# EUR-Lex - 52004SC0660 - EN

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# 52004SC0660

**Preliminary draft general budget of the European Commission for the financial year 2005 /* SEC/2004/0660 final */ **

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PRELIMINARY DRAFT GENERAL BUDGET OF THE EUROPEAN COMMISSION FOR THE FINANCIAL YEAR 2005

POLITICAL PRESENTATION

1. Introduction

Whilst the 2004 procedure was marked by the taking into account of the accession of 10 new Member States on 1 May and the first full implementation of the activity-based budget (ABB), other major events will influence the budgetary procedure for 2005, such as the European elections taking place in mid-June, bringing a number of new delegates to the European Parliament, the full participation of the representatives of the 10 in the votes of both the Council and Parliament and the appointment of a new Commission on 1 November. Furthermore, the debate on the future financial framework post 2006, which the Commission launched in February 2004 [1], and the possible agreement on the new Constitution that the European Union leaders committed themselves to reach by the end of June at the European Council on 25 and 26 March 2004 in Brussels, will both influence the smooth progress of the budget negotiations.

[1] COM(2004) 101 final.

1.1. A budget for the enlarged Union

The budget for 2004 was adopted by the budgetary authority in December for 15 Member States (EU-15), together with the political agreement for an amending budget solely devoted to enlargement and based on the principles approved at the conciliation meeting on 24 November 2003. With this amending budget, entering into force on 1 May 2004 and integrating the enlargement-related expenditure, the enlarged Union (EU-25) will be fully operational as from the accession date.

The budget for 2005 has now been prepared by the Commission for 25 Member States and is based on the priorities approved within the annual policy strategy (APS).

1.2. Activity-based budgeting

The year 2005 will be the second year of the official implementation of activity-based budgeting, required by the entry into force of the new Financial Regulation on 1 January 2003 [2]. Whilst the previous last three years have seen the gradual introduction of the approach as well as the consolidation of its link with the other components of the activity-based management, including the cycle of strategic planning and programming, the budget procedure 2005 is, however, the first one where the Commission's proposal and the decisions by the budgetary authority are based only on the ABB structure. The Commission is further improving the activity statements accompanying the PDB to aid the work of both branches of the budgetary authority. All official PDB 2005 documents are therefore using the ABB nomenclature.

[2] Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ L 248, 16.9.2002, p. 1).

1.3. The Commission's political priorities for 2005

For the fourth year, the Commission adopted on 25 February 2004 a communication on the annual policy strategy (APS) for 2005.

The objective of the APS decision is to set the policy priorities for the following year, to identify the initiatives which will contribute to the realisation of the targeted priorities, to adopt the budgetary framework and guidelines for the year concerned, so that the priorities initiatives receive the necessary resources, and to provide guidelines for the indicative multiannual financial programming. The APS sets the framework for preparing both the preliminary draft budget and the operational programming of directorates-general and services.

However, 2005 will present a particular situation. It will be the first year of the new Commission and a key year for carrying through all of the measures connected with the future financial perspective, including the legislative proposals relating to the next generation of Structural Funds, which need to be adopted by the end of 2005. It will be a crucial year to ensure proper functioning of the newly enlarged Union and the appropriate resources will have to be provided to meet this challenge.

In order to safeguard the continuity and consistency of the policies for which the Commission is responsible, and to ensure that it meets its institutional obligations, the APS decision has accordingly been drawn up by the Commission taking into account the necessity of ensuring a smooth handover to the next Commission as well as the consistency with the priorities outlined for the post-2006 financial perspective.

Taking this into account, during its debate on policy priorities for 2005, the College decided firstly that a fundamental operational priority will be to ensure the success of enlargement and shape the future of Europe. According to the APS decision, this 'means guaranteeing the proper functioning of the enlarged Europe and the full application of the policies and rules within all the Members States,. Besides this operational priority, the Commission has identified the policy priorities for 2005, in view of an enlarged Union of 25 Member States, which have to be seen in a tyingup approach with the objectives identified in the previous years.

The Commission's central objective will be to provide a new momentum of economic growth, based on enhanced competitiveness and cohesion; the objective of stability and security will be maintained, through efforts to improve security and European citizenship; the Union will also take a new external responsibility, with emphasis on the neighbourhood dimension, by strengthening its new continental legitimacy.

1.3.1. Competitiveness and cohesion

Over the last decade, the rate of growth in the Union has fallen to a level of just 2 %. At the same time, the Union is about to welcome 10 new Member States whose relative weight accounts for 20 % of the EU population but only 6 % of its GDP. In view of the lacklustre economic performance recorded recently by the Union and the persistent shortfall in productivity and employment rates, and given the desire to integrate successfully the new Member States, an upturn in growth will be the central policy objective of the Commission, striving constantly to improve the competitiveness of the European model while maintaining prosperity, employment, cohesion and environmental protection, as integral elements of the sustainable development agenda. The stability of the macroeconomic framework, the concrete implementation of the Growth initiative and the pursuit of structural reforms inherent in the Lisbon Strategy will be of vital importance. The proper functioning of the enlarged internal market and the full implementation of the acquis are crucial in this context.

Particular emphasis should be placed on:

-- industrial policy, whether in terms of the manufacturing or services industry. Services now account for two thirds of GDP and the majority of jobs created in the Union; they constitute the sector where the scope for higher productivity and further job creation is greatest and help to maintain a solid industrial base,

-- reducing the persistent gap between Europe and its main partners in terms of the effort put into research and the development of human and technological capital (including information and communication technologies, information society, lifelong learning and Erasmus Mundus),

-- reinforcement of consumers' confidence in the field of transborder transactions and electronic trade,

-- reducing disparities within the enlarged Union: an underlying effective cohesion policy will be essential for closing the gap and helping to boost the potential for growth.

Competitiveness and cohesion: key initiatives for 2005

The following key initiatives have been selected:

-- to promote better economic governance and strengthen the capacity for monitoring the macroeconomic and fiscal situation,

-- to develop and implement mature projects identified in the Growth I Initiative, especially through extension of the trans-European networks and efforts put into research and the development of human and technological capital,

-- to elaborate a new social policy agenda for the post-2006 period,

-- to place particular emphasis on controlling State aid in the enlarged Union,

-- to present a legislative proposal to enforce the principal of mutual recognition in the area of goods,

-- to put forward a proposal on redress in the field of public procurement,

-- to prioritise, in the services sector, the rapid adoption of the proposed Directive on services by the co-legislators and to step up the bilateral negotiations aimed at fostering access by European service companies to third-country markets,

-- to put forward, in the financial services field, three legislative proposals: on clearing and settlement, on solvency of insurance companies, and on shareholder rights in stock market listed companies,

-- to put forward new legislative proposals on corporate taxation within the enlarged internal market, aimed at removing the tax obstacles to cross-border activities, and simplifying the VAT-related provisions,

-- to put forward, in the defence field, legislative proposals on intra-Community transfers and public procurement tenders,

-- to launch the development and implementation of new air traffic management systems, which will support the modernisation of the sector within the framework of the Single sky initiative.

-- to propose reinforced financing of the transEuropean networks for energy and transport and the creation of a European guarantee instrument to allow the mobilisation of public and private investments in favour of concrete projects,

-- to put forward proposals on interaction between industrial policy and other Community policies, and how these policies can contribute to enhanced competitiveness; indepth analysis of the ICT, defence and raw materials sectors, followed by concrete proposals for measures to improve their competitiveness,

-- to put forward proposals to improve and simplify legislation in key industrial sectors, thereby strengthening their competitiveness (e.g. cars, construction products, cosmetics), and proposals to further implement and review the policy in favour of the information society (legal framework for electronic communications; eEurope initiative),

-- to carry on, in the field of European contract law, the preparatory work for the common frame of reference,

-- to adopt proposals for the seventh framework programme for research and technological development,

-- To promote the European space programme,

-- to propose, in the field of environment, an overall approach towards thematic strategies (air quality, sustainable use and management of resources, marine environment, and urban environment) as well as integrated solutions (including legislative proposals).

1.3.2. Security and European citizenship

The European Union must manage a land border of 6 000 km and a sea border of 85 000 km. The total of third-country nationals living in the EU exceeds 14 million, while around 1,5 million are arriving each year. Moreover, enlargement will accentuate the diversity of cultures and peoples, and will present a new challenge in the form of European citizenship as a new EU dimension.

Enlargement of the Union's territory and the increased population will require a greater effort and better coordination from the point of view of managing the new common borders, dealing with the increased mobility of individuals within this area and the need to ensure their security. In this field, the Commission has taken steps to create a European area of freedom, security and justice in accordance with the instructions given by the Tampere European Council in October 1999. This strategy will enter a second phase in 2005.

After 11 September 2001 and the devastating train bombings in Madrid, the European Union faced a mounting concern about the threat of terrorism, which has further sharpened this need for security. This was confirmed by the European leaders' summit on 25 and 26 March 2004 along with the decision of naming the first counter-terrorism coordinator and vowing to share intelligence better than in the past.

Moreover, for the purpose of protecting Europe's citizens from risks associated with natural disasters and environmental or epidemiological crises, the Union is being called upon more and more to assist or take over from the Member States when problems assume a pan-European dimension. To this end, the Commission manages a large number of programmes geared to protection, safety, public health, food safety, prevention and control, together with solidarity and crisis-management funds.

In 2005, it is proposed:

-- to consolidate a European area of freedom, security and justice, started under the Tampere programme, entailing the adoption of additional legislative instruments; the main issues to be addressed will include asylum and immigration, the fight against organised crime and terrorism,

-- to focus on consolidating the right of everyone to protection (from natural or environmental disasters -- through the enhancement and extension of the civil protection response capacity in the enlarged Union -- and crises relating to health or nuclear energy) and access to basic public services (health, food safety, education, transport, consumer safety and a clean and healthy environment),

-- to promote initiatives bringing Europe closer to its citizens.

Security and European citizenship: key initiatives for 2005

The following key initiatives have been selected:

-- preparation of the second phase of the common asylum system (including implementation of European Refugee Fund II),

-- strengthening of common visa policy and security of travel documents (including biometrics); implementation of VIS (visa information system) following adoption of the legal act by the Council and coordination of design and development of SIS II (Schengen information system),

-- enhancing of the role and capabilities of the European Police College (CEPOL) in the training of senior EU police officers, in particular by transforming CEPOL into a body of the European Union,

-- establishment of a genuine European area of justice in civil matters, including the further development of the European Judicial Network in civil and commercial matters,

-- establishment of a genuine European area of justice in criminal matters, including the adoption of common definitions of offences and sanctions for serious forms of crime, and development of the project 'Erasmus for Judges,,

-- launching the new action plan on drugs,

-- launch of new initiatives concerning the management of citizens' electronic identity, in order to tackle the likely intrusiveness of information society technologies on privacy, confidentiality and intimacy,

-- proposal of an amendment to the Council regulation on the control of trade in dual-use items, in order to maximise its effectiveness within the enlarged Union,

-- improvement of controls and supervision efficiency at the external border of the enlarged Union,

-- promotion of measures fostering security research (with a view to establishing a comprehensive programme for enhancing European security through research and technology),

-- improvement of maritime safety by monitoring the prohibition of emptying tanks out at sea,

-- proposal of legislation on a Community framework for the safety of services provided to consumers,

-- extension of the health information systems, alignment of preparedness for disease threat, application of standard operational practices for early warning systems,

-- ensuring of food safety and phytosanitary controls as well as harmonised verification of the health of imported animals and the safety of imported food and feed,

-- ensuring through a network of Community reference laboratories a harmonised approach in testing and control of chemical and biological contaminants,

-- implementing a new framework for labelling of feed and extend the existing rapid alert system for food and feed to non-EU countries,

-- modify the Directive 'Television without frontiers,,

-- negotiation of an international convention on cultural diversity under the Unesco framework.

1.3.3. External responsibility: neighbourhood and partnership

The Union's new dimension and the new external borders resulting from enlargement will make it necessary to put in place a stable, comprehensive political framework with the neighbouring countries of the south and the east. Once enlargement becomes a reality, the implementation of this second sphere of prosperity and stability will be the central external priority.

With this in mind, the Commission will implement a new EU neighbourhood policy and will strive to promote intra-regional cooperation. This new policy is aimed at neighbouring States which are not (with the exception of Balkan countries) candidates for EU accession. This approach will be underpinned by relevant proposals to be presented by the Commission before the summer break, covering, inter alia, the new Neighbourhood Instrument.

As far as the countries of the western Balkans are concerned, the stabilisation and association process will remain the policy cornerstone.

Furthermore, in 2005, the Commission's external action will be geared to achieving further objectives, namely:

-- contributing to the completion of the ongoing enlargement process, entailing preparation for the accession of Romania and Bulgaria. In addition, and in the light of decisions taken in 2004, the Commission will continue implementing the preaccession strategy with Turkey and might enter into an active phase of negotiation with Croatia,

-- the enlarged Union can and must assume greater global responsibility. The Commission will be required to play a greater role in promoting sustainable development in line with Europe's international commitments, including the Millennium Development Goals, which will need to be reviewed in 2005. The Union's integrated commercial policy and its vital role in promoting development will lead it to take on greater responsibility in multilateral governance,

-- lastly, the Union's expansion will go hand in hand with increased international responsibility and will require even more coherence in its external actions, using all the instruments available. This increased coherence will allow the EU to better address Europe's challenges and threats as set out, inter alia, in the European security strategy [3] and will include the establishment of appropriate crisis-management capacity combining civilian and military means, while ensuring that humanitarian aid remains independent from political considerations.

[3] Endorsed by the European Council in December 2003.

External responsibility: neighbourhood and partnership: key initiatives for 2005

The following key initiatives have been selected:

-- to place particular emphasis on the stabilisation and association process with the countries of the western Balkans; to strengthen the capacity for economic monitoring and advising the countries of the region,

-- on the basis of guidelines to be adopted in the spring of 2004, to enter into an active phase of neighbourhood policy, especially by means of action plans with a number of the countries concerned, on the basis of shared values in particular democracy, human rights, rule of law and respect of minorities; to create a more productive framework for trade and investment, including rules of origin, at regional level, to step up economic monitoring of the region; to strengthen the regulatory dialogue and promote the development of ACAAS (Accreditation and Conformity Assessment Agreements); to extend the Charter for Small Enterprises to these countries,

-- to extend the internal energy and transport market to Balkan and Mediterranean countries,

-- to take forward the creation of four common spaces with Russia (economic space ; space of freedom, security and justice ; space of cooperation in the field of external security ; space of research and education, including culture) through the development of a joint action plan, including and with specific reference to energy matters. This work will need to draw on ongoing positive cooperation in specific fields (e.g. approximation of legislation in the customs field),

-- to conclude trade negotiations with Mercosur,

-- to strengthen the Union's relations with Gulf countries, especially Iran, and toseek to conclude negotiations with the Gulf Cooperation Council,

-- to ensure the Union's contribution to the reconstruction process in Iraq,

-- to extend and implement international fishery agreements,

-- to review and scaling up of the EU contribution to the millennium development goals,

-- to support African efforts to ensure peace and stability on the African continent, and to make the Peace Facility for Africa operational,

-- to launch an EU Water Facility to implement the EU Water initiative proposed at the Johannesburg Summit (2002),

-- to ensure the Union's role as a key contributor in the UN World Summit on Information Society II to be held in Tunis in November 2005,

-- to present to the Council a revised regulation on the rapid reaction mechanism with a view to making it more effective in times of crisis; to increase Europe's capacity against weapons of mass destructions and towards destructions of post-conflict conventional stocks,

-- in the interest of better international governance, to promote the development of regulatory dialogue for financial markets, data protection and vocational qualifications.

2. Financial framework

2.1. The financial perspective framework for the 2005 budget

The financial perspective for the period 2000 to 2006, included in the Interinstitutional Agreement of 6 May 1999 on budgetary discipline and improvement of the budgetary procedure [4], remains the main point of reference for the budget procedure, together with the reference amounts provided for in the legal bases adopted under the co-decision procedure. Compliance with the financial perspective ceilings, for each of its headings representing broad categories of expenditure, is a crucial point. The margins left under the ceilings constitute the main room for manoeuvre for addressing unforeseen events in the course of the budgetary procedure or during implementation. This section presents and discusses the related figures.

[4] OJ C 172, 18.6.1999, p. 1.

The financial perspective ceilings are fixed at 1999 prices and thus need to be translated into current prices by the application of deflators, in accordance with point 15 of the Interinstitutional Agreement (IIA) [5]. This technical adjustment is carried out each year by the Commission, in advance of the budgetary procedure, on the basis of the most recent economic forecasts available. Concerning the 2005 procedure, the adjustment was carried out in December 2003 [6], and involved a reduction in the applied deflator. The result is a substantial reduction in the ceilings at current prices, in particular for headings 3, 4 and 5 where the reductions are of EUR 134 million, EUR 76 million and EUR 94 million respectively.

[5] Interinstitutional Agreement of 6 May 1999 on budgetary discipline and improvement of the budgetary procedure ( OJ C 172, 18.6.1999, p. 1). As regards the ceiling for heading 1 and the figure for the Structural Funds in heading 2, a standard deflator, fixed at 2 % a year, is applied. As far as the ceilings of the other headings are concerned, a GNI (gross national income) deflator is applied.

[6] COM(2003) 785 final.

The tables containing the figures by financial perspective heading, both for appropriations for commitments and appropriations for payments are shown in the annex concerning the numerical data.

Concerning heading 1 'Agriculture,, the ceiling for subheading 1a amounts to EUR 44 598 or an increase of 4,3 % over 2004 and for subheading 1b to EUR 6 841 million or an increase of 4,7 % over 2004.

For structural actions (heading 2) there was an underimplementation in 2000 that led to a re-budgeting of EUR 6 153 million. This sum was not committed in 2000, and was re-budgeted and redistributed over the years 2002 to 2006. Accordingly, the financial perspective was adjusted by a decision of the budgetary authority in May 2001, which increased the ceiling for 2005 by EUR 1 395 million compared to the Berlin profile.

The total ceiling for commitments for 2005 therefore now amounts to EUR 42 441 million. Of this total, the amount allocated to the Cohesion Fund is EUR 5 194 million (12 % of the total). An amount of EUR 7 749 million is commitments allocated to the countries joining the EU on 1 May 2004, of which EUR 2 394 million (31 %) is allocated to the Cohesion Fund. The percentage allocated to the Cohesion Fund is therefore somewhat higher for the new Member States than for the EU-15.

Taking into account the technical adjustment of the financial perspective for 2005, the ceiling of the internal policies (heading 3) in nominal terms increases by EUR 290 million, i.e. + 3,3 %. This increase is significantly less (EUR 134 million) if compared to the forecasts made at the time of the last budgetary procedure and which served as a base for the adaptation of the total appropriations of the co-decided programmes as a result of enlargement. The Commission therefore adjusted its financial programming in order to comply with the decisions taken on the extension of the current policies and programmes to the new Member States, and on the three new programmes decided in Copenhagen: a programme devoted to nuclear safety for the decommissioning of nuclear power stations in the new Member States; a mechanism for institution-building, aiming to increase their administrative capacity for the purposes of suitable management of the Community policies and programmes falling within their responsibility; and a Schengen facility intended to make them reach the level required by the Schengen Agreements on frontier controls.

For external actions (heading 4) the ceiling amounts to EUR 5 119 million or an increase of 1 % over 2004.

The ceiling for administrative expenditure (heading 5) reaches EUR 6 185 million (or EUR 6 360 million when including EUR 175 million for staff contribution to the pension scheme), which represents an increase of 3,4 % over 2004, part of it resulting from the increase of the ceiling in real term because of the enlargement.

Heading 6 (reserves) foresees an equal amount of EUR 223 million by the financial perspective both for the emergency aid reserve and the guarantee reserve.

The ceiling for preaccession strategy (heading 7) amounts to EUR 3 472 million, an increase of 7,1 %.

Finally, the ceiling for heading 8 'Compensation, decreases from EUR 1 410 million to EUR 1 305 million.

The total ceiling of payment appropriations for 2005 is EUR 114 235 million, which corresponds to 1,08 % of the GNI.

2.2. Overall growth rates in commitments and margins available

As shown in the table for commitment appropriations, their total amount is EUR 117 213,5 million, or + 5,2 % over budget 2004. The increase for compulsory expenditure is 8,2 % while non-compulsory expenditure increases by 3,3 %.

For Agriculture (heading 1),the Commission proposes to budget EUR 50 675 million, which increases by 8.3% over 2004, due in particular to the increase in agriculture expenditure up to EUR 43 834 million (+ 8,9 %), while rural development increases by 4,7%, equal to the increase of the ceiling of subheading 1b. Thus the margin available in heading 1 is EUR 764 million.

The 2005 ceiling and expenditure for Structural Funds is some 3,3% higher than in 2004. A substantial part of this increase arises from an increase in commitments available for the new Member States under the Structural Fund programmes, which rise by around 40 % compared to 2004. For existing Member States the increase for the Structural Funds is 1,1%.

Spending on the Cohesion Fund, by contrast, is lower for both existing and new Member States when compared to 2004. For the new Member States this follows on from the agreement reached at Copenhagen. For the existing Member States, there is a slight reduction in resources compared to the Berlin profile due to Ireland's loss of eligibility for the Cohesion Fund, following the mid-term review foreseen by Article 2 of Council Regulation (EC) No 1164/1994 establishing a cohesion fund (COM(2004)191 final of 24 March 2004).

As a result of Ireland's loss of eligibility for Cohesion funding there is a drop in the amount budgeted for the Cohesion Fund of EUR 55 million (in 1999 prices) (see COM(2004) 191). This translates into a reduction in 2005 prices of some EUR 62 million. Accordingly, the amount budgeted for 2005 for the Cohesion Fund leaves a margin under the financial perspective ceiling equivalent to this amount.

The 2005 PDB also proposes the budgeting for the 10 new Member States (EU-10) of the exact amount resulting from the accession negotiations of EUR 7 748 991 718 (in 2005 prices). However, the financial perspective is, by convention, expressed in round millions. The budgeting of the exact amount therefore leaves a slight additional margin under the financial perspective that is purely technical in nature.

The expenditure proposed for internal policies (heading 3) expressed in commitment appropriations increases by EUR 254 million in relation to the 2004 budget (passing from EUR 8 705 million in 2004 to EUR 8 959 million proposed for 2005), i.e. + 2,9 %, thus focusing on the key measures as identified by the Lisbon Strategy, including SMEs. The resulting margin is of EUR 53,4 million. Taking into account the reduction of the ceiling of heading 3 of EUR 134 million in relation to the forecasts based on the technical adjustment for 2004, the Commission had to carry out a significant effort of contraction of expenditure (EUR 113 million in relation to the financial programming) in order to present to the budgetary authority a margin which will allow for the budgetary authority's increases or additions, in particular pilot projects and preparatory actions.

For heading 4 (external actions), the commitment appropriations proposed (EUR 5 234 million) are up by 1,1 % or EUR 57,5 million over the budget for 2004. This amount exceeds the ceiling of the financial perspective by EUR 115 million. The Commission is therefore proposing to mobilise the flexibility instrument in order to continue the support to the stabilisation, democratisation and reconstruction process in Iraq, which was not programmed.

Heading 5 (administrative expenditure) for all institutions increases by 3,9 %. On the basis of the estimates received from the institutions, this increase respects the ceiling for administrative expenditure. This was made possible by the reprogramming exercise undertaken by all secretariats-general resulting in the updated report of March 2004. Further savings have been found during the preparation of the PDB.

For heading 6 (reserves), both the instruments amount exactly to the ceiling of the financial perspective.

For heading 7 (preaccession aid) and overall amount of EUR 1 856 million is programmed to assist Bulgaria, Romania and Turkey toward membership. It represents an increase of 7,1 % over the 2004 budget.

2.3. Payment appropriations and outstanding commitments (RAL)

The PDB 2005 proposal contains EUR 109 539 million in payment appropriations, representing an increase of 9,8 % over 2004, as shown in the corresponding table in the annex. This amount represents 1,03 % of GNI, thus leaving a margin of EUR 4,7 billion under the authorised ceiling of the current financial perspective (1,08 %). It is the result of a careful and rigorous analysis of two elements: the volume of 2005 commitment appropriations which will be paid in 2005, and the volume of backlog, or outstanding commitments (RAL), which will be settled during that year.

The growth patterns for payment appropriations is this year more consistent in non-compulsory expenditure (+ 11 %) compared to compulsory expenditure, which rises by 8,2 %.

The rise in appropriations is particularly significant this year because of the effect of enlargement, especially for headings 1 (+ EUR 2 131 million) and 2 (+ EUR 1 914 million). Thus, enlargement explains a total increase of EUR 3,8 billion, which represents almost half of the payment appropriations' total increase.

As far as agriculture is concerned, the most significant rise occurs for rural development (+ 15,3 %), followed by a substantial increase of agriculture expenditure of 8,9 %. This can however be explained not only by the enlargement, but also by the exchange rate between the euro and the US dollar. On the one hand, preliminary draft budget (PDB) 2005 is established on the basis of the euro-dollar exchange rate observed over the first three months of 2004 (EUR 1 = USD 1,25) following Article 8(1) of Council Regulation (EC) No 2040/2000 on budgetary discipline. Compared to the parity used for the 2004 budget (EUR 1 = USD 1,12), this means an appreciation of the euro by EUR 0,13 which will lead to additional needs of EUR240 million, in particular, for cereals, sugar and cotton. On the other hand, over an increase of EUR 4,42 billion (+ 9,7 %) compared to 2004, almost half (EUR 2,1 billion) can be explained by the enlargement consequences as shown by the following table. Additionally, the net cost of the CAP reform will add up to EUR 1,3 billion in 2005, the rest of the increase for EU-15 being to a large extent explained by the return to normal market conditions

(in million EUR)

>TABLE POSITION>

Payment appropriations for heading 2 in 2005 amount to EUR 35 396 million. These amounts concern the Structural Fund and the Cohesion Fund both for EU-10 and EU-15. The breakdown between EU-15 and EU-10 can easily explain the significant rise in the category. For EU-15 the total amount in payment appropriations of EUR 31 662 compared to EUR 28 962 in 2004 (+ 9,2 %), whilst the amount for EU-10 is EUR 3 774 compared to EUR 1 859,9 in 2004, which represents an increase of 102,9 %.

The Following table clearly shows the enlargement effect in heading 2 on payment appropriations

(in EUR)

>TABLE POSITION>

Concerning heading 3 (internal policies) payment appropriations rise by 2,9 % compared to 2004 or EUR 218 million, but it has to be pointed out that this is the result of a stabilisation in payment appropriations after last year's significant increase (+ 20,9 %) due to the preparations for enlargement (Schengen facility, decommissioning of nuclear installations and waste management and the transition facility), which however only slightly increases by EUR 63 million.

Under preaccession, the needs for payment appropriations are estimated at EUR 3 179.9 million, or an increase of 11,3% over 2004. This is mainly related to the absorption of previous commitments made under the Sapard, Turkey and ISPA programmes. An amount of EUR 1 532 million is foreseen for the phasing-out of the preaccession aid for the new Member states (Sapard = 290, ISPA = 500 and Phare = 742), to which has to be added an amount of EUR 21 million for Cyprus and Malta.

On the contrary, the compensation for new member States decreases by EUR 105 million.

Thus adding up the increase in payment appropriations related to the Union's commitments towards EU-10 (+ EUR 3,9 billion), the applicant countries (+ EUR 0,5 billion), the effect of the dollar exchange rate (+ EUR 0,24 billion) and the net cost of the CAP reform (+ EUR 1,3 billion), more than EUR 5.9 billion of the increase is explained. If account is taken of the necessary increase in payment appropriations for EU-15 in heading 2 (+ EUR 2.7 billion), as well as the increase in heading 1 for EU-15 (+ EUR 0,4 billion) due to return to normal situation after the drought of 2003, the other net increases in the different headings are limited to EUR 0,7 billion.

The Commission would like to point out that the figures proposed within the PDB represent real needs, taking into account the fact that outstanding commitments will not only involve decommitments, but also that special management measures undertaken could result in increased liquidation. The Commission is aware of the concern expressed in particular by the Council about the level of payment appropriation in its resolution adopted by the ECOFIN Council on 16 March 2004. The Council underlines the importance of maintaining overall budget discipline and stresses once again the importance of keeping a tight grip on payment appropriations. In this context the Council considers that the overprovision of payment appropriations in the budgetary procedure of recent years, which resulted in a significant surplus each year, should not occur again and invites the Commission to take the appropriate measures when preparing the preliminary draft budget for 2005.

However, in 2005, the trend might be reversed. Indeed, in the case where the making-up for the delay in implementing the Structural Funds programmes 2000 to 2006 is achieved even more quickly than recently observed and leads to increased needs for payment appropriations, the Commission would, after thorough examination of redeployment possibilities, including transfers, submit either a letter of amendment to preliminary draft budget 2005, taking into account implementation in 2004, or an amending budget in the course of financial year 2005.

This is accompanied by the continuing monitoring by the Commission of the RAL. As has been highlighted on several occasions by the Commission, despite the significant increase in RAL over the past years, most outstanding commitments are not in fact abnormal, but rather the predictable consequence of multiannual commitments: such 'normal, RAL will remain in existence as long as the underlying commitments remain unpaid, or are decommitted. RAL at the end of 2003 amounted to some EUR 104,5 billion. As for the Structural Funds, the evolution of the RAL will reflect the closure of the great majority of pre-2000 interventions, which will take place by the end of 2004.

Within this population of outstanding commitments, a number have been defined as being 'potentially abnormal,i.e. dormant commitments in respect of which no payment has been made for the last two financial years and old commitments which have been in the budget for at least five financial years. Whilst the budgetary authority has asked the Commission to examine such cases under the budget headings annexed to the Joint Declarations of 2001 and 2002, it should be stressed that the Commission services are regularly reviewing all commitments falling under this definition. At the beginning of 2003, the Commission had identified some 14 500 potentially abnormal commitments, amounting to EUR 17,3 billion. By end 2003, practically all of such cases have been examined by the Commission services and either closed, paid, decommitted or retained in the accounts for justified reasons. The work will continue in 2004.

This year, as in 2002 and 2003, the Commission will transmit to the budgetary authority, together with the PDB, a detailed monitoring report on the outcome of the 2003 budget regarding potentially abnormal RAL.

At the same time, the Commission will transmit the budget implementation plan for 2004. The Commission will report regularly on actual implementation figures and also compare these with the forecast, and will justify any significant deviation. It will provide a significant management tool and early warning system for the services, and allow the budgetary authority to monitor the ongoing budget period.

2.4. Budget headings for technical and administrative assistance

The 'B...A, headings (now to be found in XX 01 04 articles) exist for many of the operational programmes. They provide funding for technical and administrative assistance to the management and running of the specific action, activity or programme, to the mutual benefit of the Commission and the beneficiary. Since letter of amendment No 1/2001, they also cover expenditure related to the phasing-out of the technical assistance offices, on a provisional basis. Specific budget remarks continue to indicate the purpose for which expenditure on outside personnel is charged to appropriations in B...A headings.

In PDB 2005, total appropriations in the B...A headings and Structural Funds 'mini budgets' amount to EUR 357 million. This amount is significantly above (+ 6,6 %) the EUR 335 million authorised in the 2004 budget. The total number of B...A headings increases to 121 against 111 in budget 2004. Some 58 % of the requested appropriations concerns external actions and preaccession aid; a further 29 % is related to internal policies and, the remaining 13 % covers appropriations for agriculture and structural policies. For preaccession aid, including devolution to delegations, the amount on B...A headings is down by 30 % on 2004, essentially as a result of accession. Some EUR 5 million is foreseen for the Executive Agency for Intelligent Energy while new headings without appropriations are created for the executive agencies envisaged for the Education and culture and Health and consumers programmes.

2.5. The Financial Regulation and headings without legal bases

The Financial Regulation [7], as revised in 2002, incorporates the provisions of the Interinstitutional Agreement of 6 May 1999 relating to legal bases (and the implementation of the budget). Article 49 states that: 'a basic act must first be adopted before the appropriations entered in the budget for any Community action may be used,. It defines the basic act in question as, 'an act of secondary legislation which provides a legal basis for the Community action or Union action and for the implementation of the corresponding expenditure entered in the budget,, excluding acts with no legal effect such as communications, resolutions, conclusions or declarations. The Financial Regulation provides three types of exceptions: pilot schemes and preparatory actions, within the limits of EUR 32 million and EUR 75 million respectively, actions undertaken on the basis of the institutional prerogatives and specific powers conferred on the Commission by the Treaties or stemming from the administrative autonomy of the institution. For pilot schemes and preparatory actions, the Commission, according to its right of initiative, may propose new budget headings or activities.

[7] Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ L 248, 16.9.2002, p. 1).

The Interinstitutional Agreement provides that, when presenting its PDB, the Commission should submit a report on the actions referred to as pilot schemes and preparatory actions, which covers the objective of the action, an assessment of results and the follow-up envisaged. The implementation of the Agreement in this field is therefore the subject of detailed information to the budgetary authority, in the form of a working document accompanying the PDB.

As regards the specific powers conferred on the Commission by the Treaties, Article 33 of the implementing rules [8] contains a list of the articles in the EC and Euratom Treaties conferring such powers. As provided in Article 33(3), this preliminary draft budget adds the following detail to the list:

[8] Commission Regulation (EC, Euratom) No 2342/2002 of 23 December 2002 laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities (OJ L 367, 31.12.2002, p. 1).

-- EC Treaties, Articles 131 to 134 (Trade policy, headings 20 02 01 and 20 01 04): for a total amount of EUR 10,7 million in 2005.

The Interinstitutional Agreement also requires that, when submitting its PDB, the Commission takes into account the possibilities for new activities of this type (by leaving a sufficient margin) or continuing multiannual operations which are coming to an end, after assessing whether it will be possible to secure a basic act (point 28 of the Interinstitutional Agreement). The relevant proposals, particularly the pilot projects of the PDB comply with the Financial Regulation provisions and ceilings and leave, particularly in heading 3, an ample margin (EUR 28 million). As far as preparatory actions are concerned, the margin left is of EUR 11,885 million, because of the significant increase in heading 18 03 08 concerning the Financial Instrument for return management in the area of migration (up to EUR 15 million) and of heading 08 14 01 relating to the action for the enhancement of European security research (up to EUR 24 million).

KEY ASPECTS OF PDB 2004 BY FINANCIAL PERSPECTIVE HEADINGS

Under each of the eight headings of the financial perspective, the budget proposal is discussed according to the following structure: summary table, key aspects and general presentation.

3. Agricultural expenditure: heading 1

3.1. Summary table

(in million EUR, at current prices)

>TABLE POSITION>

3.2. Key aspects of heading 1

The 2005 budget is the first in which the 10 new Member States will be present for the full year. For the financing of this enlarged Union, the Commission proposes budgeting EUR 50 676 million for heading 1, of which EUR 43 835 million is for agricultural market organisation and veterinary expenditure (subheading 1a) and EUR 6 841 million is for rural development (subheading 1b). This leaves a margin of EUR 764 million under the ceiling of the financial perspective for EU-25 as adjusted in December 2003 [9]. The proposed 2005 budget appropriations constitute an increase of 8,3 % or EUR 3 894 million compared to the appropriations of the 2004 budget. This increase can be split between EUR 3 589 million for subheading 1a and EUR 305 million for subheading 1b.

[9] The financial perspective ceilings are fixed at 1999 prices and are adjusted each year by the Commission on the basis of the most recent economic forecasts available. For the 2005 procedure the adjustment can be found in COM(2003) 785 final.

As to enlargement, more than EUR 1,4 billion will be spent on direct aids paid to farmers in the new Member States.

Budget 2005 is the first to feel a significant financial impact of the 2003 reform of the common agricultural policy (CAP). New or modified direct aids, which principally concern the milk sector, rice, arable crops and nuts, entail an additional cost for budget 2005 of more than EUR 1,9 billion. However, taking into account the cost-reducing effects brought about by the 2003 reform package, the net cost of the CAP reform will add up to EUR 1,3 billion in 2005.

After excluding the impact of the direct aids to be paid in the new Member States and the net cost of the CAP reform, the increase for subheading 1a is still significant compared to budget 2004. To a large extent, however, this represents the return to normal market conditions. In 2003, EUR 404 million of premiums in the cattle, sheepmeat and goatmeat sectors, which normally would have been disbursed in 2004, was paid in advance for certain regions affected by drought or forest fires. The increase is also due to the return to normal production and export levels for some products in the arable sector.

The Commission intends to use the facility offered by the Interinstitutional Agreement to reassess needs in the context of the Letter of Amendment in October 2004. This allows the Commission to base its budgetary proposals for agriculture on the most recent economic and market information.

3.3. General presentation of heading 1

3.3.1. Agricultural market organisation and veterinary expenditure - Sub-heading 1a

In budget year 2005, the Community will pay out for the first time direct aid to the 10 new Member States. The Single Area Payment Scheme for the new Member States is foreseen to cost EUR 1 394 million. This enlargement effect accounts for more than one third of the increase in subheading 1a for 2005.

As in the past, the PDB takes into account the financial aspects of the legislative proposals tabled by the Commission. However, the reform proposals concerning the tobacco, olive oil, cotton and hops sectors which the Commission adopted in November 2003, will have no impact in 2005.

The CAP reform, formally adopted by the Agriculture Council on 29 September 2003, will have a substantial budgetary effect in 2005. This is in particular the case for the milk, rice, cereals, durum wheat and nut sectors. Thus, the newly introduced dairy premium and the additional payments to milk producers will lead to an extra cost for budget 2005 of EUR 959 million and EUR 431 million, respectively. In 2005 the modified crop specific payment for rice will involve supplementary spending of EUR 321 million compared to budget 2004. In the arable sector, new or increased direct payments such as the specific quality premium for durum wheat, the regional drying aid, the protein crop premium and aid for energy crops will cost the 2005 budget an extra EUR 226 million. The new area payment for nuts is budgeted for EUR 97 million. On the other hand, cost-cutting measures lead to decreased spending such as a reduction of EUR 104 million in supplementary aid for durum wheat. The CAP reform allows intervention savings in the milk, cereals, rice and dried fodder sector of EUR 630 million as well. All in all, the CAP reform can be said to occasion a net rise in expenditure of about EUR 1 300 million.

There is also a significant increase in financial needs due to the «return to normal» for direct aids and the expectation of a normal harvest in 2005. The 'drought, advances of EUR 404 million paid in 2003 instead of 2004, diminished outlays in the current year but this is only temporary. Also linked to the return to normal, are the increased appropriations for export refunds in the cereals sector. The combination of increased quantities of barley available for export, the lower world price for barley and the higher euro/dollar exchange rate cause export refunds for barley to rise by EUR 102 million compared to budget year 2004, despite the halving of the monthly increments of the intervention price following CAP reform 2003. Quantities in intervention are also up, bringing additional costs.

The increased expenditure in the fruit and vegetables sector is, apart from the direct payments for nuts mentioned earlier, due to the fact that in 2005 an additional EUR 138 million will be made available for operating funds for producer organisations.

The appropriations for veterinary measures change slightly compared with 2004 (+ EUR 24 million). Three factors explain this change: (1) a new regulation on official food and feed controls, which is due to enter into force before summer 2004 and to apply from 1 January 2005, will increase the needs by nearly EUR 6 million; (2) the compulsory slaughter programme in the wake of the BSE crisis was, up to the 2004 budget, financed under the AGRI heading 05 03 02 10 (from 2005, it is transferred, for the sake of transparency, to SANCO heading 17 04 01 (+ EUR 20 million)); (3) a slight economy is made in the phytosanitary area.

The average euro/dollar exchange rate of EUR 1 = USD 1,25, used for budget 2005, is 11,6 % above the rate used for budget 2004 i.e. EUR 1 = USD 1,12. The depreciation of the dollar is expected to cause increased needs of about EUR 240 million.

3.3.2. Rural development - Subheading 1b

A total amount of EUR 6.8 billion is earmarked for the second pillar of the common agriculture policy.

The appropriations allocated for rural development for the EU-15 are set exactly at the level of the ceiling of the financial perspective (EUR 4 910 million). The good outturn for 2003 suggests that Member States will take up the full amount allocated for 2005.

It should be noted that the breakdown of appropriations between different schemes under rural development, which is based on the plans as presented by the Member States and adopted by the Commission, is only indicative. In fact, according to the principle of subsidiarity, Member States can shift between the different schemes within certain limits.

As for EU-10-related expenditure, the commitment appropriations proposed correspond to the amount agreed in Copenhagen (EUR 1 931 million). These appropriations for rural development will be differentiated expenditure. Associated payment appropriations amounting to EUR 1 369 million have been pencilled in.

The budgetary ceilings and the needs for heading 1, by ABB activity, are presented in the following table.

( in million EUR)

>TABLE POSITION>

4. Structural measures: heading 2

4.1. Summary table

( in million EUR, at current prices)

>TABLE POSITION>

4.2. Key aspects of heading 2

-- The key point of note is the overall increase in payment appropriations, which are some 14,8 % higher than the 2004 budget. A significant part of this increase is due to the doubling of payments appropriations for the new Member States arising from the Copenhagen Agreement. However, appropriations for 2004 were relatively low (7 % lower than 2003).

-- The payment appropriations proposed for the 2000 to 2006 EU-15 programmes represent 95 % of commitments for the mainstream programmes and 80 % of the average annual tranche for the Community initiatives. These rates are higher than last year, but the increase is in line with the trends in implementation.

-- The RAL outstanding on the 2000 to 2006 programmes is expected to see a small increase during 2005, as payments appropriations are estimated at 95 % of commitments for the bulk of the programmes.

-- The proposed commitment appropriations for the structural operations for EU-25 are fully in line with the financial perspective annexed to the Interinstitutional Agreement (IIA) and the presidency conclusions of the European Council in Copenhagen.

-- For the Cohesion Fund there is a drop in commitments relative to 2004 of 9,7%. The bulk of this change arises in the allocation for the new Member States, and derives from the Copenhagen Agreement. There is a reduction of around EUR 61 million (2005 prices) for the EU-15 due to Ireland's loss of eligibility for the Cohesion Fund.

4.3. General presentation of heading 2

An overall amount of EUR 195 010 million is programmed for the Structural Funds for EU-15 for the period 2000 to 2006, and an amount of EUR 18 000 million forEU-15 is allocated for the Cohesion Fund during the same period (both amounts at 1999 prices). For the new Member States, the Copenhagen Council allocated EUR 14 156 million to the Structural Funds and EUR 7 591 million to the Cohesion Fund (also in 1999 prices) over the period 2004 to 2006

Under the terms of the Structural Funds regulation, annual allocations in current prices for the Structural Funds are obtained by indexing these amounts in 1999 prices at a flat rate of 2 % per year. Appropriations for the Cohesion Fund are also indexed each year, using the relevant price deflator used for the technical adjustment of the financial perspective. Determining the overall budget is therefore straightforward.

Heading 2 of the financial perspective covers the Structural Funds, i.e., the European Regional Development Fund (ERDF), the European Social Fund (ESF), the European Agricultural Guidance and Guarantee Fund (EAGGF), the Financial Instrument for Fisheries Guidance (FIFG) and the Cohesion Fund.

It relates to the following ABB policy areas:

-- regional policy for the ERDF and the Cohesion Fund,

-- employment and social affairs for the ESF,

-- agriculture and rural development for the EAGGF Guidance Section,

-- fisheries for the FIFG.

4.3.1. The Structural Funds

During the period 2000 to 2006, some 94 % of the Structural Funds for EU-25 is devoted to the main programmes (Single Programming Documents or Operational Programmes) and 5,35 % of the overall allocation is reserved for the Community initiatives. The remaining part of the allocation (0,65 %), is devoted to innovative measures (up to 0,4 %) and technical assistance (up to 0,25 %).

For 2005, commitment appropriations in 2005 prices for EU-25 amount to EUR 37 246 million, including the re-budgeted EUR 1 395 million stemming from the 2000 under-implementation.

(in million EUR, at current prices)

// Preliminary draft budget 2005

Main programmes // 34 868

Community initiatives // 2 259

Technical assistance/Innovative measures // 120

Total // 37 247

4.3.1.1. Main programmes

The main objectives of the Structural Funds are:

-- Objective 1: promoting development and structural adjustment in less-developed regions,

-- Objective 2: promoting economic and social conversion of areas in structural difficulty,

-- Objective 3: supporting the adaptation and modernisation of policies and systems for education, training and employment, and

-- Structural measures in the fisheries sector outside the regions of Objective 1.

In line with the conclusions of the European Council in Copenhagen and the Treaties of Accession, the following amounts (in 2005 prices) are allocated in 2005 for the main objectives in the new Member States:

-- Objective 1, financed by the four Structural Funds: EUR 5 014,9 million,

-- Objective 2, financed by ERDF and ESF: EUR 45,5 million,

-- Objective 3, financed by ESF: EUR 41,9 million,

-- an amount of 1,1 million is foreseen for FIFG outside objective 1.

The breakdown of allocations between the different funds within Objective 1 and 2 depends on the outcome of the new Member States' programming, to be approved by the Commission.

For EU-15 the general regulation of the Structural Funds allows the following breakdown for 2005 for the main objectives:

-- Objective 1 (including transitory support), financed by the four funds: EUR 22 218,1 million,

-- Objective 2 (including transitory support), financed by ERDF and ESF: EUR 3 498,8 million,

-- Objective 3, financed by ESF: EUR 3 869,1 million,

-- FIFG (excluding Objective 1): EUR 178,9 million,

Objective 1 also provides assistance to the specific programme for the Northern Ireland Peace Process (PEACE) as well as a special additional programme to some Swedish regions.

The regions which were eligible for Objective 1 during the previous period (1994 to 1999), and which no longer meet the required eligibility criteria during for 2000 to 2006, receive a transitory support under Objective l from all the Structural Funds, at least until 2005. Similarly, the regions which were eligible for Objective 2 or 5b in 1999, and which are not eligible for the new Objective 2, receive transitional support under Objective 2, from the ERDF, until 2005.

The breakdown of allocations between the Funds within Objectives 1 and 2 derives from the programmes that are established in partnership with the Member States.

During the early part of 2004 the Member States will be allocating and programming the 'performance reserve, that was established by the Structural Funds Regulation. This reserve is 4% of the total allocation for2000 to 2006 which was held back in order to allow it to be allocated to the best performing programmes, following the mid-term review of programmes in 2003. The precise split of the total allocation between funds will therefore evolve over time as these reserves are programmed.

The tables below give the anticipated breakdown of commitment appropriations. The table for EU-25 assumes a distribution key by policy area for EU-10 identical to the one that stemmed from the programming for EU-15 observed to date. This assumption will need to be revised in the light of the actual distribution by policy area of the EU-10 programming, and the programming of the performance reserve for EU-15.

Commitment appropriations in 2005 (including re-entry from 2000)

(in million EUR, at current prices)

>TABLE POSITION>

In each policy area, there are specific budget headings covering the completion of earlier programmes. For commitments, these headings have a token entry ('p.m.,). Payments are the only outstanding issue to be addressed in these headings, but a marginal one given that most of the RAL for these headings is expected to be cleared in 2004.

4.3.1.2. The Community initiatives

There are four Community initiatives, each being financed by only one Fund:

1) Interreg for the promotion of cross-border, trans-national and interregional cooperation, financed by the ERDF;

2) Leader+, for rural development, financed by the EAGGF Guidance Section;

3) EQUAL, for the development of human resources in a context of equal opportunities, financed by the ESF; and

4) URBAN, for the economic and social regeneration of cities and urban neighbourhoods in crisis with a view to promoting sustainable urban development, financed by the ERDF.

For the new Member States, the Copenhagen Council decided to support only Interreg and EQUAL.

The commitment appropriations for the four Community initiatives for EU-25 in 2005 amount to EUR 2 259 million at 2005 prices, of which EUR 2 022 million is earmarked for EU-15. In accordance with the Structural Funds Regulation, the Commission's guidelines on each initiative, and the Copenhagen conclusions, the sharing-out of the allocation for 2005 is the following:

( in million EUR, at current prices)

// Preliminary draft budget 2005

Interreg // 1 110

Leader+ // 402

EQUAL // 615

URBAN // 132

Total // 2 259

There is also a separate budget heading to cover payments from previous programming periods that includes all former Community initiatives.

4.3.1.3. Innovative actions and technical assistance

These appropriations (see table in point 2.3.1) cover innovative actions at the Community level such as studies, pilot projects and experience-sharing, as well as technical assistance actions such as preparation, monitoring, evaluation and control measures. Structural Funds' technical assistance of an administrative nature is now fully budgeted under Chapter 1, except for the payment of the RAL associated with previously dissociated appropriations (Chapter 49).

In line with the conclusions of the Copenhagen Council, commitment appropriations for the new Member States for technical assistance and innovative actions amount to EUR 14,4 million (in 2005 prices). For EU-15 the commitment appropriations amount to EUR 105,1 million (in 2005 prices). The total allocation is therefore EUR 119,5 million.

4.3.1.4. Payment appropriations

New programmes 2000 to 2006

EU-15

For the new programmes the payments in 2005 will be almost all reimbursements. For the sixth year of implementation of the new programmes, an amount of EUR 28 544 million (which represents an increase of 13,2 %) is foreseen.

It is assumed that payments in 2005 will be on average 95 % of the annual average commitment instalment. This is higher than the assumption that was made for the 2004 PDB (80 %). However, the increase from 2004 to 2005 is broadly in line with the trend increase in payments as a percentage of the average commitment tranche. Payments rose from 66 % of the average annual tranche in 2002 to 78 % of a tranche in 2003.

For the Community initiatives, whose budgetary implementation is lagging behind the main programmes, payments are projected to be at 80 % of the average annual tranche. This broadly corresponds to the rate of 2003 implementation of the main programmes. For Technical Assistance/Innovative Actions, the payment appropriations are based on a 'bottom up, assessment by the Commission services in charge.

For the PEACE II programme, the payment appropriations amount to EUR 101 million.

Payment needs for 2005 will depend partly on 2004 implementation. In view of this, the Commission will take stock of budgetary implementation in July 2004 and take corrective action should this be needed.

EU-25

Total payments for the new (2000 to 2006) programmes are EUR 31 637 million, out of a total of EUR 32 391 million for the Structural Funds as a whole. The payments for the new programmes are split by Objective in the table below:

(in million EUR, at current prices)

>TABLE POSITION>

Of these totals, the part that is payment appropriations for EU-10 fully reflects the conclusions of the Copenhagen European Council. Payments for EU-10 equal the sum of 6 % of the overall commitments' allocation 2004 to 2006 together with 40 % of the average annual commitment for this three-year period.

Earlier programmes pre-2000

For these programmes, due to be closed for the major part in 2004, only a residual amount of payments is foreseen for 2005 for late payments. Appropriations foreseen are EUR 754 million, which corresponds to roughly 10 % of the RAL at the end of 2003.

4.3.2. The Cohesion Fund

The commitment appropriations are EUR 5 132 million for EU-25, of which EUR 2 738 million is for EU-15 and EUR 2 394 million for EU-10. For the EU-10 these figures are the conclusions of the Copenhagen Council. Within EU-15, Ireland will no longer be entitled to new commitments, as it became ineligible for the Cohesion Fund in 2004. As a result, the amount budgeted for the Cohesion Fund in 2005 is EUR 61 million lower than the financial perspective ceiling.

Payment appropriations amount to EUR 3 006 million for EU-25 and EUR 2 335 million for EU-15. The amount for EU-10 is based on the Copenhagen conclusion and represents 3 % of the commitment instalment for 2005 plus 21 % of the annual commitment tranche for 2004. The amount for EU-15 is around 17 % lower than the amount included for EU-15 in the 2004 budget.

5. Internal policies: heading 3

5.1. Summary table

(in million EUR, at current prices)

>TABLE POSITION>

5.2. Key aspects of heading 3

The proposed budget for heading 3 covers, in particular, two of the three political priorities proposed by the Commission for 2005 on the basis of 25 Member States: 'Competitiveness and cohesion,, and 'Security and European citizenship,.

For the first priority, 'Competitiveness and cohesion,, the activities financed by heading 3 aim, in particular, at strengthening efforts in the field of research, and the development of human and technological capital, by ensuring respect of the environment and the social dimension.

With regard to the second priority, 'Security and European citizenship,, the contribution of heading 3 will focus on the consolidation of the European area of freedom, security and justice, arising from the Tampere programme, and from the citizens' right to protection against natural or environmental disasters and to access to fundamental goods (health, consumer safety, food security, transport safety, and the safety of telecommunications and information networks).

For the financial year 2005, the Commission proposal, with regard to expenditure intended for internal policies, is raised to a total of EUR 8 958,6 million in commitment appropriations, and to EUR 7 728,6 million in payment appropriations, which represents, respectively, an increase of 2,9 % in relation to 2004. The resulting margin is EUR 53,4 million.

The proposed net increase of EUR 254 million as compared to the 2004 budget, may largely be explained as follows:

-- the reprogramming of the sixth RTD framework programme, was reinforced by EUR 33 million in 2003, leading to a reduction by the same amount in 2005 of the appropriations envisaged by the financial plan of May 2003. This amount is therefore assigned to other policies in 2005,

-- approximately EUR 144 million, as compared to the financial programming, can be assigned to other policy areas. The source of these appropriations is, in particular, the policy areas of economic and financial affairs, agriculture and rural development, fisheries, and energy and transport.

These savings help to make possible significant increases compared to the 2004 budget in the following policy areas:

-- research and technological development (+EUR 232 million),

-- decommissioning of nuclear installations and waste management (+EUR 51 million),

-- justice and home affairs (+EUR 44 million),

-- education and culture (+EUR 37 million),

-- transport and energy (+EUR 35 million),

-- health and consumer protection (+EUR 13 million),

-- information society (+EUR 9 million),

-- taxation and customs union (+EUR 8 million).

5.3. General presentation of heading 3

Research and technological development: The sixth framework programmes were instituted by Decision of the European Parliament and of the Council 2002/1513/EC and by Council Decision 2002/668/Euratom. Both Decisions have been amended according to the agreement reached at the conciliation meetinf of 24 November 2003. The sixth framework programmes were adopted with a view to contributing to achieving the objectives set out in Article 163(1) of the Treaty, namely 'strengthening the scientific and technological bases of Community industry and encouraging it to become more competitive at international level, while promoting all the research activities deemed considered by virtue of other chapters of this Treaty,.

The framework programme remains the most significant expenditure under this heading, the total appropriations being established at EUR 5 047 million, i.e. an increase of EUR 232 million. It constitutes a central element of the process of developing within the Union, a knowledge-based economy and society, essential for innovation, competitiveness and employment, sustainable economic growth and social cohesion.

The table indicates the distribution of the appropriations for the sixth framework programme by policy area:

in million EUR, at current prices)

>TABLE POSITION>

The support of the Joint Research Centre (JRC) to the policies of the EU will primarily take the form of scientific and technical support in the fields of environmental protection, safety and security of the population, and sustainable development. These activities include risk assessment, testing, validation and improvement of methods, materials and technologies, and aim to support a number of policies from food safety to protection against fraud, chemical substances, the environment and sustainable development, and nuclear safety. This support will be ensured in close cooperation with the laboratories and research centres of research of the Member States and of third countries

As regards enlargement, the specific actions of the JRC will aim at encouraging the integration of the research organisations and staff of the new Member States in its networks and projects, in particular in fields such as the environment, food and nuclear security, where these countries still have to develop in relation to the scientific and technical needs of Community legislation. The JRC will also continue information actions and promotion of its activities within the three remaining applicant countries, and will increasingly open up towards the countries of the western Balkans. It will also provide scientific and technical support to the new Neighbourhood policy of the Union.

With regard to the activity entitled 'Historical liabilities resulting from the nuclear activities carried out by the Joint Research Centre (JRC) under the Euratom Treaty,, the Commission has been implementing, since 1999, an action plan to dismantle and downgrade all the nuclear facilities inherited from the nuclear activities of the past.

The action plan includes the construction of waste-processing facilities at the Ispra (IT) centre, and the construction of a storage centre on the Ispra site, since Italy is lacking such a storage centre. The plan will continue with the existing waste processing and the dismantling of all the facilities, including the treatment and the storage of resulting waste.

The implementation of the action plan concerns, initially, the Centre of the JRC in Ispra where almost all of the nuclear activities are completed. The centres at Petten (NL), Geel (BE) and Karlsruhe (DE), which are still active, will implement their action plan after the shutting down of their nuclear facilities, which could happen in about 2015 for Petten, and 2025 for Geel and Karlsruhe.

The evaluation of the Commission's programme carried out in 2002 and 2003 by a consortium of external companies, confirmed the guidelines envisaged by the JRC and re-estimated the cost of the programme, while recommending its acceleration. Any delay or extension in the duration of the project will result in an increase in its cost. The outcome is an increase in the budgetary requirements for 2005, with the aim of returning the irradiated fuel of American origin at Petten to the USA (before 2006, when this possibility disappears), and to build the waste storage centre in Ispra. The latter stage constitutes a preliminary condition to the launching of the operations of waste processing and of dismantling.

The proposed budget for 2005 for the decommissioning of nuclear installations and waste management amounts to EUR 66,9 million as explained by the following workload:

-- EUR 27.5 million corresponding to the appropriations already foreseen related to:

-- completion of the Ispra waste management facilities (construction, refurbishing),

-- retrieval and treatment of old waste at Ispra (in compliance with the JRC commitment to the safety authorities),

-- decommissioning at Karlsruhe of obsolete glove boxes, and removal of nuclear materials, in order to limit the nuclear material inventory (as prescribed) and allow for new activities to take place,

-- EUR 10 million to allow for the early return of fuel from Petten to the USA, since this possibility will end in 2006,

-- EUR 20 million to create a turnkey contract for the construction of the interim store. This option of one single contract is preferable to several contracts, even if the expenditure related to the construction will be paid over three years to optimise accountability and security,

-- EUR 9,4 million is explained by the need for compacting the waste, either by the construction of a compacting facility on the Ispra site, or another external solution if it should prove more economical.

The bulk of the increase is explained by one-off investments for the interim store, the return of fuel to the US, and the compaction of waste.

Its is important to recall that the independent expert decommissioning group advising the JRC on the programme recommended that the programme be implemented as quickly as possible, in order to save running costs related to safe conservation, security and maintenance. These costs can be estimated at around EUR 6 million per year.

Other actions:

-- research programme of the research fund for coal and steel financed by the net revenue generated by the investment of ECSC holdings on the expiry of its Treaty,

-- strengthening of the potential of European industry in research on security: this preparatory action, in its second year, is additional to the efforts made by the Member States and by the other European institutions in this field, and concentrates in particular on the development of a research programme in advanced security. Its objective is to study in which conditions and by which mechanisms an environment more favourable to the scientific, technological and industrial competitiveness of Europe as regards security can be created.

Energy and transport: despite the increase (excluding research) of EUR 35 million in relation to the 2004 budget, thus reaching an amount of EUR 1 047 million, this policy area sees a reduction of EUR 52 million in relation to the previously agreed financial programming. This results from the withdrawal of the amendment to the TEN regulation concerning frontier regions.

The appropriations assigned to this political field will enable, in particular:

-- the development and implementation of the mature projects identified under the Growth initiative via the extension of the transEuropean networks. Indeed, within the context of the White Paper on the common transport policy, an update of Community guidelines for the development of transEuropean transport networks was adopted in 2003, and aims to complete the list of priority projects proposed in 2001 with new projects including the development of transnational motorways of the sea, bringing the total number of projects to 29. It also aims to grant a label of European interest to these projects, to introduce a mechanism to strengthen the operational and financial coordination of the Member States, and to proceed with 2020 as the goal for the achievement of the transEuropean network. The guidelines of the transEuropean energy network were also revised in order to establish new priorities and greater flexibility in the adoption of the projects,

-- the development of a policy of safety and of the citizens' protection in energy and transport, in particular with the creation of a new activity 'Safety and protection of the users of energy and of transport,. It includes the transport safety, nuclear safety, and radiation protection;

-- the adoption of the European Agency for Railway Safety, and the deployment of the activities of the European Agency for Air Safety and the European Agency for Maritime Safety (in particular with the possibility of chartering anti-pollution ships, in provision of the Member States), able to intervene in accidental or continual maritime pollution as a result of the expansion of the activities of the latter Agency.

The increase in the Community subsidy in these three Agencies will also make it possible to accelerate their full setting in place in the seats decided by the European Council of December 2003,

-- the provision of a satellite surveillance system for maritime vessels, in order to monitor vessels that pollute EU waters, thereby enforcing the new regulation which prohibits the emptying of tanks out at sea. As a complement to this [10], a feasibility study and measures for the coordination of EU coastguards services are also proposed,

[10] In response to a proposal made by the European Parliament on 13 January 2004.

-- the continuation of the Marco Polo programme, which aims to promote innovative actions in the markets for logistics and intermodalities,

-- the deployment of the programme 'Intelligent Energy -- Europe,, intended to promote energy saving, in particular in transport, and the development of renewable energy,

-- the modernisation of the infrastructure of the management of the air traffic (Deploy project),

-- the financing (EUR 139 million) from the nuclear safety measures aiming to the dismantling of the nuclear power stations of Ignalina (Lithuania) and of Bohunice (Slovakia).

An amount of EUR 242.3 million is planned for the actions in the field of energy and of the transport financed by the sixth framework programme for research, in line with the financial planning of the programme. Priorities are to consolidate the position of the European industry in the aeronautical (technology relating to the implementation of the single sky) and space field (Galileo) and to help to exploit the potential of this sector in the service of the improvement of safety and of environmental protection. For the energy field, priorities aim in particular to manage the energy demand and to incorporate on a large scale renewable energy and to encourage the use of clean public transport and substitution fuel resources. For the field of transport, initiatives meet the need to develop environmentally friendly and competitive innovative systems for all the modes of surface transport (rail, roads and inland waterways), to rebalance and incorporate the various modes of transport, and to strengthen security.

Economic and financial affairs: The appropriation proposed for this political field is EUR 49.7 million, i.e. a reduction of EUR 50 million in relation to the 2004 budget.

This is explained by the following facts:

-- the commitment appropriations entered into the 2004 budget for the 'programme for enterprises - improvement of the financial environment for SME's (MAP), amounted to EUR 91 million. According to the information provided by the trustee, the European Investment Fund (EIF), that amount is expected to be fully used under the MAP programme in 2004. For 2005, however, the proposed commitment appropriations are significantly less than for 2004. This proposal takes into account the EIF pipeline of expected projects for the last year of commitments under the MAP programme (2001 to 2005).

It should be noted that the MAP financial instruments are market driven. In particular, for ETF start-up, the downturn of the stock exchanges, the reassessment of innovative fast-growing businesses and subsequent heavy losses for investors, contributed decisively to the lower take-up expected in 2005, as also reflected in the EIF pipeline for this year. The EIF pipeline for MAP supports projects amounting to EUR 44.5 million. This amount is based on the latest pipeline information provided by the EIF for all MAP financial instruments together and it must be considered as a more realistic target that the one foreseen in the financial programming of May 2003 (EUR 63.5 million). It represents projects that are expected to be submitted for approval until the end of the MAP commitment period, as well as eligible costs under the programmes (for example, EIF management fees, marketing and legal costs, etc.). For 2005 only the commitment appropriations that can reasonably be expected to be used under the programme are requested,

-- expenditure on the budget heading 'Nuclear safety, in this policy area is contingent on receipt of applications for Euratom loans which could be met within existing lending limits and eligibility criteria. In accordance with budgetary practice and to reflect current expectations on the possibilities for entertaining applications requiring expenditure on this budget heading during 2005, a token entry, rather than a definite amount, has therefore been proposed in this PDB.

Information society: this policy area benefits from an increase, excluding research, of EUR 8.9 million in relation to the 2004 budget, in accordance with the financial plan.

This policy area consists of three operational activities: communication policy, eEurope, and research and technological development in the area of information society.

The communications policy provides a major contribution to the objectives set by the Heads of State or Government in Lisbon in 2000, i.e. to make Europe the world's most competitive and dynamic economy by 2010.

This contribution consists of enabling and promoting the development of an open and competitive internal market for communications networks and services, in which growth, innovation and efficiency are stimulated.

The electronic communications policy contributes not only to generating competition in the market, but also to enabling European citizens to benefit from the information society

The eEurope activity contains several programmes that contribute to the implementation of the eEurope action plan which provides an overall policy umbrella. The broad objective of the eEurope 2005 action plan is to accelerate the transformation to the information society, and to ensure that the benefits are available to all citizens. To this end the eEurope activity encompasses:

-- Modinis (monitoring of the eEurope 2005 action plan, dissemination of good practices and the improvement of network and information security),

-- eTen - supporting the set-up of «public e-services» identified in the action plan, by bringing services of common interest based on electronic data transmission networks to an operational level,

-- eContent and eContentplus supporting the development of European digital content on global networks, thus addressing the central requirements for a wider take-up of broadband,

-- The Internet action plan and Safer Internet action planplus addressing a more secure information infrastructure by promoting the safer use of the Internet through combating illegal and harmful content,

-- Finally, the European Agency for Network and Information Security will be fully operational and facilitate a Co-ordinated approach on security issues on European scale.

The focus of the information society technologies priority under the sixth framework programme (FP6) of research and technological development is on the future generation of technologies that will allow computers and networks to be seamlessly integrated into the everyday environment. This vision places the users, people and businesses, at the centre of future developments for an inclusive knowledge-based society for all. An amount of EUR 1 119,5 million is foreseen for that activity, in line with the financial programming of FP6.

Education and culture: a total amount of EUR 884,6 million is proposed for this policy area that aims to strengthen the human dimension of Europe, while contributing to building a Europe of knowledge, to developing European cultural space, and to involving the citizens with European integration.

This amount will make it possible to finance in particular:

-- the interventions under the education activity. An appropriation of EUR 428.6 million is proposed, which reflects an increase of EUR 43.8 million in relation to 2004.

This increase is explained to some extent by the strengthening of the appropriations allocated to the Socrates programme (EUR 361,2 million proposed for 2005), in line with the programming of the total allocation for the duration of the programme (2000 to 2006). It is also explained by the progression of the appropriations for the programme Erasmus Mundus, which passes from EUR 8 million in 2004 to EUR 27 million in 2005.

In contrast, the appropriations for the programme eLearning falls by EUR 16 million in 2004 to EUR 14 million in 2005, so as to respect the total appropriations allocated to the programme for its duration (2004 to 2006).

Finally the appropriations proposed for the other headings of the activity, covered by the programme of support for the organisations active in the field of education, do not present any considerable divergence in relation to the appropriations of 2004,

-- the key Community intervention under the activity 'Vocational training,, concerns the second phase of the Leonardo da Vinci programme, for which EUR 208.2 million is proposed for 2005.

This chapter also contains the subsidies intended for Cedefop (EUR 16.1 million proposed for 2005), and the European Training Foundation in Turin (EUR 18.5 million proposed for 2005, including EUR 2.5 million under the Phare programme),

-- the main Community intervention under the activity 'Culture and languages, is the framework programme for culture, for which EUR 34.9 million is proposed for 2005, in line with the programming of the total allocation for the duration of the programme (2000-2004, in the process of being extended to 2005 and 2006).

The appropriations for the other headings of the activity, covered by the programme of support for organisations active in the field of culture, are proposed for amounts making it possible to respect the multiannual allocation of the programme,

-- the principal Community intervention carried out under the audio-visual policy and sport activity is the implementation of the programmes MediaPlus and MediaTraining. For 2005 a total appropriation of EUR 93.3 million is proposed, in line with the programming of the total allocations for the programmes for their duration (2001 to 2005, in the process of extension to 2006).

The reduction of the overall appropriation for this activity is primarily explained by the fact that the 2004 appropriations included EUR 8.6 million under the European year of education through sport.

-- for the principal Community intervention under the activity 'Youth,, the Youth programme, an allocation of EUR 111,5 million is proposed for 2005, which explains the rise of the appropriations of the activity,

-- finally, it is proposed to create a single executive agency for the education and culture field. It will assist the Commission in the current programme management, the basic acts of which all anticipate the resort to external assistance. The creation of this agency, firstly motivated by the need to replace the TAOs, offers moreover the opportunity to improve programme management, and of ensuring a better service for recipients, while concentrating the activities of the Commission departments on more political and priority tasks in this field.

The information and communication actions are distributed between various policy areas: press and communication, education and culture, economic and financial affairs, enlargement, justice and home affairs, external actions, and coordination of the policies of the Commission. An overall appropriation of EUR 89.7 million is proposed, including EUR 63.8 million for the policy area 'Press and communication,. This amount will allow:

-- inform the media and the citizens of the activities of the Commission, and make the goals of its policies known,

-- inform the Commission of the development of public opinion in the Member States.

Taxation and customs union: a total amount of EUR 58.2 million, i.e. an increase of EUR 8 million in relation to 2004, is foreseen for this policy area, as anticipated in the financial plan, and will make it possible to fully incorporate the new Member States into the current programmes, in particular:

-- Customs 2007 (EUR 35.1 million): the actions envisaged in 2005 aim primarily at the application of Community legislation, in order to ensure the orderly functioning of the single market in an enlarged Community. The specific objectives of the programme take account of the need to ensure the smooth operation and development of the existing computer systems, to strengthen the actions of fraud prevention, and to reduce the costs of setting in conformity, by encouraging the creation of a competitive environment for enterprise. Actions concern communication systems and information exchange, management and project groups, comparative analysis, exchange of officials, organisation of seminars and workshops, and of training and follow-up activities.

In view of the extension of the customs union to the 10 new Member States, with the displacement of a major part of the external frontier of the EU towards the east, actions will be taken to help the administrations of the new Member States to exercise a control mechanism which protects the internal market in relation to trade with the third countries,

-- Fiscalis 2007 (EUR 14.6 million): This programme aims at improving the smooth operation of the tax systems in the internal market by strengthening cooperation between the participating countries, their administrations and officials, and at establishing, with a view to remedying, the problems likely to make this cooperation more difficult in the fields of legislation and administrative practices. In particular, various actions are envisaged in the fields of communication systems and information exchange, exchange of officials, working parties, multilateral seminars and controls, and common training initiatives.

Health and consumer protection: EUR 120,6 million is assigned to this policy area, i.e. an increase of EUR 12,6 million compared to 2004.

The main elements of the activities in this policy area over the medium term are identified in the actions set out in the Consumer policy strategy 2002 to 2006, the implementation of the Public health programme 2003 to 2008, and the completion and implementation of the actions set out in the White Paper on food safety, along with the general activity of adapting to a Community of 25 and, in due course, more Member States.

In particular the specific objectives for 2005 financed by heading 3 are, notably:

-- to implement a programme of actions under the five-year Consumer policy strategy (2002 to 2006). That strategy sets a clear sense of political direction by setting three mid-term objectives: 'a high common level of consumer protection,, 'effective enforcement of to consumer protection rules,, and 'involvement of consume organisations in EU policies,. In 2005, the work will continue in building an environment in which consumers feel confident, benefiting in terms of choice and prices from the Internal Market unrestricted by national borders. This work contributes to the global competitiveness of the EU by ensuring that the full force of competition is felt in the business-to-consumer market. An amount of EUR 20,2 million is foreseen for the programme,

-- to implement the Public health programme 2003 to 2008 (EUR 58.9 million for 2005), with reinforced support from an Executive Agency,

-- to develop the activities of the European Food Safety Authority, which will be located in Parma, as set out in the decision of the European Council of December 2003, ensuring that the Agency can continue its development and meet the various demands placed upon it. This will require some additional financial support over and above that planned for 2005, hence the request for an additional EUR 2,5 million to give a total of EUR 36.7 million,

-- to launch the new European Centre for Disease Prevention and Control (EUR 4.8 million).

Enterprise: the actions in this policy area aim primarily at:

-- encouraging entrepreneurial activity and contributing to the improvement of the enterprise environment,

-- guaranteeing the access of goods and services to the market, while ensuring a high level of safety and of environmental protection,

-- helping the creation of an environment favourable to innovation and to change,

-- strengthening the overall competitive position of European enterprise, encouraging sustainable production, and ensuring the profitability of the environmental and social pillars of the EU strategy for sustainability, in particular by impact assessments.

An amount of EUR 136.4 million, excluding research, is planned for this policy area, and aims in particular at:

-- the strengthening of growth and competitiveness of enterprise, and the improvement of the administrative, regulatory and financial environment of enterprise, in particular through the programme for enterprise and entrepreneurship, especially the SME (EUR 26 million) and the IDA network (EUR 29.3 million);

-- the development of the internal market (EUR 19.7 million), in particular by sectoral alignment, notification and certification, designed to stimulate the exchanges between the EU and its new neighbours, and standardisation and approximation of legislation (EUR 18.8 million). An amount of EUR 5.8 million of this is planned for the financing of preparatory work linked to the implementation of the new EU regulatory framework for chemicalsincluding the creation of the new Chemicals Agency, which will be located in Helsinki, as decided by the European Council of December 2003. This Agency will have a central role for the administration of the REACH system (new strategy for chemicals), which is priority of this policy area,

-- the subsidy for the operation of the Agency for the evaluation of medicines, amounting to EUR 29.1 million, i.e. + EUR 0,6 million in relation to 2004, includes an additional subsidy of EUR 3.7 million for the fee exemptions for orphan medicines.

The activity 'Research, - promoting innovation and change under the sixth RTD framework programme is intended to stimulate technological innovation, utilisation of research results, transfer of knowledge and technologies, and the setting-up of technology businesses in the Community and in all its regions. The amount of EUR 75.6 million allocated to that activity is in line with the financial programming of the FP6.

The overall aim is to make a tangible improvement in Europe's innovation performance, in the short, medium and long term, by stimulating a better integration between research and innovation, and by working towards a more coherent policy and regulatory environment across the European Union. In the field of research and innovation, positive externalities can be obtained only by complementing existing national activities by coordination and action at European level. Important economies of scale can be obtained by avoiding fragmentation and duplication of efforts at national level. The predominance of the co-ordination role and exchange of best practices ensures these results while at the same time respecting the principles of subsidiarity and proportionality.

Environment: an appropriation of EUR 234.5 million is proposed for this policy area, including EUR 142.5 million for the extension of the LIFE programme in 2005 and EUR 56.9 million for the implementation of the environmental policy and the development of new political initiatives.

The strategic objectives of the Commission, targeted towards ensuring a high level of protection of the environment and sustainable development, are set in the sixth environment action programme 2002 to 2012, and will not change fundamentally in 2005.

Within this strategic framework, continued priority will be granted to climate change, the quality of natural resources and bio-diversity, sustainable use of resources, environment and health (air quality and the urban environment) and global environment issues.

The protection of the environment is a key element of all the 2005 priorities. In the context of competitiveness and cohesion, investment in environmental technologies will give a boost to the economy, delivering growth while reducing negative impacts on health and the environment, and will enhance the quality of life. Concerning citizenship and security, EU citizens look to the EU level for protection against disasters as well as CBRN threats, in the form of a rapid response in the event of natural or man-made disasters, and of risk prevention measures, in particular to ensure that hazardous chemicals are controlled. This has an significant environmental dimension and is closely linked with the implementation of environmental legislation. Finally, concerning the third priority of global security and stability, environmental policy has a key role to play in the effort to promote the external dimension of sustainable development.

Justice and home affairs: 2005 will coincide with the start of the second stage of establishment of the area of freedom, security and justice, following the evaluation of the results achieved under the Tampere programme. The core and overarching strategic objective will remain to work on the completion of this area, and this objective will represent a key contribution to the Commission's second priority for 2005 (Security and European citizenship).

A total of EUR 536.7 million is proposed for this policy area, i.e. an increase of EUR 44.5 million compared to 2004. This amount will enable, in particular, the development of the integrated system of information for visas (VIS), the Schengen information system II, as well as common policies in regard to immigration, asylum and integration of third-country nationals into the EU. An important initiative in this field is the extension of the European Refugee Fund for the period 2005 to 2010.

An amount of EUR 336 million is included to finance the implementation of the transitional Schengen facility, in order to help the new Member States to control the new external frontiers of the Union. EUR 13 million will be used to finance the transitional facility for Kaliningrad.

Employment and social affairs: under Article 138 of the Treaty, the Commission has the task of promoting the consultation of management and labour at Community level, and shall take any relevant measures to facilitate their dialogue by ensuring balanced support to the parties. This social dialogue must create the right conditions for workers to be involved in the process of change, providing earlier knowledge of what is going on in firms, industrial sectors and geographical territories. The search for innovative collective frameworks geared to the new forms of employment must foster mobility and investment in people in increasingly diversified occupational situations, by organising the transition between successive situations and jobs without endangering their rights to social protection.

The EU legislation in the fields of labour and health and safety at work must ensure that workers benefit from the same rights and protection all over the internal market and that enterprises are submitted to the same requirements in these fields.

Finally, an intervention at European level is needed to allow and foster the free movement of workers and their family throughout the Union.

The Lisbon European Council stressed the need for Member States to intensify their efforts in order to make a significant impact on the eradication of poverty by 2010. It is crucial that the open method of coordination continues to support national strategies as set out in the NAPs/inclusion to fight poverty and social exclusion, and contributes to the mobilisation of all other stakeholders, particularly local and regional authorities, NGOs, the social partners, the third sector and social services.

Seen as an essential component of the European social model, social protection systems remain the responsibility of the individual Member States. However, the EU is called upon increasingly to assist and support Member States in their efforts to modernise social protection, in particular as they are largely facing common demographic, societal and economic challenges. With a view to tackling these in the most effective way possible, there is a need for strengthened cooperation between the Member States, through the open method of coordination. Modernising social protection systems must have the effect of strengthening solidarity while ensuring that they contribute to employment and economic growth and that they are sustainable.

At the same time, the European Union must continue to underpin fundamental social rights and develop effective policies and measures to combat discrimination and eliminate barriers to participation on the grounds of racial or ethnic origin, religion or belief, age, disability and sexual orientation.

Article 2 TEC recognises equality between men and women as a fundamental principle and one of the objectives and tasks of the Community. Moreover, a specific mission is conferred on the Community i.e. to mainstream equality between men and women in all its activities.

This principle must be supplemented by legislation and by a number of specific measures to give women more access to decision-taking positions, strengthening equality rights, and making it easier to reconcile work and family life.

In this field the Commission has four types of action:

-- it implements the framework strategy on gender equality,

-- it is continuing to implement the fifth action programme on equal opportunities,

-- it prepares and drafts legislative texts with a view to achieving equal opportunities for men and women, and watches over the application of this legislation by the Member States,

-- it promotes the mainstreaming of gender equality issues in the various policies run by the Commission.

To implement the priorities above mentioned, the total budget allocated to this policy area is EUR 170,8 million. The actions to be implemented by that amount are notably:

-- EURES - European employment services (EUR 16.5 million),

-- Labour market programme (EUR 15 million),

-- working organisations and working conditions (EUR 72.5 million), including the Community grants for the European Foundation for the Improvement of Living and Working Conditions (EUR 18.6 million) and for the European Agency for Safety and Health at Work (EUR 17.5 million),

-- promoting an inclusive society (EUR 55.8 million) including EUR 19.9 million for the actions combating and preventing exclusion, EUR 19.3 million for the measures combating and preventing discrimination, and EUR 8.2 million for the European Monitoring Centre on Racism and Xenophobia,

-- Community measures to achieve equality between men and women (EUR 11,4 million).

6. External action: heading 4

6.1. Summary table

(in million EUR, at current prices)

>TABLE POSITION>

6.2. Key aspects of heading 4

-- The commitment appropriations proposed in the preliminary draft budget for 2005 for heading 4 amount to EUR 5 234 million, an increase of 1,1 % or EUR 57.4 million over the 2004 budget. The ceiling for heading 4 was set at EUR 5 119 million for 2005. The PDB request therefore exceeds the ceiling by EUR 115 million and a recourse will have to be made to the flexibility instrument, just as in 2004 (EUR 95 million) but for a somewhat higher amount.

-- This situation arises from the need to continue the support to the stabilisation, democratisation and reconstruction process in Iraq. The PDB sets aside EUR 200 million for that objective (of which EUR 190 million implemented under the dedicated budget article and EUR 10 million under the human rights and democracy chapter), i.e. slightly more than the amount budgeted in 2004 (EUR 160 million).

-- The support to Iraq had not been programmed. Its financing is proposed for somewhat less than half within the ceiling by consuming the margin and through reprogramming. A little more than half of the funding is requested above the ceiling. After the many reprogramming exercises undertaken within heading 4 since 2000 for responding to a series of substantial stabilisation and reconstruction exercises (Kosovo, Serbia, Afghanistan and now Iraq) the heading has approached a situation in which further re-prioritisation would bring at risk the continuity in the Union's policy and in its aid relations with many poor countries and for significant objectives pursued by the health and democracy programmes.

-- The support for Iraq responds to the 2005 APS priority 'External responsibility, neighbourhood and partnership,. PDB 2005 proposes further to consolidate the budgets for the programmes supporting the neighbouring countries (southern Mediterranean and eastern Europe) at the higher level attained after the major increases voted under the 2004 budget. Similarly, the policy of mitigating the reduction of the western Balkans' budget, equally decided last year, is not put into question by the 2005 proposals.

-- Among the 'external responsibility, and 'security, priorities increased attention is further being paid to the management of the migration flows in cooperation with the countries of origin. This programme, which works on a new legal basis adopted early 2004 after three years of preparatory action, sees its budget increased by 50 % compared to 2004.

-- As far as the payment appropriations are concerned, the overall level proposed exceeds EUR 5 billion and represents an increase of 1,2 % as compared to 2004. The proposed level of payments will allow the Commission to carry on its efforts on the absorption of the outstanding commitments. It further reflects the gradual improvement achieved in the aid delivery notably as a result of the reform of the external aid policy and mechanisms.

-- Improving effectiveness of external aid indeed ranks high among the present Commission's priorities. Hence the attention paid to the reinforcement of programme management structures and in particular to a wide process of devolution. This process, which started in 2001, included notably the devolution of management (from Headquarters to the Delegations) for the geographical programmes. In 2005 it will enter into its final phase: devolution of the management of the main thematic programmes. The overall level of administrative and support expenditure (former B...A headings), will therefore approach its equilibrium level which is expected to stabilise around 4 % of the allocations of programmes supported.

6.3. General presentation of heading 4

Heading 4 of the financial perspective covers the external programmes of the Union, with the exception of the enlargement process (covered under heading 7 - Preaccession strategy) and the European Development Fund (EDF). Eleven policy areas use (commitment) funds under heading 4. However, the funds are highly concentrated: three major policy areas - external relations, development and humanitarian aid - account for more than 93 % of the appropriations. Two medium policy areas - economic and financial affairs, and fisheries - consume a further 6 % whilst the remaining 1 % is distributed over six policy areas, mainly addressing external aspects of internal policies.

Specific attention is given to payment appropriations, for two reasons: firstly, the need to ensure an adequate level of payment appropriations to respect all the contractual obligations undertaken; secondly, the continuation of the effort already deployed in recent years for the absorption of the potentially abnormal outstanding commitments. The Commission has already undertaken a far-reaching analysis of all the old and dormant commitments, and this exercise has already produced good results. To address both requirements, a thorough assessment of the needs in payment appropriations has been undertaken. Such an analysis is also aimed at reducing to a minimum the number of adjustments needed during implementation (transfers and amending budgets).

Policy area 'External relations, comprises 10 activities: the major geographical programmes and some thematic activities. The major developments, in terms of commitment appropriations, are as follows (the amounts presented here include the administrative support expenditure - i.e. the former B...A headings -- within the activities rather than presenting them as a separate group under Chapter 19 01):

-- eastern Europe, Caucasus and central Asian republics (+1,1 %; EUR 515 million): a new framework for the relations with eastern and southern neighbours was presented in March 2003 to the Council and Parliament and will further be worked out in 2004. This framework includes focusing the assistance notably on cross-border issues, on regional cooperation and on sustainable development on the eastern border, as well as further promoting reform and catalysing private investment. The 2005 PDB consolidates the 2004 increase so that the allocation proposed is 6.7 % above the 2003 level,

-- western Balkans (- 9.2 %, EUR 554 million): commitment appropriations for the western Balkans are on a decreasing trend after a period of very high reconstruction aid. In view, however, of the neighbourhood priority and of the risks for continuing instability in the region, a major upward correction was operated in 2004 and proposed for the whole period 2004 to 2006. The PDB proposes to confirm in the 2005 budget the upward revision programmed last year,

-- Mediterranean and Middle East region (+6.8 %, EUR 1 070 million; or +4.5% and EUR 880 million when Iraq is excluded): this region benefits from more than 20 % of the heading 4 budget. EUR 190 million are set aside for Iraq (and additional EUR 10 million under human rights and democracy), compared to EUR 160 million in 2004. The budget further supports the Middle East peace process through dedicated budget headings and as part of the MEDA programme. The latter channels the main part of the aid to the region. In 2004 a major upward revision of the aid to the region was voted as part of the redefined cooperation framework with the southern neighbours, already referred to above. PDB 2005 confirms the reprogramming initiated by the 2004 budget. The budget without Iraq increases by a further 4.5 % bringing it to a level which is 16.7 % or EUR 126 million higher than in 2003,

-- Latin America (+0,9 %; EUR 315 million): the proposed amount is a little above the 2004 appropriations. The proposed level of aid has to be assessed against the ending of the temporary additional financial support (worth EUR 250 million) deployed over 1999 to 2003 in Central America through the PRRAC (post-Mitch rehabilitation). If this temporary support is excluded, funds available for Latin America in 2005 are on an increasing trend and respond to the insistence of the budgetary authority that an adequate amount be directed towards that region,

-- Asia (+5.2%; EUR 648 million): the increase reflects mainly the profile of the assistance as reprogrammed in complement to the multiannual pledge of EUR 1 billion for Afghanistan made in January 2002. The attention given to Afghanistan will not be to the detriment of the aid to other beneficiaries in the region for which the budget can increase at the same rate as the overall allocation,

-- thematic programmes: in view of the tight situation of heading 4, the budget for the rapid reaction mechanism is maintained at its 2004 level (EUR 30 million). The appropriations for human rights are proposed at the level which prevailed on average since 2000 (with the exception of 2004). They stay in line with the recent Commission proposal for the extension of the expiring legal base into 2005/06. After the coming into effect, early 2004, of a new legal base for cooperation with non-member countries on questions of migration, an increase of its budget from EUR 30 million to EUR 45 million is put forward in 2005 and as programmed. For the second consecutive year, no contribution for KEDO is advanced, given the non-compliance of the Democratic People's Republic of Korea with its obligations regarding the non-proliferation Treaty.

-- common foreign and security policy: a budget of EUR 55 million is proposed. This is 16 % higher than the 2003 budget but lower than the 2004 budget (EUR 62.6 million). The Commission has based its proposal on a judgement combining expected needs, the availability of other institutionalised channels for funding and the tight situation of heading 4.

Policy area 'Development,comprises two major activities:

-- development cooperation policy and sectoral strategies: the main developments worth mentioning under this activity are the proposal of a food aid budget (EUR 435.7 million) above its 2003 and 2004 levels, the continuation of the budget for NGOs at the level voted by the budget authority in 2004 and a consolidation, coming on top of the significant boost in 2003, for the health budget headings (poverty diseases and reproductive health) thereby ensuring a level of funding compatible with the wishes expressed by the legislative authority when discussing the underlying legal bases. Some decreases are operated, but they fully respect the allocations as voted in the respective legal bases.

-- subSaharan Africa and ACP States (-3,2%, EUR 168.5 million): the negative growth rate follows from the decrease in the temporary support to the banana producers in line with the underlying legal base. The budget for South Africa stays unchanged as compared to 2004. The bulk of this activity relates to EDF funds, which are outside the budget (although the management costs of EDF are largely funded under the budget, thereby being an exception to the ABB principles). The amounts involved under EDF could reach annual commitments above EUR 3 billion in 2005. Under the Commission communication, cooperation with ACP States is proposed to be fully integrated into the EU budget from 2008 onwards, i.e., after completion of the commitment period under the ongoing ninth EDF.

Policy area 'Humanitarian aid,(+0%; EUR 490 million)

Community humanitarian aid targets non-discriminatory assistance, geared primarily towards help and protection for people in the non-member countries, primarily those in developing countries, victims of natural disasters, wars or armed conflicts. After the increase of 11% in 2004, PDB 2005 advances a stabilisation thereby introducing a pause on the path of bringing the initial budget more closely into line with real average needs.

Other policy areas under heading 4

Two further policy areas account for slightly less than 6% of heading 4: fisheries (+4.1%; EUR 202 million) and economic and financial affairs (-6.7%, EUR 84.2 million). For international fisheries agreements, an increase of EUR 8 million is put forward. After a pause in their budget, during which the instruments for ensuring sustainable and responsible fisheries in international waters were prepared, (limited) additional room is being created for a few new or renewed agreements. The second policy area covers exceptional macrofinancial aid to non-member countries in the western Balkans and the east European and central Asian areas. Given its exceptional nature, its allocation is managed in synergy with the respective geographical allocations under the policy area 'External relations,.

Finally, heading 4 devotes 1% to a series of smaller activities under seven different policy areas. This mainly concerns external aspects of internal policies. The amount is almost the same as in 2004.

The budgetary capabilities to respond in 2005 to the challenges Europe faces in its relations with non-member countries are not yet limited to heading 4. Heading 7 is to direct some EUR 1 856 million towards those candidate countries benefiting from preaccession aid. Within the budget, the 'Emergency aid reserve' avails a further amount of EUR 223 million, up from EUR 221 million in 2004 and which can, if need be, reinforce humanitarian and crisis related interventions. And finally, the ACP States can, apart from their access to funding under various thematic budget headings, rely on the funds under the ninth EDF. This source came into force in 2003 and is expected to finance around EUR 3 400 million in 2005, mostly through specific national development programmes but also, within certain constraints, in the form of humanitarian aid.

7. Administrative expenditure: heading 5

7.1. Summary table

(in million EUR, at current prices)

>TABLE POSITION>

- Amending budgets 1, 2, 3, 4, 5 and 6/2004 included.

7.2. Key aspects of heading 5

As for the other headings, the technical adaptation of the ceiling of heading 5 has been smaller than the inflation in most countries. Although the ceiling is increasing in 2005 because of the enlargement (EUR 55 million at 1999 prices in comparison with 2004), it is difficult to build a preliminary draft budget for administrative expenditure compatible with the ceiling while allowing the Commission to request the additional posts necessary for enlargement.

Nevertheless, the Commission's request for heading 5 of the PDB is compatible with the level of the ceiling. Taking into account the frontloading exercise (which lowered artificially the level of appropriations of 2004), the requested increase excluding pensions is 2.7%, while the rate of increase of the ceiling is 3.4%.

In fact, the Commission's request for heading 5 is lower than announced in the update of the third report of the Secretaries General on trends in heading 5, dated March 2004. Taking into account the statement of estimates received for the other institutions and the fact that Parliament is expected to include the cost for financing the political parties (at least in 2005) in its 20% share of the heading and that the Council is expected to identify further economies in comparison with the update of the third report (as an example a decrease of the cost of publishing its part of the official journal), the PDB of the Commission gives a proposal with an expected margin of heading 5 of nil.

The main factors explaining the Commission's request for heading 5 concern the impact of enlargement on the administrative expenditure and the search for economies:

-- as justified by the APS decision, enlargement has lead the Commission to request 700 new posts in 2005 on top of the 780 ones allocated by the budgetary authority in 2004. As in 2004, many of these new posts will go to the language services, allowing them to have the resource level needed for translation and interpretation. The other posts will go to operational services, especially for internal policies. These posts are part of a multiannual programme extending to 2008 [11] aimed at adjusting the level of the Commission's resources to its needs.

[11] See communication COM(2002) 311 final of 5 June 2002.

-- some expenditure such as the expenditure on Committees will increase in 2005 in comparison with 2004, because 2005 will be the first complete year with 25 Member States and at least 20 languages,

-- this PDB has been built with economy in mind. This quest for economy is especially visible in the field of publication of the Official Journal where a new call for tender has reduced the need by more than EUR 20 million in comparison with the growth expected from going from 11 languages to 20. The European Personnel Section Office (EPSO) also identified significant economies in its recruitment procedures, while maintaining the quality and the efficiency of the recruitment process. Other economies have been identified in information technology, buildings, the administrative Offices and the unit cost of freelance translation,

-- beside economies, the Commission has also postponed investments in computer equipments and limited the maximum its request for additional building space in order to host the requested additional staff.

In the PDB, it is also worthwhile to pinpoint some significant elements which influence the total request:

-- the entry into force of the reform of the Staff Regulations on 1 May 2004: this will bring savings of about EUR 30 million for the Commission budget in salaries and nearly EUR 10 million for pensions. The administrative offices of the Commission will also convert part of their staff into contractual agent leading to savings,

-- remuneration: the increase for remuneration has to be analysed remembering that the new posts of 2004 have been only valued for four months. The posts of 2005 have been valued for six months. Also there is a technical adjustment between remuneration of staff in Commission and remuneration of staff in the administrative offices, taking into account the real needs of the offices in 2003, the first year of existence of the Commission's administrative offices and EPSO,

-- early retirement: the establishment plan will be reduced in 2005 as a result of the second wave of early retirement. The Commission is presently taking the decision for the third wave, leading to a further reduction in 2006,

-- devolution: as the Commission completed the plan announced in communication COM (2001) 381, and a number of delegations have been transformed into representation office, the budget for delegations has a very limited increase. As a counterpart, the budget for representation offices increases because additional appropriations in 2004 for the representation in the 10 new Member States were only for eight months,

-- Berlaymont: the Commission will enter the Berlaymont in 2004. As the rent is paid yearly at the end of the rental period, 2005 will be the first budget including the full cost of the Berlaymont. Yearly rent is approximately EUR 32 million,

-- European Administrative School (EAS): the creation of the EAS has been made with budget neutrality. However, PDB of the Commission now contains appropriations that were previously in the other institutions' budget (staff and staff-related expenditure and specific training expenditure),

-- 'former A-30 grants,: with the adoption of the basic acts for these grants, expenditure has been adjusted in order to follow the financial programming of these basic acts,

-- executive agencies: the creation of executive agencies in the policy areas of TREN leads to an increase to the standard abatement as requested by the regulation on the executive agencies.

As already mentioned, the 2004 budget as voted took into account the frontloading of some appropriations needed in 2004 through the use of available appropriations in the 2003 budget. This frontloading operation resulted into an artificially low level of appropriations in 2004 for rents. In the presentation of its request, the Commission has neutralised the effect of this frontloading on budget 2004, in order to provide meaningful comparisons between budget 2004 and PDB 2005.

7.3. General presentation of heading 5

7.3.1. Human resources

In adopting its communication on the annual policy strategy for 2005 [12], the Commission stressed the importance of the new human resources needed for facing the new tasks deriving from enlargement.

[12] COM (2004) 133 final of 25 February 2004.

In its communication "Activities and human resources of the Commission in the enlarged European Union" [13], the Commission estimated that extending its work to the new Member States would require imperatively the recruitment of 3 900 additional staff members over a transition period from 2003 to 2008, after internal redeployment. It breaks down between a net increase of 3 960 additional staff covered by the current heading 5 and a reduction of 60 people financed by other headings of the financial perspective [14].

[13] COM(2002) 311 final of 5 June 2002.

[14] It corresponds to an estimated breakdown of 3 400 officials and 560 external staff on the operating budget, an increase of 150 research posts in the research budget but an estimated net reduction of 210 external staff financed by operational programmes.

During the last two years, the budgetary authority subscribed to the estimates of human resources presented in this communication as far as these initial years were concerned. The requests of new posts for enlargement were satisfied and the budgetary authority granted 1 280 new staff members to the Commission, of which 780 new posts and 500 external staff. While these first reinforcements were significant, it is by far insufficient to ensure the proper functioning of the enlarged Union with the full application of policies, rules and programmes, for which the Commission confirms the need for 3 900 new staff members. To safeguard the continuity of ongoing activities, especially the main common policies, linked to cohesion and single market, the further allocation of additional resources until 2008 will be crucial in enabling the Commission to meet its institutional responsibilities.

In the communication, the target was to reach around 50% of the medium term estimated needs in human resources for 2005, i.e. 1 980 people on the 3 960 people planned for 2008 and financed by administrative appropriations. On the top of existing human resources in 2004, it requires a net reinforcement of 700 new posts in 2005.

In 2005, consequences of enlargement on the workload of the Commission will accelerate and spread through most areas of Community activities. Compared to 2004, monitoring implementation of the acquis and controlling financial programmes will assume more importance. The Commission services will have to check the transposition of Community law, to deal with competition cases, requests for information from national administration and infringements procedures. As the first payments on Community programmes will probably be released before the end of 2004, controlling operations will start, mainly for agriculture and structural programmes. In many cases, these operations will require an in-depth knowledge of the new Member States, including abilities to work in the new languages.

Reinforcement of linguistic services will also be one of key priority of the Commission for 2005. Approximately half of the new staff that will be allocated in 2005, including increase in linguistic external staff, will be devoted to linguistic services (translation, interpretation and publication). Despite this substantial effort, these services will still be slightly below the two thirds of their full capacity at the end of the year 2005 for the new languages. The planned recruitment capacity and the budgetary framework do not allow for a larger coverage.

A review of all these new tasks during the preparation of this preliminary draft budget clearly showed that the Commission had to face a major challenge. It appeared that the phasing-in of new tasks was, in some cases, speeder than the planned phasing-in of new staff and actual staffing needs appears to be higher than 700 new posts.

However, in the current budgetary constraints, it was obviously out of question to depart from the assumptions made in the communication in which the Commission had deliberately opted for a progressive recruitment of new staff over the years, to be compatible with the recruitment capacity of the institution and the financial perspective. Permanent or temporary discontinuation or scaling-down of non-core activities will rather have to be considered by departments until human resources fully match the acknowledged needs for enlargement.

On the other hand, this review confirmed that the request for 700 new establishment plan posts was the major priority of the Commission to be accommodated in the current ceiling for heading 5. These 700 new posts will be shared between 661 new posts for the operating establishment plan of the Commission and 39 new posts for the Offices.

Operating budget (heading 5) // Additional posts 2005 by establishment plans

Commission operating budget // 661

OPOCE // 23

OLAF // 2

EPSO (including EAS) // 9

OIB // 5

OIL // 0

PMO // 0

Total // 700

On the top of the 700 new posts, it is intended to redeploy some 62 officials progressively in 2005 between departments, as a consequence of the phasing-out of preaccession tasks, allowing the Commission to allocate a total of 762 posts for enlargement. The phasing-out of preaccession activities will also allow for some 34 people to be re-deployed within their department. It should be emphasized that these redeployments will be additional to the 509 staff members, which should be redeployed during 2004, as announced last year. It will bring the total number of staff redeployment over two years, as a consequence of the phasing-out of preaccession activities, to more than 600 people. Further redeployments are still expected in the future when projects financed under the preaccession financial instruments will be finalised. Furthermore, as identified in the APS communication, departments will also consider other internal reallocation of staff to meet the most urgent tasks deriving from accession by discontinuing permanently or temporary other activities.

As a consequence of enlargement, the Commission also requests 80 additional establishment plan posts financed under the RTD framework programme under heading 3 of the financial perspective (27 for direct research and 53 for indirect research). This request is also in line with the estimates proposed in the communication taking into account the 70 posts requested and granted in 2004.

The following table indicates how the Commission intends to distribute the 1 980 staff for enlargement (officials and external staff) and more specifically the 700 new posts for 2005. This table also include redeployment of staff between departments stemming from policy area 'enlargement and the corresponding delegations. Internal redeployments are not mentioned as the table only covers net variation.

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- Including establishment plan posts and external staff of OPOCE

**Including establishment plan posts and external staff of other Offices (OLAF, EPSO, OIL, OIB, PMO).

As explained above, a strong emphasis is given to language services, including external staff, in order to meet the challenge of working in 20 languages. A substantial proportion of the new resources will also be devoted to internal policies, mainly for law enforcement activities and for assisting the new Member States in applying Community rules and practices. It also covers information and competition policies. Agriculture and structural funds are decisive but require comparatively fewer resources as they are indirectly managed by the Commission. In 2005, the number of posts is however growing for these two areas in line with control activities. General coordination in an enlarged Community also plays a significant role.

These new posts are required for the extension of the activities in an enlarged Union. In some cases, it appears that this extension of activities also matches the three priorities identified by the Commission for 2005: competitiveness and cohesion, security and European citizenship, external responsibility. The APS communication identified that 255 of these new posts will fit in the first priority, 92 in the second priority and six posts in the third priority. The remaining posts (347 posts) are not assigned to any of these three priorities but they are nevertheless indispensable for the functioning of the Commission (for instance, linguistic services).

For all other initiatives, supporting these three priorities but not linked to any enlargement-induced activities, the Commission is not requesting any additional human resources for 2005 and is willing to make, as last year, its own efforts to support the initiatives proposed for these priorities. Accordingly, some 185 officials will be redeployed between the services (70 for competitiveness and cohesion, 46 for security and European citizenship and 69 for external responsibility). These posts will stem from a central contribution to all departments to support these priorities and from eight posts redeployed following the creation of the executive agency 'Intelligent energy, on the top of the posts that are frozen as a consequence of secondment of officials to this agency. Furthermore, departments will also proceed with 226 internal redeployments in order to support these three priorities as described in the APS communication.

Other major technical changes in the establishment plans of the Commission and the Offices are:

-- consequences of the second round of early retirement operation with a net reduction in the establishment plans,

-- conversion of posts into appropriations (external staff), keeping total staff number constant, for the administrative offices (OIB, OIL, PMO),

-- conversion of a limited number of auxiliaries into posts (Commission operating establishment plan, OPOCE, OLAF), keeping total staff number constant.

The proposed establishment plans in the PDB are based on the establishment plans, as approved for 2004 in amending budget No 4/2004, and taking into account relevant principles of the new Staff Regulations for 2005.

7.3.2. Appropriations

The following table summarises the main items of expenditure under heading 5 in the Commission's budget [15].

[15] In order to facilitate comparison, EUR 29 393 000 of expenditure frontloaded in 2004 through the use of available budget 2003 has been added in the comparison for rent. The budget 2004 includes amending budgets Nos 1,2 and 6/2004 as voted by the budgetary authority.

(in EUR, at current prices)

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Members and remuneration

The decrease in requested appropriations for the Commission's members is related to the reduction from 30 members to 25 in 2004 upon the departure of the present Commission. Budget 2004 had also included the additional expenses linked to the departure of the present Commission and the arrival of new Commissioners.

For remuneration, in 2005, it will be necessary to finance on a full year basis the 780 additional posts requested by the Commission in 2004 for the priority 'enlargement,. These new posts had been covered for only four months in 2004. The 700 new posts of 2005 will be financed for six months at an estimated cost of EUR 31 million.

Some staff will still stay up to July 2005 in the new Member States after enlargement for the phasing-out of the Phare programme, benefiting from a specific allowance provided for in the Accession Treaties. This allowance is equivalent to the benefits available under Annex 10 to the Staff Regulation (this allowance is not being paid to staff working for the representation offices).

The savings on salaries due to the reform have been fully taken into account in the preparation of the Commission's request concerning remuneration. The Commission has used the relevant section of Article XIII of the Staff Regulations to calculate the pay for the occupied posts and the ones filled on the base of the turnover.

In its request for appropriations, the Commission has also taken into account the effect of three waves of the early retirement scheme, demonstrating its budgetary neutrality. As a consequence of the early retirement scheme 2003, 81 posts are taken away from the administrative establishment plans of the Commission (including the administrative offices).

External personnel including language staff

The increase is moderate, broadly in line with the standard increase in salaries but significant changes should however be highlighted within the various components.

As expected, expenditure for auxiliary interpreters and freelance translators increases again because of enlargement needs. The external resources will be a decisive complement to establishment plan resources for interpreting and translation. The increase has however been limited thanks to one-off economies in freelance interpreters and a reduced unit cost per page for translation.

This increase in the number of linguistic external staff is compensated by a reduction in the number of non-linguistic external staff and external staff for enlargement remains broadly constant in 2005 or is even slightly down as there is a limited conversion into posts.

Non-linguistic external personnel related to enlargement (auxiliary staff and seconded national experts) will again be reduced but a large number will remain in 2005 to allow for a smooth transition (some 247 staff members planned for 2005 down from 329 posts in 2004 and 377 posts in 2003). Accordingly, corresponding appropriations will be reduced by some EUR 5 million. Services will benefit from the new posts requested to the budgetary authority. As the new posts will only be budgeted on a six-month basis, appropriations are still tabled in for six months for the conversions.

Excluding enlargement, the estimated adjustment of salaries is one of the major factors in the evolution of appropriations for non-language external personnel. However, other elements have to be taken into consideration, most of them reducing the costs and limiting the increase of appropriations below the standard increase in salaries. The breakdown between different categories of staff is affected by a reduction in the number of agency staff and a corresponding increase in the number of auxiliary/contract agents, leading to some net savings. The PDB also incorporates an estimate of the progressive substitution of auxiliary staff into contract agents. On the contrary, some appropriations from the administrative part of the decentralised expenditure budget (budget for conferences) have been shifted to the budget for auxiliaries/contract agents in accordance with the actual pattern of budget implementation.

Missions, committees, conferences, studies, training

Excluding the consequences of enlargement, most budget items increase by about 2 %, in line with inflation.

The budget for training remains constant in 2005. However, due to the creation of the European Administration School (EAS), the budget for training in the Commission's budget will have to be increased during the budgetary procedure because it has to contain abudget for the other institutions, which have to be deduced in their section.

Enlargement has a direct consequence on three budget headings (meetings, committees, missions), involving an increase of some EUR 12,2 million. These costs have now been calculated on a full-year basis while only a partial phasing-in was budgeted in 2004. Estimates of higher average travel costs from/to the new Member States have also been incorporated in the calculation. Meetings and committees are directly affected by accession of the new Member States as it increases proportionally the number of representatives attending these meetings. However, due to the tight budgetary context, the Commission has assumed that the full participation will not yet be reached in 2005 and has carefully reduced the estimated needs for 2005. Expenditure for missions of officials will also increase, proportionally more than the increase of staff members, because of the additional duties linked to enlargement.

Buildings and building-related costs

The increase for the rent is largely the result of the need to pay for the new Berlaymont for the first time in 2005. The rent is paid at the end of the rent period, so although the Commission will occupy the building in 2004, the payment will only be made in 2005. Also in 2004, the 'substitution buildings, were made available free for six months (18 months for the Beaulieu) as agreed in the Berlaymont agreement.

The additional space brought by the Berlaymont will be offset by the buildings that the Commission intends to leave in 2004 and in the course of 2005. Beside the 'Genève, complex, the Commission will quit the JECL towards the end of 2005, albeit on the temporary basis, and the N85. This means that there will be significant restrictions on office space that can be made available.

In Luxembourg, the Commission intends to reach a final agreement on the future of the JMO building. Talks have progressed steadily. The agreement will solve both the short- and long-term future of the location of the Commission's premises in Luxembourg. In 2005, the Commission will also enter the extended Euroforum building and vacate the CUBE.

Furniture, IT and other investments and operating costs

As promised to the budgetary authority in the framework of PDB 2004, the Commission has reduced its request for furniture in 2005 to a very low level, to compensate for the investment made for the Berlaymont in 2004.

In order to stay within the ceiling of heading 5 in 2005, the Commission has also decided to maintain at an abnormally low level the investment for replacement of some IT equipment such as PC and printers. It should be clear that such low level of investment cannot be maintained for too long to avoid creating inefficiencies in the working environment of the institution.

Publications and OPOCE

The highest level of economies is reached in the publication of the Official Journal. Thanks to a new call for tender, the Publication Office has been able to make dramatic savings. This means that the yearly cost of publishing the Official Journal in 20 languages is lower than the cost of publishing it in 11 languages a few years ago. This economy is closely linked to the investments made in the past in information technology.

Budgetary increase for the Publications Office is linked to the necessity to have some costs of enlargement for 12 months instead of eight months as in 2004. Also OPOCE will convert some of the auxiliary posts it had into permanent posts. This adds a "one off» cost linked to the recruitment of staff.

Social expenditure and recruitment

One of the most important issues related both to reform and enlargement is the issue of the creches. Already at this time, the Commission has identified a shortage of places in the existing creches, and, with the enlargement, the situation will only be tighter. In the long term, the Commission intends to build a new creche to solve this problem. However this new facility will only be operational in 2007. In the interval, the Commission intends to buy room in existing Belgian creches. A budget of EUR 1,5 million is foreseen in PDB 2005 to cover this action.

As in previous years, the Commission also intends to better address the needs of disabled officials or the needs of officials with a disabled person in their family and has increased to appropriations it requests to cover this need.

As far as recruitment is concerned, budget 2005 for the recruitment managed by the European Personnel Selection Office (EPSO) is decreasing as a result of the active and permanent actions made to generate economies, without slowing down the speed of recruitment or the quality of the selection process.

As in 2004, the specific budget of the Commission for recruitment of A 1 and A 2 officials will stay at a high level because of the need to publish new posts in the context of enlargement and to make the assessment of the candidates according to the rules approved by the Commission.

The budget of EPSO itself is increasing because of the creation of the European Administration School (EAS) which will be associated with EPSO at the beginning of its existence in order to lower the administrative costs. The budget of EAS for the Commission's part is budgetary neutral. However, the creation of EAS implies also a transfer of human resources and training appropriations from the institution's budget to the Commission's.

The transfer of human resources (posts and external) has been valued in Commission's budget. The transfer of training appropriation has to be made in the course of the budgetary procedure.

OLAF, administrative offices of the Commission (PMO, OIB and OIL) and executive agencies

The increase in OLAF's budget is justified by the fact that the posts granted to OLAF were only valued for four months for the posts requested in PDB 2004 and were not valued at all for the additional posts granted by the budgetary authority in the course of the budgetary procedure.

For the administrative Offices of the Commission, the budget is decreasing in 2005 for two reasons. Firstly there is the technical adjustment of the amount of remuneration needed in the Offices' budgets. But more importantly, by transforming permanent posts into the new and cheaper contractual agents' posts, the Offices generate the economies expected at their creation.

In its PDB, the Commission has also included the executive agency related to Intelligent Energy. As requested by the framework regulation covering the creation of the executive agencies, the Commission has made a special abatement in its request for appropriations for remuneration in order to freeze the posts.

Other interinstitutional expenditure (pensions and European Schools)

The administrative budget of the Commission pays for pensions and the European Schools in order to cover the needs of all institutions.

For pensions, the increase is in line with expectations. The appropriations needed for paying pensions were calculated taking into account a saving of EUR 9,8 million expected from the adoption of the new Staff Regulations.

The subsidy to the European Schools' budget is presently expected to be at the same level as in 2004 and this forecast has been included in the Commission's PDB. This could have to be adjusted during the budgetary procedure in relation with the draft budget of the schools established by the Conseil supérieur des écoles.

Grants and other operational expenditures financed under heading 5

The most important action in the field of grants paid by heading 5 (the 'A-30, grants) is the adoption of the basic acts by the Council (decision) or by both the Council and Parliament (co-decision). All these basic acts contain mandatory reference amounts agreed by both Parliament and the Council. As most of these basic acts cover the period 2004 to 2006, the Commission's request has been made in order to respect these reference amounts.

8. Reserves: heading 6

(in million EUR, at current prices)

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Heading 6 comprises two reserves from which resources will be called on only if the need arises during the year:

-- the emergency aid reserve has been allocated EUR 223 million by the financial perspective,

-- the guarantee reserve is also allocated EUR 223 million.

The monetary reserve for EAGGF Guarantee expenditure was EUR 500 million until 2001. The Interinstitutional Agreement provided that it would be phased out by 2003. No appropriations are therefore included in the budget any longer.

9. Preaccession strategy: heading 7

9.1. Summary table

(in million EUR, at current prices)

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9.2. Key aspects of heading 7

An overall amount of EUR 1 856 million is programmed for the preaccession assistance under heading 7. This amount is intended to assist Bulgaria, Romania and Turkey towards membership (except for a small amount related to the phasing-out of the preaccession assistance to new Member States). It represents a 7,1% increase over the 2004 budget and reflects the road maps agreed for the three countries in accordance with the conclusions of the Copenhagen European Council. It includes:

-- the road map for Bulgaria and Romania, with a substantial increase of their respective financial assistance (+30% above the average 2001 to 2003 assistance). The overall assistance for the two countries amounts to EUR 1 502 million, a 10% increase over last year,

-- an additional support for the advanced decommissioning of nuclear power plants of EUR 50 million, not included in the road map figures of EUR 1 502 million above-mentioned. In 2004, EUR 100 million has been provisioned for that purpose,

-- the administrative expenditure deemed necessary for a smooth transition between the management systems of Phare and ISPA applicable before and after accession, as provided for in the Accession Treaty under Article 33. This expenditure is estimated at EUR 4 million for 2005. That phasing-out will be effectively terminated in 2005,

-- the assistance to Turkey in accordance with the programmed increase of its preaccession aid from EUR 250 million in 2004 up to EUR 300 million for 2005.

Since the Berlin ceiling has not been adjusted for the ending of the preaccession assistance to the acceding countries, the level of the 2005 commitment appropriations is well below the ceiling of heading 7.

For payment appropriations, the needs are calculated at EUR 3 179,5 million, i.e. an increase of 11,3% over the 2004 budget. This net increase is mainly related to the absorption of previous commitments made under Sapard, Turkey and ISPA programmes. The amount for Phare is rather stable, with already a decrease initiated in relation to the completion of the assistance to the acceding countries.

9.3. General presentation of heading 7

Heading 7 will provide preaccession assistance to Romania and Bulgaria through the three instruments - Sapard, ISPA and Phare - according to the road map adopted for those countries. The assistance to Turkey will be provided through its specific preaccession regulation.

Since the introduction of the ABB nomenclature, the presentation of heading 7 is no longer under the same title but split between the different policy areas responsible for their respective implementation:

Sapard activities (+ 10,4%, EUR 250,3 million) are part of the agriculture and rural development policy area and will continue to support improvements in the efficiency of farms, processing and distribution of agricultural products, veterinary and plant health controls and quality. Sapard will also support the management of natural resources, vocational training, economic diversification in rural areas, agrienvironmental and forestry initiatives as well as improvements to rural infrastructure and villages. For 2005, the Sapard commitment appropriations have been established at EUR 250,3 million for Romania and Bulgaria in accordance with the road map. Payment appropriations amount to EUR 541,5 million to cover the RAL of the eight acceding countries and the payments for Romania and Bulgaria.

ISPA activities (+ 10,4%, EUR 500,7 million) are part of the regional policy area and are devoted to structural adjustments. ISPA projects are aiming to improve transport infrastructures and environmental protection. Most of the projects focus on the modernisation of urban and municipal water supplies, waste-water systems, and road, motorway and railways repair and construction. For 2005, the ISPA commitment appropriations amount to EUR 500 million for Romania and Bulgaria in accordance with the road map. Payment appropriations are set at EUR 703 million to cater for the RAL of the eight acceding countries and the payments for Romania and Bulgaria.

Other preaccession activities (+ 5 %, EUR 1 105 million) are part of the enlargement policy area, except for a small contribution of EUR 2,5 million relating to the European Training Foundation managed under the education and culture policy area. These activities concentrate on institution-building, infrastructure necessary for the application of the acquis, and support for economic and social cohesion. For 2005, the commitment appropriations cover EUR 801 million for Romania and Bulgaria, EUR 300 million for Turkey, and EUR 4 million for the phasing-out in the new Member States. The amounts have been set in accordance with the road map for Romania and Bulgaria and with the revised accession strategy for Turkey.

For Bulgaria and Romania, the share of Phare amounts to EUR 751 million, representing 50% of the total assistance under the road map, and a 10,4% increase over last year. A small part (EUR 1,5 million) is directed to the European Training Foundation under the EAC policy area. On top of this, an amount of EUR 50 million is budgeted for a contribution to the early closure of the non-upgradable units of the Kozloduy nuclear plant (EUR 100 million has already been provisioned in the 2004 budget). Therefore, the total Phare assistance for the two countries amounts to EUR 851 million.

For Turkey, the proposed amount of EUR 300 million is a 20% increase over last year in accordance with the revised accession strategy. A small part (EUR 1 million) is directed to the European Training Foundation under the EAC policy area. A part of this amount is also directed to horizontal programmes such as TAIEX and multi-country programmes.

Finally, an amount of EUR 4 million is budgeted for the administrative expenditure related to the phasing-out of the preaccession assistance to the new Member States. This phasing-out will be terminated in 2005 in accordance with the provisions of the Accession Treaty under Article 33.

Payment appropriations related to these activities amount to EUR 1 932,5 million in order to absorb the RAL of the acceding countries as well as the RAL and new payments for Bulgaria, Romania and Turkey. It is worth noting that although payments relating to candidate countries are increasing, the needs relating to the completion of the preaccession assistance for the new Member States are starting to decrease (-22 %).

10. Compensations: heading 8

(in million EUR, at current prices)

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A new heading 8 for compensation was inserted into the financial perspective by the adjustment for enlargement, following the conclusions of the Copenhagen Council. This heading includes the amounts corresponding to the 'temporary budgetary compensation, and 'special lump-sum cash-flow facility, agreed during the accession negotiations.

The 2005 PDB proposes the budgeting of the whole amounts resulting from the accession negotiations for a total of EUR 1 305 million.

11. Attachments

11.1. FINANCIAL PERSPECTIVE AT 2005 PRICES

(amounts in EUR million, at current prices)

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11.2. PDB 2005 and 2004 budget by financial perspective headings, in commitment appropriations (aggregate)

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1 Amending budget 1, 2, 3, 4, 5 and 6 included.

2 The margins for heading 3 and heading 7 are to be increased in 2004 by respectively EUR 20 995 775 and EUR 961 220 corresponding to the expenditure of the European Union Solidarity Fund entered, by amending budget 3/2004, "in the budget over and above the relevant headings" as laid down in the interinstitutional agreement of 7 November 2002 (OJ C 283 of 20.11.2002).

3 An allocation of EUR 175 million for staff contributions to the pension scheme is included in the ceiling of heading 5, in accordance with footnote (1) to table of the financial perspective as adjusted for 2005.

11.3. PDB 2005 and 2004 budget by financial perspective headings, in payment appropriations (aggregate)

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1 Amending budget 1, 2, 3, 4, 5 and 6 included.

11.4. PDB 2005 and 2004 budget by financial perspective headings, in commitment appropriations (detailed)

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1 Amending budget 1, 2, 3, 4, 5 and 6 included.

2 The margins for heading 3 and heading 7 are to be increased in 2004 by respectively EUR 20 995 775 and EUR 961 220 corresponding to the expenditure of the European Union Solidarity Fund entered, by amending budget 3/2004, "in the budget over and above the relevant headings" as laid down in the interinstitutional agreement of 7 November 2002 (OJ C 283 of 20.11.2002).

3 The ceiling for heading 5 includes EUR 175 million for staff contributions to the pension scheme, in accordance with footnote (1) to table of the financial perspective as adjusted for 2005.

11.5. PDB 2005 and 2004 budget by financial perspective headings, in payment appropriations (detailed)

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1 Amending budget 1, 2, 3, 4, 5 and 6 included.

EXPENDITURE ANALYSIS BY POLICY AREA

1. Introduction

After the first activity-based budgetary procedure leading to the adoption of the 2004 budget, the 2005 preliminary draft budget is characterised by the consolidation of the ABB approach. Firstly, the budget nomenclature, which is based on the activities of the Commission, is largely unchanged, thus representing the continuity in the institution's undertakings with respect to the previous financial year. Secondly, the new instruments introduced in the 2004 procedure for the provision of performance information on the Commission's activities have been consolidated this year.

Regarding the 2005 budget nomenclature, the continuity of the activity structure is essential for the successful implementation of activity-based management in the Commission. Indeed, managing resources by means of objectives and indicators, and effectively using information on the results achieved in the budgetary procedure are central elements for a more efficient use of public resources. This process requires an activity structure and consequently a budget nomenclature at the activity level which are stable over time.

This stability has not prevented the nomenclature from properly reflecting the evolving political environment when so required. Accordingly, the 2005 PDB foresees a new activity '06 07: Security and protection of energy and transport users, in order to better manage and report on this priority area. Other activity changes are reflected in this document.

Activity statements, which constitute the main instrument for linking performance information for all Commission's activities and resources needed, have been consolidated this year. Objectives, indicators, outputs and outcomes are provided in these documents, thus connecting the annual activity reports for 2003, annual management plans for 2004 and the political orientations given in the annual policy strategy for 2005 with the resources required in the PDB and with evaluation information.

The Commission has undertaken a substantial effort in improving the activity statements attached to the 2005 PDB, in order to render them more useful in the budgetary procedure. In this context, a selective approach has been agreed with the budgetary authority that begins with 33 important activities (Annex IV) this year, and which will be expanded in subsequent procedures in view of covering all activities over a period of four to five years. In turn, the Council and the European Parliament are welcome to provide feedback on the quality of the selected activity statements and on their usefulness for the budgetary procedure.

2. The activity-based budget nomenclature

The activity-based budget nomenclature offers a clear view of the total amount of resources which are proposed for each policy area, including human and financial resources, in turn subdivided into administrative and operational expenditure. Thus, the previous subdivision of the budget into parts A and B is definitively abandoned, including the accompanying documents.

This ABB nomenclature does not question the composition of the headings of the financial perspectives, for which a clear correspondence with each article or item is assured. Therefore, the continued respect of the Interinstitutional Agreement of 6 May 1999 on budgetary discipline and improvement of the budgetary procedure is guaranteed.

Like last year, the activity-based PDB nomenclature includes 31 titles of which 30 reflect the Commission's policy areas and Title 31 includes the reserves. These policy areas are predominantly operational, since their core activities aim at benefiting a third-party beneficiary, each within their respective domains of activity. Other policy areas, however, are horizontal and assure the proper functioning of the Commission, such as 'Coordination and legal advice, and 'Budget,.

The policy areas are subdivided into 221 activities of which 119 include operating budget headings and are thus reflected in the budget nomenclature as budget chapters. In addition, the first chapter of each title (hereafter referred to as Chapter 01) comprises all administrative expenditure of the policy area, making it possible to show the total resources related to the policy area in question for 2005. The other chapters (02 and following) comprise operating resources, including programmes, subsidies, etc. Finally, a Chapter 49 has been foreseen for most titles in order to inscribe the payment appropriations needed for the liquidation of the outstanding commitments of the former 'B...A, headings as of 2004, thus assuring their transition to non-differentiated appropriations as foreseen in the new Financial Regulation.

The new distinction between administrative and operatingl resources as introduced with ABB is based on the purpose of the expenditure, and establishes that operating expenditure is the one which is directly aimed at a third-party beneficiary, whereas administrative expenditure provides the management and support resources necessary for the proper functioning of the institution, and thus for the delivery of the institution's objectives. As a result, the following are the components of Chapters 01 on the one hand, and of subsequent chapters on the other:

-- Chapter 01 of all policy areas includes the administrative appropriations of the policy area and essentially the former part A (salaries, building costs, etc). This chapter also includes appropriations in the former part B which are in fact of an administrative nature, such as technical and administrative assistance (former B...A headings), administrative expenditure relating to research, and other support expenditure directly related to the programme or action such as the mini-budgets for the Structural Funds. Chapter 01 of horizontal policy areas also include those administrative appropriations which are used not only for the functioning of the Directorate-General (DG) or service concerned but for the Commission as a whole. Examples are the central library or the publication of the Official Journal,

-- Chapter 02 and those subsequent reflect those Commission activities which include operational appropriations, and which in turn are found at the level of budget articles or items. These include most of the former part B appropriations, but also certain appropriations found in the former part A, such as subsidies which are aimed at having an impact for beneficiaries outside the EU institutions.

Finally, the level of human resources employed for each policy area is also presented as an integral component. This includes establishment plan posts financed under former Titles A-1, A-6, and B-6 in the case of research-related policy areas. In addition, support staff includes outside personnel financed under former Titles A-1, A-3, A-4, A-6, and A-7, staff financed from the research budget (former B6), estimates of staff financed from the Structural Funds mini-budgets, and from B...A headings. The estimate of external staff derives from the average standard cost and it is not a counting tool of actual staff in place. As the external staff is not bound by any specific establishment plan, the actual number of staff, financed by the corresponding appropriations, will be dependent on the category of staff actually recruited. The financial appropriations relating to the human resources allocated to each policy area are found under its administrative expenditure.

In addition to those activities that require operational resources for the achievement of their objectives, policy areas also include activities that do not consume any financial resources and therefore do not appear in the ABB nomenclature. These are the 'activities without budget headings,, and are also explained by means of an activity statement. Generally speaking, each operational policy area includes at least two activities without budget headings which involve providing horizontal support to directorates-general. The descriptions given below of these two activities are of general application unless otherwise stated under a specific policy area.

-- Administrative support: promotes and maintains sound and efficient management of human, financial and IT resources within the DG/service, and ensures that the resources are allocated to achieve the policy objectives of the DG/service. It ensures the soundness of internal controls established in the DG's/service's operational management and its financial accounting and reporting systems, and provides internal audit advice within the DG/service, ensuring transparency in the advice provided. It also provides the necessary administrative support to the organisation.

-- Policy strategy and coordination: gives the necessary impulse to the policy definition, preparation and implementation in order to achieve the overall mission of the DG/service within the time scales laid down. It promotes the development of a strategic planning culture within the DG/service; prepares the management plan, and coordinates the DG/service contribution to the Commission work programme and to the annual policy strategy actively promoting the main policies of the DG/service by supportive means of information, communication, awareness raising and dialogue. It contributes to the coherence of the different activities within the DG/service, ensuring the liaison with the horizontal services, the Cabinet and other institutions, while promoting transparency in all actions of the DG/service. It also runs the evaluation programme for the DG/service.

This section of the document begins with the presentation of the total amount of resources proposed in the 2005 PDB by policy area, showing both the financial and human resources for that year as well as for 2004. Total appropriations include both administrative and operational resources.

Table II.1 shows, for the Commission only (section III), the 2004 budget and the 2005 PDB by policy area. The table presents the total commitment appropriations and human resources allocated to each policy area (in person/years). Details for each policy area are shown in the subsequent section of this document.

Table II.1. - Section III: the 2004 budget and 2005 PDB by policy area

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(*) Human resources figures for Title 27 'Budget»' include staff (117 in 2004, and 111 in 2005) currently not allocated to a specific policy area or awaiting reallocation, and attributed for technical reasons to «Budget,.

(**) Human resources figures include the reallocated linguistic staff and changes in these staff numbers from one year to another will have an effect on the total figures for the policy areas.

Correspondence between ABB and the financial perspective

As it was the case in the previous presentation of the budget, the ceilings of the financial perspective headings continue to be the main point of reference. Therefore, it is important to have a clear view of how the ABB nomenclature translates into these headings.

Table II.2 provides a presentation of the 2005 PDB by policy area and heading. The rows correspond to policy areas into which the Commission's activities have been grouped. The columns present the headings of the financial perspective (and subheadings where appropriate). This table shows for each policy area the financial resources which fall under each of the headings of the financial perspective. To the extent that the Commission's resource allocation process follows the ABB approach, this table is necessary in order to verify that the resources allocated permit the financial perspective ceilings to be respected. The last row shows the margin left under the ceilings.

The amounts found in Table II.2 correspond to all financial resources, in commitment appropriations, including operating as well as administrative appropriations. It is worth noting that a majority of policy areas include resources which correspond to more than one heading. For instance, the Fisheries policy area includes resources under headings 1a (EAGGF Guarantee), 2a (FIFG), 3 (Control of fisheries), 4 (International fisheries agreements) and 5 (Administrative resources for fisheries). All policy areas include amounts under heading 5, as they all require administrative resources for the implementation of their activities.

Table II.2. 2005 PDB by policy area and financial perspective heading

(Operating and administrative expenditure in million EUR)

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3. Expenditure analysis by policy area

3.1. Title 01: Economic and financial affairs

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The main role of the Commission in the policy area of economic and financial affairs is to foster the success of economic and monetary union both inside and outside the European Union, by advancing economic policy coordination, conducting economic surveillance and providing policy assessment. Economic analysis and evaluation is also provided in support of Community policies and priorities in general, covering both internal affairs and external relations. In certain areas, EU financial programmes are implemented in furtherance of other Commission policies, as are financial market operations (borrowing and lending, treasury management and management of the Guarantee Fund as well as macrofinancial aid to third countries), in close cooperation with the EIB, EIF and EBRD.

The implementation and strengthening of the economic governance framework of economic and monetary union (EMU) to ensure that Member States achieve and sustain sound and growth-promoting budgetary policies, remains the core objective. Integration of the new Member States will continue in 2005, with some new Member States expected to move towards participation in the exchange-rate mechanism and ultimately, joining the euro area. In this context, financial resources for external communication on the euro and EMU will need to be sustained in order to include the new Member States.

For international economic and financial affairs, implementation of the economic and financial aspects of the accession strategy for Bulgaria and Romania will be an important priority, as well as implementing the revised accession strategy for Turkey and defining and implementing the relevant parts of an accession strategy for possible additional candidate countries. The new Neighbourhood Instrument for the countries of eastern Europe and the Mediterranean region will require enhanced economic analysis and policy dialogue as well as further financial interventions for macrofinancial assistance in the form of grants. The main beneficiaries remain the countries of the western Balkans and the new independent States (NIS), although at a reduced level compared to the front-loading of aid earlier in this decade.

The activity «Financial operations and instruments» involves sound and efficient management of the financial schemes of the multiannual programme for enterprise and entrepreneurship specifically targeted at improving the financial environment for businesses, especially SMEs, by bridging those gaps that financial markets would otherwise normally leave open. The needs expected in 2005, the final year of this programme, should be fully covered by the amount of EUR 44,5 million proposed for new commitments. The guarantee reserve of EUR 223 million is determined by the financial perspective and is used to guarantee loans to third countries, either directly by the Community (macrofinancial assistance, Euratom loans) or by the European Investment Bank.

3.2. Title 02: Enterprise

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The actions in the Enterprise policy area will continue to be organised around four main themes:

-- to encourage entrepreneurial activity and to contribute to the improvement of the business environment,

-- to ensure access for goods and services to markets while ensuring a high level of safety and protection of the environment,

-- to support the creation of an environment which is supportive to innovation and change,

-- to enhance the global competitive position of the European industry, promote sustainable production and ensure the cost-effectiveness of the environmental and social pillars of the EU's sustainability strategy, notably through impact assessments.

The activity 'Encouraging entrepreneurship, covers actions for the improvement of the business environment, mainly through best practice and business support networks. These actions are mainly implemented through the multiannual programme for enterprise and entrepreneurship, in particular for SMEs (2001 to 2005) and the networks between public administrations, businesses and citizens (IDAbc 2005 to 2009).

The overall aim is that enterprises can work under framework conditions that are uniform ('level playing field,), and favourable to entrepreneurial development. In full respect of the subsidiarity and proportionality principles, and in order to ensure the maximum EU added value, these actions are carried on through the open method of coordination and exchange of best practices.

The activity 'Getting still more from the internal market, covers measures designed to ensure the smooth operation of the internal market, while ensuring a high level of consumer safety and environmental protection. The DG has a key role in internal market issues, looking at them not only from the horizontal policy aspect but also in supporting the internal market for, and promoting the competitiveness of European industries across the entire spectrum of industrial products as diverse as pharmaceuticals, automotive vehicles, mechanical and electrotechnical equipment, construction products and raw materials. Guaranteeing market access is an important focus of this activity.

European standardisation is also an important tool in support of the operation of the internal market and the implementation of European legislation. Support measures for the work of the main European standardisation bodies (e.g. ETSI, CEN, Cenelec) fall under this activity.

Promoting market access involves external aspects. In line with the Communication on the annual policy strategy for 2005, the EU regulatory framework will be promoted vis-à-vis the new neighbours, in particular by developing accreditation and conformity assessment agreements (ACAA) with them.

In two sectors, the implementation of Community legislation is or will be supported by Agencies. In the field of pharmaceuticals, the European Agency for the Evaluation of Medicinal Products is already supported through this activity. In the field of chemical products, the preparatory work linked to the implementation of the new EU regulatory framework for chemicals (REACH), including the creation of an Agency, also falls under this activity. Under the proposal adopted by the Commission on 29 October 2003, the Agency should assume its functions within 18 months of the entry into force of the Regulation. In the intervening period the functions of the Agency would have to be exercised by the Commission. Given that a decision on the REACH proposal is expected in the second half of 2005, preparatory work is needed to ensure that the Agency can carry out its responsibilities effectively once the legislation is adopted.

The activity 'Research -- Promoting innovation and change, is intended to stimulate technological innovation, utilisation of research results, transfer of knowledge and technologies and the setting-up of technology businesses in the Community and in all its regions.

The overall aim is to make a tangible improvement in Europe's innovation performance, in the short, medium and long term, by stimulating a better integration between research and innovation, and by working towards a more coherent policy and regulatory environment across the European Union. In the field of research and innovation, positive externalities can be obtained only by complementing existing national activities by coordination and action at European level. Important economies of scale can be obtained by avoiding fragmentation and duplication of efforts at national level. The predominance of a coordination role and exchange of best practices ensures these results, while at the same time respecting the subsidiarity and proportionality principles.

'Competitiveness and sustainable development, is intended to promote the ongoing adjustment of Community industry to industrial change in an open and competitive market, with a view to developing an industrial competitiveness policy for the European Union by benchmarking and other initiatives. Intervention at EU level is necessary in the framework of the ambitious objectives set by the Lisbon European Council. The added value comes from benchmarking and spreading of best practices through the open method of coordination. Direct intervention is not foreseen, in accordance to the principles of subsidiarity and proportionality.

This activity covers horizontal and sectoral activities to analyse and improve the competitiveness of Europe's businesses. It also covers the interface with other EU policies that may have an impact on enterprises.

3.3. Title 03: Competition

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On the basis of the Treaty, the DG exercises control over restrictive agreements and practices, mergers and State aids, thereby also contributing to market liberalisation objectives in formerly State-dominated sectors. In addition to decisions in individual cases, the DG prepares competition policy instruments, such as Commission block exemption regulations and guidelines, and makes proposals for Council regulations for the implementation of the Treaty. The DG also implements and develops bilateral and multilateral cooperation and contributes to preparations for enlargement. Finally it advocates competition policy within the Community and in international forums.

In 2005, the DG faces a challenge to ensure that the competition rules will apply with equal effectiveness throughout the enlarged Union. As regards State aid in particular, the DG is examining cases in the new Member States within the context of the 'interim mechanism, in order to define the kind of measures that can be accepted as existing aid. Those measures that are refused will automatically lead to an opening of formal proceedings under the State aid rules. Liberalisation also poses specific challenges in the framework of enlargement.

An ongoing priority for 2005 will be to maintain and enhance the quality of decisions. To this end, the DG will apply for the second year three cross-cutting initiatives: the role of the appointed chief economist, the scrutiny function at DG level to provide for a 'fresh pair of eyes, to look at all elements of major proceedings (facts, economic analysis and legal analysis); and the work of the pool of paralegals to assist case-handlers in reviewing facts and documents submitted by parties and Member States. As an ongoing priority, the Competition DG will also enforce respect of State aid decisions.

Important changes to the Merger Regulation will affect the case allocation system between the Commission and Member States so as to better reflect the principle of subsidiarity, and to allow for additional investigation time to examine remedies and, at the request of the parties, to examine particularly complex cases.

Under the new antitrust enforcement system, which will apply simultaneously with enlargement as of 1 May 2004, Member States will assume further responsibility with the Commission for implementing Community competition law. The reform also increases scope for private enforcement of the Community competition rules before national courts by removing the bottleneck constituted by the need to refer exemption defences under Article 81(3) by defendants to the Commission which had a monopoly to grant such exemptions. A small budget (EUR 0,8 million in 2005) for training activities directed at national judges is requested in this context.

Work on merger guidance for the legal and business community will focus in 2005 on the update and expansion of the best practices on the conduct of Community merger proceedings in order to cover new instruments and procedural elements introduced by the recast Merger Regulation, and to expand the document in specific areas including a more detailed section on remedies.

As far as cartels are concerned, the impact of enlargement will probably be limited as many of the cartels dealt with by the Commission are worldwide in scope. However, the trend of rapidly increasing cartel workload will continue, due not least to the modernisation reform which will allow the Commission to be more proactive in their detection and prosecution. Resources will be focused on cases, including inspections, in important sectors of the economy where action by the Commission would directly improve consumer welfare.

In the area of State aid control, priority will be given to a comprehensive reform programme which will cover internal working methods and rules of procedure efforts will focus on cases which raise substantial competition problems. The DG will also aim in this phase at raising the awareness of local, regional and national authorities and of the national judiciary for State aid issues.

Lastly, with a view to promoting international convergence the DG will continue its substantial work in the International Competition Network and the WTO, as well as with third country authorities, particularly the USA.

3.4. Title 04: Employment and social affairs

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The Employment and social affairs policy area covers activities which contribute to the development of a modern, innovative and sustainable European social model with more and better jobs in an inclusive society based on equal opportunities.

The bulk of the appropriations assigned to this policy area (97,9 %) are devoted to cohesion interventions under the European Social Fund (ESF). ESF interventions are mainly implemented by the Member States as a part of shared management. However, the Commission directly manages the appropriations for innovative measures and technical assistance.

Compared to 2004, overall commitment appropriations increase by 6,6 %. This is mainly due to ESF interventions. Payment appropriations and their evolution have been presented in Document 1 which is structured by heading of the financial perspectives.

The increase in commitment appropriations for the Employment and European Social Fund activity is fully due to the ESF. This reflects the schedule laid down in the financial perspectives, and also the impact of a full year of commitments for the new Member States.

The increase for the activity 'Work organisations and working conditions, is due to the European Foundation for the Improvement of Living and Working Conditions (Dublin) and to the European Agency for Safety and Health at Work (Bilbao), which must both integrate the EU-25 dimension into their activities.

The decrease in the total allocation for the activity 'Promoting an inclusive society, in 2005 is linked to the discontinuation of commitment appropriations for the pilot projects on active ageing and on mainstreaming of disability actions, actions which are mainly included in the different programmes of the employment and social affairs domain. Nevertheless, the commitment appropriations allocated to the programme 'Combating and preventing social exclusion, increase by 18 % in line with the adaptation of co-decided programmes for EU-25.

The commitment appropriations for the activity 'Equal opportunities for women and men, remain stable.

3.5. Title 05: Agriculture and rural development

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Scope of the policy area

The policy area 'Agriculture and rural development, (excluding administrative expenditure) covers the following:

- heading 1: EUR 50 355 million, of which EUR 43 514 million for market-related and direct aid expenditures (heading 1a) and EUR 6 841 million for rural development measures (heading 1b), financed by the Guarantee Section of the EAGGF,

- a total amount of EUR 4 221 million for different measures under headings 2, 3, 4 and 7 i.e. EUR 3 930 million for agricultural expenditure within the Structural Funds under heading 2 (EAGGF Guidance Section), EUR 250 million for external actions under headings 4 and 7 (mainly the preaccession agricultural instrument Sapard) and finally, EUR 41 million for controls and other operations in the agricultural sector under heading 3.

The expenditure in commitment appropriations proposed for this policy area for 2005 is around EUR 4,2 billion higher than in the 2004 budget. This increase is essentially the result of two factors:

-- direct aid payments in the new Member States will be made for the first time in 2005, at a rate of 25 % of that applicable for the EU-15. This amount, as well as those in respect of rural development, are in line with the decisions taken at the Copenhagen Summit of December 2002 and with the Act of Accession,

-- the impact of the decisions on the reform of the common agricultural policy agreed in June 2003 and formally decided in September 2003, under which a lowering of market support for certain sectors is accompanied by an increase in direct aid payments to farmers. The year 2005 is the first for which these decisions have a significant impact on the budget.

The evolution of the main activities of the policy area can be summarised as follows:

Plant products activity: the appropriations increase from EUR 27 537,4 million in the 2004 budget to EUR 29 792,4 million in the 2005 PDB (+ EUR 2 255 million). The principal element in this increase is the first payment of direct aids to farmers in the new Member States, of which the predominant part will take place through the single area payment scheme, with appropriation needs of EUR 1 394 million.

The remainder of the increase mainly reflects the impact of the decisions on CAP reform, under which the expenditure needs for the direct aids covered by this activity increase by EUR 540 million, essentially for reinforced or new aids in the arable crops and rice sectors, and for nuts. Increased needs for market measures in the cereal, sugar and textile plant sectors totalling EUR 171 million are due in particular to the impact of a lower value for the dollar against the euro (EUR 1 = USD 1,25), compared to the rate used for budget 2004 (EUR 1 = USD 1,12). In the case of cereals, this impact is limited by the expectation that world prices for wheat and maize will remain relatively firm for 2005, at levels higher than those used for 2004. Elsewhere in this activity, increased needs are also foreseen for the operational funds of producers groups in the fruit and vegetables sector, and for distillation measures in the wine sector.

For the activity 'Animal products,, appropriations of EUR 14 026 million are proposed, compared to EUR 12 717,5 million for 2004 (+ EUR 1 308,5 million).

The major part of the increase is the consequence of the CAP reform decisions concerning milk and milk products, under which direct aids to dairy farmers for a total amount of EUR 1 390 million are payable for the first time in 2005. Taking into account the savings for market measures, resulting from the reform decision to modify price support arrangements, notably the reduction in intervention prices for butter and skimmed milk powder as from 1 July 2004, the net increase in the needs for this sector is EUR 942 million.

With regard to direct payments in the beef and sheep and goat meat sectors, the 2004 budget was atypical since just over EUR 400 million was paid out as advances from the 2003 appropriations to farmers in certain drought-affected regions of the Union. Thus 2005 sees a return to normal for these payments. For market measures for beef and veal, the needs decrease, especially for export refunds.

EUR 10 771 million is foreseen for the rural development activity, compared with EUR 10 095,2 million in 2004, in line with the evolution of the financial perspective, including the needs for the new Member States.

The appropriations allocated to rural development funded by the EAGGF Guarantee are set exactly at the level of the financial perspective for heading 1b. For the new Member States, the commitment appropriations under the EAGGF Guarantee (EUR 1 931 million) correspond to the amount agreed in Copenhagen and taken into consideration in the adaptation of the financial perspective for an enlarged Union, as decided in May 2003. Given the nature of the transitional instrument foreseen for the financing of rural development measures under the EAGGF Guarantee for the new Member States, these differentiated appropriations are booked under a separate heading, with proposed payment appropriations of EUR 1 369,4 Million.

Concerning rural development financed by the EAGGF Guidance Section, the increase in commitment appropriations reflects, in particular, the allocation of the reserve for EU-15 not yet programmed and distributed between the four Funds, on the basis of the assumption that the share of each Fund remains unchanged, as well as the progression of the envelopes for the 10 new Member States (EU-10), in accordance with the rhythm of the development of the financial perspectives. For payment appropriations, the decrease compared to 2004 results from the almost-completed closure of the programmes for the period 1994 to 1999.

For the Sapard activity an amount of EUR 248,8 million is proposed as commitment appropriations for operating expenditure in respect of Bulgaria and Romania in accordance with the road map agreed in Copenhagen in 2002. Payment appropriations are set at EUR 540 million, comprising EUR 250 million for Bulgaria and Romania, and EUR 290 million to cover the completion of the programmes for the 10 new Member States. A further EUR 1,5 million is foreseen for management expenditure.

3.6. Title 06: Energy and transport

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(*) The external staff for PDB 2005 includes 30 external staff for the executive Agency 'Intelligent Energy, and eight new establishment plan posts of the executive agency. Eight officials from the Commission, whose posts will be frozen in the Commission's establishment plan, will be seconded to the Agency and will also be covered by the establishment plan of the Agency.

Two documents chart the Commission's action in the field of energy and transport: the Green Paper 'Towards a European strategy for the security of energy supply»and the White Paper «European transport policy for 2010: time to decide,. They point to new ambitions for European policy on energy and transport. The main aims are to complete the internal market, contribute to sustainable development, develop the major infrastructure networks and connect them to neighbouring countries, improve safety and security, achieve enlargement and establish real cooperative actions with third countries.

The objectives of transport policy within the Union should help to gradually shift the balance in favour of environmentally friendly modes of transport and put users at the heart of policy. All the activities in this area form part of the Commission's priorities for successfully integrating the new Member States within the enlarged Europe and, at the same time, promoting competitiveness and citizenship.

A number of factors account for the significant increase in commitment appropriations for inland, air and maritime transport:

- the development and roll-out of the activities of the European Aviation Safety Agency (EASA - operational since September 2003) and the European Maritime Safety Agency (EMSA - operational since December 2002),

- the proposal to charter an anti-pollution vessel, to be available to Member States for use in cases of accidental or continuous marine pollution following the extension of the activities of EMSA,

- continuation of the Marco Polo programme designed to promote innovation in the logistics and intermodal markets,

- the establishment of the European Railway Safety Agency,

- creation of the Galileo supervisory authority (with no specific budget in 2005),

- modernisation of the infrastructure for the management of air traffic (Deploy project),

- improvement of maritime safety by satellite surveillance, in order to monitor vessels that pollute EU waters, thereby enforcing the new regulation which prohibits the emptying of tanks out at sea,

- a feasibility study and measures for the coordination of EU coastguard services.

In addition the earlier activities on transport safety or improvement of transport systems (sustainable mobility) are being continued. There are also projects to implement in the field of air transport to establish the single sky and the open sky negotiations.

All these actions must be extended to the new Member States and consistent efforts are needed to apply existing European rules. Safety and intermodality are particularly sensitive issues here.

The transEuropean networks activity focuses mainly on the development of the transEuropean transport and energy networks. In following up the White Paper on the common transport policy, the Community guidelines for the development of the transEuropean transport network were updated in 2003. The purpose of this review was to add to the list of priority projects proposed in 2001 new projects, including support for the development of transnational motorways of the sea projects, bringing the total to 29 projects, to attach a label of European interest to these projects, to introduce a mechanism to strengthen the operational and financial coordination of the Member States and put back the deadline for completing the transEuropean network to 2020. The guidelines of the transEuropean energy network were also revised in order to set new priorities and provide greater flexibility in the adoption of projects.

It should also be noted that the proposal for a regulation on border regions was withdrawn.

Regarding conventional and renewable energy, in 2005 the Commission will continue rolling out the Intelligent energy -- Europe programme, which is intended to promote energy savings, particularly in transport, the development of renewable energy and the promotion of these actions in developing countries.

As indicated in the Green Paper 'Towards a European strategy for security of energy supply, the Union's energy policy also aims at maintaining a high level of security of energy supply in order to improve the competitiveness of manufacturing industries and the EU's energy supplies for the benefit of consumers and in the context of sustainable development. 2005 should see the adoption of a new directive on security of gas supplies. A budget heading for preparatory action was entered in the 2004 budget to accompany the adoption of this directive.

A regulation on cross-border trade in electricity has been adopted and it is therefore proposed that a specific budget heading be entered for this.

The priorities for the nuclear energy activity continue to focus on enlargement, sustainable development, protection of the public and national and regional responsibility. The recent accession of 10 Member States will mean applying to the nuclear installations of these countries the provisions of Chapter VII of the Euratom Treaty, cooperation with the International Atomic Energy Agency (IAEA), nuclear supplies (laid down in Chapter VI of the Euratom Treaty) and implementation of Euratom international agreements (Chapter X).

In addition, on the basis of experience in recent decades, the Commission will step up its nuclear inspections by means of audits of quality control systems put in place by operators.

The principle of inspections under Article 81 of the Treaty will be maintained and the internal consistency of checks will be improved. Account will also be taken of the work done by Member States and by the International Atomic Energy Agency responsible for nuclear non-proliferation controls.

The research related to energy and transport activity covers some of the measures under the sixth research framework programme on energy and transport. The appropriations requested are consistent with the financial programming of the programme. The priorities are to consolidate the position of European industry in aeronautics (technology relating to introduction of the single sky) and space (Galileo) and to help exploit the potential of this sector with a view to improving safety and environmental protection. In the energy field the priorities are concerned with managing energy demand, integrating renewable energy sources on a large scale and promoting the use of clean urban transport and replacement fuels. In the field of transport the initiatives are a response to the need to develop innovative systems for all modes of surface transport (rail, road and inland waterways) that are environmentally friendly and competitive create a new balance between and integrate the different modes of transport and enhance safety.

A new activity «Safety and protection of energy and transport users» is created in 2005. It covers transport safety, nuclear safety and radiation protection. Airport and maritime inspections are an integral part of the first strand of this new activity and will be developed to cover the enlarged Union. Implementation of the nuclear safety obligations derives from the Euratom Treaty (Chapter 3) for which the Commission adopted a communication in November 2002 and two directives were before the Council for approval at the start of 2004. If the directives are adopted a minimum core of nuclear safety experts will be required. Radiation protection skills are of particular importance for the new Member States. Implementation of the Chapter III Euratom provisions will also be stepped up. In particular the number of inspections scheduled will have to be increased and more attention will have to be paid to the evaluation of the information collected.

New headings have been created for administrative appropriations to support the Marco Polo programme actions and projects in the field of transport safety and the security of conventional energy supply. The creation of the Intelligent Energy Executive Agency in 2004 will also mean increased requirements for administrative appropriations in 2005. The nuclear administrative appropriations increase in order to cover the administrative operation of on-site laboratories.

3.7. Title 07: Environment

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Strategic objectives 2005

The strategic objectives of DG ENV, targeted towards ensuring a high level of protection of the environment and sustainable development, are set in the sixth environment action programme 2002 to 2012, and will not change fundamentally in 2005. Within this strategic framework, continued priority will be granted to climate change, the quality of natural resources and bio-diversity, sustainable use of resources, environment and health (air quality and the urban environment) and global environment issues.

The protection of the environment is a key element of all the APS 2005 priorities. In the context of competitiveness and cohesion, investment in environmental technologies will give a boost to the economy, delivering growth while reducing negative impacts on health and the environment, and will enhance the quality of life. Concerning citizenship and security, EU citizens look to the EU-level for protection against disasters as well as CBRN threats. They look for a rapid response in the event of natural or man-made disasters, and for risk prevention measures, in particular to ensure that hazardous chemicals are controlled. This has an important environmental dimension and is closely linked with the implementation of environmental legislation. Finally, concerning the third priority of global security and stability, environmental policy has a key role to play in the effort to promote the external dimension of sustainable development.

Major changes in 2005

While there will be no change of the overriding objectives of environment policy, there will be a shift in emphasis and focus in 2005 towards the timely implementation and correct application of the existing body of environmental legislation, particularly in the new Member States, in order to ensure the integrity of the internal market. Among the major challenges in 2005 will be the implementation of the world's largest emissions trading system in the area of climate change, and the active management of the Natura network throughout the enlarged EU.

The number of complaints and infringement cases related to the environment has increased steadily during recent years. To avoid that this situation is exacerbated with enlargement, new approaches need to be developed such as improved design of legislation, comprising broad stakeholder consultation, extensive assistance to Member States and enhanced monitoring and reporting.

Particular resource needs are anticipated for the implementation of waste legislation, the habitats and birds directives, climate change legislation, chemicals legislation, integrated pollution prevention and control legislation. Another major change in the work of DG ENV concerns the finalisation of plans for the implementation of REACH, and especially the setting up of the Chemicals Agency, following the proposal made by the Commission in 2003.

Given the implementation challenge, priority is given to implementation of current activities and legislation over the development of new policy initiatives. The internal redeployment exercise of human resources as well as new posts agreed in the APS 2005 decision will be mainly dedicated to reinforce implementation actions.

New environmental policies are growing in complexity and new approaches are being developed. These include integrated, science-based approaches, in the form of thematic strategies that involve working on themes rather than individual pollutants. The thematic strategies on resources, the marine environment, air and the urban environment are examples of this approach, and are to be completed in 2005.

The open method of coordination is being progressively applied to environment policy and will be tested in the environmental technology area in 2005. Impact assessments of all new policies having an important economic, social and environmental impact will be systematically conducted in 2005.

Environment policy is being developed in close consultation with stakeholders: these new approaches, combined with increased attention being paid to governance, make increasing demands on time and resources throughout the policy cycle.

Wider Europe and global. The enlargement of the EU will bring new neighbours to the east and closer links with the Mediterranean. In this context a new neighbourhood policy is being developed, which will have environment aspects and related resource implications. The Commission is expected to adopt a Wider Europe package which will cover the environment dimension in May 2004. This will require substantial follow-up in 2005.

The EU is committed to promoting the external dimension of sustainable development. The EU is a strong supporter of multilateral environment actions. In 2005, DG Environment will contribute to the effort to reach the Millennium goals on renewable energy, through the support to the Johannesburg Coalition on Renewable Energy, and on sanitation through water initiatives which promote the good management of water resources.

Civil protection: as mentioned above, there is a growing demand for enhanced EU response to natural and technological disasters. The EU civil protection mechanism, currently operated by DG Environment, will need reinforcement in the enlarged EU.

Future outlook

The Communication on the financial perspectives post-2006 will require adaptation of the Commission's overall financial framework and structural programmes in 2005. DG Environment's objective is to integrate environment fully into the other funding programmes (cohesion, competitiveness, agricultural, rural development, fisheries research and development, external and development programmes), while at the same time having a separate funding instrument to cover specific environment objectives.

The results from the review of the sustainable development strategy in 2004 may have implications on environment priorities in 2005 and beyond. This will feed into the review of the Lisbon Strategy in 2005, an exercise that will also require a significant involvement from DG Environment.

3.8. Title 08: Research

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This policy area covers:

- shared-cost actions managed by the DG for Research on the basis of the sixth framework programme for research and technological development. As other policy areas are involved in the implementation of the sixth framework programme, a summary table is attached,

- activities connected with the formulation and coordination of research policy for DG Research in order to support the creation of a European research area

- shared-cost actions managed by the DG for Research on the basis of the completion of the research and technological development framework programmes earlier than the sixth,

-research programme actions of the research fund for coal and steel financed by the net revenue generated by the investment of the ECSC assets remaining when the Treaty expired,

- action connected with the enhancement of European industrial potential in the field of security research.

Sixth framework programme: 2002 to 2006.

The sixth framework programme was set up by Decision 2002/1513/EC of the European Parliament and of the Council to help achieve the objectives set out in Article 163(1) of the Treaty, namely 'strengthening the scientific and technological bases of Community industry and encouraging it to become more competitive at international level, while promoting all the research activities deemed necessary by virtue of other chapters of this Treaty,.

In accordance with the approach of multiannual planning of the objectives, priorities and actions of the sixth framework programme, 2005, like 2004 before it, continues the implementation begun in 2003.

Within this policy area the budget planned in 2005 for the framework programme is EUR 3 292,9 million, an increase of EUR 135,9 million (4 %) on the 2004 budget.

The activity "Formulation and coordination of research policy for DG Research" concerns initiatives to be taken by the Commission in order to support the creation of a European research area, particularly with a view to promoting coordination and consistency among national policies and Community policy in RTD:

-- the European Research Area: by increased coordination of national and regional programmes, the coordination of national policies by benchmarking measures, networking of centres of excellence and the creation of virtual centres of excellence, strengthening the role of the regions in European RTD, managing the European RTD evaluation network and carrying out high-level scientific or technological analyses and evaluations to explore new fields of research appropriate for Community action,

-- preparation and monitoring of the decision-making process of the framework programme and the annual report which is drawn up pursuant to Article 173 of the Treaty,

-- coordination of RTD actions with other Community policies and Commission initiatives to explore strategic links between RTD and market realities,

-- relations with international bodies and programmes,

-- cross-cutting activities creating synergy between the Structural Funds activities and research and technological development activities,

-- continuous monitoring of the framework programmes and their specific programmes by the Commission and their evaluation by groups of independent experts,

-- communication and dissemination of information to the outside world.

Completion of framework programmes earlier than the sixth.

These activities correspond to the completion and clearance of commitments under pre-1999 programmes and the fifth framework programme (1998 to 2002) EC and Euratom.

With regard to the activity «Research programme of the research fund for coal and steel», the protocol on the financial consequences of the expiry of the ECSC Treaty and on the research fund for coal and steel, adopted at Nice and annexed to the Treaty establishing the European Community, states that the net revenue generated by the investment of the ECSC assets remaining when the Treaty expired should be used exclusively for research in the sectors related to the coal and steel industry.

This fund is used exclusively for financing research projects in coal- and steel-related sectors which are not covered by the research framework programme.

Concerning the enhancement of the European industrial potential in the field of security research, the financial resources shown result from the new proposed preparatory action.

This action, lasting three years, will be in its second year in 2005.

This preparatory action is complementary to the actions and efforts of Member States and the other European institutions in this area and focuses in particular on the development of an advanced security research programme.

The objective is to study how and by what means an environment can be created that is more favourable to Europe's scientific, technological and industrial competitiveness in matters of security.

3.9. Title 09: Information society

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The policy area 'Information society, consists of the three operational activities: the communication policy, eEurope, and research and technological development in the area of information society.

The communications policy provides a major contribution to the objectives set by the Heads of State or Government in Lisbon in 2000, i.e. to make Europe the world's most competitive and dynamic economy by 2010.

This contribution consists in enabling and promoting the development of an open and competitive internal market for communications networks and services, in which growth, innovation and efficiency are stimulated.

The main components of this policy are to address the general conception and coordination of the regulatory policy for electronic communications and associated services, monitor and enforce the implementation of the regulatory framework in Member States, develop a radio spectrum policy at Community level, foster the development of Internet-related services and coordinate the international aspects of policies and regulations in liaison with other Commission services.

The electronic communications policy contributes not only to generate competition in the market but also to enable European citizens to benefit from the Information Society

The eEurope activity contains several programmes that contribute to the implementation of the eEurope action plan. The broad objective of the eEurope 2005 action plan is to accelerate the transformation to the information society and to ensure that the benefits are available to all citizens. To this end the activity eEurope encompasses:

-- Modinis (monitoring of the eEurope 2005 action plan, Dissemination of good practices and the improvement of network and information security) - the main financial instrument, directly targeting the Council resolutions in the action plan, such as benchmarking indicators, the eEurope Steering Group, and exchange of best practice,

-- e-Ten - supporting the set-up of' 'public e-services' identified in the action plan by bringing services of common interest based on electronic data transmission networks to an operational level,

-- eContent and eContentplus supporting the development of European digital content on global networks, thus addressing the central requirements for a wider take-up of broadband.

-- the Internet action plan and Safer Internet action planplus addressing a more secure information infrastructure by promoting the safer use of the Internet through combating illegal and harmful content,

-- finally, the European Agency for Network and Information Security will be fully operational and facilitate a coordinated approach on security issues on European scale.

Research and technological development in information society technologies (IST) contributes to the realisation of the Union policy priorities established in the Lisbon and Götenborg summits. It aims at developing the technologies and skills that are instrumental for improving the Union's growth potential, and ensuring cohesion and larger participation of citizens in public life.

The focus of the IST priority under the sixth Framework programme (FP6) is on the future generation of technologies that will allow computers and networks to be seamlessly integrated into the everyday environment. This vision places the users, people and businesses, at the centre of future developments for an inclusive knowledge-based society for all. IST in FP6 will increase innovation capabilities and competitiveness of European businesses and industry and will help address the Union's major societal challenges.

This research effort will therefore reinforce and complement the eEurope 2005 objectives and look beyond them to the 2010 goals of the Union of bringing IST applications and services to everyone, every home, every school, and to all businesses.

The ability of Europe's research teams to remain at the forefront of all fields of science and technology also depends on their being supported by state-of-the-art infrastructures.

In this respect DG INFSO, through the Communication network development scheme, promotes the deployment of «eInfrastructure» for research capitalising on new computing and communication opportunities, aimed at the establishment of 'virtual research communities,. Broadband communication networks and grid technologies are key to promoting a further breadth and depth to collaboration amongst researchers in Europe. These activities are highly relevant to the political goals set out by the European Research Area and the eEurope initiative.

3.10. Title 10: Direct research

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The Joint Research Centre's mission is to provide customer-driven scientific and technical support for the conception, preparation, implementation and monitoring of European Union policies. The JRC is independent of special private or national interests and serves the common interest of the Member States, providing support when there is a need for intervention at European level.

The JRC's contribution to the framework programme takes account of the recommendations of recent evaluations and the requirements of the reform of the Commission. In particular, it includes:

-- a strengthened user-orientation,

-- networking activities to create a broad knowledge base and, in the spirit of the European Research Area, more closely associate Member and accession State laboratories, industry and regulators in the scientific and technical support provided to the Community policies,

-- the concentration of activities on selected themes; the training of researchers using, in particular, large-scale facilities and specialised laboratories.

In its areas of competence, the JRC will aim at establishing synergies with the relevant thematic priorities in the other specific programmes.

Three characteristics permeate JRC's work programme: (i) concentration; (ii) openness and networking; and (iii) customer-orientation.

The thrust of the JRC's support to EU policies lies in the provision of technical support on issues related to environmental protection, safety and security of the public and sustainable development. This includes risk assessment, testing, validation and refinement of methods, materials and technologies to support a whole gamut of policies ranging from safety of food products, chemicals, air quality, water quality, nuclear safety, to protection against fraud. Almost all this support will be carried out in close collaboration with laboratories and research centres in Member States and elsewhere. To achieve this, the JRC has refocused its activities upon three core areas, supported by horizontal competences:

-- food, chemical products and health (food safety and quality, GMOs, chemical products, biomedical applications),

-- environment and sustainability (climate change, technologies for sustainability, environmental protection, GMES),

-- nuclear safety and security (waste treatment and storage, radio-protection, reactor safety, illicit trafficking, reference materials and measurements).

The core areas will be complemented by three horizontal activities namely technology foresight, reference materials and measurements (BCR, Reference materials, chemical measurements) and, public security and anti-fraud (demining, natural and industrial hazards, cyber-security, antifraud technologies).

The multiannual work programme (2003 to 2006 ) has been drawn up in close consultation with user directorates-general and reflects the scientific and technical support necessary to support the policy concerns of Commission services where the JRC has the necessary competence and resources. In 2005 the area of safety and the establishment of links between the environment and health will be given special attention and, if necessary, additional resources by internal prioritisation.

In 2005, there are two main articles where significant modifications to the budget are to be found, notably related to enlargement and the decommissioning and waste management of nuclear installations on JRC sites.

As regards enlargement, specific JRC action will be designed to promote the integration of organisations and researchers from the new Member States in JRC networks and projects, in particular in areas such as the environment and food or nuclear safety where these countries still need to come into line with the scientific and technical requirements of Community legislation. The JRC will also continue the information and promotion measures in the three remaining candidate countries and will turn more to the countries of the western Balkans. It will also provide scientific and technical support for the Union's new neighbourhood policy.

With regard to the historical liabilities resulting from nuclear activities carried out by the JRC under the Euratom Treaty, the Commission has, since 1999, been implementing a plan of action for the decommissioning of nuclear installations remaining from past nuclear activities. These activities were initially concerned with developing nuclear energy in Europe, and subsequently with improving the security of installations

The action plan comprises the construction of waste processing installations at the Ispra (IT) centre and the construction of a storage facility on the Ispra site, given that Italy has no storage facility. It will continue with processing of existing waste and the decommissioning of all the installations including the processing and storage of the waste produced.

Implementation of the action plan concerns, initially, the JRC centre in Ispra, where virtually all nuclear activities are carried out. The Petten (NL), Geel (BE) and Karlsruhe (DE) centres, still in operation, will implement their action plan once they have closed down their nuclear installations, which could be around 2015 for Petten and 2025 for Geel and Karlsruhe.

The evaluation of the Commission programme conducted in 2002 and 2003 by a consortium of outside firms confirmed the headings envisaged by the JRC and reviewed the cost of the programme, while at the same time recommending that it be speeded up. Any delay or extension of the duration would increase the cost of the programme. The outcome is an increase in the budgetary requirements for 2005 for sending back to the USA the irradiated fuel at Petten of American origin (before 2006 when this possibility should disappear) and to build the waste storage centre at Ispra. The latter stage is a precondition for launching the waste processing and decommissioning operations.

3.11. Title 11: Fisheries

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The common fisheries policy underwent a major reform in December 2002. In fact, it has been the most far-reaching reform since the inception of the CFP. In 2005, the main strategic objectives will focus on the full implementation and consolidation of the reformed CFP and on the application of tools and instruments that the new regulatory framework provides for in an enlarged Europe and in a different political context, in particular involving greater consultation of stakeholders.

Thus, DG Fisheries will be implementing key aspects of the CFP, particularly in the field of conservation (recovery plans for depleted stocks, data-collection programmes, focus on the Baltic and the Mediterranean to reflect the needs of new Member States), governance (direct communication and information strategy), policy dialogue and communication with stakeholders (creation and effective functioning of the first regional advisory councils), control and enforcement (setting up of a Community Fishery Control Agency), fleet policy follow-up (new fleet register system starting in September 2004, development of parameters to better measure the fishing capacity) and external relations (fisheries partnerships agreements). As part of the CFP reform for fleet policy several measures such as aid for exportations and for the construction of fishing vessels will expire on 31 December 2004.

Enlargement will continue to have a significant impact on a number of Commission activities such as fleet policy, management of fishing opportunities, control and enforcement, data-collection, governance and the follow-up of structural funds.

The likely increase of the fisheries budget will be around 7,2 % or some EUR 71 million, as follows:

The slight increase (0,38 %) for the Fisheries market is attributable to the increased use of the market intervention mechanism foreseen in the enlarged Europe.

The increase (4,1 %) for International fisheries agreements is due to the renewal of protocols linked to existing fisheries agreements about to expire, and new agreements to be negotiated, the framework contract put into place to assist the Commission with the evaluation, studies and analysis of the various agreements, the new membership to two regional fisheries organisations (RFOs), and the increase in the contributions due to enlargement and the activities of the RFOs.

The 46 % increase for governance of the common fisheries policy is largely due to the creation and effective functioning of the Regional Advisory Councils.

In the context of the sixth framework programme for research and in respect of the indicative amounts foreseen for the priority 'Policy support and anticipating scientific and technological needs,, an agreement on the multiannual programming has been reached by all participating policy areas (operating and administrative budget). This multiannual programming represents the basis for the variations in the commitment and payment appropriations.

As regards the activity 'Structural interventions for fisheries, the increase is 8,04 %. The FIFG finances measures under Objective 1, to promote development and the structural adjustment of the less developed regions; and structural measures in the fisheries sector outside Objective 1 regions. The 2005 commitment appropriations are in line with the financial programming plan.

The 7,9 % increase for 'Fisheries conservation, control and enforcement,is essentially for the extension of the data collection programmes to the new Member States. The availability of reliable data and scientific advice is essential for the conservation policy of the fisheries stocks.

3.12. Title 12: Internal market

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In the first phase of European integration the internal market played a key role, culminating with the political plan of completing it in 1992.

Today the internal market is entering a new phase, which could be termed rediscovering the internal market as the driving force behind a new economic dynamic for the post-enlargement period. The main stress will be on a shift away from the introduction of common rules towards the development of 'systems, effectively integrating Community action with the action of the Member States, with the aim of ensuring governance of the internal market. This approach adds to compliance with common rules the need for constant attention to check that the systems set up operate in an economically satisfactory manner.

The overall financial resources requested are down on 2004 because of an overhaul of priorities and a substantial reduction in the investment on studies. The EUR 10,1 million in commitment appropriations proposed for 2005 should cover the work necessary to achieve the following policy priorities, in line with APS 2005:

Competitiveness and cohesion

An upturn in growth will be the Commission's key objective in 2005, by constantly striving to improve the competitiveness of the European economic and social model. In 2005 adjustments and/or new initiatives are essential in order to provide a stable macroeconomic framework for the pursuit of the structural reforms inherent in the Lisbon strategy. The action will be refocused on economic reforms.

-- In the context of development of policies, particular attention will be paid to services in general and more especially financial services:

The proposed directive on services, which covers many sectors of activity and should be approved at second reading in the course of 2005, will prompt the Commission to adopt a proactive approach to Member States to ensure transposal within the time allowed and to provide flanking measures for implementation of the necessary instruments to ensure the administrative cooperation required by the directive.

A number of important directives concerning financial services, and any implementing measures, will have to be transposed in 2005 in the legal orders of the 25 Member States (in particular on international accounting standards, insurance intermediaries, market manipulation, etc.).

Many measures announced in the action plan on corporate governance and company law will take shape in 2005 and a wide-ranging action programme covering a number of areas of activity will be implemented.

The new internal market strategy 2003 to 2006 will be translated into specific proposals for 2004 onwards and implementation will continue in 2005.

The transposal of various legislative measures will be one of the main tasks during 2005: the proposed directive on regulated professions should be finally adopted by Parliament and the Council. The transposal of this very important directive will then have to be monitored in the 25 Member States. The adoption in 2004 of the legislative package on the modernisation and consolidation of public procurement will also be followed by transposal in the 25 Member States which the Commission will have to monitor.

Tasks of modernisation - action plan on electronic public procurement and evaluation, (as in the case of postal services) - of existing instruments will also be a major objective in 2005.

-- A large number of new initiatives will be launched in various areas:

In the field of financial services three new proposals for directives (on clearing, solvency margins and shareholder rights) will be presented by the Commission in 2005. The emphasis will thus be on completion of the 43 measures contained in the action plan for financial services.

Because of the importance of public procurement (which represents 16% of GNP) the Commission will step up its harmonisation efforts. To this end a proposed directive on redress and the follow-up to the green paper on public-private partnerships, and legislative proposals concerning the common vocabulary for public procurement will be presented in 2005.

DG MARKT will also contribute to the development of a unified area of security and defence with two major proposals: one on public defence contracts and the other on intra-Community transfers of defence products.

Improving access to the products market in non-harmonised sectors, creating an additional Community protection certificate for medicinal products and plant health products or increasing coherence and simplifying existing legislation are also objectives for 2005 in areas such as free movement of goods, industrial property or copyright.

Citizenship

Among the initiatives designed to bring Europe closer to its people, two actions announced in the internal market strategy 2003 to 2005 will be undertaken by the Commission in 2005: enlargement of the dialogue with citizens and business and the establishment of a new internal market portal.

External responsibility

The activity of developing the regulatory dialogue on opening up financial markets and prudential cooperation with the Community's main economic partners, which has been in progress since 2002, will have to be stepped up in 2005.

As part of its new neighbourhood policy, the Commission will pay particular attention to the extension of the internal market and its regulatory structures to its new immediate neighbours (Mediterranean, Russia, Balkans, Ukraine and Moldova), defining common objectives with each country. A good deal of work will have to be done on clarifying the political, legal and technical concepts and implications and negotiations will have to be conducted on various sectoral chapters.

Improving implementation of the reform

After two full cycles of activity-based management, adjustments will be required to the performance indicators. The evaluation function will be reinforced and the new requirements connected with impact assessment will assume their full significance in 2005.

As regards personnel management, the new policy adopted by the Commission and the implementation of the new Staff Regulations require far more rigorous support, management and monitoring which DG MARKT intends to develop actively in the course of 2005.

3.13. Title 13: Regional policy

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This policy area includes the management of regional policy, by means of the European Regional Development Fund (ERDF), the Cohesion Fund, the Structural preaccession Instrument (ISPA) and the Solidarity Fund.

In 2005, DG Regional Policy will stress the following horizontal priorities: the contribution of Cohesion Policy through the Growth initiative to European competitiveness, to reinforce the links between Cohesion and other political domains and to participate fully in the implementation of the new Neighbourhood Instrument.

The programmes which started at the beginning of the programming period 2000 to 2006 have now reached 'cruising speed,, and the amount of payment appropriations required matches closely the annual commitment 2000 to 2006. The increase in technical assistance 2000 to 2006 is directly related to enlargement.

The implementation and management of the new programmes of the new Member States will be at cruising speed in 2005, and will need particular scrutiny, as the first programmes already need to be closed by the end of the programming period 2000 to 2006.

While the focus was on preparation and implementation in 2004, it will now shift more to financial management. There will remain an ongoing need in to provide assistance to the administrations of the new Member States. The negotiations with Romania and Bulgaria on Chapter 21 will need to be continued in a focused way in 2005, and need to maintain their resource capacity.

At the threshold of a new programming period, proper consideration will have to be devoted to the new regulations for the programming period 2007 to 2013.

Strategic objectives for 2005

(a) Strategic objectives

The strategic objectives of DG Regional Policy for 2005 continue its targets as described in the DG's 2004 annual management plan:

-- make the accession of new Member States a success,

-- ensure the full contribution of Cohesion policy towards growth and competitiveness,

-- ensure sound financial management.

These objectives are the building structure for the DG's main mission of economic and social cohesion.

The multiannual perspective 2004 to 2006

The full implementation of the new Member States programmes will have a permanent effect on the DG and requires additional resources on a permanent basis, both within geographical and horizontal units.

The numbers of interventions for the new Member States are as follows:

-- 24 mainstream Structural Fund programmes (CSFs, SPDs, OPs),

-- About 200 new Cohesion Fund projects,

-- 23 existing Interreg III programmes to adapt and nine new (sub) programmes.,

-- 387 existing ISPA projects ongoing converted to Cohesion Fund projects.

The next programming period

The preparation of the new regulations for the post-2006 programming period will need thorough preparation and coordination.

DG Regional Policy has an evaluation plan that covers the period 2000 to 2006 in its entirety. The following areas of work and resulting evaluations are particularly relevant for 2005:

-- the preparation of the Structural Funds after 2006. In this preparation full account will be taken of the enlargement of the EU,

-- the development of trans-European networks in the enlarged EU and an evaluation of the contribution of Structural Policy Instruments to this.

(b) Other objectives

The administrative reform will be implemented including the new accounting framework and the internal management system, complying with the growing requirements set out by the strategic planning and programming cycle and by activity-based management.

The Solidarity Fund has proven to be an adequate and visible tool for helping respond to natural disasters in Europe.

Changes with respect to 2004 budget.

Payments 2000 to 2006 have been calculated in a common approach for the four Structural Funds, as 95 % of an average year's commitments for Objectives 1 and 2, and as 80 % of an average year's commitments for the Community initiatives. Although payments 2000 to 2006 are still smaller than commitments 2000 to 2006 , (and therefore the amount still to be paid is bound to increase) they represent a significant increase compared with 2004.

For the Cohesion Fund, the commitments for the EU-25 are lower than in 2004. For the EU-10 there is a reduction that is in line with the agreements reached in Copenhagen. For the EU-15, there is a fall relative to 2004 due to Ireland's loss of eligibility for the Cohesion Fund. As a result of the adjustment for Ireland, the amount budgeted for 2005 is some EUR 62 million below the financial perspective ceiling.

In order to have a common structure between the four Structural Funds, heading 13 02 has been suppressed, and the 2000 to 2006 moved to heading 13 01 04 01 for administrative technical assistance, and to heading 13 03 08 for other technical assistance.

3.14. Title 14: Taxation and customs union

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This area comprises all aspects of the development of policies on taxation and customs union.

The EUR 2,9 million proposed for commitment for Operational support and coordination in general for 2005 is to meet the following requirements:

-- regarding customs policy, the updating of the European customs inventory of chemical substances (ECICS) database and an impact assessment of customs transit,

-- regarding fiscal policy, various studies on direct and indirect taxation and statutory charges.

The aim of the actions for the activity «International aspects of taxation and customs» (EUR 1,7 million) is to maintain relations concerning customs and taxation with third countries and international organisations (e.g. the discussions on the taxation of savings with the six third countries mentioned in the Feira conclusions and with other important financial centres (Hong Kong and Singapore)).

This activity also includes finalising the detailed preparations for candidate countries regarding taxation, technical assistance for candidate countries to make sure that they will be able to discharge their obligations, bringing national law into line with the Community acquis and ensuring that their administrative and operational efforts will be properly deployed as soon as those States accede, thereby ensuring that the internal market operates properly.

The Customs 2007 strategic programme for the Community customs system will continue to support the enlargement process through practical assistance for candidate countries, by agreeing guidelines to assist them in applying Community law, increasing computerisation to maintain quality control in the enlarged Community, furthering work on access for candidate countries to Community systems (especially regarding interconnectivity) and giving practical assistance, such as training, in all aspects of the customs application of Community rules (especially those in the Community Customs Code). In addition there will be support for developing cross-border cooperation between the enlarged Union and its new neighbours, as part of the new neighbourhood policy adopted by the Commission.

The actions making up the Customs policy activity in 2005 (EUR 35,06 million) form part of the internal aspects of the Customs 2007 programme and also contribute to the proper operation of the internal market. The programme is mainly aimed at ensuring that customs services apply Community legislation in such a way that the single market operates properly in the enlarged Community. The detailed objectives of the programme take account of the need to make sure that existing IT systems operate and develop properly, to strengthen actions to fight fraud and to reduce the costs of securing conformity, while creating a competitive environment for enterprises.

The actions concern communication and information-transfer systems, management and project groups, comparative analyses, exchanges of officials, organisation of seminars and workshops and training and follow-up actions.

The extension of the Customs Union to the 10 new Member States, with the shift of much of the Union's external border to the east, will involve close monitoring of the activities of the new Member States. Steps will be taken to assist the services of new Member States to participate in a control system protecting the internal market acquis in trade with third countries.

The aims of the actions forming part of taxation policy are as follows:

-- to develop taxation policy, maintaining continuity in discussions on the code of conduct held in the Taxation Policy Group, in order to continue the study of a comprehensive approach to taxation. Likewise, account will taken of the support needed to remove tax obstacles to the operation of the single market and of studies of the effectiveness of national taxation policies,

-- regarding VAT, the Commission's principal aim in its new strategy will be the simplification, modernisation and more uniform application of the legislation and the attainment of greater administrative cooperation. The objective is to adapt the current VAT system in the short and medium term to enhance the smooth operation of the internal market.

The general objective of the Fiscalis 2007 programme is to improve the smooth operation of taxation systems in the internal market by enhancing cooperation between participating countries, their administrations and officials, to identify and remedy difficulties in areas such as legislation and administrative practices that impede cooperation and to strengthen taxation systems.

More specifically, various actions are planned in the areas of communication and information transfer, through exchanges of officials, working parties, seminars, multilateral controls and joint training initiatives.

The computerisation of the excise system (EMCS), whose legal basis is being prepared, involves the establishment of a European computerised system for the control of movements of products liable to excise duties.

3.15. Title 15: Education and culture

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The aim of this policy area is to strengthen the European Union's human dimension by helping to build a 'Europe of knowledge,, develop a European cultural area and enlist European citizens in the construction of Europe.

The task is to develop a European life-long education and training area that will form a world benchmark by 2010 and help to make the European Union the most competitive and dynamic knowledge-based economy in the world, capable of combining sustainable economic growth with a quantitative and qualitative improvement in work and greater social cohesion.

Steps must also be taken to preserve and enhance European cultural diversity in the various areas in where it manifests itself and ultimately, acting in the spirit of the new governance, to promote forms of active participation by citizens, particularly young people, in the European venture and by so doing to assist in developing mutual understanding and confidence and a spirit of tolerance in the Union as a polity that is open to the rest of the world.

Part of the increase for education in 2005 is the result of the additional resources allocated to the Socrates programme (EUR 361,2 million proposed for 2005), in line with the total amount scheduled for the programme over its lifetime (2000 to 2006). Another factor is the increase in the allocation for the Erasmus Mundus programme from EUR 8,0 million in 2004 to EUR 27,0 million in 2005.

The allocation for the eLearning programme, on the other hand, has to be reduced from EUR 16,0 million in 2004 to EUR 14,0 million in 2005 in order to remain within the overall limits set for the programme over its lifetime (2004 to 2006).

The allocation proposed for the other headings in this activity, covered by the programme of support for bodies active in the field of education, are much the same as the 2004 allocations.

The main Community operation under the vocational training activity relates to the second phase of the Leonardo da Vinci programme, for which EUR 208,2 million is proposed for 2005.

This chapter also includes the subsidies for Cedefop (EUR 16,1 million proposed for 2005) and the European Training Foundation in Turin (EUR 18,5 million proposed for 2005, including EUR 2,5 million from the Phare programme).

The principal Community operation under the activity «Culture and language» is the framework programme in support of culture, for which EUR 34,9 million is proposed for 2005, in line with the schedule for the total amount earmarked for the programme for its lifetime (2000 to 2004) and planned extension to 2005 and 2006.

The proposed allocations for the other headings of the activity, covered by the programme of support for bodies active in the field of culture, are amounts which comply with the overall multiannual amount for the programme.

The principal Community operation under the audiovisual policy and sports activity is the implementation of the MediaPlus and MediaTraining programmes. A total allocation of EUR 93,3 million is proposed for 2005, in line with the scheduling of the total amounts earmarked for the programmes over their lifetimes (2001 to 2005, being extended to 2006).

The reduction in the overall allocation for this activity is mainly accounted for by the fact that the 2004 appropriations included EUR 8,6 million for the European year of education through sport.

Regarding the activity «Dialogue with the citizens», the proposed allocations for the headings covered by the programme of support for bodies active in the field of active citizenship are amounts which comply with the overall multiannual total for the programme over its lifetime (2004 to 2006), which in particular entails reducing the allocation for town twinning (EUR 11,1 million proposed for 2005 compared with an allocation of EUR 14,0 million in 2004).

The principal Community operation under the youth activity is the YOUTH programme, for which EUR 111,5 million is proposed for 2005, which accounts for the increase in the appropriations for this activity.

The proposed allocations for the other headings of this activity, covered by the programme of support for bodies active in the field of youth, are amounts that comply with the overall multiannual total for the programme.

It should be pointed out that the appropriations for administrative expenditure on most of the programmes in the policy area will be used in part to finance the operating expenditure of an executive agency which it is proposed be set up in order to take charge, from 2005 onwards, of the management of aspects of programmes which hitherto have been managed with the assistance of temporary technical assistance offices.

3.16. Title 16: Press and communication

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This policy area aims at:

-- providing information to the media and the citizens on the activities of the Commission and on the objectives of its policies,

-- informing the Commission on the evolution of opinion in Member States.

In order to accomplish this mission:

-- all contacts with the media are centralised,

-- a development of a coherent approach to communication and information issues is sought within the Commission. This involves contacts with directorates-general and services within the Commission that have information units responsible for sectoral information,

-- a coherent mechanism for cooperation with Parliament, the Council of Ministers, and the Member States is being developed

-- all the activities of the representations in the Member States are coordinated.

The general objectives are:

-- to generate positive visibility for the European Commission and its action through media coverage of the institution and communicate the Commission's political messages to and through the media,

-- to provide coherent information to the citizens in the Member States and in the applicant countries, about the European Union at large, so that they feel that they are adequately informed about what the Union is about and what it does,

-- to make use of all modern means of communication to support the first two objectives through an articulated strategy that takes into account the role and impact of the different media.

The activities in this policy area will be deployed in the enlarged Union for a full year for the first time in 2005.

Headquarters and representations must therefore be provided with adequate resources to implement the communication and information strategy.

3.17. Title 17: Health and consumer protection

>TABLE POSITION>

DG SANCO is responsible for ensuring a high level of protection of consumers' health, safety and economic interests, as well as of public health, for European citizens.

No changes are foreseen to the multiannual general objectives set out in the 2004 annual management plan. Within those general objectives, a considerable amount of activity is due to enlargement, as the new Member States must be fully integrated into SANCO's policies.

The general objectives are:

Consumer policy

-- to implement a programme of actions under the five-year consumer policy strategy to improve the level of consumer protection across the EU,

Public health and risk assessment

-- to assure a high level of human health protection in the development of all Community policies,

-- to take actions to improve public health in the European Union, to prevent human illness and diseases, and to obviate sources of danger to human health. Action includes collaboration with the WHO,

-- to implement the Public health programme (2003 to 2008),

-- to provide independent and transparent risk assessment through scientific committees.

Food safety, animal health, animal welfare and plant health

-- to complete the legislative programme set out in the White Paper on food safety, and to secure and verify the effective implementation of the acquis in Member States and third countries,

-- to provide effective information to consumers on food and feed,

-- to promote EU food safety legislation and the coordination of EU positions within international organisations, and to ensure that EU food safety requirements are met while facilitating trade with third countries.

DG SANCO's activities over the medium-term are set out in the consumer policy strategy 2002 to 2006, in the Public health programme 2003 to 2008, and in the White Paper on food safety.

In particular, the provisional specific objectives for 2005 are as follows.

Consumer Policy

The consumer policy strategy (2002 to 2006) establishes a clear sense of political direction by setting three mid-term objectives: 'a high common level of consumer protection,, 'effective enforcement of consumer protection rules,, and 'involvement of consumer organisations in EU policies,.

In 2005 specific actions include:

-- a proposal for new legislative initiative on safety of services,

-- to review of the existing consumer policy acquis in the light of the response to the review paper to be produced in early 2004, with a view to harmonising consumer protection rules across the EU,

-- to continue work on the CHEM-risk project which will be supplemented by specific follow-up risk-management initiatives in the light of the results of the project. The first results of the application of the revised General product safety Directive (GPSD) in the enlarged EU will also be reviewed to assess its effectiveness,

-- the regulatory work on harmonising consumer rules, is complemented by non-legislative actions such as information campaigns, educational initiatives, and ADR alternative systems, will give consumers the confidence to seek the products and services wherever they can find the best deal

-- the work on economic analysis and data gathering for building a proper knowledge base for consumer policy and the Internal Market for consumers continue to be strengthened.

Particular emphasis will be given to the work extending consumer actions, including networks (including EEJ-Net, ECCs and Rapex-networks), and other actions (i.e. training programmes for staff of consumer associations in the new Member States and remaining candidate countries).

Public health and risk assessment

-- To implement the 2003-2008 Public Health programme, with reinforced support from an Executive Agency.

-- To follow-up the actions to be set out in the Commission communication on the recommendations of the high-level reflection process on patient mobility and healthcare developments in the European Union.

-- To implement recent legislative initiatives, i.e. the creation of the European Centre for Disease Prevention and Control, the tobacco directives, and those on blood and blood products, tissues and cells, and on bio-terrorism.

-- To launch new initiatives in areas such as organ transplantation, and to continue those already started such as alcohol strategy, the health and environment action plan, and the setting up of the public health portal.

-- To integrate the new Member States into the public health policies, networks, etc.

Food safety, animal health, animal welfare and plant health

-- To implement the programme set out in the White Paper on food safety.

-- To implement the new regulation, due to be adopted before summer 2004, on official food and feed control.

-- To update legislation and ancillary activities in the area of plant health.

-- To improve the ability of citizens to make informed dietary choices through a reform of food labelling and nutrition law.

Horizontal activity.

-- To manage and direct DG SANCO in accordance with Commission requirements and internal controls to achieve the general and specific objectives.

Other significant variations

In terms of financial resources, SANCO requested, a small increase in funding for EFSA (for which the decision has now been taken to locate it in Parma) in 2005, to ensure that the Authority can continue its build-up and meet the various demands placed upon it. This will require some additional financial support over and above that planned for 2005, hence the request for an additional EUR 2,5 million to give a total of EUR 36,7 million, which would smooth the increase in funding between 2004 (EUR 29 million) and 2006 (EUR 46,4 million). This increase would in large part be simply a recuperation of amounts that should have been taken up in earlier years, but were not, due to the uncertainties about the location of the Agency.

3.18. Title 18: Justice and home affairs

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2005 will coincide with the start of the second stage of establishing an area of freedom, security and justice, following the evaluation of the results achieved under the Tampere programme. The core and overarching strategic objective will remain to work on the completion of this area, and this objective will represent a key contribution to delivering the Commission's second APS priority for 2005 (Citizenship). 2005 will be a crucial year for consolidation (both in terms of presentation and adoption of certain legislative instruments, and of monitoring existing legislation), and a lot of work will need to be done further to the adoption of the Constitution, which should be concluded in 2004.

2005 will also be a busy year of preparation as regards the new financial perspectives, which propose a substantial increase in resources for the JAI policy area. For the Justice and fundamental rights framework programme, as well as for the Security framework programme, and already for certain parts of the framework programme for freedom of movement and solidarity in the area of migration, asylum and external borders, where the current Treaty allows for advances, DG JAI will prepare and present the relevant proposals during the second half of 2005.

This is reflected in the changes foreseen in DG JAI's strategic objectives for 2005 which are fully in line with the Council's multiannual strategic programme (2004 to 2006):

-- adapting to the prospect of new Treaty provisions and revised institutional arrangements in several areas of Justice and home affairs policy. In particular the new Treaty can be expected to abandon the pillar structure and to extend co-decision and qualified majority voting throughout the current Title IV TEC of the IGC; substantial preparatory work will take place in 2004 and 2005 such as preparing for transposing existing the Title VI TEU instruments into the usual Union legal instruments.

The second stage of the development of an area of freedom, security and justice may be finalised by the Council later than expected initially. However, preparatory work will already start in 2004 and an important input is to be provided in 2005. The following fields of action should be mentioned since they entail a clear multiannual dimension:

-- advancing the fight against terrorism, and implementing the strategy for the fight against organised crime, which are to be assessed and revised in 2005,

-- monitoring and evaluation of the development of the common immigration and asylum policies (annual reports on immigration and integration, asylum and illegal immigration, transposition and implementation of EU legislation in these fields, with a view to putting forward amended proposals). The establishment of the European Refugee Fund for the period 2005 to 2010 represents an important initiative in this field,

-- promoting the development of new channels for legal immigration to the EU and of a holistic approach to the integration of third country nationals, including the development of the activities of the national contact points for integration,

-- strengthening the control of access to the territory of the Member States of the EU, and reinforcing the fight against illegal immigration,

-- developing the second phase of the common European asylum system and in particular the more orderly entry to the EU of persons in need of international protection, and measures to enhance protection capacity in regions of origin,

-- reinforcing partnership with third countries in the management of migration flows and implementing the evaluation mechanism to monitor relations with them,

-- monitoring the degree of preparation of the new Member States to lift their internal borders with existing members of Schengen, and monitoring the new Schengen Facility (EUR 336 million in 2005),

-- developing a visa information system (VIS) and the Schengen information system II (SIS II), as well as biometrics,

-- supporting the development and reinforcement of a conceptually integrated European law enforcement information policy which also takes into account the data-protection issues in Title VI TEU,

-- increasing the protection of fundamental rights, in particular through the preparation for the setting up of the Fundamental Rights Agency,

-- developing common approaches to the protection of EU interests and values against criminal behaviours threatening the Union; ensuring a high standard of protection of individual rights, taking measures to build trust in a system based on mutual recognition (development of procedural safeguards, improvement of judicial training, mutual evaluation of implementation of mutual recognition, improvement of judicial capacity, etc.),

-- Achieving the mutual recognition programmes both in civil and criminal matters.

In the context of the new financial perspectives, preparation will take place in three new JAI framework programmes, to be presented to the Council and Parliament during the second semester of 2005. Certain elements of the Freedom of movement and solidarity in the area of migration, asylum and external borders framework programme will, however, have to await the entry into force of the Euopean Constitution because of the limitations of the present legal basis. This preparatory work and the management of large financial amounts will also require the DG to adjust its management capacities accordingly.

3.19. Title 19: External relations

>TABLE POSITION>

The policy area'External relations, comprises 10 activities: the major geographical programmes and some thematic activities. The major developments, in terms of commitment appropriations, are as follows (the amounts presented here include the administrative support expenditure - i.e. the former B...A headings - within the activities rather than presenting them as a separate group under Chapter 19 01):

-- eastern Europe, Caucasus and central Asian republics (+ 1,1 %; EUR 515 million): a new framework for the relations with eastern and southern neighbours was presented in March 2003 to the Council and Parliament and will be worked out further in 2004. This framework includes focusing the assistance notably on cross-border issues, on regional cooperation and on sustainable development on the eastern border, as well as further promoting reform and catalysing private investment. The 2005 PDB consolidates the 2004 increase so that the envelope proposed is 6,7 % above the 2003 level,

-- western Balkans (- 9,2 %, EUR 554 million): commitment appropriations for the western Balkans are on a decreasing trend after a period of very high reconstruction aid. However, in view of the neighbourhood priority and of the risks for continuing instability in the region, a major upward correction was operated in 2004 and proposed for the whole period 2004 to 2006. The PDB proposes to confirm in the 2005 budget the upward revision programmed last year,

-- Mediterranean and Middle East region (+ 6,8 %, EUR 1 070 million; when Iraq is excluded: + 4,5 % and EUR 880 million): this region benefits from more than 20 % of the heading 4 budget. EUR 190 million is set aside for Iraq out of the EUR 200 million package (additional EUR 10 million under Human rights and democracy), compared to EUR 160 million in 2004. The budget further supports the Middle East peace process through dedicated budget headings and as part of the MEDA programme. The latter channels the main part of the aid to the region. In 2004 a major upward revision of the aid to the region was voted as part of the redefined cooperation framework with the southern neighbours, already referred to above. PDB 2005 confirms the reprogramming initiated by the 2004 budget. The budget without Iraq increases by a further 4,5 % bringing it to a level which is 16,7 % or EUR 126 million higher than in 2003,

-- Latin America (+ 1,1 %; EUR 315 million): the proposed amount is a little above the 2004 appropriations. The proposed level of aid has to be assessed against the ending of the temporary additional financial support (worth EUR 250 million) deployed over 1999 to 2003 in Central America through the PRRAC (post-Mitch rehabilitation). If this temporary support is excluded, funds available for Latin America in 2005 are on an increasing trend and respond to the insistence of the budgetary authority that an adequate amount be directed towards that region,

-- Asia (+5.2%; EUR 648 million): the increase reflects mainly the profile of the assistance as reprogrammed in complement to the multiannual pledge of EUR 1 billion for Afghanistan made in January 2002. The attention given to Afghanistan will not be to the detriment of the aid to other beneficiaries in the region for which the budget can increase at the same rate as the overall allocation,

-- thematic programmes: in view of the tight situation of heading 4 the budget for the rapid reaction mechanism is maintained at its 2004 level (EUR 30 million). The appropriations for human rights are proposed at the level which prevailed on average since 2000 (with the exception of 2004). They stay in line with the recent Commission proposal for the extension of the expiring legal base into 2005 to 2006 and the follow-up to the deconcentration of the EIDHR. After the coming into effect, early 2004, of a new legal base for cooperation with non-member countries on questions of migration, an increase of its budget from EUR 30 million to EUR 45 million is put forward in 2005 and as programmed. For the second consecutive year, no contribution for KEDO is advanced, given the non-compliance of the Democratic People's Republic of Korea with its obligations regarding the non-proliferation Treaty.

-- common foreign and security policy: a budget of EUR 55 million is proposed. This is 16 % higher than the 2003 budget but lower than the 2004 budget (EUR 62,6 million). However, the decrease of appropriations in 2005 compared to 2004 is compatible with the financial programming which has been respected. According to the IIA of 6 May 1999, the amount for emergency measures covering unforeseen events may not exceed 20 % of the overall CFSP budget. The Commission has based its proposal on a judgement combining expected needs, the availability of other institutionalised channels for funding and the tight situation of heading 4.

3.20. Title 20: Trade

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The Union's trade policy aims 'to contribute, in the general interest, to the harmonious development of world trade, the gradual removal of restrictions to international trade, and the reduction of customs barriers' (Article 131 of the Treaty) .

Trade policy, broadly understood, forms, together with monetary policy and development policy, the main pillar of the European Union's external economic relations with the rest of the world. Its aim is to promote the economic and political interests of the European Union. It covers all the main aspects of trade in goods and services (tariff and non-tariff barriers, trade defence, in particular in cases of dumping and subsidies, export credits) and important aspects of intellectual property, investment and competition.

The key strategic objectives for the Trade policy area in 2005 are:

-- to promote trade policy as a key instrument for the Union's broader goals of promoting sustainable development and assuming a larger role in multilateral governance,

-- to ensure an effective and efficient common commercial policy - a key and exclusive competence of the Union -- with 25 Member States,

-- to carry on the work toward a successful conclusion and implementation of the Doha Development Agenda. Following the outcome of the September 2003 Cancun Ministerial, DDA negotiations have recently been on a slower track than would otherwise have been the case. However, the rhythm is to pick up during 2004, and 2005 is set to be a very intensive year for the negotiations and the ensuing implementation arrangements,

-- to maintain leadership in the WTO and remain a leading proponent of a multilateral trade system. In parallel with the Doha Round, regular non-DDA business will continue, for example in the Councils for Trade in Goods and for Trade in Services and their many subsidiary bodies,

-- to follow the expected addition of new WTO members. Some key accession negotiations (e.g. Russia and Saudi Arabia) will enter a determining and intensive phase in 2005,

-- while multilateral trade negotiations remain the EU's first priority, greater attention ought to be devoted to bilateral initiatives, whose timetable cannot necessarily await conclusion of the DDA. Even without considering possible new initiatives, the existing portfolio of bilateral negotiations is extensive and activity will be intense in 2005.

New initiatives for the trade policy area for 2005 with respect to 2004

In pursuit of the above objectives, it is envisaged, inter alia, that the following specific new initiatives will be undertaken in 2005 in the area of trade policy:

as regards the APS initiative 'Competitiveness and cohesion,:

-- specific focus on ongoing or envisaged international trade negotiations (multilateral and bilateral) to increase the opening of foreign markets to European service providers,

as regards the APS initiative 'Security and European citizenship,:

-- efforts to improve export controls of dual-use items in the enlarged EU,

as regards the APS initiative 'External responsibility,:

-- implementation and follow-up of Wider Europe action plans,

-- monitoring of sanitary and phytosanitary (SPS) measures in the context of Wider Europe

-- intense activity in bilateral trade negotiations (inter alia: Mercosur, Gulf Cooperation Council, Economic Partnership Agreements with ACP States, treaties with ASEAN countries).

In the area of trade defence the introduction of mandatory deadlines in anti-dumping and anti-subsidy review investigations imposed by the new Council anti-dumping and anti-aubsidy Regulation will create a more effective and transparent trade defence instrument. The amendments will however commit the Commission to carry out its trade defence investigations under a tighter regime, within shorter deadlines.

3.21. Title 21: Development and relations with ACP States

>TABLE POSITION>

The policy area covers a wide range of activities from political relations and policy formulation, to programming and implementation of cooperation programmes. It includes budgetary appropriations under heading 4 of the financial perspectives, and funds under the various European Development Funds (EDF) for the African, Caribbean and Pacific States, as well as the overseas countries and territories. The amount of the EDF varies from year to year due to the five-year implementation cycle, and corresponds to an estimated amount of approximately EUR 3 to 3,5 billion in commitment appropriations in 2005, compared to an overall total of about EUR 5 billion under heading 4, of which about EUR 1 billion falls technically under this policy area. This implies that the significant human resources, which are employed to implement the EDF and the complex operations under the Cotonou Agreement, are to be taken into account in the overall human and administrative resources requirements in this policy area.

The overall objective for this policy area, as defined in the Treaty, the Cotonou Agreement and the Community development policy, is poverty eradication, sustainable economic and social development, the integration of developing countries into the world economy, and contributing to developing and consolidating democracy, the rule of law and the respect for human rights and fundamental freedoms. More specifically, the strategic objectives are:

a strengthened Community contribution to the international development debate as well as mechanism for aid delivery,

improved aid effectiveness,

improved coherence,

improved quality and increased efficiency in the partnership with individual ACP States and regions, including effective support to peace and conflict resolution,

progress towards more equitable trade relations.

The year 2005 is likely to become an important one in terms of policy development. The European Community development policy statement may need to be updated. At the same time, the international community will make a first assessment of the progress towards the millennium development goals stipulated in the Millennium Declaration of the United Nations. Beyond this, the emphasis will continue to be on aid delivery and the impact of devolution should bring to bear. In fact, a significant part of operations, both EDF and budget financed, will be managed by delegations, thereby completing a major element of the Reform of the external service of the Commission.

Implications of the mid-term review of the ninth European Development Fund, undertaken during 2004, will be reflected in the implementation of country and regional strategies. Moreover, the commitments made by the European Union in the context of international conferences, including that on financing for development and the World Summit on Sustainable Development, but also agreements and initiatives during recent years (such the Global Health Fund) will still need to be implemented. This heavy agenda should make a tangible contribution to achieving the millennium development goals.

Africa will remain a priority under the policy area with a focus on implementing the G8 Africa action plan, and the strengthening of relations between the Community and the new pan-African institutions such as the African Union. This will entail reinforced support in the area of conflict prevention and increased aid effectiveness, with the Commission taking a lead in a number of areas notably in support of African regional integration efforts.

The enlargement of the Union is not expected to have an immediate impact on the overall development policy objectives, which are also embedded in the international development context, nor on the relations with the African, Caribbean and Pacific States. The main challenge for the adhesion of the new Member States to the Community's development policy emanates from their limited experience in this policy area as well as their track record in external cooperation programmes. The accession will therefore require an increased effort in information and coordination activities to help build their capacity for a fully informed and constructive participation in policy deliberations and participation in Community financed cooperation programmes. For this reason, appropriations for information and awareness as well as coordination have been increased notably, however with marginal overall impact on the budget.

The allocation to the policy area has been slightly increased by approximately 2 % from 2004 to 2005. The most significant variations are a further increase in the appropriations for poverty related diseases and reproductive health, in line with the political priority attached to this sector, and an increase in the environment/tropical forests heading, coherent with the total amounts foreseen in the two Regulations concerned and in order to provide appropriate funding for follow up actions to the World Summit for Sustainable Development. Furthermore, the amount allocated to food aid/food security operations has been increased when compared to the 2004 budget, in order to compensate some of the significant cuts made in previous years in favour of other political priority sectors.

On the other hand, a few small headings have been suppressed, in line with the Commission's efforts to streamline and rationalise the various thematic instruments and avoid small or overlapping budget headings, such as on basic education, information technology/sustainable energy and aid for poverty related diseases other than HIV/AIDS, malaria and tuberculosis, and cultural cooperation, which are better mainstreamed into geographical cooperation programmes, where this approach ensures higher efficiency and effectiveness through well coordinated and focused country or regional programmes.

3.22. Title 22: Enlargement

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The enlargement policy area was set up to deal with the strategic objective of enlarging the European Union, ensuring the completion of the recognised candidate countries' accession process in compliance with the political and economic criteria and orientations set by the European Council.

The accession of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia on 1 May 2004 is a decisive landmark in this process.

The enlargement mission will now shift towards securing, at least, an equally successful conclusion of the preaccession process for the remaining two candidates involved in accession negotiations, Romania and Bulgaria; providing an effective follow-up to the Council's decision, due by the end of 2004, on whether to open accession negotiations with Turkey; and launching accession negotiations with Croatia if its candidacy is accepted by the Council.

Following the Council decision to choose January 2007 as the target accession date for Bulgaria and Romania, the need for these countries to make energetic progress was also highlighted so that negotiations can be successfully concluded on the basis of own merits in 2004 and the Accession Treaty can be signed as soon as possible in 2005. This implies that the Commission activity on the second wave of enlargement will peak in the year 2005, with intense monitoring of negotiated commitments, intensified financial and technical assistance to institution-building, and follow-up to all actions, measures and initiatives necessary to ensure that the candidates stay on course to achieve the targets set with them. A similar intensification will take place in the financial assistance and the general preaccession strategy towards Turkey.

While the enlargement mission regarding the 10 new Member States will have been largely fulfilled with their accession, some delicate and important - albeit less glamorous - tasks will still have to be performed. The headline accession date of May 2004 is just the highlight of a crucial transition period in which delegations will be phased out until 18 months after accession at the latest; the implementation of Phare funds will undergo a major change with the waiving of ex ante controls by the Commission as national implementation systems are thoroughly audited and then certified; Phare funds themselves will be implemented, paid and audited on closure until at least 2006; and the enlargement policy area will include the three-year transition facility amounting to about EUR 423 million, and designed to prolong the institution-building effort of the Phare programme in the new Member States up to 2006.

A further focus of the enlargement process in 2005 is the likelihood of new countries, notably from the western Balkans, declaring their formal application to the European Union. The former Yugoslav Republic of Macedonia formally applied in March 2004. This will require close monitoring.

Budgetary impact of these developments on the activities of the policy area

After the substantial scaling down of DG Enlargement's human and financial resources in 2003 and 2004, reflecting the end of the negotiations with the 10 acceding countries (153 FTE, or 40 % of total, at headquarters, and circa 500, or 50 % of total, including delegations), 2005 will be a year of stepped-up effort with regard to the remaining candidates, and possibly a year of taking up new candidates.

The financial management activity will remain relatively stable compared to 2004 level, with EUR 1 247 million in new operating commitments, EUR 2 079 million in payments and an estimated EUR 4 400 million RAL. A substantial number of human resources will remain necessary over the year, as will administrative 2000 to 2006 for external staff and other expenditure.

3.23. Title 23: Humanitarian aid

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The European Commission Humanitarian Aid Office (ECHO) is the service of the European Commission responsible for humanitarian assistance. Its mandate, rules and procedures are governed by Council Regulation (EC) No 1257/96 on humanitarian aid. The Regulation specifies that aid is provided to populations who are victims of man-made (conflicts, civil wars) or natural disasters (earthquakes, floods, tropical storms, etc.). ECHO supports humanitarian aid operations in line with internationally agreed humanitarian principles and in respect of international humanitarian law. Aid sectors covered by ECHO include, for example, food aid, water, health and medical, shelter and disaster preparedness.

Council Regulation (EC) No 1257/96 defines ECHO's strategic objectives as follows:

(a) to save and preserve life during emergencies and their immediate aftermath and natural disasters that have entailed major loss of life, physical, psychological or social suffering or material damage;

(b) to provide the necessary assistance and relief to people affected by longer-lasting crises arising, in particular, from outbreaks of fighting or wars;

(c) to help finance the transport of aid and efforts to ensure that it is accessible to those for whom it is intended, by all logistical means available, and by protecting humanitarian goods and personnel;

(d) to carry out short-term rehabilitation and reconstruction work especially on infrastructure and equipment;

(e) to cope with the consequences of population movements (refugees, displaced people and returnees) caused by natural and man-made disasters and to carry out repatriation schemes;

(f) to ensure readiness for risks of natural disasters or comparable exceptional circumstances and to develop suitable early-warning and intervention systems;

(g) to support civil operations to protect the victims of fighting or comparable emergencies.

The year 2004 will be one of institutional transition at European level (accession of 10 new Member States, renewal of the Commission and of the European Parliament). This period is also marked by a large debate on issues linked to global governance and security, which can have an impact not only for the European Commission Humanitarian Aid Office, but possibly for the global humanitarian community as a whole, for 2005 and beyond.

ECHO will remain engaged in a policy of strictly adhering to the fundamental principles and values of humanitarian assistance, namely neutrality, impartiality and independence. It is convinced that strict adherence to those principles is more important than ever because of worrying trends, both in an institutional context, where certain political forces tend to regard humanitarian aid as an instrument of foreign policy or crisis management, and in the increasingly dangerous reality in the field where civilian populations and humanitarian organisations themselves become targets of warring factions.

For ECHO, the best way to preserve the 'humanitarian space, is to maintain a high level of engagement in the good donorship principles that were agreed in Stockholm on 16 and 17 June 2003, i.e., to provide assistance on the basis of needs, not on the basis of political considerations. The experience of recent crises in Afghanistan, the Middle East and Iraq demonstrates that the above principles are key requirements for the effective delivery of aid, for maintaining access to the populations in need, and for safeguarding the lives and security of humanitarian personnel. ECHO will remain committed to high quality assistance and to maintaining a transparent dialogue with other key players, both bilaterally and in multilateral humanitarian forums.

The civilian population continues to be a prime target of violent conflicts. Asia and Africa are the regions of the world most afflicted. The number of internally displaced persons (IDPs) worldwide remains at 25 million. In absolute figures the numbers of refugees dropped after the return of 2 million civilians to Afghanistan, bringing the global number down to 10,4 million refugees. However, those figures conceal that, in reality, humanitarian needs are increasing because not only IDPs and refugees are in need of assistance but also returnees. On a global level the number of natural disasters has increased during the last decade, with famine being the single greatest cause of death. Here again statistics may appear to hide the reality. Although the number of deaths reported globally due to natural disasters has decreased, the number of people affected has risen, thus causing greater humanitarian needs.

Over the last five years the average budget spending for humanitarian aid has been EUR 570 million. Due to constraints under heading 4, the budget proposed by the Commission for the year 2005, in total EUR 490 million, shows no variation compared to 2004. In the case of humanitarian aid there is the safety net of the emergency reserve, which may be called on should an urgent need arise.

Following the renewal of its legal frameworks with its different groups of partners, ECHO will have to organise extended training activities for existing and new partners in 2004 and 2005. All potential signatories to the new framework partnership agreements (i.e. NGOs from all 25 Member States) will have to undergo a selection procedure, based on the quality criteria laid down in the Financial Regulation. In the coming years, ECHO aims to expand the network of partners with NGO's from all 10 new Member States, which require appropriate reinforcement of ECHO's legal and audit sector.

ECHO has updated and developed its Communication strategy 2004/05, taking account of the importance of communication issues for the new external responsibility of the European Union, referred to by the Commission during its orientation debate. It will focus on communicating the values, principles and concrete achievements of EU humanitarian aid, so that one of the European Union's success stories will be duly recognised by the public in the European Union and third countries alike.

3.24. Title 24: Fight against fraud

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The mission of the European Anti-fraud Office (OLAF) is to help protect the interests of the European Union and to fight fraud, corruption and any other illegal activity, including misconduct within the European Institutions. In pursuing this mission in an accountable, transparent and cost-effective manner, OLAF aims to provide a quality service to the citizens of Europe.

The budget for OLAF's administrative expenditure in 2005 is up by 17 % on the initial 2004 appropriations (excluding amending budget). This increase can be explained as follows:

-- in the 2004 budgetary procedure 29 new posts were granted in connection with enlargement. The appropriations for these posts covered salaries for only four months. In 2005 the entire year will have to be covered,

-- the increase in appropriations connected with external staff and other external expenditure is accounted for by an increase in mission costs and IT expenditure in particular for the development of the electronic document management system. The distribution of telecommunication costs between the Commission budget and the budget of the Offices has been reviewed, leading to an increase of the expenditure in charge of the Offices,

-- since February 2004, OLAF has occupied an additional floor in the J30 building. As expenditure on buildings is calculated on the basis of area occupied, OLAF must enter seven ninths of the expenditure connected with the J30 building in its budget, the remainder continuing to be covered by the OIB budget.

The operational appropriations for the Pericles and Hercule programmes develop in line with the reference amounts given in the legal bases. The appropriations for the AFIS anti-fraud information system increase to cover the development of new modules and to extend the entire system to the new Member States. On the other hand, the appropriations for general anti-fraud measures conducted by OLAF, by contrast with the Hercule programme which has the same objectives but operates with grants, are reduced.

3.25. Title 25: Commission's policy coordination and legal service

>TABLE POSITION>

The main mission of the Secretariat-General will continue to be to ensure the support for the Commission's political priorities as defined by the President and to be at the service of other services and the College, while acting as a force for cohesiveness in the Commission. The SG will continue to assist the President in defining and driving forward the Commission's strategic priorities. It will play a key role in ensuring coherence and coordination within the Commission, considering the increased complexity of operations due to enlargement. It will coordinate relations with the other institutions and continue to foster improved involvement of civil society and more openness in policy-making, an area of growing importance.

It is evident that any shift in priority objectives, or organisation or working methods decided by the new Commission when it takes up office in November 2004, will imply a re-examination of the activities of the SG.

The SG in 2005

No particular change in SG tasks and general objectives is necessary with respect to the priorities identified by the College on 3 December 2003. At this stage, it is expected that the SG maintains its current role and priorities:

-- full and effective integration of the new Member States will remain a priority, with a particular focus on monitoring the implementation of the acquis,

-- the new Treaty will probably be signed, and preparations will be ongoing for the entry into force of the new constitutional framework,

-- the SG will continue to assist the President, whose powers may well be reinforced, in shaping and driving the Commission's strategic priorities. Internal coordination will be fundamental to help the Commission achieve its objectives in a focused, efficient manner. The SG will be involved in the definition of the next financial perspectives,

-- the SG will pursue its role of supporting the smooth functioning of the College and of designing and implementing revised structures, working methods and procedures with the objective of making the institution more efficient,

-- the SG will have to act effectively in ensuring coherence and in safeguarding the institutional role of the Commission, especially as concerns relations with the other institutions. The new Parliament will be entering into the first full year of its mandate and will probably be discussing the revision of the framework agreement. The Better Regulation Iinterinstitutional Agreement will be in force. Twenty-five Member States will be active members of the Council. Co-decision will be of growing importance. The negotiation on the next financial perspectives will be high on the interinstitutional agenda,

-- the SG will continue supporting improved involvement of civil society and more openness in policy-making. New actions will have to be implemented, such as the dialogue with churches and popular initiative laws.

Two important aspects, extending the activities of the SG are enlargement, and the consolidation of administrative reform. This will include:

1) the work of the Greffe (registry) due to the increase of the number of languages, procedures and the greater complexity of managing official documents;

2) reinforcing relations with the other institutions, especially relations with the Ombudsman, national Parliaments and other bodies;

3) adapting to a growing demand for access to documents by the public and active involvement of civil society.

With regard to significant variations in the financial resources between PDB 2005 and the 2004 budget, the following points should be mentioned:

-- the proposed amount for the Debate on the future of the EU European Union has decreased to EUR 1,5 million in commitment appropriations (instead of EUR 4,5 million in 2004),

-- the proposed amount for general publications has increased by EUR 100 000. This results from a reduction of EUR 150 000, due to the fact that the publications of DG ECFIN are to be financed on a separate budget heading in its policy area and, on the other hand, from an increase of EUR 250 000 for publications-related postage, which were previously financed on a different budget heading ('Postal charges,).

The Legal service will be intimately involved in the preparation, development and implementation of the APS priorities with each of the 10 teams advising, guiding, counselling, defending and promoting the legal affairs of the Community in these areas.

For the priorities concerning competitiveness and cohesion, citizenship and external responsibility the work carried out in the teams responsible for JAI matters, RELEX matters, competition and State aids, social affairs and the internal market and business law will be particularly affected.

The other areas of work in the Legal service which are not covered by the Commission's political priorities but which will have an impact on the human and financial resource requirements of the Legal service are the administrative reform of the Commission, the setting up of a special team within the Legal service to deal with the recovery of debts and the ongoing financial impact of competition cases on the budget of the Legal service.

The mission of the Group of Policy Advisers (GOPA) is to provide timely, informed and impartial advice to the President and Commissioners on issues relating to the future policy of the European Union. The activity will thus consist of the production of analyses on issues of current interest and position papers on policy, the organisation of lectures, seminars and workshops and commissioning of studies, and maintaining relations with relevant bodies and sources of information, expertise, and opinion within and outside the Commission.

The work in 2005 will, as before, most probably concentrate on three policy domains of interest to the President, namely institutional affairs, with a particular emphasis on the outcome and follow-up to the Intergovernmental Conference on the future of Europe; neighbourhood affairs, with a particular emphasis on policy in the Mediterranean basin; and economic and social affairs, with a particular emphasis on economic policies for the enlarged Union, public finances of the Member States, the own resources of the Union, and governance in the Euro-zone. Also within the economic and social domain GOPA has two specialised tasks, which are to provide support for the European Group on Ethics, which publishes opinions on the ethical issues posed by new technologies, and to provide the focal point for the dialogue on European affairs which exists between the Commission and the Churches and humanisms.

In all three domains the main activity of GOPA is the collection of information and analysis and the development of policy options for the President and Commissioners; as such, the activity of GOPA is to be clearly distinguished from operational and coordination activities.

3.26. Title 26: Commission's administration

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(*) Establishment plan figures include 113 posts of the Offices that will be frozen in the course of 2004. Related appropriations have already been reduced in 2005 to the benefit of external staff. Establishment plans will be reduced accordingly in 2006

The aim in 2005 for administration is to bring the Commission services beyond mere compliance to a deeper level of implementation of reform. This evolution involves continuous adjustments and adaptations as various aspects of our policies need to be fine-tuned based on experience and the results of several evaluations which will be finalised at this time. Nevertheless, this process should not change the orientations decided by this Commission and the Council.

In addition the impact of enlargement will continue to represent a major workload in 2005 and beyond. The Commission will face the bulk of recruitments including middle/senior management and external staff. In this respect, 2005 can be considered as probably the busiest year since frontloading of middle management staff is continuing and the full impact of enlargement on the Commission's administration will be felt.

Major efforts will be necessary in 2005 to properly address major risks arising from the senior management risk analysis and the current political situation. They concern the sound operation of the Commission in the field of administration and personnel management and will include the establishment of an electronic system to ensure that personnel dossiers are protected against loss. Also, an automated system of access control to Commission buildings and facilities will be launched after a thorough analysis of the situation in 2004.

Following the achievement by 2004 of the main priorities in the area of personnel policy the health and safety policy for Commission staff including the wellbeing of staff at the workplace and the improvement of working conditions will be receiving increased attention.

A review of the EMAS project on current environmental performance became available recently and provides the Commission with a sound basis for the next phases of EMAS. Starting in 2004, the Commission will define its policy, environmental objectives and actions, the implementation of which will be a priority in 2005.

In 2005 the work of the Office for Administration and Payment of Individual Entitlements (PMO) will focus on the following:

-- guaranteeing compliance with the relevant regulations by correct, uniform and transparent application of the rules for determining and paying individual entitlements,

-- providing a high-quality European public service in compliance with the rules,

-- making effective use of human and financial resources by rationalising procedures, modernising tools and developing a training policy,

-- consolidating implementation of the new Staff Regulations as they affect entitlements, remuneration and pensions.

In 2005 the Infrastructure and Logistics Office - Brussels (OIB) will pursue its mission in the four operational areas of its activities: buildings policy, expenditure relating to buildings (projects, management of space and maintenance, protection of buildings and house services), fittings and furniture and services (mobility, transport, mail, design and reproduction, catering, creches and childminding centres, sports activities).

As well as developing a multiannual buildings plan, stepping up interinstitutional cooperation, strengthening internal management (in particular creation of the IAC) and contributing to the development of the institution's environmental policy (EMAS), the OIB's two specific objectives for 2005 are to respond to the increased needs for buildings and creche facilities and implement the communication on buildings policy and infrastructures in Brussels (COM(2003) 755 of 10 December 2003), in particular by:

-- putting in place the works supervision required for management and renovation of the buildings in Brussels,

-- developing an alternative site made necessary by the high cost of property and the limited scope for extension in the European quarter,

-- implementing a new mobility policy, in particular for disabled people.

The principal tasks of the Infrastructure and Logistics Office - Luxembourg (OIL) will be similar to those of the OIB. Of particular importance will be the continuing process of housing nearly 200 translators from the new member countries.

The year 2005 will be the second year for the phasing in of translation into and from the new official languages. Resources will be allocated to allow internal translation into the new languages for two thirds of normal capacity for core business documents. This will require prioritisation in providing translation services during the year 2005.

Apart from the enlargement aspects, the budget for translation activities, both internal and outsourced, has not increased compared to previous years. Despite continued efforts in terms of demand management the rise in demand (5,3,% per year on average over the period 1999 to 2003) is likely to continue during 2005. The Commission intends to give further thought to the most appropriate ways of strengthening the capacity of these services to satisfy such increasing demands in the future, giving due consideration to its objectives for increasing outsourcing and inter-institutional cooperation.

The Publications Office (OPOCE) will produce all obligatory texts in 20 language versions throughout 2005. Its reorganisation, made necessary by the impact of the nine new official languages, will continue in 2005.

The budget for the Official Journal L and C series is reduced due to a fall in the price/page of the paper edition, following the entry into force of new contracts on 1 May 2004.

The strategic objectives of JICS will be the same in 2005 as in the 2004 AMP. The years 2004 to 2006 will be a period for gradually adjusting to the new post-enlargement working environment and will involve continuing current operations and a special effort for prospective enlargements in 2007 and beyond.

The DG's strategy will therefore continue to be based on the guidelines laid down in the communication on enlargement adopted by the Commission on 9 April 2002 and in its document on internal reorganisation adopted on 8 October 2003. They are being implemented as planned. After consolidation of the current enlargement and preparation of the forthcoming ones, the DG's strategy should be reviewed in 2006/07 in the light of results achieved.

In view of the nature of the DG's activities - provision of services - and the institutional timetable for 2004, the general objectives of availability and proper use of resources to satisfy demand for interpreting in all the languages required, including the new ones, will continue to be paramount in 2005. These objectives are associated with the priority of ensuring smooth operation of post-enlargement Europe which underlies the conclusions of the Commission's orientation debate on APS 2005.

In order to ensure that its work is meeting its objectives, the DG has introduced a system for the evaluation of its services by users within the Commission which will be gradually extended to all its customers. The DG is also keeping accounts of services supplied and resources used, in particular in AMP monitoring.

With all these data, it is possible to measure achievement of the service's general objective of making best use of resources available in responding as far as possible to requests for interpreting into all languages.

In connection with enlargement, one area where developments may have a very strong influence on the DG's activities in terms of human resources is cooperation between the interpreting services of the various institutions, as approved by the Secretaries-General in 2002. Great advances were made in 2003 and further significant developments are expected in 2004 and 2005, in particular as regards external interpreters and mutual use of human resources.

The main change in budgetary terms for 2005 concerns providing JICS with adequate appropriations to recruit the final large batch of freelance interpreters planned for enlargement in the document of 9 April 2002 mentioned above. Together with the 2003 and 2004 batches, these resources will enable JICS to cover virtually all identified needs. The provision of permanent posts will not be fully completed in 2005.

The European Personnel Selection Office (EPSO) has the task of organising open competitions in order to provide the institutions with officials by applying professional and cost-effective procedures. EPSO draws up reserve lists from which institutions can recruit highly qualified staff meeting their requirements. EPSO has already initiated all actions necessary to meet the institution's needs in 2003 and 2004 and it will continue to do so in 2005.

As announced in the reform White Paper and following an examination undertaken by the Secretaries-General on behalf of their institutions, decisions should be taken in 2004 by the institutions concerned to set up a European Administrative School (EAS). This is an institutional body which will take over certain types of training for all the Community institutions. The school depends administratively on EPSO, so its budget and staff are included in the EPSO budget from the point at which it becomes operational, namely 1 January 2005.

3.27. Title 27: Budget

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(*)Posts currently not allocated to a specific policy area, awaiting reallocation and attributed for technical reasons to the budget policy area.

(**) Resources available for all policy areas but attributed for technical reasons to the budget policy area.

The main priorities of the budget policy area are:

-- to obtain, from the budgetary authority (the European Parliament and the Council), the means necessary for the implementation of the policies of the European Union,

-- to manage the budgetary legal framework,

-- to implement the budget in terms of income and expenditure, respecting the legal and financial framework,

-- to draw up the annual accounts of the institutions and report on the execution of the budget,

-- to contribute, by means of advice and training, and by the provision of control and management tools, to the promotion of sound financial management in Commission departments.

With regard to accountancy, a new system of public-sector accounting is to be introduced, based on more dynamic and comprehensive management, rather than merely recording the execution of the budget. Changing to accrual-based accounting will make it possible to show the position of the Communities more fully, reflecting all of their assets, debts and liabilities, and the year's expenditure and revenue. This new approach will be implemented from 1 January 2005.

Expenditure in the budget policy area consists essentially of banking expenses and other financial charges, which are increasing slightly as a result of the need to open bank accounts in financial institutions in the new Member States. Expenditure relating to communication systems and budgetary publications also increases, due to the requirement to publish in all the official languages of the enlarged Union.

The activity 'Budget implementation, control and discharge, embodies a new section for the payment of compensation to the new Member States, for which DG Budget will be the authorising department. It comprises funds corresponding to the sum of the 'temporary budget compensation, and the special lump-sum 'cash-flow facility, agreed at the Copenhagen European Council, and in accordance with Articles 29 and 30 of the Accession Treaty.

3.28. Title 28: Audit

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The audit policy prea will contribute to the efficient and effective performance of all Commission activities by providing independent, effective and objective assurance and consultancy. This will include auditing the internal controls systems that exist within the European Commission in order to assess their effectiveness and, more generally, the performance of Commission departments in implementing policies, programmes and actions with a view to bringing about continuous improvement.

It will also seek to help the Commission and its departments, by means of its opinions, advice and recommendations with regard to the control of risks, the safeguarding of assets, compliance with rules, accurate and reliable accounting and management information, the quality of internal control and, finally, the efficiency and effectiveness of operations.

2005 will bring an increase in workload for audit, notably as a result of the impact of enlargement.

3.29. Title 29: Statistics

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Article 285 of the Treaty of Amsterdam lays down the procedure and principles of law-making for the production of statistics necessary for the performance of Community activities. The normative framework for the production of Community statistics is provided by Council Regulation (EC) No 322/97 of 17 February 1997 on Community statistics.

The mission is to provide the European Union with the high quality statistical information service it requires. Statistics provide an essential infrastructure for the sound and efficient functioning of democracy and a modern economy.

Political decision-makers and actors in the market constantly need statistics in order to make their decisions, monitor and evaluate their implementation. Over the last few years, with the creation of the Single Market and the entry into force of the Maastricht, Amsterdam and Nice Treaties, there has been an increased growth in the amount of Community statistics and a greater necessity for their comparability and quality. For its part, the single currency has transformed the role of statistics in the Euro-zone, with EUR-12 aggregations being the most sought-after figures.

Statistics are also used as the basis of calculating own resources and allocating funds. Furthermore, indicators are required for the monitoring and evaluation of policies in an increasing number of domains.

In order to fulfil the needs of users, Community statistics must be reliable, independent of political interference and available in time and in a convenient form for users. Furthermore, their preparation should not impose an excessive burden on respondents and their collection must be undertaken in accordance with the principles of subsidiarity and proportionality.

European Statistical System

In accordance with the principle of subsidiary Eurostat has set up, together with the national statistical authorities, a network collectively called the European Statistical System.

Taking due account of developments in Community policies, the European Statistical System must:

-- meet the needs of Community policies as users of Community statistics,

-- improve the cooperation between Eurostat and its national partners in order to provide the necessary statistics, particularly in view of the enlargement of the Community.

Objectives

The objectives of the European Statistical System are:

-- to develop a system of standards, methods and organisational structures capable of producing comparable, reliable and relevant statistics,

-- to provide the European Institutions and the Governments of the Member States with the information they need to formulate, implement, monitor and evaluate policies,

-- to disseminate statistical information to Europe in general, to businesses and to all concerned with economic and social matters, for their decisions,

-- to seek to improve the statistical systems in the Member States and EEA countries as well as to support development of the statistical systems of countries changing over to a market economy and developing countries.

Framework statistical programme 2003 to 2007

The framework statistical programme for 2003 to 2007 (Decision No 2367/2002/EC of the EP and Council of 16 December 2002) identifies three main priorities:

-- enlargement,

-- economic and monetary union,

-- competitiveness, sustainable development and the social agenda.

Work programme for 2005

The work programme for 2005 will focus on the following domains alongside regular statistical production:

1) Enlargement

Beyond the policy priorities, there is one fundamental operational priority for the Commission: ensure the success of enlargement and shape the future of Europe. This means guaranteeing the proper functioning of the enlarged Europe and the full application of policies and rules in all the Member States.

For Eurostat that means finalising integration of the new Member States in the decision-making and consultation bodies of the ESS (SPC, CEIES and other committees and working parties), expanding geographical coverage of our statistical production systems (collection, processing and dissemination of data), continuing support for upgrading the national statistical systems of the new Member States, receiving and integrating new colleagues. Special attention will be paid to improving the quality and completeness of the structural indicators for the new Member States.

2) Competitiveness and cohesion

In view of the lacklustre economic performance recorded recently by the Union and the persistent shortfall in our productivity and employment rates, and given our desire to integrate successfully the new Member States, an upturn in growth will be the central policy objective of the Commission, striving constantly to improve the competitiveness of the European model while maintaining prosperity, employment, cohesion and environmental protection.

In the Eurostat work programme, special emphasis could be placed on:

a) improving the macroeconomic indicators of productivity and competitiveness;

b) service statistics: services today represent two thirds of GDP and most jobs created in the Union; they are the sector where the scope for improving productivity and creating jobs is greatest;

c) statistics linked to research and development of human and technological capital (in particular information and communication technologies, education, information society, lifelong learning);

d) the statistics required to draw up the mid-term review of the Lisbon strategy (structural indicators);

e) the statistics required to draw up a new social agenda for the post-2006 period;

f) indicators linked to sustainable management and use of resources.

A closer watch should also be kept on the response burden of information providers by coordinating requests to businesses and using the new accounting standards as reference items wherever possible.

1) Security and citizenship

Enlargement of the Union's territory and the increased population will require a greater effort and better coordination from the point of view of managing the new common borders and dealing with the increased mobility of individuals within this area. The development of statistics on migration and asylum comes within this framework.

2) External responsibility: neighbourhood and partnership

In a spirit of partnership certain Community policies will be extended to wider areas. Statistical information will have an important role to play in this process.

3.30. Title 30: Pensions

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With regard to pensions, the specific activities in 2005 will be as follows:

-- to implement the provisions contained in the new Staff Regulations which change the present pensions system, with transitional measures. In order to implement these changes, appropriate IT tools will have to be created or developed. The changes will also have to be clearly documented so that they can be understood by the persons concerned,

-- to determine the pension rights of staff with due account for the pensions systems of the new Member States, negotiations on the transfer of pension rights.

The increase in appropriations for pensions is mainly due to the changing age pyramid within the institutions. It is also the result of the higher remuneration level of retiring officials, which has the effect of inflating the average pension level.

Finally the usual annual adjustment of pensions has been incorporated.

3.31. Title 31: Reserves

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4. Annex I: Summary table - Sixth research framework programme

Introduction

The sixth research framework programme (2002 to 2006) is implemented with a view to contributing to the achievement of the objectives established in Article 163 of the Treaty: to strengthen the scientific and technological bases of the Community and to encourage the development of its international competitiveness, as well as to promote the research activities considered necessary in support of the other Community policies.

In order to achieve these goals, and improve the contribution to the implementation of the European Research Area, it is structured along the following three main principles: to focus and integrate research on a Community-wide scale, to structure the European Research Area, and to consolidate the bases of the European Research Area. The actions carried out according to these three main principles will contribute to integrating the efforts and research activities on a European scale as well as to structuring and to coordinating the various dimensions of this area. The participation of small and medium-sized enterprises will be encouraged in all the fields of the programme.

The year 2005 will constitute the third year of effective implementation of this programme, which comprises important innovations in relation to the previous programmes, in particular by the introduction of new instruments such as the networks of excellence and the integrated projects capable of exerting a significant integrating impact.

The budgetary proposals for 2005 (shown in the table below) concerning the various topics and research activities are based on the overall amounts set in the following two decisions:

-- No 1513/2002/EC of the European Parliament and of the Council of 27 June 2002 concerning the sixth framework programme of the European Community for research, technological development and demonstration activities, contributing to the creation of the European Research Area and to innovation (2002 to 2006),

-- 2002/668/Euratom of the Council of 3 June 2002 concerning the sixth framework programme of the European Atomic Energy Community (Euratom) for nuclear research and training activities, also contributing to the creation of the European Research Area (2002 to 2006).

THE SUMMARY TABLE OF COMMITMENT APPROPRIATIONS - SIXTH RESEARCH FRAMEWORK PROGRAMME - PDB 2005 - EU-25

(in million EUR)

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5. Annex IIA: Summary table - Structural Funds (commitment appropriations)

Summary table for the Structural Funds PDB 2005 (commitment appropriations)

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6. Annex IIB: Summary table - Structural Funds (payment appropriations)

Summary table for the Structural Funds PDB 2005 (payment appropriations)

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7. Annex III: Decentralised agencies

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8. Annex IV: Selection of activities for the 2005 PDB

Title 01: Economic and financial affairs

01 03 International economic and financial questions

Title 02: Enterprises

02 02 Encouraging entrepreneurship

02 04 Getting still more from the internal market

02 05 Competitiveness and sustainable development

Title 03: Competition

03 03 Mergers, antitrust and market liberalisation and cartels

Title 04: Employment and social affairs

04 02 Employment and European Social Fund

04 03 Work organisations and working conditions

Title 05: Agriculture and rural development

05 02 Plant products

05 04 Rural development

Title 06: Energy and transport

06 03 Trans-European network

06 04 Conventional and renewable energies

Title 07: Environment

07 03 Environmental programmes and projects

Title 08: Research

08 06 Sustainable development, global change and ecosystems

08 07 Citizens and governance in a knowledge-based society

Title 09: Information society

09 03 eEurope

09 04 Research and technological development on information society policy

Title 11: Fisheries

11 03 International fisheries

Title 12: Internal market

12 03 Internal market for goods and services

Title 13: Regional policy

13 03 European regional development fund and other regional interventions

13 04 Cohesion fund

Title 14: Taxation and customs union

14 04 Customs policy

Title 15: Education and culture

15 02 Education

15 07 Youth

Title 17: Health and consumer protection

17 02 Consumer policy

17 04 Food safety, animal health, animal welfare and plant health

Title 18: Area of freedom, security and justice

18 02 External borders, visa policy and free movement of people

18 03 Common immigration and asylum policies

Title 19: External relations

19 04 Human rights and democratisation

19 07 Relations with western Balkans

19 10 Relations with Asia

Title 21: Development and relations with ACP States

21 02 Development cooperation policy and sectoral strategies

Title 22: Enlargement

22 02 Preaccession assistance instruments

Title 23: Humanitarian aid

23 02 Humanitarian aid

FIGURES BY BUDGET LINE

1. Document IV -- Figures by budget line

1.1. Administrative expenditure by policy area

Classification by type

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1.2. Figures by budget line

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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT - FINANCIAL PROGRAMMING 2005-2006: HEADINGS 3 AND 4

1. Introduction

Following the Commission decision of 16 January 1991 [16], a financial programming of Community actions was to be established at the time of the preparation of the Preliminary draft budget. This year's financial programming covers the period 2005 to 2006, thus including the last two years of the current financial framework.

[16] SEC (91) 60, 16.1.1991.

This framework is the financial perspective for the period 2000 to 2006, included in the Interinstitutional Agreement of 6 May 1999 on budgetary discipline and improvement of the budgetary procedure. The financial perspective has recently been modified by the technical adjustment of the financial perspective for 2005 in line with movements in GNI and prices [17], decided by the Commission on 12 December 2003.

[17] COM(2003) 785 final, 12.12.2003.

This technical adjustment has entailed a reduction in the cumulated GNI deflator in euros for the period 2000 to 2005 to 11,28 % compared to the 12,94 % calculated previously, in particular due to the very low deflator for the year 2003, as applied in this adjustment for 2005.

Such a reduction of the cumulative deflator for 2005 of - 1.66 % compared with the foreseen value, i.e. the deflator used for the calculation of the ceilings at current prices at the moment of the adoption of the PDB and the financial programming for 2004, has entailed a substantial reduction in the current ceilings for headings 3 (Internal policies) and 4 (External action).

The financial perspective provides a general framework by broad categories of expenditure (the headings) that needs to be further detailed if the Commission is to put operations into a medium-term context. It is not, however, equivalent to the multiannual financial programming. The financial programming is the tool which allows departments to programme the various Community policies and actions.

An agreement with the budgetary authority provides for systematically examining the compatibility of the planned programmes with the financial perspective. The Commission has undertaken to transmit to the budgetary authority the financial programming of headings 3 and 4. The present communication presents therefore the financial programming of headings 3 and 4 for the period 2005 to 2006, in coherence with the preliminary draft budget for 2005.

The financial programming provides an orientation for future years but remains indicative in nature and, as such, does not prejudge any decision the Commission or the Budgetary Authority might take in future budgetary procedures.

Finally, it is worth noting that in accordance with the ABB nomenclature, the programming for the former B...A headings is also presented separately from that of their main operational programmes thus maintaining the distinction between administrative and operating expenditure, which is introduced in the ABB nomenclature.

2. Heading 3: internal policies

The effect of the aforementioned technical adjustment of the financial perspective for 2005 on the ceiling of heading 3 has been a reduction of EUR 134 million for 2005 and EUR 139 million for 2006.

As a consequence, the Commission's financial programming of May 2003, updated to take account of the new initiatives and programmes subsequently adopted, in particular relating to the adjustment of the financial envelopes of the co-decided programmes to cater for enlargement, displayed a negative margin amounting to EUR - 54 million for 2005 and a reduced positive margin of EUR 23 million for 2006.

Re-establishing a sufficient margin, of EUR 53 million, makes it necessary to introduce reductions in the previously programmed level of expenditure of some EUR 107 million for 2005. The Commission proposes to do so without modifying the adopted amounts of the co-decided programmes.

Three types of expenditure can be differentiated:

-- multiannual programmes that have been adopted or proposed and for which the amounts are programmed in accordance with the Interinstitutional Agreement of 6 May 1999 with regard to the incorporation of financial provisions in legislative decisions. Two categories are found here: programmes already adopted by the legislative authority (shown in the tables as 'd, for decided or 'c, for co-decision) and programmes which have been proposed by the Commission but not yet adopted by the legislative authority (shown in the tables as 'p,),

-- multiannual programmes which are about to expire and for which no extension or renewal has yet been proposed. These amounts are extrapolated, in most cases, by applying an annual growth rate of 2 %, in line with the expected budgetary deflator (shown in the tables as 'e, with the figures in italics),

-- measures not forming part of multiannual programmes, which are grouped together under the heading 'Other actions,. It is assumed that, in most cases, expenditure will grow in line with the budgetary deflator (2% yearly).

2.1. Comments

The heading 3 ceilings for the period 2004 to 2006 are those of the financial perspective agreed for that period, expressed in current prices. As mentioned above, projections for individual policies which are not yet the subject of a budgetary or legislative decision are essentially linear, i.e. an annual growth rate of 2% has been applied, except where there are sound reasons for assuming either that spending should remain at current levels or that it should increase at a faster rate to reflect political priorities.

Besides the fundamental operational priority 'ensuring the success of enlargement,, the programming takes into account the policy priorities for 2005 'competitiveness and cohesion, and 'security and European citizenship, that are closely linked to objectives set in previous years. Similarly, consideration has been given to the implementation of the Lisbon Strategy and to the consolidation of a European area of freedom, security and justice, started under the Tampere programme.

The accession of 10 new Member States, on 1 May 2004 and the associated adjustment of the financial perspective led to a major change in the financial programming of Heading 3 for the period 2004 to 2006, allowing the actions financed by Heading 3 to have been adequately developed to cover all 25 Member States.

In the context of the enlarged Europe, the following Commission priorities have been taken into account:

-- continued development of the European area of freedom, security and justice; development of a policy for security including health and consumer protection, health and safety at work as well as food safety, transport safety and security, communications networks and information; continuation of the action against bio-terrorism and enhancement of European security measures, including research (aiming to explore and foster the conditions and a favourable environment to enhance Europe's scientific, technological and industrial capabilities in the field of security),

-- promotion of the key elements of a knowledge society and of sustainable growth, focusing on the development of human capital, technology and innovation, which are essential for the competitiveness of European enterprises; incorporation of environmental and social aspects; implementation of the sixth framework programme for research and technological development; the promotion of the information society, measures to stimulate innovation and the entrepreneurial spirit, and the programmes on education and training, encouraging life-long training and elearning; improvement of general quality of life for European citizens, also sought by further development of road safety and new Trans-European energy networks,

-- continuation of the three specific programmes fixed by the Copenhagen European Council:

-- a programme dedicated to measures for the decommissioning of the nuclear reactors of Ignalina (Lithuania) and Bohunice (Slovakia),

-- a facility for institution building to prepare the phasing-out of the actions covered by the Phare programme to assist the acceding countries to strengthen their administrative and judicial capacities for proper management of Community policies and programmes under their responsibility,

-- a Schengen facility to ensure the correct application of certain provisions of the Schengen acquis to the new Member States and to prepare for lifting of internal border controls, and the support for the implementation of the new regime of facilitated transit documents in respect of Kaliningrad.

The following points should also be noted:

-- research and technological development (RTD) remains the single largest area of spending (about 60% of heading 3). The amounts for the period 2004 to 2006 correspond to the programming fixed for the sixth framework programme, which is reinforced by EUR 1.735 billion to cater for enlargement,

-- a number of financially significant programmes have been adopted since the first year of the present financial perspective:

-- under the co-decision procedure: Socrates 2000 to 2006, YOUTH 2000 to 2006, Culture 2000 to 2004 and its prolongation for 2005 to 2006, TransEuropean networks 2000 to 2006 (Transport, Energy, Telecom), LIFE III 2000 to 2004 (its prolongation for 2005 to 2006 is under examination by the legislative authority), Forest Focus, Consumer Policy 2004 to 2007, Public Health 2003 to 2008, Fiscalis 2003-2007, Customs 2003-2006, Community Statistical Framework Programme 2003 to 2007, Intelligent Energy for Europe 2003 to 2006, Daphne programme (measures for combating violence against children, adolescents and women), computerisation of excise duties 2002 to 2006, Marco Polo 2003 to 2006, Erasmus Mundus Programme 2004 to 2008 and the eLearning Programme 2004 to 2006,

-- by Council Decision with a financial reference amount: Leonardo 2000 to 2006, MediaPlus 2001 to 2005 , Programme for enterprises and entrepreneurship 2001 to 2005, ARGO Programme 2002 to 2006 (visas, immigration and asylum), AGIS Programme 2003 to 2007 (police and judicial cooperation in criminal matters).

-- Certain proposals made by the Commission have also been taken into account:

-- the prolongation of the European Refugee Fund for the period 2005 to 2010,;

-- the prolongation of MediaPlus and MediaTraining programmes (2006),

-- the establishment of the Visa Information System (VIS),

-- the Commission will also study the development of EU capacity to respond to oil pollution disasters in line with the related changes to the adopted European Maritime Safety Agency legal base,

-- the eContentplus programme (2005 to 2008);

-- the 'Safer Internet plus, programme (2005 to 2008).

2.2. Margin available beneath the ceiling for the heading

A number of remarks should be made concerning the margin between the current financial programming of heading 3 and the ceiling for this heading in the financial perspective:

-- the financial programming allows for the appropriate margins, which are according to the increased size of the European Union, above the level of previous years. The ceilings are calculated according to the technical adjustment of the financial perspective for 2005 in line with movements in GNI and prices. For 2006 a deflator of 2% is used. However, should the deflator turn out to be 0.5 percentage points lower than that of the present hypothesis, the ceiling will need to be adjusted downwards and the margin in 2006 will be some EUR 46 million lower,

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-- a margin also has to be available to meet the cost of new preparatory actions, pilot projects or other possible measures to respond to new circumstances. Following preparatory work, the Commission might have to propose new programmes. Neither the scope of such programmes nor their budgetary allocations can be foreseen at present.

3. Heading 4: external actions

Funds under heading 4 are used within 11 Policy Areas. For the period 2005 to 2006 three major policy areas consume 93 % of the total: External Relations, Development and Humanitarian Aid. Two medium-sized policy areas consume 6 % of the total: Economic and Financial Affairs and Fisheries. Six small policy areas together consume slightly more than 1 % of the total: Agriculture, Energy and Transport, Environment, Taxation and Customs Union, Education and Culture, and Trade.

3.1. The period 2000 to 2006: general comments

The composition of Heading 4 was largely shaped by the geopolitical events in Central and East European Countries in the 1990s: most of the major EU assistance programmes (MEDA, TACIS and CARDS) were created in the course of the last decade. Their allocations have further been adjusted throughout the ongoing period with a view to provide an adequate EU response capacity to different conflicts and natural disasters in various regions of the world (Balkans, Central America, Afghanistan and Iraq). EC crisis and post-crisis interventions have assumed an increasing part in recent years on top of traditional development cooperation and human rights' programmes.

According to the financial perspective included in the Interinstitutional Agreement of 6 May 1999, the ceiling for heading 4 (external actions excluding preaccession) increases from EUR 4 550 million in 2000 to EUR 4 610 million in 2006, at constant 1999 prices. The latter figure represents now an estimated EUR 5 233 million at current prices. The additional financial needs were accommodated without revision of the financial perspective and in particular without an increase of the heading 4 ceiling. This was possible through reprioritising external actions whenever feasible and through using the possibilities provided by the IIA, namely by mobilising the flexibility instrument in 2000, 2001 and 2004, and by calling on the emergency aid reserve.

In practice, the Commission has undertaken, over the past few years, a serious effort aiming at redeploying funds within heading 4 thereby led by the following orientations:

-- the geopolitical weight and priorities attached to certain regions,

-- the poverty-focus dimension of external programmes,

-- the record in terms of absorption of the various programmes.

3.2. The financial programming update of Heading 4 for 2005 and 2006

The period to be covered by the programming relates to the remaining two years of the seven-year perspective period, i.e. the PDB year 2005 and 2006. The comments concentrate on the main changes introduced for these last two years as compared to the expected expenditure profile under the previous programming adopted in May 2003.

Main changes

The main changes relate to the challenging situation created by the financing needs of the proposed continued participation in the reconstruction of Iraq (EUR 200 million for 2005) while the technical adjustment of the financial perspective for 2005 has reduced the heading 4 ceiling by EUR 76 million and EUR 78 million in 2005 and 2006 respectively.

The decrease of the funding possibilities combined with this new priority has forced the Commission to perform a thorough examination of potential reductions in programmed amounts. From this analysis, it is clear that only part of this new expenditure can be financed in 2005 within the ceiling. Concerning 2006, although there is some uncertainty as regards the amount of the future support for Iraq, some adjustments have also been carried out to restore a margin of EUR 92 million. Finally, an upward correction had to be made to reflect the financial envelope of the new programme on the management of the migration flows in cooperation with the countries of origin as adopted early 2004.

As a result, the major changes to the programming, as compared to last year, fall within the External Relations policy area which comprises the major geographical programmes and some thematic activities (the amounts presented here include the administrative support expenditure - i.e. the former B...A headings - within the activities rather than presenting them as a separate group under Chapter 19 01):

-- Mediterranean and Middle East region: excluding Iraq, this region benefited last year of a significant upward (re-)programming over the 2004 to 2006 period. This increase is intended to compensate for the reduced allocations in the first half of the financial framework when compared to the previous period and to reinforce the reinvigorated cooperation framework with the southern neighbours. As such, this region, excluding Iraq, received a 13% increase in 2004. Although the financing needs for Iraq have required a slight decrease for 2005 and 2006 over last year's programming, the allocation will still grow 4% annually, thus allowing the stated priorities to remain unchanged,

-- Iraq reconstruction: EUR 200 million are set aside for Iraq in 2005, of which EUR 190 million are entered under the activity 'Relations with the Middle East and southern Mediterranean (compared to EUR 160 million in 2004), and EUR 10 million within the 'Human rights and democratisation, chapter,

-- eastern Europe, Caucasus and central Asian republics: the 2004 programming presented an increase for the 2004 to 2006 period in line with the new framework for the relations with Eastern and Southern neighbours. The 2005 to 2006 programming consolidates this increase albeit with a slightly lower rate,

-- Asia: the increase reflects the profile of the assistance reprogrammed in the light of the Tokyo multiannual pledge of 1 billion for Afghanistan made in January 2002. The reprogrammed increase has been slightly reduced for 2005 but still allows the EU to maintain its commitment of the region,

-- the programming of the western Balkans and Latin America is unchanged compared to last year. The major upward correction for the Balkans operated in 2004 is therefore confirmed for the whole period 2004 to 2006. As for Latin America, the programmed amounts are unaltered,

-- thematic programmes: in view of the tight situation of Heading 4 the budget for the Rapid Reaction Mechanism is maintained at its 2004 level (EUR 30 million). The anti-personal landmines budget is slightly reduced but only in 2005 and in line with the overall financial envelope for the period. These reductions allow the upward revision for the migration cooperation programme with third countries (EUR 45 million). The appropriations for human rights are proposed at the level which prevailed on average since 2000 (with the exception of 2004). They stay in line with the recent Commission proposal for the extension of the expiring legal base into 2005 and2006,

-- Common Foreign and Security Policy: a budget of EUR 55 million is proposed. This is 16 % higher than the 2003 budget but lower than the 2004 budget (EUR 62.6 million). The Commission has based its proposal on a judgement combining expected needs, the availability of other institutionalised channels for funding and the tight situation of Heading 4.

Another policy area for which appropriations have been adjusted upwards is that of Fisheries, where resources dedicated to the international fisheries agreements and related activities are increased by 4 % compared to 2004: EUR 202 million is proposed for 2005 and 2006. This increase will allow the renegotiation of expiring protocols and the conclusion of a few new agreements.

The budget for 'administrative management expenditure' has grown to a significantly higher level than in the first part of the period. The increase reflects the Commission's efforts to improve effectiveness of external aid through reinforced programme support structures and through the deconcentration process, bringing programme management closer to the field by moving staff from Headquarters to delegations. The level proposed represents about 3,3 % of the overall heading 4 allocation. The estimation of this category of expenditure remains difficult as the process of deconcentration went in different waves over 2001 to 2004 and the nature of the appropriations changed (from differentiated to non differentiated).

The budgetary capabilities to react in 2005 and 2006 to the challenges Europe is facing in its relations with non-member countries exceed the amounts availed under Heading 4. There are further amounts under the Emergency aid reserve, and the ACP States can, apart from their access to funding out from the thematic budget headings within the budget, count on substantial funds made available under the ninth EDF which came into force in 2003. For the period 2005 and2006, the EDF could provide on average around EUR 3 000 million a year through specific national programmes but also for humanitarian aid, although for limited amounts.

Margin

The more we have progressed towards the end of the period covered by the FP, the greater the number of priorities that have been taken on board, and the lower the remaining margin. In spite of redeployments, the contribution to the reconstruction of Iraq cannot be accommodated within the ceiling. The technical adjustment to be carried out next year, to the financial perspective in line with movements in GNI and prices, will be crucial for the 2006 margin as the room for manoeuvre has now been exhausted.

4. Financial programming headings 3 and 4

(amounts in EUR million)

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(amounts in EUR million)

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