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Insight: Facing austerity, Europe's bureaucrats chafe

By Sebastian Moffett and Claire Davenport

BRUSSELS (Reuters) - Workers protesting austerity on the streets of southern Europe weren't to know it, but earlier this month there was also a strike at the heart of the European Union - by bureaucrats fighting possible cuts.

For an increasing number of Europeans, cuts in Brussels are what is needed.

The European capital has told member states to reduce spending, but as millions in Spain, Portugal and Greece feel the pain in pay, pensions, and social services, people are looking to the centre and finding what looks like fat.

Britain has led the way. Newspapers there have for decades carped at cosy 'eurocrats', as they call Europe's civil servants. Prime Minister David Cameron need only mention the EU and generous spending to produce a sea of nods and chants of "hear, hear!" around parliament.

"We can't have European spending going up and up and up when we're having to make difficult decisions in so many different areas," Cameron told reporters at the last summit of EU leaders in October, going on to express his frustration at the salaries of civil servants in Brussels.

Now, doubts are mounting in other member states. Such concerns have held up talks over the EU's long-term budget, a financial program worth more than 1 trillion euros ($1.3 trillion) over the next seven years. EU leaders hope to reach a deal at a summit on November 22-23.

The problem is that governments from Helsinki to Madrid are freezing spending or cutting it by 5 percent or more a year, but the European Commission has asked for a 6 percent increase over 2014-2020. An influential group of eight EU countries, including Germany and France as well as Britain, wants the Commission to save between 5 and 15 billion euros over the period.

The Commission argues that it has already made cuts. But in politics, symbolism matters, and numerous examples appear to contradict the claims of restraint:

- The European Parliament shifts its base once a month from Brussels to Strasbourg in France, at an annual cost of 180 million euros ($230 million).

- The European Council, which represents member states, is building a new ‘Europa' headquarters right next door to its existing marble-and-glass building, at a cost of 310 million euros.

- The European Court of Auditors, another EU institution, announced on November 6 that 4 percent of spending in the last EU budget had been "irregular", although this was largely due to mismanagement by member states.

- EU civil servants get generous health and pension benefits and free private education for their children in Brussels' leafy neighborhoods.

- EU institutions have cellars stocked with nearly 47,000 bottles of red, white and sparkling wine with a total value of 515,000 euros, according to a response to questions from German Member of the European Parliament Martin Ehrenhauser.

Cayo Lara, the leader of Spain's left-wing Izquierda Unida party, puts it succinctly: "While Brussels applauds, Spain bleeds," he said.

Until the financial crisis hit, polls by EU opinion monitor Eurobarometer showed Europeans liked the EU significantly more than their own governments. But the latest, published in May, showed just 31 percent trusted the EU - the lowest level ever, and just three points above trust in national governments.

"The EU started out with the best of intentions," said Memnon Prokopiou, 76, a retired lawyer, leaning on a walking stick in central Athens. "But its leaders need to show more solidarity to the people of the south. There is huge inequality in Europe and they are responsible for this."

PRE-EMPTIVE CUTS

Cameron is under pressure at home, and finds a convenient and familiar scapegoat in Brussels. Hitting out at EU spending casts him in a role played with success by Margaret Thatcher, a Conservative predecessor who in 1984 famously won a rebate after threatening to halt payments to the EU budget.

Britain, Cameron said in October, had cracked down on central administration, "and we need to see in the budget proposals that sort of rigorous approach."

The bill for Brussels is not actually enormous. The entire cost of running the EU and all its development, aid, research and subsidy programs amounts to only 1 percent of the bloc's gross domestic product. In most member states, government spending takes up nearer 40-50 percent of GDP.

Administration is just 6 percent of the EU budget, and there is evidence the Commission has cut back. Officials say they began tightening their belts long before the crisis. A fraud and cronyism scandal in 1999, which forced all the EU's commissioners to resign, triggered a shake-up of how the institution and its administration is run.

"Unlike the member states, we didn't wait for a crisis," says Antony Gravilli, the Commission's spokesman for administration and related costs.

From 2004, entry-level pay was lowered, officials had to contribute more to pensions and tax, and automatic pay rises were capped. The Commission started to employ contract staff who do not receive the EU's full benefits and now make up 20 percent of its 33,000-strong workforce.

The changes triggered a decline in the purchasing power of EU officials, according to figures provided by the Commission. Now it says it doesn't pay enough to attract as many qualified staff from richer western European countries as it needs. The Commission has proposed to peg its administrative costs to inflation for five years, and aims to cut staff by 1 percent a year, saying this will help save one billion euros by 2020.

Felix Geradon, 53, a translator at the Council who helped lead the recent strike, said EU institutions wouldn't be able to function properly after significant cuts. He is planning another strike for Wednesday.

He said politicians seeking EU budget cuts were mainly out to please domestic political audiences, but top officials in Brussels could learn from ministers in countries such as France who have taken pay cuts: "There could, or should, be gestures from the top of our institutions."

THE SALARY STUDY

Even though the European Commission has cut administrative costs, a little-known study carried out on its behalf suggests EU pay is still broadly better than for officials in most member states.

The study, prepared for the Commission by management consultants in 2009 but not published before now, compared net pay and conditions in the Commission with that of 26 other organizations, many of which declined to be named, but which included NATO.

It found EU officials in general did much better than all but the most senior national civil servants, though they were less well paid than people in international organizations. A married financial officer at the Commission is paid between 45,000 euros and 105,000 euros, compared with between 18,000 euros and just under 50,000 on average in a national civil service, the report said.

The study did not include the salaries of contract staff at the Commission, and the Commission said it did not publish the results because the consultants had not unearthed enough comparative data.

Comparison is complicated. Changes in EU civil servants' pay are dictated by a formula based on what public officials in member states earn. The EU pay moves in line with the average, but lags by a year. That meant EU staffers were due a raise last year, just as some national officials were suffering cuts. Britain, France and Germany have refused to grant the formula-based increases. The Commission has taken them to the EU's top court, the European Court of Justice. The case is pending.

"In politics you need visible gestures, and there should be some more of these," said Stephan Keukeleire, a professor of politics at the University of Leuven who is a specialist in European policy.

OBRIGADO

Cyprus holds the rotating presidency of the EU. It has proposed cutting at least 50 billion euros from the next long-term budget by reducing administrative costs. There appears to be broad agreement among member states that this will be the deal hammered out later this week.

In May, Open Europe, a London-based think-tank which is skeptical of Brussels, suggested cuts to reduce the total EU budget by 30 percent. These would come partly in development and agricultural subsidies that it says are ineffective, and partly from scrapping projects it believes are not needed.

One of these, the Committee of the Regions, has an 80 million euro budget to provide a voice for sub-national authorities from places such as Catalonia.

Another project the think-tank would scrap is the House of European History, a museum being built in Brussels on the initiative of the European Parliament. It will feature exhibits on postwar history and is scheduled for completion in 2015 at a cost of more than 50 million euros.

"The EU operates in a sort of bubble," says Open Europe researcher Pawel Swidlicki. "There's less accountability to the public." Nations with directly elected governments can pressure governments to rethink costly schemes, he says.

Probably Europe's most bizarre set-up is the 500-million euro parliament building in Strasbourg. The parliament's 754 members meet 12 times a year there, even though they also have a complex in Brussels.

Each time the parliament moves to Strasbourg, more than 5,000 people travel the 350 km (217 miles) from Brussels, many of them in two specially laid-on high-speed trains or on charter flights. A lorry picks up a trunk of documents from each lawmaker's Brussels office on Friday evening and delivers it to his or her office in Strasbourg's gleaming, glass parliament by Monday morning.

The arrangement drives many parliamentarians nuts.

"I've yet to go to a meeting in my constituency where someone doesn't say, ‘Why on earth do you still go to Strasbourg and Brussels?'" says Edward McMillan-Scott, the British leader of a campaign to abolish the Strasbourg seat. He commissioned a 2011 study that put its total cost at 180 million euros a year.

But the system is written into the EU's treaties.

This year, parliament cut back one trip. France said that was against EU treaties, and Paris took the parliament to the European Court of Justice. A preliminary opinion sided with the French, and a final judgment is expected in the next few weeks.

Not everyone is complaining. At Strasbourg's Chez Yvonne, a restaurant, the takings go up 30 percent when parliament comes to town.

The president of the European Commission, Jose Manuel Barroso, who is a former prime minister of Portugal, is a regular, according to manager Julien de Valmigere. He produces a hand-written note from Barroso.

"Obrigado!" it reads - Portuguese for thanks.

(Additional reporting by Karolina Tagoris in Athens, Paul Day in Madrid, and Luke Baker in Brussels; Edited by Sara Ledwith and Simon Robinson)

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