Governments avoid austerity measures.

As Europe struggles to deal with its public sector debt, how far have governments gone to cut back their own payrolls?

Although many governments around Europe took drastic action to control public spending in the midst of the last recession, austerity measures have eased considerably over the last year. In Latvia, for instance, where between 2008 and 2010 the government cut civil service jobs by 10% and slashed public sector salaries by 15-25%, the government’s payroll rose by 4.2% over the year to Q1 2012.

It is true that in most EU countries, the public sector employees have fared worse during the last year than employees in general - although public payrolls have generally continued to grow. But three countries stand out as bucking this trend. According to the latest figures from the EU’s statistical agency Eurostat, in Slovenia public sector salary bills rose by 1.1% over the year to Q1, compared with a general rise in payroll costs of 0.05%. At the same time in both Hungary and Spain public sector payrolls fell, but by not as much as in the rest of the economy.

The only country where public sector payrolls contracted against a general expansion in the rest of the economy over the last year was in the UK, where government salary costs fell by 0.3% compared with a rise of 5.1%  for of all UK employers.

Commenting on the figures, the Secretary-General of the Federation of European Employers, Robin Chater, questioned whether “the Spanish government could have done more to resolve its own banking crisis if it had applied tougher austerity measures to its own payrolls. Too many governments in ailing economies are looking to the EU and IMF to sort out their problems, when they could do far more to fund their own rescue programmes, through tighter controls on costs and better tax collection.”

“Although eastern Europe has so far escaped the fallout from the crises in Greece, Ireland, Portugal and Spain, there are cracks now appearing in the Slovenian economy, with individual pay rises (as distinct from payroll changes) over the year to March 2012, averaging 5.3% at a time when the economy is shrinking by almost 1%.”