EU Austerity: A Country-by-Country Table     Print

Greater budget discipline is a goal that all EU countries are pursuing, with tax increases (including in VAT rates) and often-drastic cuts in government spending. A country-by-country table of these measures being adopted by EU member states has been compiled by the European Institute and is available here as a survey current as of July 1.

Austria: The government intends to focus on cuts in subsidies and budgets rather than on increases in taxes. Officials plan to reduce spending by €1.7 billion in 2011 and €3.5 billion until 2013; the government will implement a “bank solidarity tax” to increase revenue by €500 million per year; €20 million in education budget cuts could also occur over the next three years.

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 frozen; 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: Fuel taxes have been increased and corporate taxes raised by one percent; freezes are being put on public-sector recruitment and parts of the telecommunications budget; a rise in VAT rates is under discussion.

Czech Republic: Alongside a €3.2 billion savings-package, taxes will rise by €1.9 billion; university spending will be reduced by 10 percent for graduate programs and five percent for undergraduate programs; reforms are under discussion for pension and health care.

Denmark: In seeking €3.2 billion in budget “consolidation,” the government proposes to cut unemployment benefits back to two years (from four); the public sector will lose 20,000 jobs; child benefits are to be 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, savings of €432 million are being sought and an increase in VAT rates is under consideration.

Finland: 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 being raised one percent (to 23 percent), but the restaurant VAT rate will be reduced to 13 percent.

France: Seeking to restore a three percent radio of budget deficit to gross domestic product, the government needs to save €100 billion a year; Parliament proposes to raise the retirement age to 62 (from 60) by 2018; the pay-as-you-go pension system is being raised by half a year to 41.5; a three-year freeze on public spending is under consideration; pension contributions from employees’ pay will rise to 10.55 percent from 7.85 percent; income taxes for the highest income group will rise. Under these plans, a total of €45 billion a year will be cut from government spending over the next three years.

Germany: Berlin has passed an austerity budget that between 2011 and 2014 will save €81 billion in an effort to bring the deficit back down below three percent. 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: Until 2014, the government will freeze civil-service hiring and eliminate many contract workers; VAT rates have been raised two percent; early retirement will be cut back in a pension-reform bill; 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; postal, water and rail services will be privatized.

Hungary: In order to reduce the annual deficit to 3.8 percent in 2010, the newly-elected government plans to implement a 15 percent cut in public sector expenditure (saving €171 million); Parliament has proposed new lower wage ceilings for public sector employees (and the elimination of the 13th month payment) and a 15 percent cut in budget subsidies for political parties in 2010; reductions of seats in parliament and local assemblies is another possibility to reduce spending. Additionally, measures implemented by the previous government in 2009 include a gradual three-year increase in the retirement age to 65; a two-year freeze in public sector pensions; a temporary increase to 25 percent in VAT rates; cuts in the “jubilee” bonuses for the prime minister, ministers and state secretaries; a 10 percent cut in sick pay and suspension of a housing subsidy.

Ireland: 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.

Italy: In order to reach a €25 billion deficit reduction in 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; the budget of all ministries will be reduced by ten percent; funding for local and regional governments will also be reduced.

Latvia: Parliament proposes to reduce government expenditures; public sector wages will be cut by 25 percent; additionally, a fixed exchange rate between the Latvian’ lat and the euro will aid in decreasing the deficit.

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.

Malta: In 2009, Malta ran a 3.8 percent deficit so officials do not believe that austerity measures are necessary: instead, they are concentrating on aiding the creation of jobs.

Netherlands: Due to recent elections, there has been little ability to implement austerity measures, but the probable new prime minister, Mark Rutte, has proposed budget cuts to reduce spending by €45 billion over the next four years; likely measures would include higher retirement age, reduction in military spending, tax hikes and cuts in government programs.

Poland: The government plans to cut €14.4 billion in the next two years; discretionary spending will be limited to one percent above inflation.

Portugal: In order to reach a 4.6 percent budget deficit by 2011 (down from 9.3 percent in 2009), the government plans to freeze government salaries and cut social programs; 17 enterprises will be privatized; VAT rates will rise and income and corporate taxes will rise by two to five percent.

Romania: State wages will be cut by 25 percent and pensions will be cut by 15 percent; up to 70,000 public sector jobs could be lost in 2010; the government will raise VAT rates to 24 percent (up five percent) to raise up to €1.2 billion.

Slovakia: Due to recent elections, the government has not decided upon a concrete plan for austerity.

Slovenia: Parliament has proposed reductions in public sector bonuses; inflation adjustments for wages will not be implemented.

Spain: Parliament passed plans to cut wages by five percent for civil servants and 13,000 jobs will be eliminated; public investment plans will be cut by more than €6 billion; automatic inflation-adjustments for pensions will be suspended; a €2,747baby bonus subsidy will be cut; regional funding will be cut by €1.2 billion.

Sweden: In the 1990’s Sweden implemented a fiscal rules-based system based on budgetary spending ceilings. Strong public finances and a sustainable debt situation are likely to remain. No exceptional austerity measures are foreseen given the recent pick-up in economic activity and continued improvement in the fiscal balance.

United Kingdom: Chancellor of the Exchequer George Osborne announced a budget that cuts spending by €20.3 billion by implementing a council tax-freeze, raising the non-business capital gains tax, raising the retirement age to 66, and increasing the VAT rates 2.5 percent (to 20 percent); public sector wages will be frozen for two years; most governmental department spending will be reduced by 25 percent; even the Queen’s budget (the Civil List) will be frozen for a year; left-wing critics brand these austerity measures penalizing the poor in the “worst way since World War II,” including the Thatcher era.

 

Meghan Kelly, European Affairs

mkelly@europeaninstitute.org