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50 years of the Method

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50 years of the Method

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Agora #88
Pages 14 - 19

50 Years of the Method. 1972-2022, from the first to the sixth. A legacy left by Ludwig Schubert after his brilliant European career and his trade union and community life.

Officials and other staff, whether in active service or retired, we are all accustomed to finding out at the end of the year – usually* – that our salary or pension is increasing by a certain amount, backdated for 6 months.

This is the result of the application of the “Method” designed in early 1971 by Ludwig Schubert. This benefit in our lives as staff and pensioners of the European Public Service (EPS), as some of us know, did not appear from anywhere.

*Few pay reductions are possible at certain duty stations at the time of changes in FWC/exchange rates.

On the one hand, this allows each official or other servant, irrespective of their career and remuneration or the fixed amount of their pension (1), to have an income which adjusts annually according to a combination of the cost of living in their place of employment or residence and the average of the change in salary of officials of the main national civil services.

On the other hand, the annual adjustment – which is certainly not an automatic adjustment for inflation – maintains the attractiveness of the EPS through jobs and pensions that in principle remain financially competitive. This regular adjustment ensures the continuity of a competent, permanent and independent European Civil Service serving an ever closer Union of its Member States.

However, between 1962, the year of the first version of the current Staff Regulations, and 1972, the year of the first implementation of the Method, the adjustments to the remuneration of the first officials and servants depended almost exclusively on the political will of the Council of Ministers: the Commission proposes, the Council decides!

As inflation often reached double-digit levels in the emerging European Community, salaries were only adjusted when staff and their trade unions mobilised to push the Commission to put forward a proposal that ultimately became an arbitrary and often unsatisfactory decision of the Council. Not only is industrial peace constantly disrupted by strikes to the detriment of the functioning of the institutions, but the attractiveness of the emerging EPS is threatened by a loss of purchasing power estimated at 25% compared to the evolution of remuneration in national civil services, not to mention private sector multinationals.

Those who at that time worked outside the Brussels-Luxembourg headquarters can testify that, this loss of purchasing power worsened in several places of employment, in particular because of then (2) uncertain statistics allowing correction coefficients to be established via a process particularly complicated by constant variations in exchange rates between Member States.

In the context of the years 1970-1972, where the prospect of enlargement to three new Member States and the rapid deterioration of the economic situation due to the first ‘oil shock’ were becoming clear, a solution needed to be found to the adjustment of salaries and pensions (3) and to enable the restoration of social peace.

 

[1] Seniority, survival or orphanage, as well as invalidity allowance.

[2] For example, the Italian Corrector Coefficient between the Capital Rome and Varese (province where the Ispra JRC is established), the creation of regional CCs such as Varese, Culham and Munich, etc.;

[3] There were very few pensioners at that time.

Ludwig Schubert, then a young administrative official in DG II, where he had worked since 1966, and a member of Union Syndicale, a progressive and reformist union (1), proposed to the Commission and the other trade unions a ‘method’ for adjusting the remuneration and pensions of Community officials.

Establishing parallelism of change to our salaries and pensions with those of the national civil services as the basic principle of that method may appear simple today, but at the beginning of the 1970s, it was an unprecedented, sensitive and hyper complex concept in the rather difficult political, social and economic climate of the Community.

It was a question of persuading the Member States to disclose at Community level their data on the remuneration of national civil servants, which at that time was not politically or statistically easy.

The basic principle was to obtain from each of the Member States verifiable data on the nominal change – positive or negative – of general government remuneration, disregarding career progression, inflation and (net) taxation at national level.

The weighted average provided the percentage of the change in purchasing power – specific indicator, positive or negative — added to the cost-of-living index (inflation) at headquarters (Brussels/Luxembourg). The final percentage obtained (2) was applied to the table of basic salaries of officials (Article 66 of the Staff Regulations), as well as to most allowances, and to the salary tables for other staff.

Thanks to the correction coefficients already present in the 1962 Staff Regulations, the equivalence of purchasing power between places of employment is maintained and consolidated, despite the statistical vagaries of the 1960s in some Member States.

[1] Ludwig Schubert was always a member of Union Syndicale, of which he was one day to become a leader and, once retired, President of AIACE and Honorary President until his death.

[2] Example for 2019. Evolution of the cost of living in Belgium (HICP) and Luxembourg (CPI) (common index): + 1.5 %
Purchasing power (specific indicator):  + 0.5 %
Update 2019 + 2.0%  ((101.5 x 100,5/100) -100)

“the Commission proposes, the Council decides !”

The first three-year method was adopted in March 1972 by the Council, which denounced it almost immediately at the end of the year.

Restored at the beginning of 1973, thanks to the Commission, which, under pressure from staff, brought an action against the Council, the Method began its long and ultimately brilliant career, which has now lasted 50 years.

The second method, adopted in 1976 as a result of new action by staff mainly carried out by US, was of unlimited duration. As early as 1980, however, it was again denounced by the Council in an economic context made worse by the second ‘oil shock’. It is in this period, which was not conducive to wage demands that one of the longest and most difficult negotiations of the existence of the Method began.

Faced with a Council which had sworn that there would never again be a Method, it took staff more than six months of action to obtain the third method, lasting 10 years, but with a ‘disaster’ clause which (1) the Council may apply in the event of a serious and sudden deterioration of the economic and social situation. The Council also required, in compensation for the ‘exceptional’ period of 10 years of the agreement on the Method, the introduction of a crisis levy, the application of which spared the most disadvantaged categories, in particular C and D. Under different names and variable rates, it remains to this day the price to pay for the Method.

It is again Ludwig Schubert within the US and the USF who led the negotiations on this levy. Thanks to his exceptional skills in economics and statistics and his resulting authority, he achieves the setting of objective parameters that will limit the percentage of this levy and which, if the economic situation improves, should enable the rate to be further reduced.

Also at the initiative of Ludwig Schubert and US, a Conciliation Commission (COCO) bringing together trade unions, institutions’ administrations and Member States’ representatives was set up at Council level. It played an important role in reaching this agreement, which would not have happened without the actions of staff, particularly in the General Secretariat of the Council, in order to maintain the balance of power between staff and the legislator.

[1] Clause that it would use more than 20 years later: twice, in 2011 and 2012.

In 1991, staff would have to mobilise for four and a half months to extract from the Member States the fourth method, identical to the previous one, but which then became an integral part of the Staff Regulations (Annex XI).

The fifth method, similar to the previous two, was adopted with the Staff Regulations of May 2004 (1). It should be noted that for the first time, it legally guarantees an identical adjustment of the level of pensions.

During the 2004 reform negotiations, Ludwig Schubert, who was by then retired, also designed two other important elements of our current Staff Regulations: the method of adjusting pension contributions (2) and the new salary scale (3).

The Council, which since the 1973 judgment, had always complied with the Method, decided in 2009 not to apply it, relying on the exception clause (4) and the degraded economic and budgetary context. The Court of Justice again ruled in favour of the staff and obliges the Council to apply the Method.

In2011 and 2012, the Council repeated infringements with the same arguments, but taking care to comply scrupulously with the procedures and it was then the European Court of Justice which legitimised recourse to the exception clause (5), although it was economically unjustified and contrary to the results of the Method during that period.

[1] Council Regulation (EC, Euratom) No 723/2004 of 22 March 2004.

[2] Annex XII to the Staff Regulations

[3] Article 66 and Annex XIII of the Transition Statute. The changes include, among other things, a new category designation (AST and AD) as well as new more continuous careers from 1 to 16 (Annex I to the Staff Regulations). The new grid of five steps per grade (except 16) takes up the levels (D3/1) and (A 1/6) of the old grid and creates an identical progression (as a percentage) between each step (4.2 %) and between each grade (13.14 %), based on root 47e of the difference between these two starting points. Since 2014 the grid and careers have been modified with the addition of a new AST/C category (Secretary and Committee) with 6 grades of five steps.

[4] Article 10 of Annex XI (2004).

[5] The 2008 subprime crisis marked the evolution of the Method, when the legislator in 2009 and then in 2011 and 2012 refused the proposal based on the Method and decided to apply the exception clause. Then, for 2013 and 2014, the legislator also decided to suspend the Method and to apply a freeze on remuneration and pensions. In this context, two judgments of the European Court of Justice in favour of the decisions of the legislator did the greatest damage in the history of the Method. In order to defend the Method, the ‘Schubert action’ was brought in January 2015. 

It was in December 2018 that the case ‘Schubert et al. (P. Blanchard and others)’ was the subject of a very surprising judgment of the Court in favour of the legislature. It was also on 28 December that Ludwig Schubert died.

The Court’s judgment sweeps aside all the applicants’ arguments to confirm a previous judgment of the Court against the Commission and uses this case-law as the main ground justifying its findings: with regard to the adjustment of remuneration, it is ultimately for the legislature to decide whether and how it applies the exception clause.

The Council’s decisions for these four years (2011-2014) caused a virtual freezing of nominal salaries in the EPS (+ 0.8%) and a loss of purchasing power for active and retired staff of 9.2% compared to officials of national central governments. This loss will never be recovered: the remuneration of officials and other servants will remain perpetually almost 10% lower than the level corresponding to parallelism: the competitiveness of the European Civil Service’s emoluments system has been and remains severely degraded.

In this context, the Commission, Council and Parliament are negotiating the Sixth Method, slightly amended and renewed, which remains in the 2014 Statute. It is the culmination of an optimal method obtained through an informed administration, an indisputable expertise from Eurostat and the representation of staff in particular the USF, as well as the AIACE, where Ludwig Schubert and his now retired members played a key role.

The process set out in Annex XI is now entitled: annual update of the level of remuneration provided for in Article 65(1) of the Staff Regulations. Member States are direct actors in the statistical process, but calculations, reports and proposals and decisions remain within the competence of Eurostat and the Commission. The co-legislators — Council and Parliament — are informed.

The principle of parallelism with national civil services as laid down in 1972 remains the basis of the Method.

As with the previous ones, this sixth method is of an exceptional duration of 10 years in relation to the Union’s wage agreement. On the basis of Eurostat’s annual report, of which the College of the Commission takes note, remuneration, including allowances and allowances, is to be automatically updated. The result is communicated to the co-legislators and published in the OJ C series.

In addition, the exception clause in Annex XI, which gave full powers to the co-legislators in the event of a crisis, is replaced by ‘moderation and exception clauses (1)’ based on objective and verifiable arrangements for spreading the update, in particular in the event of a deterioration in EU GDP.

Since the economic, budgetary and social crisis did not fully end in 2013, the co-legislators imposed in the Sixth Method a new solidarity levy (2), the application of which does not penalise the most disadvantaged categories of staff or pensioners (3) . Finally, the Statute provides for the application of the sixth Method until 2023 and beyond if necessary, until an agreement with the co-legislators has been reached for a possible seventh Method.

 

[1] Articles 10 and 11 of Annex XI (2014).

[2] As defined in Article 66a of the Staff Regulations

[3] The EU Staff Pension Scheme is a notional accounting fund, the amount of which remains in the MS treasury. This basic characteristic implies that all pensions (seniority, survival, orphanage and invalidity allowance) are formally derived from the pension of a capital constituted by the contribution (employer-employee) of each member of the plan during his or her activity.

On 1 March 2022, the Method, which has faced, and often withstood, many obstacles and challenges, celebrated its 50th anniversary.

Over the years, the ups and downs faced by these six methods include: economic and social crises, in particular the consequences of three oil shocks (1972, 1980 and 2003); the legislator’s refusal to apply the Method (1973, 2009, 2011 and 2012); its denunciation in 1980; the difficulties encountered at each deadline in obtaining its renewal (most often under staff pressure), legal actions brought by the Commission and by members of staff to defend it – but also by other staff members to annul it; the difficult negotiations on the justifications and levels of the various levies (crisis, exceptional, temporary or solidarity), the exception clause ( Article 10 of Annex XI (2004); the creation of weightings, including for a certain period of time at headquarters, and the inclusion in the salary scale of the Brussels-Luxembourg coefficient; the application of the Method to the progressiveness of the Community tax; the introduction of the Method into the Staff Regulations; the major revision of the Staff Regulations in 2004 and, more recently, the great 2008 global financial (‘sub-prime’) crisis, which had serious budgetary consequences within the EU that were used to justify the 5th Method not being applied for 4 years from 2011 to 2014.

This half-century of existence of these six methods is something of a reflection of the economic and social evolution between the 1970s and 2022 (from the European Community to six Member States to the European Union with 28 members [27 since 1 February 2020]).

Between 2004 and 2019, the results of the Method show that the FPE was more severely subjected to the general austerity imposed on central national civil servants and civil servants. These European citizens are representative of an EU middle class that has suffered the full brunt of the 2008 crisis, but who tends to attribute responsibility to the EU?

It is undoubtedly for this political aspect of the Method, as well as for its impact on the European Civil Service constantly committed to an ever stronger Union, that several Member States — not the least and not the less Europeans — under financial pretexts, try to adapt it to their requirements, or even simply denounce it.

Unfortunately, at the beginning of 2020, yet another crisis emerged with the severe economic consequences of the COVID-19 pandemic.

In 2020, the economic downturn caused by this new crisis resulted in an unprecedented decline of -5.9% of EU GDP. The new exception clause therefore applied and froze the result of the Method, which would have been an increase in purchasing power by 2.5%. It will only be reactivated on 1 July 2022, according to the forecast in the Commission’s report to the legislator for the period 1 July 2021-31 December 2021

Icing on the cake of this year 2022, barely were we out of the critical period of the COVID-19 pandemic, yet not entirely free from its threats, when Russia under the orders of the autocrat Putin decided on 24 February to invade Ukraine militarily.

This aggression, which those in power in the Kremlin refuse to call ‘war’, but rather a ‘special operation’ that was supposed to be brief, is entering its fifth month.

This war on the EU’s borders is a humanitarian and material disaster for Ukraine and its citizens. It poses a military threat to the Union and to its democratic values. The consequences are already disastrous and are manifested, among other things, by an unprecedented energy crisis that has exacerbated the return of rising inflation in the EU since the end of 2021.

It is in this new inflationary context reminiscent of the 1980s that the interim update foreseen by the 6th Method resulted in an increase of 2.4% for the 2nd half of 2021 (Belgium Luxembourg).

A further adjustment will take place with effect from 1 July 2022. This is expected to compensate for ongoing inflation of more than 8% in some Member States. However, the result is expected to be moderated by a decrease in the purchasing power of national civil servants still to be confirmed. However, with the recovery of the 2.5% purchasing power of 2020, the update to be decided at the end of 2022 could reach 4% (Brussels and Luxembourg).

[1] Eurostat Report on the intermediate update of remuneration and pensions of EU officials. In accordance with the Articles 64, 65 and Annex XI of the Staff Regulations applicable to officials and other servants of the European Union. Reference period: 1 July 2021-1 January 2022

Conclusions

To prepare for the future, you need to know the past. Let us bet that the Method will again be a victim of its historic success. Some Member States (1) will criticise and challenge it as soon as the Commission, no later than the end of 2023, decides either to extend the sixth method or to propose a possible seventh method on the basis of the report COM (2022) 180 final (2).

This will be all the more critical in the new economic situation linked to Russia’s war in Ukraine, which is likely to continue. Moreover, the judgment of the Court of Justice of December 2018 on the application of the Method in 2011 and 2012 reminds us that the updating of our remuneration, which has been included in the Staff Regulations since 1991, is not an acquired right (3) and unfortunately, Ludwig Schubert will no longer be there!

Active staff and pensioners, and hopefully all trade unions united with an ‘informed’ Commission, will have to mobilise themselves to make tireless use of the acquis of the Method and its win-win aspects for the EU institutions and bodies and their staff as well as for the 27 Member States.

[1] See Council Presidency document at the end of 2018, which is already the MS spokesperson calling for savings on Heading 7: European public administration (revision of the Staff Regulations, career, allowances, taxes, levy and pension, etc.).

[2]Com (2022) 180 final. REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the application of Annex XI to the Staff Regulations and Article 66a thereof

[3] Judgment in Case T-530/16, paragraph 4. The fourth argument raised in the context of the plea of illegality, alleging infringement of Article 65 of the Staff Regulations and of the principle of acquired rights relating to the parallelism rule.

Pierre Blanchard

About The Author

Former President of Union Syndicale Petten (JRC Petten) from 1973 to 1985. Former President of Union des syndicats (UdS,) late 1970s early 1980s (now Union Syndicale fédérale [USF]). Former President and Secretary General of Union Syndicale Brussels (USB) from 1988 to 2007. Former President of the Central Staff Committee (CSC) of the European Commission from 1990 to 1991. Retired EU official, former Secretary General and then Vice President of the International Association of Former Members of the European Union (AIACE) from 2010 to 2014. Member of the Administrative Council of AIACE International and of the AIACE Belgium section.

Félix Geradon

About The Author

He was a translator at the General Secretariat of the Council. He was for many years a member of the Staff Committee and held various positions (secretary, vice-president, president) and represented the staff in several joint bodies. He was also Deputy Secretary General of Union Syndicale Brussels for several years. Retired since 2019, he continues to participate actively in the life of Union Syndicale by being associated with the Executive Committee.

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