EU's Administrative Costs Set To Rise 4,4% In 2011

While public spending among the EU members are being slashed to the bone,  salaries and pensions cut, and social benefits reduced, the politicians in the EU administration are increasing their budgets by a total of EUR 8,3 billion, or 4,4%. Most EU citizens will see  significant budget cuts in their children’s educational system next year, but the cost of nurseries and schools providing high-quality free education to the children of EU civil servants will grow by 12.5%.

“There is a growing recognition that the credibility, the legitimacy of the institutions is at stake.”

The EUobserver


The austerity measures does obviously not include the EU bureaucrats and their families. According to the EUobserver, there is a growing nervousness at the top of the EU Commission who now suddenly see a threat to the very legitimacy of the European Union if the bloc’s institutions continue to expand, while public spending elsewhere is being slashed to the bone.

Speaking to a group of reporters, one very senior commission official let out some of his frustration about the institutional expansion in the euro zone, and how many European actors appear to be totally blithe to the in-congruence of their situation amid austerity everywhere else in Europe.

“Austerity measures at the moment have yet to really set in, but in the autumn, this is going to be tangible, with salary and social benefit reductions, pension cuts. People will begin to feel it,” the official who would not be named says about the situation.

“And people will look at us and say: ‘How is it that they are immune, they keep growing when we are having to cut back?”

Mushrooming Institutions

“The number one issue should be to stop the mushrooming of the institutions. We don’t need new institutions,” the official points out.

“There is a tendency to think every time there is a new problem, the EU can solve it with a new institution,” he says.

“We have to launch the new external action service, which involves additional costs; and the parliament wants more money. I was worried that the Van Rompuy task force would create a new institution,” he continues, referring to the EU Council president’s investigation into possibilities for greater “economic governance” of the bloc in the wake of the sovereign debt crisis.

“What was stopped, fortunately, was the creation of a euro zone secretariat, pushed by the French. The idea is still flying about though. Economic governance should be about finance ministers working more closely together, not creating yet another institution.”

Increase Budget By 4,4%

As it is, the administrative costs of setting up the new European Systemic Risk Board and three new economic supervisory bodies overseeing the banking, insurance and securities sectors amount to €15 million, which was less than some had feared, the EUobserver reports.

The EU’s new foreign office and diplomatic corps, the External Action Service, was originally envisaged as being budget neutral.

“But next year, the service would like to have more – new building security, VIP access. This is not wise in the present climate. This is precisely the kind of institution that will keep demanding more money,” the EU official says.

In 2011, the administrative costs for all EU institutions will climb 4.4 percent, with the total amounting to €8.3 billion out of the bloc’s budget.

The admin costs of the commission itself will rise slightly less, on 2.9 percent, with the total costs amounting to €3.7 billion.

The cost rises from other institutions including the European Parliament, the Committee of the Regions, the Economic and Social Committee, the European Court of Justice, the Court of Auditors and the various agencies will come to 4.8 percent, with the total costs amounting to just over €3 billion.

Embarrassing

For example; particularly incongruous – at a time –  earlier this year, Romania had attempted to slash pensions across the board by 15 percent before the country’s top court struck down the measure as unconstitutional, the cost of EU pensions will rise 6.9 percent next year, with the total cost amounting to €1.275 billion, coming mainly from the cost of people heading into retirement.

But most embarrassing of all is perhaps the fact that the cost of the European Schools, the nursery, primary and secondary schools providing high-quality free education to the children of EU civil servants, will grow a full 12.5 percent, with the total amounting to €174 million.

At the same time ordinary EU citizens are seeing significant budget cuts in their children’s educational system.

In proportion to the administrative costs of member states, these figures are actually not that high, the EU official underlines, but the divergent fiscal paths of the EU institutions and the member states has not gone without notice in some national capitals.

No Pay Cut For Central Bankers

In early July, the European Central Bank, the ne plus ultra of fiscal austerity taskmasters, warned Bucharest in a letter against the government’s plans to slash the pay of employees of the country’s central bank by 25 percent, making the bankers appear to be looking after their own while leaving it for everyone else to tighten their belts.

“The political class of Europe is getting really frustrated with the EU institutions. They should show some restraint, they say. They are growing at a time of national austerity. And they are right,” the EUobserver’s source says.

Slow Recognition

Inside the commission, people are slowly coming around to this view as well, “because there is a growing recognition that the credibility, the legitimacy of the institutions is at stake.”

“We should liquidate some institutions, otherwise we could in late 2011 be forced to do so,” the EU representative says, predicting that next year will be the time that the austerity measures will start biting truly.

“We need to show some measure of restraint at least, a gesture, such as doing away with the parliament’s Strasbourg seat,” he says.

A Traveling Circus

The French city of Strasbourg is the official seat of the European Parliament and its secretariat is in Luxembourg, but most work is done in the parliament’s buildings in Brussels and the cost of the “traveling circus” shuttling between the three cities in 2011 will come to an estimated €240 million over what would be spent for a single location.

France however has consistently called the move to a single seat “non-negotiable.”

“We should also shut down the Economic and Social Committee and Committee of the Regions,” the official adds, referring to the two institutions that represent the interests of EU sub-national regions and employers and workers.

Both have only consultative rights in the EU legislative process.

In German, such institutions are referred to as “Tintenburgen” – or “Ink Castles” – producing a mountain of reports that few people pay any attention to.

“These institutions were born when the parliament had no power, was not a factor. Now this is a duplication. There is no real need for these bodies.”

“Europe needs a bit of masochism,” the EU official jokes.

I guess the people of Greece, Spain, Romania, etc. don’t find the joke particularly funny.

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