  assumption  that  the  euro  area  will  successfully  handle  crisis  related 
challenges,  a  return  of  confidence  over  the  course  of  2012  is  expected.  With 
transitory shocks waning  and confidence  rebounding,  DG.ECFIN  forecasts  a  return 
to subdued economic growth for 2013, i.e. 1.3 % growth in the EU. 

In 2011 net exports were the main engine of the economic growth, while inventories 
and  domestic  demand  only  modestly  contributed  to  the  GDP  increase.  In  2012 
domestic  demand  and  inventories  are  expected  to  turn  negative,  but  their  effect 
would  be  compensated  by  net  exports,  resulting  in  marginal  economic  growth  for 
2012.  In  2013  the  domestic  demand  is  forecast  to  surge  and  to  contribute  together 
with net exports to more considerable pick-up in the economic activity (see Figure 2)  

Figure 2: GDP growth and decomposition within the EU-27 (annual %  change)

3,2

0,3

2,0

1,5

1,3

0,1

-4,3

4,0

3,0

2,0

1,0

0,0

-1,0

-2,0

-3,0

-4,0

-5,0

2007

2008

2009

2010

2011

2012

2013

Domestic demand

Inventories

Net exports

GDP grow th

Source: Eurostat (2007-2011) and DG ECFIN (2012-2013)
The  cumulative  value  of  the  GDP  has  been  increasing  since  the  recession  that 
occurred  in  2009.  In  2011  it  has  reached  2.6 %  (2006  is  used  as  a  basis),  and  is 
forecast to remain very close to that value in 2012. In 2013, it should make another 
leap forward to 4 %, due to more significant economic growth that year. 

EN 

13 

   EN 

 
 
Figure 3: GDP growth within the EU-27 (cumulative % change since 2006)

3,2

3,5

4,0

2,6

2,7

1,0

2007

2008

2009

-0,9

2010

2011

2012

2013

5,0

4,0

3,0

2,0

1,0

0,0

-1,0

-2,0

Source: DG HR

The Economic Sentiment Indicator (ESI)6 stabilised in the first quarter of 2012, but 
remained below its long-term average. The Economic Sentiment Indicator remained 
stable  in  April  in  the  EU  at  93.2.  In  the  euro  area  it  decreased  to  92.8,  thereby 
offsetting the gains recorded over the first quarter of 2012. The decline in the euro 
area was mainly driven by weakening confidence in the industry and services sectors. 
Confidence improved only in the retail sector. The more positive reading of the ESI 
in  the  EU  reflects  a  strong  improvement  in  the  UK7.  A  visible  improvement  in  the 
consumer  confidence  indicator  in  May  2012  should  positively  affect  the  Economic 
Sentiment Indicator in the near future. 

Figure 4: Economic sentiment index within the EU-27 (Average since 1990 = 100)

120

110

100

90

80

70

60

50

40

30

20

10

0

n
a
J

b
e
F

r
a
M

r
p
A

y
a
M

n
u
J

l

u
J

g
u
A

p
e
S

t
c
O

v
o
N

c
e
D

n
a
J

b
e
F

r
a
M

r
p
A

y
a
M

n
u
J

l

u
J

g
u
A

p
e
S

t
c
O

v
o
N

c
e
D

n
a
J

b
e
F

r
a
M

r
p
A

y
a
M

n
u
J

l

u
J

g
u
A

p
e
S

t
c
O

v
o
N

c
e
D

n
a
J

b
e
F

r
a
M

r
p
A

2009

2010

2011

2012

ESI

Average since 1990

Source: DG ECFIN

6 

7 

Business and consumer surveys provide monthly judgments and expectations concerning diverse facets 
of economic activity in the different sectors of the economy: industry, services, construction and retail 
trade, as well as consumers. For each of the five surveyed sectors, ‘confidence indicators’ are produced 
to reflect overall perceptions and expectations at the individual sector level in a one-dimensional index. 
In order to be able to track overall economic activity, the broader Economic Sentiment Indicator (ESI) 
has been calculated since 1985, as a weighted sum of these five indicators. 
Source: Business and consumer survey results, May 2012, DG ECFIN. 

EN 

14 

   EN 

 
 
 
                                                 
Figure 5: Main features within the EU-27 (annual %  change)

14,0
12,0
10,0
8,0
6,0
4,0
2,0
0,0
-2,0
-4,0
-6,0
-8,0
-10,0
-12,0
-14,0

2007

2008

2009

2010

2011

2012

2013

Private consumption

Public consumption

Total investment

Exports

GDP grow th

Source: Eurostat (2007-2011) and DG ECFIN (2012-2013)

5.2.2.  Public finances start to adjust 

Public finance developments in the euro area and the EU continue to be characterised 
by  the  fiscal  exit  strategy  put  in  place  after  the  2008-09  recession.  In  line  with  the 
Council conclusions first issued in 2009 and subsequently reiterated in 2011 and in 
early  2012,  the  key  objective  of  the  fiscal  exit  strategy  is  to  bring  public  finances 
back  to  a  sustainable  path  within  the  context  of  the  EU  fiscal  rules.  Fiscal 
consolidation  efforts,  which  started  in  2010,  intensified  in  2011  and  led  to  a 
significant improvement in public finance conditions in both the euro area and in the 
EU.  The  economic  cycle,  which  was  still  supportive  in  the  first  half  of  2011,  also 
contributed positively to this improvement.  

The aggregate general government deficit in the euro area is expected to decline to 
3.2% of GDP in 2012, about 1 percentage point of GDP lower than in 2011. Taking 
into  account  only  adopted  budgets  and  other  measures  sufficiently  specified  by 
Member States by the cut-off date, the overall budget deficit is set to decrease further 
to 2.9% of GDP in 2013. A similar profile is expected in the EU, where the aggregate 
deficit is expected to reach 3.6% and 3.3% of GDP in 2012 and 2013 respectively. 

Government  debt-to-GDP  ratios  are  expected  to  continue  to  increase  over  the 
forecast  horizon  in  both  the  euro  area  and  in  the  EU,  albeit  at  a  slowing  pace 
compared with the 2008-10 period. Even though current deficits are being reduced, 
increasing interest payments, combined with somewhat lower nominal GDP growth, 
are assumed to increase debt ratios very moderately. On the whole, in the euro area 
gross public debt is projected to reach 92.5 % of GDP in 2013, while in the EU it is 
expected to slightly exceed 87% of GDP (see Figure 6). 

EN 

15 

   EN 

 
 
Figure 6: General government balance and public debt within the EU-27, in % of GDP (2007 – 2013)

20,0

15,0

10,0

5,0

0,0

-5,0

-10,0

-15,0

-20,0

86,2

87,2

83,0

80,2

74,8

-6,9

-6,5

-0,9

59,0

-2,4

62,5

-4,5

-3,6

-3,3

2007

2008

2009

2010

2011

2012

2013

Government balance

Government debt

90,0

85,0

80,0

75,0

70,0

65,0

60,0

55,0

50,0

Source : Eurostat (2007-2011) and DG ECFIN (2012-2013)

Box: Number of Member States in an ongoing excessive deficit procedure (EDP) 

The  Council  requested  the  Commission,  in  addition  to  the  data  used  in  its  2011 
Report, to take into account the number of Member States with an ongoing Excessive 
Deficit  Procedure  (EDP).  This  indicator  derives  from  the  general  government 
balance, which is assessed above. In the Commission's view, the general government 
balance better captures the essence of the problem. The number of Member States in 
the ongoing EDP does not show the magnitude of the deficit, but merely indicates the 
number  of  the  Member  States  where  it  is  above  the  threshold  of  3%.  It  should  be 
noted  that  reasons  for  being  in  the  EDP  are  structurally  different  for  each  Member 
State. 

The Maastricht Treaty of 1992 which foresaw the creation of the EURO, organized 
the  way  multilateral  fiscal  surveillance  is  conducted  within  the  Union.  This 
surveillance,  enforced  recently  by  the  "six-pack"  and  the  Treaty  on  Stability, 
Coordination  and  Governance  (TSCG)  is  based  on  the  EDP.  In  order  for  EMU  to 
function  smoothly,  Article  126  TFEU  provides  that  Member  States  shall  avoid 
excessive  government  deficits  defined  in  the  Protocol  on  the  EDP  by  the  reference 
values  for  the  annual  general  government  deficit  (3%)  and  gross  debt  (60%)  in 
relation  to  GDP  at  the  end  of  the  year,  whereby  a  number  of  qualifications  can  be 
applied. 

In the end of May 2012, there were 23 Member States with an ongoing EDP i.e. BE, 
BG, CZ, DK, DE, IE, EL, ES, FR, IT, CY, LV, LT, HU, MT, NL, AT, PL, PT, RO, 
SI, SK and UK. Seven of them  have the deficit correction deadline in 2012, ten of 
them have the correction deadline in 2013, ES in 2013, EL in 2014, while IE and UK 
in  2015.  Only  three  Member  States  have  not  met  the  correction  deadline  of  2011 
(BG, HU  and  MT).  As there are different structural reasons  for  launching the EDP 
for  different  Member  States,  the  mere  indication  of  their  number  does  not  bring 
strong added value, if any, to other indicators used in the present report, in particular 
those referring to public finances. 

EN 

16 

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The  objective  of  EDP  is  to  improve  the  public  finances  of  Member  States  through 
individual  recommendations;  therefore  its  existence  may  be  seen  as  going  into  the 
direction  of  improved  public  finances.  The  underlying  rationale  of  the  currently 
reinforced  economic  governance  framework  is  that  sound  public  finances  are  the 
only  way  to  create  a  healthy  economic  environment.  Its  nature  is  to  analyse  the 
public finances through criteria set by the legislation. This is even more important at 
the  final  stage  of  EPD,  when  the  Member  State  complies  with  recommendations 
before  the  correction  deadline.  Therefore,  the  number  of  Member  States  under  the 
EDP  changes  periodically  as  a  result  of  actions  reducing  the  annual  general 
government deficit below 3% in relation to GDP. The number of Member States in 
this  procedure  can  change  from  year  to  year.  The  increase  of  this  number  in  2009 
was caused by increased public spending resulting from government interventions on 
financial markets. All but seven Member States (BG, CZ, EE, MT, PL, RO and SK) 
reported  various  interventions  undertaken  by  the  government  in  the  context  of  the 
financial crisis since 2007. Therefore, the indicator of the number of Member States 
with  ongoing  EDP  is  not  conclusive.  In  this  context,  the  indicators  reflecting  the 
level and change of the government deficit and gross debt in Member States are more 
relevant.  

All in all, the government finances have been adjusting. The government deficit rate 
has significantly improved since 2008 and is expected to go down to 3.3 % in 2013, 
while the debt ratio will increase very moderately to 87% of GDP in 2013. 

5.2.3. 

Inflation is expected to abate gradually 

Consumer  prices  in  2011  were  mainly  driven  by  the  pass-through  of  rising  global 
commodity  prices  and,  in  some  Member  States,  by  increases  in  indirect  taxes  and 
administered prices. HICP inflation temporarily exceeded 3% in 2011, but began to 
recede in the light of a weakening economic environment. The easing in commodity 
prices as indicated by commodities futures toward the end of this year and relative 
weak  economic  activity  should  lower  consumer-price  inflation  further.  A  faster 
decline in inflation rates is precluded by fiscal measures adopted in several Member 
States, most notably increases in indirect taxes and administered prices. The return of 
subdued  growth  in  late  2012  and  2013  is  not  expected  to  contribute  to  price 
pressures, in particular since output gaps are expected to narrow very slowly in the 
EU and the euro area.  

The easing in commodity prices towards the end of this year, in line with the futures-
based assumptions, and relatively weak economic activity, should lower consumer-
price inflation. Further on, headline inflation is expected to decline, owing to the fall 
in energy inflation, reflecting base effects related to oil price hikes in early 2011. 

The return to subdued economic growth in late 2012 and 2013 is not expected to add 
any substantial inflationary pressure, in particular since output gaps are only closing 
very slowly in the EU and the euro area. HICP headline inflation is expected to stay 
close to 2% in 2013 (1.9% in the EU, 1.8% in the euro area) and thus to be in line 
with  inflation  expectations.  In  2013,  core  inflation,  despite  some  distortion  from 
increases in indirect taxes and administered prices, will move in parallel (see Figure 
7). 

EN 

17 

   EN 

 
Figure 7: Harmonised index of consumer prices within the EU-27 (annual % change)

4,0

3,5

3,0

2,5

2,0

1,5

1,0

0,5

0,0

3,7

2,4

1,0

3,1

2,6

2,1

1,9

2007

2008

2009

2010

2011

2012

2013

HICP

Source: Eurostat (2007-2011) and DG ECFIN (2012-2013)

5.2.4.  The labour-market situation is expected to stabilise 

Current  labour  market  developments  reflect  both  the  heritage  of  the  2008-09 
recession and the stagnation of 2011-12. Improvements during the early stages of the 
2009-11 recovery had been limited. Since companies had adjusted their labour input 
by  reducing  the  number  of  hours  worked  per  employee  rather  than  cutting 
headcounts, the expansion first saw a normalisation in terms of working hours but no 
or only marginal employment growth. 

With  employment  falling  in  the  second  half  of  2011,  the  unemployment  rate 
increased  to  10.3%  in  2012  and  is  expected  to  remain  at  that  level  in  2013  (see 
Figure 8). 

Figure 8: Employment growth and unemployment rate within the EU-27 (2006 – 2013)

2,5%

2,0%

1,5%

1,0%

0,5%

0,0%

-0,5%

-1,0%

-1,5%

-2,0%

-2,5%

1,6%

8,3%

1,8%

7,2%

1,0%

7,1%

9,7%

9,7%

9,0%

10,3%

10,3%

0,3%

0,2%

-0,5%

-0,2%

-1,8%

2006

2007

2008

2009

2010

2011

2012

2013

Employment growth (left axis)

Unemployment rate (right axis)

12,0%

10,0%

8,0%

6,0%

4,0%

2,0%

0,0%

Source: Eurostat (2006-2011) and DG ECFIN (2012-2013)

EN 

18 

   EN 

 
 
 
Accordingly,  in  the  Commission  surveys,  employment  expectations  in  the  EU 
industry and services sectors declined towards the end of 2011 and remained at low 
levels  in  the  first  quarter  of  2012.  The  employment  expectations  in  the  EU  for 
manufacturing  remained  above  the  long-term  average  and  the  employment 
expectation in services remained slightly below the long-term average (see Figure 9). 

Figure 9: Employment expectations in 2011 – 2012 (balance)

10,0

5,0

0,0

-5,0

-10,0

-15,0

2011Q3

2011Q4

2012Q1

2012Q2

Manufacturing

Services

LTA (manufacturing)

LTA (services)

Source : DG ECFIN

Further  on,  the  expected  rebound  in  economic  activity  should  help  to  stabilise  the 
labour market situation. Due to the usual lag of responses in employment to changes 
in  economic  activity,  however,  it  will  take  time  to  see  any  improvements  in  the 
labour  market.  The  situation  is  also  expected  to  benefit  increasingly  from  reform 
efforts, which have been undertaken in several parts of the EU. They should become 
effective  with  the  kind  of  time  lag  already  seen  in  countries,  which  had  already 
undertaken such measures some time ago. 

Overall,  in  2013  employment  is  forecast  to  increase  moderately  in  the  EU  and  to 
stabilise  in  the  euro  area.  As  a  result  the  upward  trend  in  unemployment  rates  is 
expected to be broken in the EU and the euro area. 

It  should  be  reminded  that  it  is  not  the  first  time  when  the  unemployment  rate 
increases in the European Union and reaches a comparable level. In 2000 – 2004, the 
unemployment rate increased from 8.5% to 9.1%, before dropping to 7.1 % in 2008. 

5.2.5.  Compensation in the public sector versus the total economy 

The Commission considers that it is important to compare the situation of employees 
in the public sector to the total economy in the EU. For this purpose, it is appropriate 
to use the compensation of employees, which measures the total labour cost for all 
employees,  defined  as  gross  wages  including  overtime  and  bonuses,  together  with 
benefits received in kind and employer social contributions8, both in the public sector 

8 

As a consequence, it reflects changes in the employment rate and changes in welfare policy as well as 
the wage level. 

EN 

19 

   EN 

 
 
                                                 
(general government sector9) and in the total economy. It should be noted that data 
on  the  total  economy  include  those  for  the  public  sector.  The  weight  of  the  public 
sector in the total economy is of the order of 22 %. 

Compensation  in  the  private  sector  is  highly  correlated  to  economic  cycles: 
compensation  of  employees  in  the  total  economy  increased  by  5.2 %  in  2007  and 
4.4 %  in  2008  but  dropped  to  -0.3 %  in  2009  at  the  heart  of  the  financial  turmoil, 
when the GDP fell by 4.3 %. Compensation in the public service may not necessarily 
follow  economic  cycles.  For  example,  in  2009,  compensation  of  employees  in 
general government increased by 3.4 %. 

The annual increase in compensation of employees in the public sector is expected to 
increase  from  0.4 %  in  2011  to  0.8 %  in  2012  and  to  increase  further  to  1.3 %  in 
2013. Compensation in the total economy increased by 2.6 % in 2011 and is forecast 
to increase at a faster pace (1.9 % in 2012 and 2.3% in 2013) than compensation in 
the public sector (see Figure 10). 

During  the  2009  recession,  salary  increases  in  the  total  economy  were  minimal, 
while salary adjustments in the public sector remained moderate. However, this has 
changed as soon as the recession ended, resulting in stronger salary increases in the 
total economy, while salary adjustments in the public sector remained subdued due to 
governments' efforts to adjust budget deficits. From 2004 to 2011, compensation in 
the EU increased in nominal terms by 28.4 % in the public sector and by 27.9 % in 
the total economy. According to the 2012 Spring European Economic Forecast, it is 
likely  to  rise  to  31.1 %  in  the  public  sector  by  2013  (starting  from  2004)  against 
33.3 % in the total economy (see Figure 11).  

Nominal  compensation  per  employee  is  expected  to  grow  at  annual  rates  of  about 
2.1 %  in  2012  and  2013.  This  will  result  in  a  cut  of  real  salaries  in  2012,  due  to  a 
higher  inflation  rate  (2.6 %),  but  will  produce  an  increase  in  real  salaries  in  2013, 
with the inflation dropping to 1.9%. The situation is expected to be less positive for 
employees in  the public sector,  with a  lower increase in compensation.  The loss of 
purchasing power in the public sector would amount to 1.8% in 2012 and is in line 
with  the  specific  indicator  forecast  issued  by  Eurostat  on  the  basis  of  information 
supplied  by  the  Article  65  Working  Group  in  March  2012,  according  to  which 
national officials in central government are expected to lose 1.6% of their purchasing 
power. This clearly shows that the upcoming salary adjustment in the EU Institutions 
is closely correlated to salary increases in the public sector and is fully in line with 
the economic and social situation in the Union, in spite of higher salary increases in 
the total economy. 

9 

The public sector stands for general government throughout this section. The general government sector 
includes  all  institutional  units  which  are  other  non-market  producers  whose  output  is  intended  for 
individual  and  collective  consumption,  and  mainly  financed  by  compulsory  payments  made  by  units 
belonging  to  other  sectors,  and/or  all  institutional  units  principally  engaged  in  the  redistribution  of 
national income and wealth. Institutional units include general government entities and some non-profit 
institutions  and  autonomous  pension  funds.  The  general  government  sector  is  divided  into  four  sub-
sectors: central government, state government, local government and social security funds. 

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Figure 10: Changes in compensation of employees within the EU-27, total economy versus general 
government (2007 – 2012)

6%

4%

2%

0%

-2%

-4%

-6%

12%

10%

8%

6%

4%

2%

0%

e
t
a
r

t
n
e
m
y
o
p
m
e
n
U

l

2007

2008

2009

2010

2011

2012

2013

Compensation in total economy (nominal)

Compensation in general government (nominal)

Economic growth

Unemployment rate

Figure 11: Cumulative changes in compensation of employees in the EU, total economy versus 
general government (2004 – 2012)

Source: Eurostat (2007-2011) and DG ECFIN (2012-2013)

135 

130 

125 

120 

115 

110 

105 

100 

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Compensation in total economy (nominal; 2004 = 100)

Compensation in general government (nominal; 2004 = 100)

Source: Eurostat (2004-2011) and DG ECFIN (2012-2013)

Table 11: Changes in compensation of employees in the EU (annual % change)

2004

2005

2006

2007

2008

General government

Total economy

4,1 

3,4 

4,3 

3,6 

3,9 

4,6 

3,6 

5,2 

4,5 

4,4 

2009

3,4 

-      

0,3 

2010

2011

2012*

2013*

1,3 

1,6 

0,4 

2,6 

0,8 

1,9 

1,3 

2,3 

Source: Eurostat (2004-2011) and DG ECFIN (2012-2013)

5.2.6.  Changes  in  purchasing  power  of  national  civil  servants  in  central  public 

administration (additional forecast) 

An additional forecasting exercise carried out by Eurostat in the end of May showed 
that the loss of purchasing power in the public sector will be lower than previously 
forecasted,  i.e.  1  %10  in  the  eight  reference  Member  States  and  1.4%  in  the  EU27. 
This  is  due  to  an  important  salary  increase  in  Germany  granted  by  the  federal 

10 

UK has not submitted revised data 

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government  to  public  sector  employees  and  which  will  also  apply  to  federal  civil 
servants. The above loss of purchasing power will be applied to EU staff through the 
method. There are no events that should be reflected in the salary adjustment and that 
the  method  has  not  been  able  to  capture.  Therefore,  there  are  no  any  objective 
reasons to inflict a higher loss of purchasing power on European civil servants going 
beyond that applied by the Member States to their civil servants. Moreover, it should 
be reminded that, due to the elements of double counting and the Council's refusal to 
adjust the salaries in 2011, the loss of purchasing power in the EU Institutions since 
2004  has  been  more  than  double  (7.6 %)  compared  to  the  national  civil  services 
(3.6%). 

Member  States  have  also  been  asked  to  forecast  salary  changes  from  1  July  2012 
until  the  end  of  the  year,  however,  a  number  of  them  found  it  difficult  to  provide 
Eurostat  with  reliable  figures,  thus  preventing  Eurostat  from  drawing  a  reliable 
forecast.  Nevertheless,  it  should  be  pointed  out  that  none  of  the  Member  States  is 
forecasting a salary cut in the second half of 2012 and at least nine Member States 
have envisaged salary increases for national civil servants. Therefore, the exception 
clause should not be applied. This is fully in line with the reasoning of the Court of 
Justice in Case C-40/10, where the Court stressed that the ‘clause enables account to 
be taken of the consequences of a deterioration in the economic and social situation 
which  is  both  serious  and  sudden  where,  under  the  ‘normal  method’,  the 
remuneration of officials would not be adjusted quickly enough’. As Member States 
do not envisage any pay cut in the second half of 2012, but forecast salary increases, 
there is no reason to depart from the ‘normal method’ by taking into account salary 
adjustment in the Member States outside the reference period. 

Altogether, even though due to the consolidation of public finances salary increases 
in the public sector are expected to remain subdued, this will not be the case in the 
total economy. Salary adjustments below the inflation will continue eroding salaries 
of national officials and EU civil servants in 2012 and, if the new method is adopted 
to come to effect in 2013, any further loss in purchasing power of national officials 
would be applied to the EU staff. 

6. 

CONCLUSION 

It  follows  from  the  foregoing  considerations  and  analysis  that  the  legal  criteria  of 
Article  10  of  Annex  XI  are  not  met  during  the  reference  period  of  1  July  2011  to 
mid-May  2012.  In  2012  the  EU  economy  is  expected  to  stagnate  before  moving 
towards contained growth. The salaries in total economy are expected to increase by 
2.1 % in 2012 and 2013, although salary increases in the public sector will be lower 
corresponding to the lower rates of compensation of employees. 

No event has been identified that has not been or could not be captured by the normal 
application of the method.  

In  2012  the  real  salaries  of  EU  staff  would  go  down  in  line  with  the  loss  of 
purchasing power of national civil servants. After the reference period, at least nine 
Member  States  are  estimating  a  salary  increase  and  none  of  them  forecast  a  salary 
cut. Therefore, there is no reason to depart from the ‘normal method’ by taking into 
account salary adjustment in the Member States outside the reference period. 

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Therefore, the Commission considers that it is not appropriate to submit a proposal 
under Article 10 of Annex XI to the Staff Regulations.  

The Commission recalls again that, in reply to the difficult general economic context, 
it has submitted a draft proposal to the European Parliament and the Council which 
would lead to significant savings in the next years and to even higher savings in the 
long term. The proposal includes a new and revised method as well as amendments 
to the mechanism of the exception clause. 

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