Ag.11 Extra-EU CC currently in application Doc.A6465/14/10 Ag.11 Extra-EU CC currently in application Working Group on Article 64 and Article 65 of the Staff Regulations Meeting in Luxembourg 24th & 25th March 2014

Content of this presentation Introduction Latest Commission Decisions Work in progress Next steps Changes between July 2012 and July 2013 2013 New delegations Croatia case Japan complaint (lately received) Conclusion

Introduction Extra-EU CCs are prepared as monthly time series, in two "packages" each covering a 6 months period (Feb-July; Aug-Jan) New: Extra-EU CC values for July and Intermediate modification, when PPP varies by more than 5%, are automaticaly updated, via Commission decision, twice per year, and publications are within two weeks after the update in the C series of the Official Journal of the European Union for information purposes

Next steps: From July 2014 and onwards, CCs will not be approved via a Council Regulation; they will be automatically updated via Commission Decision twice per year.

Changes CC>100 July 2013 / 2012 ie. Euro appreciate → CC decrease

Changes CC>100 July 2013 / 2012 > 100 = 40 in 2012, only 30 in 2013

2013 New Delegations From February 2013 onwards, 4 new Duty Stations were added in the current list of 139 Delegations: Comoros / Moroni (CC 07/2013 = 75.4) United Arab Emirates / Abou Dhabi (No P2P) Myanmar / Yangon (CC 07/2013 = 60.8) Turkmenistan / Achgabat (CC 07/2013 = 59.4) Total number DS: 143

Croatia case Since July 2013 Croatia is a new Member State of the European Union (the 28th). Extra-EU CC for Croatia will still be produced for 18 months (until January 2015) to cover transitional period for staff on post.

Treatment Delegation complaints (eg. Japan) Usually 4 requests for clarification are identified: -1) Method used to calculate the weightings, -2) Individual components of the PPP, -3) Variations in the weighting factor, -4) Exchange rates.

Treatment Delegation complaint -1&2) Method used to calculate weightings and individual components of the PPP. The method used to calculate the weightings in general and the description of the individual components of the PPP, can be found in our methodology Extra-EU. -3) Variations in the weighting factor: Our system is not designed to maintain the purchasing power in duty station itself; it aims to maintain equivalence of the purchasing power in the duty station with that of those receiving the Brussels salary.

Treatment Delegation complaint It can be noted that when salaries are paid in local currency and have the CC applied to them, the exchange rate impact is effectively removed to leave only the price level impact, as can be seen in the following diagram.

Treatment Delegation complaint CC movement 2011-2012 is 135.6 to 161.0: staff maybe think they can buy more…

Treatment Delegation complaint Clearly, X-rates are volatile, CC movement mirrors that, PPP is gradually decreasing (ie. price evolution in Tokyo slightly lower than price evolution in Brussels)

Numeric example (July: 2012/2011): t0: 1000 EUR x CC 135.6% x ER 116.93 = 1000 EUR x (PPP 158.56 ÷ ER 116.93) x ER 116.93 = 1356 x ER 116.93 = 158560 JPY Which is the same as: = 1000 EUR x PPP 158.56 = 158560 JPY  t1: 1000 EUR x CC 161.0% x ER 98.60 = 1000 EUR x (PPP 158.76 ÷ ER 98.60) x ER 98.60 = 1610 x ER 98.60 = 158760 JPY = 1000 EUR x PPP 158.76 = 158760 JPY ie. the exchange rate impact is effectively removed to leave only the price level impact.

If interim CC changes due solely to a change in ER (ie If interim CC changes due solely to a change in ER (ie. there is no change in PPP), then due to the way the system is working the local JPY amount will not be affected, so local purchasing power will not be impacted. -4) Exchange rates. The rates indicated therein are the market rates for the penultimate day of the previous month quoted by the European Central Bank or, depending on availability, provided by the delegations or other appropriate sources close to that date. The InforEuro Rate is the official rate for internal transactions: it is not Eurostat's role to validate its calculation. The rate can be volatile according to financial transactions on any given day.

Conclusion: Delegates are invited to comment on the information presented in this presentation.