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EU Austerity: Country-by-Country -- UPDATED -- (4/26)     Print E-mail
By European Affairs

Greater budget discipline is a goal that most EU countries are pursuing, with tax increases (including VAT rates) and often-drastic cuts in government spending. A country-by-country table of these measures has been compiled by the European Institute (as an update to a previous table) and is current as of May 1.

Austria: Plan is under way to reduce spending by €1.6 billion in 2011, and €3.5 billion by 2013; the government will implement a “bank solidarity tax” to increase revenue by €500 million per year; a total of €1.17 billion in extra public income from taxes is expected.

Belgium: Stalemate in domestic politics has paralyzed action (and even debate) on austerity measures, but when a new government is formed, it will find proposals on the table for new taxes: on pensions, on CO2 emissions, a “crisis tax” on banks – plus a proposal to bar increases in health-care spending.

Bulgaria: A planned 10 percent increase in public-sector salaries has been cancelled; the government has mandated a 20 percent across-the-board cut in public spending; cabinet ministers’ pay has been cut by 15 percent; pensions have been raised by nine per cent.

Cyprus: No comprehensive austerity plan exists, but state officials have taken a ten percent pay cut. Fuel taxes have been increased and corporate taxes raised by one percent; public-sector recruitment and parts of the telecommunications budget have been frozen.

Czech Republic: The Czech Republic plans a balanced budget by 2016. Aiming to reduce the ratio of public debt to gross domestic product to 4.6 percent, a government austerity package will reduce sick pay to 60 percent of the base rate; the number of state employees will be decreased across-the-board; MPs and constitutional officials will get a five percent pay cut; public-sector employees will suffer an average pay cut of 10 percent (with the exception of teachers); maternity benefits will be curtailed; new taxes will be imposed on the wealthy; regional budgets have suffered a nearly 20 percent cut;

Denmark: The government austerity plan seeks €3.2 billion cuts in budget “consolidation.” Unemployment benefits are being cut back to two years (from four); the public sector will lose 20,000 jobs; child benefits are reduced by five percent and ministerial salaries cut by five per cent.

Estonia: With comparatively low levels of debt (7.2 percent of GDP) and only a 1.7 percent budget deficit ratio to GDP, savings of €432 million are being sought and an increase in VAT rates is under consideration.

Finland: Nearly 5,000 government jobs will be eliminated by 2014; the government is seeking to raise the retirement age from 63 to 65; an energy tax will generate €750 million; excise taxes on sweets and soft drinks will raise an extra €100 million per year; VAT rates are to be raised by one percent (to 23 percent).

France: To work toward the goal of a three percent ratio of budget deficit to gross domestic product, the government’s initial effort aims at saving €100 billion a year; France has raised the retirement age to 62 (from 60), starting in 2018; the age for full state pension has been raised to 67 (from 65); a three-year freeze on public spending from 2011 to 2013 is being implemented; the highest wage earners will pay an additional 1% in income tax; pension contributions from employees’ pay will rise to 10.55 percent from 7.85 percent; so far, these plans will save a total of €45 billion a year toward the government’s overall target.

Germany: Berlin plans to cut its budget deficit by 80 billion euros a year. Cuts include defense spending (reducing the armed services by 40,000 troops); some bonuses for civil servants are to be suspended in 2011; the civil-service strength will be cut by 10,000 by 2014; there will also be a new tax on nuclear energy.

Greece: As a condition of its IMF-EU 110 billion euro bailout, Greece is imposing a wide range of austerity measures. The government will freeze civil-service hiring until 2014 and eliminate many contract workers; VAT rates have been raised from 19 percent to 23 percent; lower-wage workers’ bonuses will have a cap and higher- paid workers’ bonuses will be eliminated; allowances for public sector employees will be cut by eight percent; Greece plans to raise 35 billion euros by 2015 by privatizing state-owned assets such as postal, water and rail services; a two-year increase in the retirement age to 63 from 61 will  be imposed.

Hungary: The government plans to implement a 15 percent cut in public sector spending (saving €171 million). It is also discussing a 16 percent “flat tax” for personal income (that is designed to close loopholes and cut evasion). Parliament has proposed lowering wage ceilings for public-sector employees and eliminating the “13th month” pension payment; consideration is being given to cutting down the number of seats in parliament and local assemblies to reduce spending. In 2009, the previous government decided to raise the retirement age to 65 over a three-year transition period; its decisions included a two-year freeze in public sector pensions, a temporary increase to 25 percent in VAT rates and cuts in the “jubilee” bonuses for top officials; in 2011, it plans a 10 percent cut in sick pay and suspension of a housing subsidy.

Ireland: With an IMF-EU bail-out of 85 billion euros, Ireland has pledged to cut its annual deficit by six billion euros, with a goal of saving 15 billion by 2013. Taxes will be raised by a total of €5 billion; the minimum wage has been cut from 8.65 euros to 7.65 euros an hour; the government has ordered a five percent cut in public-sector wages; capital gains and capital acquisitions taxes will increase by 25 percent; social welfare will be cut by €760 million and child benefits will be reduced by €16 per month; the cigarette tax will increase; investment projects will be cut back by €960 million; a carbon tax of €15 per ton of CO2 and a new water tax will be imposed. There will also be a four percent cut in social welfare programs for the unemployed.

Italy: The government has approved austerity measures of €24 billion for 2011-2012. All public salaries will see a three-year freeze; those exceeding €90,000 and €150,000 will be cut respectively by five percent and ten percent for the amount exceeding the threshold; only one employee will replace every five who leave; funding to city and regional authorities is set to be cut by 13 billion euros.

Latvia: In 2009, Latvia passed a stringent set of austerity measures, and took out a €7.5 billion IMF loan; the economy is rebounding; measures included spending cuts and revenue increases equal to 10 percent of gross domestic product through a 25 percent public-sector wage cut, and implementing a fixed exchange rate for the Latvian lat with the Euro.

Lithuania: Public sector pay will be frozen for two years; public spending will decrease by 30 percent; public-sector pensions will be cut by 11 percent; alcohol and pharmaceuticals will be taxed at higher rates; corporate taxes will rise by five percent; parental-leave benefits will decrease.

Luxembourg: Government spending will be reduced by €370 million in 2011, and €407 million in 2012, including cuts in transportation and education spending; government subsidies to companies will be cut by 10 percent.

Malta: In 2009, Malta ran a 3.8 percent deficit so officials do not believe that austerity measures are necessary, but public service employment will be downsized by 50 percent and the retirement age will be increased to 65 from 60.

Netherlands: There has been a proposal to cut the budget by €18 billion by 2015, but no decision has been reached as of yet.

Poland: Public sector salaries have been frozen; 10 percent of public sector jobs are being cut; the VAT has been increased by one percent.

Portugal: Portugal requested financial aid from the EU on April 6, but parliament rejected an austerity package – that undoubtedly will now be imposed under any bail-out terms. Already, government salaries had been frozen and social programs cut; top earners in the public sector took a five percent pay cut; 17 enterprises are being privatized; VAT rates will rise by one percent; income and corporate taxes will rise by two to five percent. The military budget is being sharply cut back.

Romania: The government has proposed public-sector wage cuts of 25 percent and pensions cuts of 15 percent; the government will raise VAT rates to 24 percent (up five percent).

Slovakia: In 2010, Slovakia announced a plan to raise €1.7 billion; measures include a one percent raise of the VAT (from 19 percent to 20 percent); new taxes on tobacco and alcohol;

Slovenia: Parliament has proposed reductions in public sector bonuses; wages will be delinked from automatic inflation adjustments.

Spain: The 2011 budget includes a tax rise for top brackets and an eight percent cut in spending – including a five percent cut for civil servants’ pay; retirement age has been raised to 67. Taxes on tobacco are being raised by 28 percent, and privatization of state-owned assets will include 30 percent of the lottery and a stake in the airport authority; the infrastructure budget was cut by 30 percent.

Sweden: No exceptional austerity measures are foreseen. (In the 1990’s Sweden imposed spending ceilings.)

United Kingdom: The UK has announced the biggest cuts in state spending since World War II. The plan is to save 83 billion pounds. This will be done by cutting 490,000 public sector jobs, implementing a council tax-freeze, raising the capital gains tax on investments, raising the retirement age to 66, and increasing the VAT rates by 2.5 percent (to 20 percent); most governmental department spending will be reduced by 25 percent, including a year-long freeze on the Queen’s budget (the Civil List).

 
 

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