How should public sector reform progress?
Reductions in personnel play a large role in the government’s fiscal consolidation policies, and have been significant over the last couple of years. But a large share of the cuts has been introduced by an early retirement package under very generous conditions. This is costly and at variance with the need to raise labour force participation. Instead, public sector employment rules should be made more flexible so as to support the reallocation of staff. This entails in particular: • Current definitions of admissible reassignments of civil servants with respect to their function and pay should be revisited to assess whether they are broad enough. • Abolishing special tenure for civil servants and associated rigid pay schemes should be considered. • Full harmonisation of the pension schemes for civil servants with the general public scheme is necessary to abolish a significant hurdle to mobility between the two sectors. This would be facilitated by establishing individual pension account
