National governments have no right to block a planned salary increase for EU officials, the European Court of Justice (ECJ) ruled yesterday (24 November).
Judges ruled that a 1.85% pay rise for EU officials awarded by member states is not in line with EU rules, confirming a 3.7% salary increase initially adopted by the European Commission.
The court decided to annul a decision by national governments to increase the salaries of EU officials by 1.85% from July 2009 in place of a 3.7% raise required under EU law.
EU member states will now have to take a new decision in line with the ruling, meaning that the pay increase will have to be backdated.
The pay increase will have an impact on around 50,000 EU civil servants, including judges at the European Court. EU officials will also benefit from interest payments on their back pay.
In January 2010, the Commission decided to take EU member states to court over their refusal to back a pay rise for staff at the bloc's institutions and agencies (EURACTIV 07/01/10).
In December 2009, the EU Council of Ministers adopted a 1.85% increase in pay for 2010 instead of the 3.7% calculated by the EU executive in November 2009 in accordance with EU rules as laid down in the Staff Regulations.
The Council considered that the Commission's proposal for adjusting salaries had to be modified to take account of the economic and financial crises, which had triggered cuts to the salaries of national civil servants throughout the EU.
The Commission, meanwhile, justifies the increase by citing a time lag resulting from the fact that "the annual adjustment is based on figures provided by member states that reflect developments during the previous reference year," officials told journalists earlier this month (EURACTIV 11/11/10).
Council 'exceeded its powers' by blocking rise
"By fixing, in the regulation, an adjustment of officials salaries different to that proposed by the Commission, without invoking the special procedure provided for by the Staff Regulations in case of a serious and sudden deterioration in the economic situation, the Council exceeded the powers conferred on it by the Staff Regulations," read yesterday's ruling by the ECJ, the EU's highest court.
"Consequently, the articles of the regulation that fix new amounts for salaries are annulled. However, in order to avoid creating a legal vacuum in the EU salary regime, the effects of those articles are maintained until such time as a new regulation, adopted by the Council, enters into force," the court decided.
The court had not been expected to rule on the salary row until mid-2011. But it was able to reach its decision in 11 months, faster than the maximum 17 months, because the case was not referred to an advocate-general of the court for an opinion.
Increases in EU official salaries are calculated via a method based on changes in purchasing power of civil servants in the eight richest EU countries. Greece, Ireland and Portugal are not considered under this formula, and neither are the less developed Eastern European members of the bloc.
Internal rules, however, envisage the possibility of adapting the salaries of EU officials in the event of a "serious and sudden deterioration in the economic and social situation within the Community" (Article 10 of Annex XI of the EU Staff Regulations).
The Commission has the power to "set in train" a procedure to activate the clause, but it never did. An EU spokesperson justified this yesterday by saying that the crisis was "not sudden" in the period of reference for the salaries, which was nevertheless when crisis began to hit Europe.
Nevertheless, it is still possible that the clause could be activated. The Council could ask the Commission to do so. Officials at the EU executive confirmed that "we cannot totally rule out" this scenario. However, the Council did not request the activation of the clause before the case was brought before the court.
"We are satisfied with the verdict," said Michael Mann, spokesman for European Commission Vice-President Maroš Šef?ovi?.
"The ruling is in line with the method for annual adjustment of the salaries of EU officials agreed by member states until 2012," Mann said, adding that "this decision reflects increases that occurred in national salaries in 2008-9, so it simply catches up with the past".
Asked by EURACTIV what the Commission expected to happen next, Mann said "the Council has to enact the ruling". Asked whether the Commission would like the increase of 3.7% to be respected, Mann replied "yes, in line with the ruling".
Prior to yesterday's court decision, the Commission had insisted that "criticism of the method last year was the result of the time lag before Eurostat received the national data".
Some of the recent salary reductions at national level are therefore reflected in the adjustment for 2011 – which will still see gross basic salaries of EU officials based in Brussels or Luxembourg increase by 0.4%- while others will influence 2012's calculation, the EU executive explained.
EU budget in limbo
It remains to be seen what impact yesterday's court ruling will have on negotiations between the EU institutions and national governments over the European Union’s budget for 2011. Relations between members of the European Parliament and member states have been fraught for weeks over MEPs’ desire to increase the EU budget by more than the Council is willing to accept
The current complicated mechanism for calculating annual salary adjustments will be used until 2012, but Commission officials say "we're looking at how it can be improved".
"The work is ongoing, but we haven't reached any decisions yet," the spokesman said, suggesting that salaries of national civil servants in the new member states could be included in the index used to calculate the adjustment in future.
"But that's just speculation at the moment," the official said.
The Commission hopes to have the new system in place for 1 January 2013.
"We are satisfied with the Court's decision on the 2009 annual salary adjustment. The ruling is in line with the method for annual adjustment of the salaries of EU officials agreed by member states until 2012," said Michael Mann, spokesman for European Commission Vice-President Maroš Šef?ovi?.
"The 'method' follows the evolution in purchasing power of civil servants in member states. It reflects increases and decreases in member states, and this decision reflects increases that occurred in national salaries in 2008/09, so it simply catches up with the past," Mann said, recalling that "since 2004, EU staff salaries, like civil servant salaries in member states, have lost 5.3% of their purchasing power".
Stephen Booth, a researcher at Open Europe, a think-tank, warned that "when many countries are cutting back on public sector jobs and salaries, European taxpayers will see any increase in EU salaries as out of step with the economic climate".
"EU remuneration is already very generous and offers all manner of additional benefits that have been scaled back in national civil services," Booth told EURACTIV.
Open Europe director Mats Persson told EURACTIV last month that the European Commission's planned pay increases would need to be scrapped "if the Commission is going to properly reflect member states' austerity drives".
EU civil servants have broadly favourable terms and conditions, with good salaries, generous benefits and job security.
The European Commission negotiates salaries on behalf of some 50,000 EU employees, including those working in the European Parliament, the European Court of Justice and the new EU diplomatic service.
Basic gross monthly salaries for Commission staff currently range from about 2,600 euros for a secretary to about 18,000 euros for a head of department. Commissioners get about 20,000 euros.
The special Community tax paid by EU staff is generally lower than national rates of income tax for civil servants.
Brussels and Luxembourg-based officials also get a wide range of allowances, including a residence allowance equivalent to 15% of their basic salary.
Pay rises are calculated using an agreed formula which links EU salaries to those of officials in Belgium, France, Germany, Italy, Luxembourg, the Netherlands, Spain and the UK – some of the wealthiest and most stable members of the 27-nation bloc who together make up 76% of the Union's GDP. This is calculated over a twelve-month period from July to July.
Civil servants across the EU have faced pay freezes, and in some cases salary cuts, due to the deep impact of the financial crisis.
But European Commission officials announced on 10 November that the salaries of EU civil servants in Brussels will increase slightly next year (EURACTIV 11/11/10).
- 2012: Commission to review method for calculating salaries of EU officials.