COMMISSION STAFF WORKING DOCUMENT on the exception clause (Article 10 of Annex XI to the Staff Regulations) 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
Date: 2012-12-05
Institutions: European Commission
Subjects: European official, pay, pay cut, servant (EU), social-security benefit, socioeconomic conditions, wage determination

EUROPEAN 
COMMISSION 

Brussels, 5.12.2012  
SWD(2012) 428 final 

COMMISSION STAFF WORKING DOCUMENT 

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

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

{COM(2012) 754 final} 
{SWD(2012) 427 final} 

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COMMISSION STAFF WORKING DOCUMENT 

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

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 

1. 

INTRODUCTION 

Further  to  the  Council's  request  to  the  Commission  of  19  March  20121  ,  "in 
conformity with Article 241 TFEU, to monitor closely the evolution of the economic 
and social situation as well as 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 
[…]", the Commission submitted to the Council on 31 August 2012 its report on the 
exception clause.2 

The Commission report concluded that the legal criteria of Article 10 of Annex XI 
were  not  met  during  the  reference  period  of  1  July  2011  to  mid-May  2012. 
Therefore,  it  considered  not  appropriate  to  submit  a  proposal  under  Article  10  of 
Annex XI to the Staff Regulations.  

On  25  October  2012,  the  Council  made  a  new  request,  on  the  basis  of  Article  241 
TFEU, to the Commission "to submit, in accordance with Article 10 of Annex XI to 
the Staff Regulations and in the light of objective data submitted by the Commission 
so far, an appropriate proposal for this year’s EU-salary adjustment in time for the 
European  Parliament  and  the  Council  to  examine  and  adopt  it  before  the  end  of 
2012".3 

The  Commission  takes  note  that,  contrary  to  the  Council's  request  of  4  November 
20114, the latest request asks the Commission to submit a proposal only taking into 
account "the data submitted by the Commission so far", i.e. concerning the reference 
period  of  1  July  2011  to  mid-May  2012  and  not  in  the  light  of  data  reflecting  the 
situation in autumn 2012. 

However,  as  the  Commission  is  bound  by  the  duty  of  cooperation  in  good  faith 
between  the  institutions  regarding  the  application  of  Article  10  of  Annex  XI 
recognised by the case-law5, it constantly monitors the evolution of the economic and 

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Council document 7421/12 of 12 March 2012. 
COM (2012) 476 Final of 31 August 2012. 
Council document 14913/12 of 12 October 2012. 
Council document 16281/11 of 4 November 2011. 
Case C-40/10 Commission/Council. 

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social  situation.  Therefore,  the  Commission  considers  that,  for  the  sake  of 
completeness, it is appropriate to verify whether there have been any changes in the 
economic and social situation that would justify any change to the conclusion of the 
Commission Report of 31 August 2012. 

2. 

RECENT  DEVELOPMENTS  IN  THE  ECONOMIC  AND  SOCIAL  SITUATION  WITHIN  THE 
EU6 

The outlook of the European economy is mixed, due to some disappointing data and 
encouraging  signs  of  progressive  economic  adjustment  in  Member  States  and 
important policy advances. The ongoing post-financial crisis correction continues to 
weigh heavily on economic activity and employment in the EU. Yet, compared with 
the  situation  before  the  summer,  over  the  last  few  months  financial  tensions  have 
somewhat abated. A return to moderate growth is projected in the first half of 2013.  

In  the  meantime,  wide  cross-country  divergences  in  economic  activity  and  labour 
market  dynamics  have  emerged,  originating  primarily  in  varying  needs  for  public- 
and private-sector deleveraging and for reallocation of resources across sectors, but 
also in large disparities in financing conditions. 

Due to the weak starting point, the gradual recovery setting in 2013 will result in a 
low annual GDP growth rate of 0.4% for 2013 in the EU. GDP growth is forecast to 
rise in 2014 to around 1.6% in the EU, with domestic demand returning to provide a 
positive contribution to growth on the back of an expected normalisation of financing 
conditions, a stabilisation of sectoral balance sheets and returning confidence.  

Due  to  the  ongoing  post-financial  crisis  correction,  the  real  GDP  of  the  Union  for 
2012  is  expected  to  appear  negative,  at  the  rate  of  -0.3%,  with  quarterly  rates 
fluctuating  around  0.  In  the  third  quarter  of  2012,  the  GDP  rate  increased  very 
slightly, i.e. by 0.1%, compared to the previous quarter. A return to moderate growth 
is projected in the first half of 2013. The full implementation of far-reaching policy 
measures  announced  over  recent  months  and  progress  with  the  correction  of 
imbalances  should  reduce  financial  stress  in  vulnerable  Member  States  further  and 
lead  to  a  gradual  restoration  of  confidence  across  the  EU,  which  is  necessary  for 
investment  and  private  consumption  to  return.  As  the  current  weakness  of  global 
demand  is  expected  to  be  temporary,  net  exports  are  projected  to  provide  some 
impetus  for  the  recovery  of  investment,  later  spilling  over  to  consumption.  A 
moderate recover is thus expected to start in 2013. 

The cumulative value of the GDP has increased since the recession that occurred in 
2009.  In  2011  it  has  reached  2.6  %  (2006  is  used  as  a  basis).  In  2013,  it  should 
further  increase  to  2.7  %  and  in  2014  make  another  leap  to  4.3%,  due  to  more 
significant economic growth that year. 

The European Sentiment Indicator has declined to 86.2 in September, as consumers 
as well as firms have become more pessimistic about the near-term perspectives, and 
remained at the same rate in October, showing signs of stabilisation. 

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The  assessment  of  the  economic  and  social  situation  in  the  European  Union  is  based  on  the  2012 
Autumn  European  Economic  Forecast  issued  by  DG  ECFIN  on  7  November  2012  and  the  statistical 
data provided by Eurostat. 

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Fiscal  consolidation  is  expected  to  continue.  Fiscal  deficits  are  expected  to  fall  to 
3.6%  of  GDP  in  the  EU  on  the  back  of  consolidation  plans  implemented  in  the 
course  of  the  year.  The  available  information  from  budgets  for  2013  points  to 
continued, though somewhat slower, consolidation with headline deficits projected at 
3.2% of GDP in the EU. A moderate decrease in the pace of fiscal consolidation is 
also reflected in the structural improvements of the budget balance, which in the EU 
is expected at 1 pp. of GDP in 2012 and ¾ pp. in 2013. 

Government  debt-to-GDP  ratios  continue  to  stabilise  as  expected,  with  the  rate 
increasing from 86.8% in 2012 to 88.5% in 2013 and remaining at that level in 2014 
(88.6%).  The  number  of  Member  States  in  an  ongoing  excessive  deficit  procedure 
has  decreased  from  23  to  21  with  the  procedure  terminated  for  Bulgaria  and 
Germany and the procedure about to end for Malta. Eight other Member States are 
expected to have the procedure terminated in 2012. 

Consumer-price  inflation  in  the  EU  is  projected  to  remain  relatively  high  in  2012 
(2.7%),  inter  alia  due  to  the  impact  of  fiscal  measures,  but  is  expected  to  abate 
gradually  over  the  forecast  horizon,  averaging  2.0%  and  1.8%  in  2013  and  2014 
respectively. 

The unemployment rate in the EU has increased as expected and is forecast to reach 
10.5% in 2012. After another leap in 2013 to 10.9%, it is forecast to retrieve and go 
down  to  10.7%  in  2014.  Due  to  the  lack  of  fiscal  space  and  the  ongoing  structural 
adjustment  in  some  Member  States  that  limit  the  scope  for  supportive  policy 
measures,  the  employment  will  decrease  by  0.4%  in  2012  and  by  0.2%  in  2013.  A 
modest  recovery  in  economic  activity  in  horizon  may  help  to  stabilise  the  labour 
market  situation  at  the  end  of  2013  and  give  rise  to  feeble  employment  growth  in 
2014 of 0.6%. 

Salaries in total economy are expected to increase by 2.1 % in 2012 and 2013 and by 
2.3%  in  2014.  At  the  same  time,  the  wage  bill  in  the  public  sector7  will  continue 
increasing,  although  at  a  slower  pace  (0.3%  in  2012  and  1.5%  in  2013  and  2014). 
Lower  rates  of  compensation  of  employees  in  general  government  reflect  not  only 
increases  in  salaries,  but  also  staff  cuts,  which  is  a  measure  proposed  by  the 
Commission in the EU Institutions. 

3. 

CONCLUSION 

It  follows  from  the  above  social  and  economic  data  that  there  has  been  neither  a 
serious  nor  a  sudden  deterioration  in  the  economic  and  social  situation  in  the 
European Union after the presentation of the Report of 31 August 2012 that would 
justify any change to the conclusions of that Report. Therefore, the legal criteria of 
Article  10  of  Annex  XI  of  the  Staff  Regulations  have  not  been  met,  and  the 
Commission considers that it is not appropriate to submit a proposal under Article 10 
of Annex XI to the Staff Regulations. 

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Measured by compensation of employees in general government. 

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