Discontent rises to the surface

Date: 14/12/1995

By Simon Gray

LUXEMBOURG is a country which values its social stability.

The virtual absence of strikes since the early years of this century is an argument frequently trotted out as justification for the high salary levels enjoyed throughout the economy.

Nowhere has this harmony been preserved better than in the civil service.

Even when half the country's workforce went on a one-day strike in 1982 to oppose (unsuccessfully) the government's interference with the indexation of salaries to the cost of living, state employees remained stoically at their desks.

To the 6,000-odd employees of the European Union institutions dotted around the Kirchberg plateau overlooking Luxembourg City, who have downed pens occasionally over salary and conditions issues, the restraint of local functionaries must seem remarkable. But it now seems to be at an end.

Tomorrow (15 December), most of Luxembourg's state and local authority employees will stage a one-day protest strike, billed as the first such industrial action in the country's history.

It is a dispute which has deep roots and may have widespread consequences.

The ostensible cause is the five-year salary package the government has offered its employees, which seeks to launch a revolution in the Grand Duchy's pension provision and avert a crisis looming a few years down the road for the country's public finances.

As part of the package, the government wants to end the automatic link between civil service levels and the pensions of retired state employees as a first step towards bringing the civil service pension system into line with those in the private sector.

At present, public employees can look forward to a pension based on five-sixths of their final salary, towards which a limited deduction is made from their pay.

By contrast, private employees with 40 years of contributions receive approximately two-thirds of their average salary throughout their career, to which they contribute 8&percent; of their gross salary a month (as do their employers and the government).

This discrepancy dates from the days when state employees were so poorly paid that they could not afford to contribute to their own pensions, which needed to be a higher proportion of earnings than in the private sector to ensure a comparable standard of living.

Since then, public sector salaries have largely caught up with those in private enterprises (except at the highest executive levels) - and state pensions have forged far ahead.

An actuarial study of the two systems published recently by the government, aimed at giving statistical force to its arguments, compares the pensions which can currently be expected by public employees with those they would get if they were subject to the private sector system.

At the lowest level, an office clerk would receive 78,401 francs a month instead of 86,336, a difference of just over 10&percent;.

At the other end of the scale, a university-educated high-flyer would receive a pension of 158,367 francs a month compared with 226,500 at present, a drop of some 43&percent;.

The contrast between the two systems - which are compensated only to a limited extent by complementary pensions in the private sector - have become a political hot potato since private employees launched a campaign to end what they saw as an injustice seven years ago.

Under the banner of the Five-Sixths Pensions Action Committee, they entered the electoral fray to demand the same pensions as their public sector colleagues and won four seats out of 60 in the 1989 general election. Government promises of reform resulted in little more than tinkering, and the group, now called the ADR, won five seats in last year's election.

There is a slightly alarming edge to this debate.

The public sector is almost exclusively staffed by native Luxemburgers, whereas some two-thirds of private sector employees are resident foreigners or cross-border commuters.

The issue could, in the long-term, come to poison hitherto excellent relations between Luxemburgers and foreigners.

Since the 1994 election, the 'if it ain't broke, don't fix it' philosophy embodied by former Prime Minister Jacques Santer, has been replaced by the almost missionary zeal of his successor, 41-year-old Jean-Claude Juncker.

Juncker is widely admired for his energy, determination and razor-sharp intellectual edge. But he makes enemies easily, principally because of his inability to suffer fools gladly and a sarcastic wit which contrasts greatly with Santer's affable ways.

The premier's determination to deal with the issue is intensified by the looming demographic sword hanging over both pension systems.

With the number of pensioners in Luxembourg set to soar in the next 20 years as the 'baby boomers' reach retirement age, they will become a steadily-increasing burden on the active population.

Even the private sector system is essentially being subsidised by annual growth in the workforce of more than 2&percent; a year.

To keep the system solvent, this rate of growth must continue, contributions must rise, or pension levels must fall. And none of these are politically feasible while the public sector continues to receive its current pensions.

These are signs that many union leaders see the remorseless economic and political logic behind Juncker's initiative. Postmen and transport workers, while regretting the government's uncompromising stance, voted solidly to remain at work tomorrow.

However, the unions representing the majority of state and local government employees voted to strike by a margin of nearly two to one.

The question being asked by those having regular dealings with the state bureaucracy, though, is whether anyone will notice the difference.