EMU simplifies salary sums

Date: 19/02/1998

By Rory Watson

THE single currency may not have arrived yet, but it is already having an impact on the salaries of EU officials working outside Belgium and Luxembourg.

Critics of economic and monetary union often point to the enormous cost and administrative burden involved in switching to the euro. Yet the imminent dawn of the single currency is making life easier for Eurostat, the EU's statistical office as it calculates changes to the cost of living in the major centres where Union staff are based.

The EU's statisticians are currently analysing the rate of inflation in different member states to determine whether the salaries of staff seconded to national capitals need to be adjusted to give them the same purchasing power as if they were working in Brussels.

This process is due to be completed by April, with any correction backdated to January. But with average EU-wide inflation now below 2%, this could be the first year when - with the possible exception of Greece - no changes are required.

The locking of exchange rates of participating countries will also have a major impact on the statisticians' work. Annual fluctuations are taken into account to compensate for the fact that EU salaries are calculated in Belgian francs but paid in national currencies.

"Basically, the complex formula is used to determine how much officials need in the local currency to purchase, where they are living, the same amount of goods and services as they could buy in Brussels with one Belgian franc," explained one official.

In calculating the economic parities, EU statisticians follow the fluctuations of a basket of goods of up to 3,000 items. The most important include rental charges, transport, food and medical costs.

It is largely because of the strength of sterling against other currencies, rather than a higher cost of living in London than Brussels, that the basic income of officials working for Union institutions in the UK has been 42% higher than that of their Brussels counterparts since last July.

At the other end of the scale, officials in Lisbon and Athens are paid almost 14% less than those in the Belgian capital.

Additional refinements are also made for staff based outside national capitals. In Germany, for instance, the weighting for Karlsruhe is 98.1, for Bonn 101, Munich 108.8 and elsewhere in the country 109.7.

Defenders of the system, which will run until 2001, insist that it is necessary to ensure equal treatment for officials working in different parts of Europe, as well as further afield.

"It is simply not true that the UK figure represents a 42% pay increase.

People are paid in national currency and the formula takes account of the specifics of where they live and can be adjusted upwards and downwards," said one Commission official.

They also point out that EU staff employed in their own member state lose the 16% expatriation allowance they would normally receive in Brussels and add that the system is used by governments throughout the world when posting officials abroad.

"The Commission is certainly less generous than most member states are," insisted one official.

A single currency will help the European Commission work out the pay its officials will receive outside Brussels.