1. 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

2. 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

3. 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

4. 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.

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

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

7. 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

8. 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.

9. 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.

10. 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.

11. 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.

12. Treatment Delegation complaint
CC movement is to 161.0: staff maybe think they can buy more…

13. 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)

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

15. 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.

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