Photo by VanMageta

Lean years are back

The financial crisis in Central and Eastern Europe and the Baltic states, which until recently were posting record growth rates, has forced governments to slash budgets, starting with public service salaries — and cabinet ministers are leading the way.

Published on 12 August 2009 at 12:42
Photo by VanMageta

In March, he promised that the agreement that had just been signed with the International Monetary Fund (IMF) would not result in pay cuts. But Romanian Prime Minister, as Gandul reports, Emil Boc now has no option but to adopt the same painful measures that have already been implemented by other Central European states: cutbacks in civil service pay starting at the highest echelons. Public sector employees will lose 8.4% of their income, whilst pensions are set to increase by a modest 2%.

In Hungary, since April 15, the paychecks distributed to ministers in the government of Gordon Bajnai are lower than those cashed by their colleagues in the previous Gyurcsany cabinet. As for Bajnai himself, he has opted to make do with a token salary of one forint (0.4 euro cents) per month. At the same time, civil servants and pensioners have lost their additional month of holiday pay, as well as allowances for heating and various other benefits, including cheap loans for housing. As for the country's politicians, their pay has now been halved. Salaries for Bulgarian and Lithuanian government ministers were reduced by 15% at the beginning of this year, and those paid to Estonian ministers were decreased by 8%. In Latvia, the cutbacks were more severe: minus 15% in February and a further cut of 20% in June.

Latvian teachers, who have fared even worse than their government ministers, have had to accept a 40% reduction in 2008 pay levels. Since 1st July, pensions and other benefits have been reduced by 10%, while children's allowances have been halved. Only a few months ago, Latvia was the fastest growing economy in the European Union, now it is "the invalid of Europe," with a GDP that is expected to fall by 18% this year, and employment that is forecast to rise to 10 %.

In Bulgaria, which is not much better off, 400,000 public sector workers have had to accept a ban on expense claims for work-related travel, phone charges and fuel costs on top of a wage freeze. For the moment — and this is also the case in Romania — austerity measures have not been applied in Justice and Interior ministries. But more cuts are expected.

Receive the best of European journalism straight to your inbox every Thursday

TRILLIONS

Splashing out to save the banks

The IMF has evaluated the cost of repairing the financial crisis at 11.9 trillion dollars, or 8,420 billion euros — which is close to "a fifth of entire globe's annual economic output." As the Daily Telegraph reports, the sum includes billions that governments have been forced to inject into banks to save them from bankruptcy, the cost of buying up toxic bonds, debt guarantees and cash to boost liquidity in central banks. According to the British daily, the bulk of this money – 10.2 trillion dollars — has been provided by developed countries, and it further notes that the United Kingdom is the country that has spent most in measures to support the financial sector: close to 82% of its GDP, or £1.227 billion (€1.431 billion). In conclusion, the Telegraph notes that the countries which make up "the G20 will face a combined budget deficit of 10,2% of GDP in 2009 — the biggest since the Second World War."

Tags

Was this article useful? If so we are delighted!

It is freely available because we believe that the right to free and independent information is essential for democracy. But this right is not guaranteed forever, and independence comes at a cost. We need your support in order to continue publishing independent, multilingual news for all Europeans.

Discover our subscription offers and their exclusive benefits and become a member of our community now!

Are you a news organisation, a business, an association or a foundation? Check out our bespoke editorial and translation services.

Support independent European journalism

European democracy needs independent media. Join our community!

On the same topic