Industrial Relations in Europe 2012 - European Commission - Europa

public sector and its workforce in a lagged way in comparison to the abrupt reduction in demand
and rapid response of private sector firms in the immediate aftermath of the 2008 crisis. Another
contrast with the experience of the private sector, however, is that the impact of austerity
programmes for the public services stretch far into the future with supplementary measures often
put in place. In other words austerity measures are not one off initiatives, but have a long term and
cumulative effect..
Third, there is an irreducible political dimension to the implementation of austerity measures in the
public sector. Governments have been aware of the unpopularity of austerity and have tried to
curtail the scope for opposition or delayed austerity measures until after elections have been held
(Kickert 2012). Despite this manoeuvring, the political fallout from austerity programmes has been
considerable and their unpopularity has contributed to electoral defeat in many countries, including
Greece, Spain, Portugal, Ireland, France, Denmark, Finland and the Netherlands. Many
governments have passed emergency budgets and put in place revised fiscal frameworks,
strengthening finance ministries, to enhance budgetary discipline and ensure the effective
implementation of austerity measures. In 2012, the Spanish government introduced measures to
enhance control over the budgetsof the autonomous regions, which control a major component of
public expenditure. The Italian government imposed a binding financial recovery plan on Sicily to
avoid defaults by local authorities. In Greece, the consolidation measures have the force of law but
it is not only countries with the worst fiscal outlook that have used legislation. In France and Italy,
the government proposed a revision to the Constitution that would embed the principle of balanced
budgets, a measure taken by Germany as well. In the UK in 2010, the government established an
Office of Budgetary Responsibility (OBR) to provide independent forecasts and monitor adherence
to new fiscal rules. These measures are designed to reassure investors, increase transparency and
redefine political choices as technocratic decisions.
Consequently EU governments have focused on paybill reductions which can take many forms.
These include: pay cuts, pay freezes; reductions or abolition of bonuses and allowances; changes in
pension provision; alterations in working time (both increases and decreases); changes in
employment, including modifications in the use of temporary and atypical workers; and reductions
in employment often brought about by restrictions on hiring and replacement of existing workers.
Table 4.4 provides a summary of the key measures within the European Union.
4.3.2. Pay cuts
Indicating the severity of the crisis, since 2008, at least 9 EU Member States have directly reduced
the public sector wage bill. There have been significant variations in the level of cuts, related to the
weakness of the fiscal context and the scope for manoeuvre of the government concerned. The
response of the social partners, parliament and the media has also influenced government decisions
on pay cuts. Take the case of Lithuania: its government initially announced plans in June 2009 for a
13% cut for around 250,000 public sector workers such as teachers that do not enjoy civil service
status and a 10% cut in pay for 60,000 civil servants. Dissent in parliament led to this reduction
being scaled back to a 5% cut in basic pay with more substantial reductions in other allowances.
Countries where nominal pay has been reduced, at least for some groups, include the Czech
Republic, Estonia, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Portugal, Romania, Slovakia,
Slovenia, Spain and the UK. This group includes all countries subject to EU/IMF assistance and the
remainder are predominantly countries subject to strong bond market pressures to cut their deficit.
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