# EUR-Lex - 52011PC0398 - EN

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# 52011PC0398

**Proposal for a COUNCIL REGULATION laying down the multiannual financial framework for the years 2014-2020 /* COM/2011/0398 final - 2011/177 (APP) */**

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EXPLANATORY MEMORANDUM

1.
CONTEXT OF THE PROPOSAL
1.1.
Treaty basis

Article 312 of the Treaty on the
Functioning of the European Union (hereinafter referred to as the Treaty)
stipulates that a unanimously adopted Council Regulation shall lay down a
multiannual financial framework. It shall determine the amounts of the
annual ceilings on commitment appropriations by category of expenditure and of
the annual ceiling on payment appropriations and it shall lay down any
other provisions required for the annual budgetary procedure to run smoothly.

The first multiannual financial framework together
with provisions on interinstitutional cooperation and budgetary discipline was adopted
more than twenty years ago[1]. This and the following
financial frameworks allowed for considerably improving and facilitating the
annual budgetary procedure and cooperation between institutions and, at the
same time, increasing budgetary discipline.

By enshrining the multiannual financial
framework into the Union's primary law, the Treaty has recognised its importance
as a cornerstone of the budgetary architecture of the European Union.

The current multiannual financial framework
for the years 2007 to 2013 was agreed between institutions in May 2006 and laid
down in the Interinstitutional Agreement on budgetary discipline and sound
financial management[2] (hereinafter referred to
as the current IIA).

In order to implement the new Treaty
provisions, the Commission presented, on 3 March 2010, proposals for a Council
Regulation laying down the multiannual financial framework for 2007-2013 and for
a new Interinstitutional Agreement on cooperation in budgetary matters[3]
(hereinafter refered to as the March 2010 proposals). These two proposals, once
adopted, will replace the current IIA and bring the provisions on the 2007-2013
financial framework and on cooperation of the institutions in the budgetary
procedure in line with the Treaty. Meanwhile, the provisions of the current IIA
that are not rendered obsolete by the Treaty remain valid.

The present explanatory memorandum deals
with the new elements as compared with the March 2010 proposals, for both the proposal
for a Regulation laying down the multiannual financial framework for the years 2014
to 2020 (hereinafter referred to as the MFF Regulation) and the draft
Interinstitutional Agreement on cooperation in budgetary matters and sound
financial management (hereinafter referred to as the draft IIA). The
justification for changes resulting from the entry into force of the Treaty was
provided in the explanatory memorandum of the proposal for the Regulation
laying down the multiannual financial framework for 2007 to 2013 of 3 March
2010 and does not need to be repeated here.

1.2.
New provisions proposed for the 2014-2020 financial
framework
1.2.1.
Main political guidelines

The proposal for the MFF Regulation
accompanied by the draft IIA represents the legal transposition of the
Commission Communication on "A Budget for Europe 2020" adopted on 2]
June 2011[4]. It will be complemented
by a proposal amending the Commission's proposal for a Regulation on the
financial rules applicable to the annual budget of the Union in order to
introduce a few new provisions which are part of the package of proposals for
the 2014-2020 financial framework.

The Communication outlines the main
architecture and elements of the present proposals – e.g. the duration, the
structure reflecting the Europe 2020 Strategy, the need for increased
flexibility, and the amounts foreseen for the financial framework itself.

1.2.2.
Flexibility

Whilst aimed at ensuring budgetary discipline
the financial framework must, at the same time, provide for adequate levels of
flexibility to allow for effective resources allocation and a swift Union
response to unforeseen circumstances.

A number of parameters, such as the length
of the period covered by the financial framework, the number and design of
expenditure headings, the share of EU spending pre-allocated to Member States
and regions or pre-determined by 'amounts of reference' in co-decided
legislation, the margins available within each expenditure ceiling, and the
margins left between the financial framework ceilings and the own resources
ceiling, impact on the degree of flexibility or rigidity of a financial
framework. When elaborating its proposals for the next financial framework, the
Commission has taken those elements into account.

However, recent experience demonstrates
that challenges resulting from unforeseen events with global repercussions have
reached a new quality. From the very beginning of the current financial
framework all available flexibility provisions had to be mobilised, including a
number of revisions of the framework itself. The Union will increasingly be
exposed to the effects of globalisation of the economy and society, to climate
change, energy dependency, migratory pressure and other global challenges, most
of which in areas for which the Lisbon Treaty has increased the Union's responsibility
and role.

Finding the right balance between, on the
one hand, strict budgetary discipline and predictability of expenditure and, on
the other hand, the flexibility needed to enable the Union to respond to
unforeseen challenges, will always be a difficult political exercise. On the
basis of its assessment of the functioning of the current IIA[5] and of further reflections
undertaken in the context of the Budget Review[6], the
Commission proposes limited but targeted improvements to existing flexibility
provisions:

1.
Firstly, the wide and regular use made of the
Flexibility Instrument and the Emergency Aid Reserve (EAR) during the current
financial framework has proven their necessity. At the same time experience with the management of, notably, External Action over the past few
years has shown that the EU had to make a cumbersome use of different
instruments (such as the Emergency Aid Reserve, the Instrument for Stability, unallocated
margins, and the Flexibility Instrument) to address international developments
and new challenges.

Therefore, an increase of the maximum amounts available
each year is proposed for both the Flexibility Instrument and the EAR. Furthermore,
the possibility to use unused portions of the yearly maximum amounts in
subsequent financial years is extended to the year n + 3 for the Flexibility Instrument
and newly introduced, up to the year n+1, for the Emergency Aid Reserve (the
latter subject to a provision to be made in the Financial Regulation). The
scope of the Emergency Aid Reserve is broadened to cover also situations of
particular pressure resulting from migratory flows at the Union's external
borders.

This should allow the two instruments to
contribute more to a swift Union response to unexpected situations of a limited
scale.

2.
Secondly, whilst the European Union Solidarity
Fund and the European Globalisation Adjustment Fund (EGF) have proven their
utility, the maximum annual amount foreseen for the EGF under the current
financial framework (EUR 500 million) has never been used. A modest decrease of
the amount available to EUR 429 million is proposed together with a
simplification of the procedures for financing and releasing assistance and a broading
of the scope of the Fund to help mitigate also effects of globalisation affecting
farmers.

3.
Thirdly, the possibility to differ from the
indicative amounts in the co-decided programmes is proposed to be increased from
5% to 10% to increase flexibility within headings.

4.
Fourthly, the Commission will make a proposal
for introducing a new provision in the Financial Regulation with a view to
increasing flexibility for projects financed under the newly established
Infrastructure Facility.

Due to their nature those infrastructure
projects will in many cases require complex contracting procedures. Under those
circumstances, even limited delays may result in a loss of annual commitment
appropriations and undermine the viability of those projects and thus of the
Union's political determination to modernise its transport, energy and
telecommunications networks and infrastructure. To prevent this, the Financial
Regulation should allow for automatic carry-over to the following financial
year of commitment appropriations not used at the end of a financial year for
projects financed under the Infrastructure Facility.

5.
Fifthly, given the vulnerability of the
agricultural sector to major crises, a new Special Reserve for crises in the agriculture
sector is proposed with an annual amount of 500 million to be mobilised over
and above the ceilings of the financial framework. The procedure for
mobilisation of this Reserve corresponds to the one for the Emergency Aid Reserve.
Detailed rules for eligibility for the assisstance from this Reserve will be
laid down in its specific legal act.

6.
Finally, a revision of the financial framework will
continue to be needed for dealing with unforeseen circumstances with a major financial
impact. To allow for a similar level of flexibility compared to the current
IIA, a 'Contingency Margin' is proposed that can be mobilised over and above
the ceilings of the financial framework within the limits of 0.03% of the EU
GNI through the same procedure as established under Point 22 of the current
IIA.

The provisions on flexibility proposed for the
MFF Regulation and the draft IIA follow the approach of the March 2010 proposals:
Article 2 of the Regulation provides for the possibility to mobilise the amounts
of the special instruments outside the financial framework over and above the
ceilings set by the financial framework. The provisions on the instruments themselves,
their amounts and mobilisation procedures are included in the IIA. In this way
coherence of procedures and roles of the two arms of the budgetary authority
are ensured (see Points 10 to 15 of the draft IIA).

1.2.3.
Specific provisions on guarantees

If the repayment of a guaranteed loan provided
under the Balance of Payments Facility ("BoP") or under the European
Financial Stabilisation Mechanism ("EFSM") has to be covered by the Union's
budget, Regulation No 1150/2000 foresees a possibility to call additional own
resources to respect the Union's budget's legal obligation. This cash operation
would have to be followed by a budgetary operation – i.e. introduction of an amending
budget. Any amending budget has to comply with the MFF ceilings. Given the
amounts involved (the EFSM and BoP guaranteed loans), this would almost
certainly require a revision of the MFF.

It is highly unlikely that this situation will
ever occur but in order to avoid any potential difficulties it is proposed to
include in the MFF Regulation a provision excluding such potential expenditure
from the financial framework (i.e. if need be the amounts would be mobilised
over and above the ceilings of the financial framework).

The relevant ceiling constraining the
Union's capacity to guarantee lending from the Union's budget is the own
resources ceiling not the MFF ceiling. Requiring a revision of the MFF in case
of activation of this guarantee would seem to run contra to the intentions of
the legislator.

1.2.4.
Contribution to the financing of large scale
projects

The characteristics of major technological
development programmes based on large scale infrastructure projects, notably the
European satellite navigation programmes EGNOS and Galileo, call for specific
provisions aimed at 'ring-fencing' the amounts corresponding to the
contribution from the Union's budget. In the light of the experience made with the
2007-2013 financial framework, these new provisions are needed in order to
safeguard the orderly development of Union expenditure and for the annual
budgetary procedure to run smoothly.

The legislative acts concerning the above
mentioned programmes shall comply with the financial provisions set in the
present Regulation.

2.
LEGAL ELEMENTS OF THE PROPOSAL
2.1.
Multiannual Financial Framework Regulation

Article 1

The wording of Article 1 specifies the
duration of the financial framework and refers to the Annex containing the
table of the financial framework.

Article 2 – Compliance with ceiling of
the MFF

The first paragraph of Article 2 lays down
an obligation for the institutions to respect the ceilings during the budgetary
procedure in compliance with the provisions of the Treaty.

The second paragraph introduces the
possibility to exceed the ceilings, if necessary, when the instruments not
included in the financial framework are mobilised. The Emergency Aid Reserve,
the Solidarity Fund, the Flexibility instrument, the European Globalisation
Adjustment Fund and the newly created Reserve for crises in the agriculture sector
and the Contingency Margin are defined in Points 10 to 15 of the draft IIA.
They are not included in the financial framework and ensure that financing in
specific circumstances is provided in excess of the ceilings of the financial
framework, if needed. They increase the flexibility of the financial framework
and are mobilised jointly by the two arms of budgetary authority. In order to
maintain the current level of flexibility and the roles of the institutions in
the mobilisation of these instruments, the provisions governing them are
included in the draft IIA.

The third paragraph excludes the procedure of
mobilising the guarantees from the Union's budget for the loans provided under
the Balance of Payments Facility and European Financial Stabilisation Mechanism
from the obligation to respect the ceilings of the financial framework and
therefore from a need to revise the MFF. The relevant ceiling that needs to be
respected is the own resources ceiling.

Article 3
– Respect of own resources ceiling

A change to this Article is proposed
compared to the March 2010 proposal – an explicit reference to the fact that
the use made of instruments which can be mobilised from outside the financial
framework and of guarantees for a loan covered by the Union's budget according
to Regulation (EC) No 332/2002 or Regulation (EU) No 407/2010 also need to
respect the own resources ceiling.

Article 4 – Technical adjustment of the
financial framework

The financial framework is presented in
2011 prices. The procedure for its technical adjustment is maintained as well
as the 2% deflator. A new element is introduced in paragraph 1(c) – the
presentation of the absolute amount of the Contingency margin at the level of
0.03% of EU GNI as defined in Point 15 of the draft IIA .

Article 5 – Adjustment of cohesion
policy envelopes

This Article reproduces the text of point
17 of the current IIA and Article 5 of the March 2010 proposal. The changes
introduced reflect the timing for the 2014-2020 financial framework and the
change of the financial framework structure.

Article 6
– Adjustments related to implementation

The wording of this Article, which lays
down rules for the adjustments related to implementation, corresponds to Point
18 of the current IIA. No changes proposed compared to the March 2010 proposal.

Article 7 – Adjustment of Structural
Funds, Cohesion Fund, Rural Development and the European Fund for Fisheries

This Article reproduces the text of Point
48 of the current IIA. The preparation of the legal bases and then programming
documents is usually quite lengthy and therefore a late adoption of the legal
texts or programmes needs to be envisaged.

Article 8 – Adjustments related to the
excessive government deficit

The wording of this Article, which lays
down rules for the adjustments related to excessive government deficit,
reproduces the text of Point 20 of the current IIA and has not been changed
compared to the March 2010 proposal.

Article 9 – Revision of the financial
framework

The wording of this Article corresponds to
the Points 21 to 23 of the current IIA and Article 8 of the March 2010 proposal.
A few changes have been introduced: 1. the general rule concerning the timing
of a proposal for a revision, as included in Article 8(2) of the March 2010
proposal, has been dropped as it did not correspond to current practice given
the need to deal with unforeseen circumstances when they arise; 2. the possibility
to adapt the financial framework by qualified majority as proposed in Art. 8(3)
in March 2010 has been withdrawn (given the proposed widening of flexibility
instruments, including the introduction of the Contingency Margin); and 3. a new
paragraph 5 was introduced which specifies which of the adjustments to the
financial framework provided for in other Articles are also to be considered as
a revision of the financial framework.

Article 10 – Adjustment of the financial
framework in case of a revision of the Treaty

The wording of this Article, which lays
down rules for the adjustments in case of a revision of the Treaty, reproduces
the text of Point 4 of the current IIA and corresponds to Article 9 of the
March 2010 proposal.

Article 11 – Adjustment of the financial
framework in the case of enlargement

The wording of this Article reproduces the
text of Point 29 of the current IIA and Article 11 of the March 2010 proposal.

A new paragraph is introduced with
particular reference to a possible comprehensive settlement of the Cyprus problem
during the period covered by the financial framework.

Article 12 – Interinstitutional
cooperation in budgetary procedure

The provisions of this Article correspond
to the March 2010 proposal. The general rules of the cooperation in budgetary
procedure are included in the MFF Regulation, whilst the draft IIA and its
Annex contain more detailed provisions.

Article 13 – Financing of the Common
Foreign and Security Policy (CFSP)

The provision of the March 2010 proposal is
maintained with an exception of establishing the minimum amount for CFSP.

Article 14 – Contribution to the financing
of large scale projects

Specific provisions are needed for major
technological development programmes based on large scale infrastructure
projects, notably the European satellite navigation programmes EGNOS and
Galileo. Such provisions are warranted by the specific features of those
projects, i.e. a duration largely exceeding the multiannual financial
framework, project risks liable to produce substantial cost-overruns, limited
or no participation of private capital, and no or only a modest ability to
generate revenues from commercial exploitation in the short to medium-term.

Consequently, the proposed provision
foresees a 'ring-fencing' of the amount available for the European satellite
navigation programmes EGNOS and Galileo under the 2014-2020 financial framework.

Article 15 – Mid-term assessment of
implementation of the financial framework

A new provision is included that
establishes the timing for a mid-term assessment of the functioning of the
financial framework. A similar provision was included in the current IIA (Point
7 and Declaration No 1).

Article 16 - Transition towards the next
financial framework

This Article lays down the obligation for
the Commission to present a new financial framework before 1 January 2018, i.e.
three years before the end of the financial framework.

The second paragraph recalls the rules in
case no new financial framework is agreed by the end of the financial framework
covered by the Regulation.

Article 17

The final Article of the MFF regulation
sets the date of entry into force of the Regulation. The IIA should enter into
force on the same day as the two legal texts complement each other.

2.2.
Interinstitutional Agreement on cooperation in
budgetary matters and on sound financial management

Introduction – Points 1 to 6 of the draft
IIA

The introductory part of the draft IIA introduces
the Treaty reference (Art. 295), the binding nature of this agreement, its
coherence with other legal acts linked to the multiannual financial framework
and the budgetary procedure, describes the structure of the Agreement, and
stipulates the date of its entry into force (the same date as the MFF
Regulation).

It reproduces the wording of Points 1 to 6
of the March 2010 proposal.

Part I
– provisions related to the financial framework and special instruments not
included in the financial framework

A. Provisions related to the financial
framework

Point 7 provides for the rules on
presenting information about operations not included in the budget (i.e.
European Development Fund) and about the development of the categories of own
resources. The practice of providing this information is maintained but it is
proposed to present it no longer with the technical adjustment of the financial
framework but with the documents accompanying the draft budget where this more
logically belongs. The timing of the presentation remains practically the same
(end of April/beginning of May). This change has been included already in the March
2010 proposal.

Point 8 of the new IIA concerns the margins
beneath the ceilings. The MFF Regulation establishes the ceilings for all
headings that have to be respected during each annual budgetary procedure as
required by the Treaty. However, the practice to ensure as far as possible
sufficient margins beneath the ceilings should be preserved. It constitutes an
element of the interinstitutional cooperation and good will of the institutions
in the budgetary procedure and as such belongs in the IIA. The provision is
kept without any changes to the current practice and also compared to the March
2010 proposal.

Point 9 provides for an update of forecast
for payment appropriations after 2020 in the fourth year of the financial
framework, according to the current practice and the March 2010 proposal.

B. Provisions related to the special
instruments not included in the financial framework

The existing instruments that are not
included in the financial framework (the Emergency Aid Reserve, the Solidarity
Fund, the Flexibility instrument and the European Globalisation Adjustment
Fund) are maintained in the IIA. The MFF Regulation includes in Article 2 the
possibility to mobilise them, if necessary, over and above the ceilings
established by the financial framework. This split of the provisions between
the two acts corresponds to the logic presented in March 2010 proposals.

The changes compared to the March 2010
proposal consist of the increase of the amounts for the Flexibility instrument
and the Emergency Aid Reserve, a decrease of the amount of the European
Globalisation Adjustment Fund, the introduction, subject to a provision to be
introduced in the Financial Regulation, of the possibility to use unused
portions of annual amounts available under the EAR until the year n+1 and broadening
its scope to cover also situations of particular pressure resulting from
migratory flows at the Union's external borders, the prolongation of that
possibility for the Flexibility instrument from year n+2 to year n+3, as well
as deleting the provisions which limit the yearly amounts available under the European
Globalisation Adjustment Fund (EGF) to the availability of unspent and
decommitted amounts from the previous two years and broadening its scope to help
mitigate effects of globalisation affecting farmers. All amounts are expressed
in 2011 prices to be coherent with the overall presentation of the financial
framework. The mobilisation procedures are simplified compared to the current
practice.

A new Reserve for major crises in the agriculture
sector is proposed. Detailed rules for the eligibility of the assistance from
this Reserve will be laid down in a specific legal base. The IIA defines the
amount and the rules for its mobilisation.

A new instrument outside the financial
framework – the 'Contingency Margin' - is proposed. The wording corresponds, in
substance, to the provisions adopted by the Council in its position of 18
January 2011 on the March 2010 proposals. However, the split of provisions on
the Contingency Margin corresponds to the logic of the March 2010 proposals –
i.e. maintaining in the IIA all the provisions related to the special
instruments outside the financial framework.

Part II –
improvement of interinstitutional cooperation in budgetary procedure

A. The interinstitutional collaboration
procedure

The provisions on interinstitutional
cooperation in budgetary procedure have been significantly amended compared to
the current rules to comply with the new budgetary procedure introduced by the
Treaty. All the provisions are included in the Annex of the IIA as proposed in
March 2010.

The provisions included in the annex correspond
to the March 2010 proposal but incorporate the changes agreed since in the
Declarations by the institutions.

B. Incorporation of financial provisions
in legislative acts

The provisions of the current IIA and
therefore also of the March 2010 proposal are maintained. The possibility to
depart from the amounts included in the legislative acts is increased from 5%
to 10% in order to increase flexibility within the headings. This provision
does not apply to amount pre-allocated to Member States for the whole duration
of the financial framework and newly to the large scale project defined in
Article 13 of the MFF Regulation.

C. Expenditure relating to fisheries
agreements

It is proposed to align the provisions of
the current IIA on the expenditure relating to fisheries agreements with the
new budgetary rules. The proposed change in wording reflects those parts of the
existing text which are still relevant and they are purely related to good
cooperation and keeping the institutions informed of developments. The
provisions correspond to the March 2010 proposal, no changes were deemed
necessary.

D. Financing of the Common Foreign and
Security policy

The provisions correspond to the March 2010
proposal, no changes were deemed necessary.

E. Involvement of the institutions in
the management of the European Development Fund

In order to improve parliamentary scrutiny
of the European Development Fund (EDF) and bring it closer to the rules of the
Development Cooperation financed by the Union's budget, a new provision is proposed
to be introduced concerning the dialogue with the European Parliament on the
programming documents to be financed by the EDF.

F. Cooperation of the institutions in
the budgetary procedure on administrative expenditure

A new provision is introduced aimed at
making sure that institutions agree each year at an early stage of the
budgetary procedure (timing introduced in Annex) on the sharing of
administrative expenditure; the annual variation in the level of administrative
expenditure for each institution should also reflect the possible budgetary
impact from changes to provisions in the staff regulations and the impact of progressively
reducing staff levels by 5% between 2013 and 2018 in all institutions, bodies
and agencies.

Part III – Sound financial management of
EU funds

This part reproduces the text of the March
2010 proposal on the Financial programming (with a few adjustments to bring the
text closer to the current practice) and on Agencies and European Schools (with
an addition to follow the same rules as for setting up any new Agency to
modifying the relevant legal act or modifying the tasks of any agency and a
specification on the details of the impact assessment to be undertaken by the
Commission before presentation of a proposal to establish a new Agency or a new
European School).

The section on New or Innovative Financial
Instruments is no longer necessary as the Financial Regulation will include a
new Title entirely devoted to financial instruments and with detailed rules for
reporting on those instruments.

2011/177 (APP)

Proposal for a

COUNCIL REGULATION

laying down the multiannual financial
framework for the years 2014-2020

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
functioning of the European Union, and in particular Article 312 thereof, in
conjunction with the Treaty establishing the European Atomic Energy Community,
and in particular Article 106a thereof,

Having regard to the proposal from the
European Commission[7],

Having regard to the consent of the
European Parliament[8],

After transmission of the draft legislative
act to national Parliaments,

Acting in accordance with a special
legislative procedure,

Whereas:

(1)
The annual ceilings on commitments appropriations
by category of expenditure and the annual ceilings on payment appropriations
established by this Regulation must respect the ceilings set for commitments
and own resources in [Council Decision XXXX/XX/EU, Euratom].

(2)
Taking into account the need for an adequate
level of predictability for preparing and implementing medium-term investments,
the duration of the financial framework should be set at seven years starting 1
January 2014, with an assessment of the implementation of the financial
framework at mid-term. The results of this assessment should be taken into
account during the last three years of the duration of the financial framework.

(3)
Special instruments, the Emergency Aid Reserve, the European Union Solidarity Fund, the
Flexibility Instrument, the European Globalisation Adjustment Fund, the Reserve
for crises in the agriculture sector and the Contingency Margin, are necessary
to allow the Union to react to specified unforeseen circumstances, or to allow
the financing of clearly identified expenditure which could not be financed
within the limits of the ceilings available for one or more headings as laid
down in the financial framework. Specific provisions are therefore
necessary to provide for a possibility to enter in the budget commitment
appropriations over and above the ceilings set out in financial framework where
it is necessary to use special instruments.

(4)
If it is necessary to mobilise the Union's
budget guarantees for the loans provided under the Balance of Payment Facility
and the European Financial Stabilisation Mechanism set out in Council Regulation (EC) No 332/2002 of 18 February 2002 establishing
a facility providing medium-term financial assistance for Member States'
balances of payments[9] and in Council Regulation
(EU) No 407/2010 of 11 May 2010 establishing a European financial stabilisation
mechanism[10], the necessary amount should
be mobilised over and above the ceilings of the commitments and payments appropriations
of the financial framework while respecting the own resources ceiling.

(5)
The financial framework should be laid down in
2011 prices. The rules for technical adjustments of the financial framework to
recalculate the ceilings and margins available should also be laid down.

(6)
The financial framework should not take account
of budget items financed by assigned revenue within the meaning of Regulation (EU)
No [xxx/201x] of the European Parliament and of the Council of [...] on the financial
rules applicable to the annual budget of the Union[11].

(7)
Rules should be laid down for other situations
that may require the financial framework to be adjusted. Those adjustments may
be related to the implementation of the budget, excessive government deficit,
revision of the Treaties, enlargements or delayed adoption of new rules
governing certain policy areas.

(8)
The national envelopes for Cohesion for growth
and employment are established on the basis of forecast for Gross Domestic
Product (hereinafter "GDP") of spring 2011. Given the forecasting
uncertainties and the impact for the capped Member States an assessment should
be made in mid-term to compare the forecasted and actual GDP and its impact for
the envelopes. In case the GDP for 2014-2016 differs more than +/- 5% from the
forecast used in 2011 the envelopes for 2018-2020 for the Member States
concerned need to be adjusted. The rules for this adjustment need to be
provided for.

(9)
The financial framework may need to be revised in
case of unforeseen circumstances that cannot be dealt with within the
established ceilings of the financial framework. It is therefore necessary to
provide for revision of the financial framework in such cases.

(10)
It is necessary to provide for general rules on
interinstitutional cooperation in the budgetary procedure.

(11)
In order to help the budgetary procedure to run
smoothly, it is necessary to provide for the basic rules for the budgeting of
the expenditure for the Common Foreign and Security policy and overall amount
for the period covered by the financial framework.

(12)
Detailed arrangements on interinstitutional
cooperation in the budgetary procedure and on the budgeting of the expenditure
for the Common Foreign and Security policy are laid down in the Interinstitutional
Agreement of [...] 201x between the European Parliament, the
Council and the Commission on cooperation in budgetary matters and sound financial
management[12].

(13)
Specific rules are also necessary for dealing
with large-scale infrastructure projects whose lifetime extends well beyond the
period set for the financial framework. It is necessary to establish maximum
amounts for the contributions from the Union's budget to those projects. Those
requests should not have any impact on other projects financed from the Union's
budget.

(14)
The Commission should present a proposal for a
new multiannual financial framework before 1 January 2018 to enable the
institutions to adopt it sufficiently in advance before the start of the
following financial framework. The financial framework laid down in this
Regulation should continue to apply if the new financial framework regulation is
not adopted before the end of the term of the financial framework laid down in
this Regulation,

HAS ADOPTED THIS REGULATION:

Article 1
Multiannual
Financial Framework

The multiannual financial framework for the
period 2014 to 2020 (hereinafter the financial framework) is set out in the
Annex.

Article 2
Compliance
with the ceilings of the financial framework

1.
The European Parliament, the
Council and the Commission shall comply with
the annual expenditure ceilings, set out in the financial framework, during
each budgetary procedure and when implementing the budget for the year
concerned.

2.
The commitment appropriations may be entered in
the budget over and above the ceilings of the relevant headings laid down in
the financial framework where it is necessary to use the resources from the
Emergency Aid Reserve, the European Union Solidarity Fund, the Flexibility Instrument,
the European Globalisation Adjustment Fund, the Reserve for crises in the agriculture
sector and the Contingency Margin in accordance with Council Regulation (EC) No
2012/2002[13],
Regulation (EC) No 1927/2006 of the European Parliament and of the Council[14], Regulation No xxxx/201x of
the European Parliament and the Council[15]
and the Interinstitutional Agreement of [...] 201x on cooperation in budgetary
matters and sound financial management (hereinafter the Insterinstitutional
Agreement).

3.
Where a guarantee for a loan covered by the Union's
budget according to Regulation (EC) No 332/2002 or Regulation (EU) No 407/2010
needs to be mobilised, it shall be over and above the ceilings laid down in the
financial framework.

Article 3
Respect
of own resources ceiling

1.           For each of the years
covered by the financial framework, the total appropriations for payments
required, after annual adjustment and taking account of any other adjustments and
revisions as well as the application of paragraphs 2 and 3 of Article 2, may not
be such as to produce a call-in rate for own resources that exceeds the own
resources ceiling set in accordance with [Decision XXXX/XX/EU, Euratom].

2.           Where necessary, the
ceilings set in the financial framework shall be lowered in
order to ensure compliance with the own resources ceiling set in accordance with [Decision
XXXX/XX/EU, Euratom].

Article 4
Technical adjustments

1.           Each year the Commission,
acting ahead of the budgetary procedure for year n+1, shall make the
following technical adjustments to the financial framework:

(a)     revaluation, at year n+1 prices, of
the ceilings and of the overall figures for appropriations for commitments and
appropriations for payments;

(b)     calculation of the margin available
under the own resources ceiling set in accordance with [Decision
XXXX/XX/EU, Euratom];

(c)     calculation of the absolute amount of
the Contingency Margin provided for in Point 15 of the Interinstitutional
Agreement.

2.           The Commission shall
make the technical adjustments referred to in paragraph 1 on the basis of
a fixed deflator of 2% a year.

3.           The Commission shall
communicate the results of the technical adjustments referred to in paragraph 1
and the underlying economic forecasts to the European Parliament and the
Council.

4.           No further technical
adjustments may be made in respect of the year concerned, either during
the year or as ex-post corrections during subsequent years.

Article 5
Adjustment of cohesion policy envelopes

1.
In its technical adjustment for the year 2018,
if it is established that cumulated Gross Domestic Product ("GDP") of
any Member State for the years 2014-2016 has diverged by more
than +/- 5 % from the cumulated GDP estimated in 2011 for the establishment
of cohesion policy envelopes for Member States for the period 2014-2020,
the Commission shall adjust the amounts allocated from
funds supporting cohesion to the Member State concerned for that period.

2.
The total net effect, whether positive or
negative, of the adjustments referred to in paragraph 1 may not exceed
EUR 3 billion.

3.
The required adjustments shall be spread
in equal proportions over the years 2018-2020 and the corresponding ceilings of the
financial framework shall be modified accordingly.

Article 6
Adjustments related to implementation

When notifying the European Parliament and
the Council of the results of the technical adjustments to the financial
framework, the Commission shall present any proposals for adjustments to the
total appropriations for payments which it considers necessary, in the light of
implementation, to ensure an orderly progression in relation to the
appropriations for commitments. The decisions on those proposals shall be taken
before 1 May of year n.

Article 7
Adjustment
of Structural Funds, Cohesion Fund, Rural Development Fund and the European
Fund for Fisheries

1.
In the case of adoption after 1 January 2014 of
new rules or programmes governing the Structural Funds, the Cohesion Fund, the Rural
Development Fund and the European Fund for Fisheries, the financial framework
shall be adjusted in order to transfer to subsequent years, in excess of the
corresponding expenditure ceilings, of allocations not used in 2014.

2.
The adjustment concerning the transfer of unused
allocation for the year 2014 shall be adopted before 1 May 2015.

Article 8
Adjustments related to excessive government deficit

In the case of the lifting of a suspension
of budgetary commitments concerning the Cohesion Fund in the context of an
excessive government deficit procedure, the Council, in accordance with the
Treaty and in compliance with the relevant basic act, shall decide on a
transfer of suspended commitments to the following years. Suspended commitments
of year n may not be re-budgeted beyond year n+2.

Article 9
Revision of the financial framework

1.
In case of
unforeseen circumstances the financial framework may be revised in compliance
with the own resources ceiling set in accordance with [Decision XXXX/XX/EU,
Euratom].

2.
Any revision of the financial framework in accordance with paragraph 1 shall take into
account the scope for reallocating expenditure between the programmes covered
by the heading concerned by the revision, with particular reference to any
expected under-utilisation of appropriations. Where feasible, a
significant amount, in absolute terms and as a percentage of the new expenditure
planned, shall be within the existing ceiling for the heading.

3.
Any revision of the financial framework in accordance with paragraph 1 shall take into
account the scope for offsetting any raising of the ceiling for one heading by
the lowering of the ceiling for another.

4.
Any revision of the financial framework in
accordance with paragraph 1 shall maintain an appropriate relationship
between commitments and payments.

5.
Adjustments referred to in Article 3(2), 6, 7, 8,
10, 11 and 16 also constitute a revision of the financial framework.

Article 10
Adjustment of the financial framework in case of a revision of the Treaties

Should a revision of the Treaties with
budgetary implications occur during the financial framework, the necessary
adjustments to the financial framework shall be
made accordingly.

Article 11
Adjustment of the financial framework in case of enlargement and
unification of Cyprus

If new Member States accede to the Union
during the period covered by the financial framework, the financial framework
shall be adjusted to take account of the expenditure requirements resulting
from the outcome of the accession negotiations.

In case of unification of Cyprus during the
period covered by the financial framework, the latter shall be adjusted to take
account of the comprehensive settlement of the Cyprus problem and the
additional financial needs resulting from unification.

Article 12
Interinstitutional cooperation in the budgetary procedure

The European Parliament, the Council and
the Commission (hereinafter the institutions) shall take any measures to
facilitate the annual budgetary procedure.

The institutions shall cooperate in good
faith throughout the procedure with a view to reconciling their positions. The
institutions shall cooperate through appropriate interinstitutional contacts to
monitor the progress of the work and analyse the degree of convergence at all
stages of the procedure.

The institutions shall ensure that their
respective calendars of work are coordinated as far as possible in order to enable
proceedings to be conducted in a coherent and convergent fashion, leading to
the final adoption of the budget.

Trilogues may be held at all stages of the
procedure and at different levels of representation, depending on the nature of
the expected discussion. Each institution, in accordance with its own rules of
procedure, shall designate its participants for each meeting, define its
mandate for the negotiations and inform the other institutions of arrangements
for the meetings in good time.

Article 13
Financing of the Common foreign and security policy

The total amount of operating Common
foreign and security policy (hereinafter "CFSP") expenditure shall be
entered entirely in one budget chapter, entitled CFSP. That amount shall
cover the real predictable needs, assessed in the framework of the
establishment of the draft budget, on the basis of forecasts drawn up annually
by the High
Representative of the Union for Foreign Affairs and Security Policy,
and a reasonable margin for unforeseen actions. No funds may be entered in
a reserve.

Article 14
Contribution to the financing of large scale projects

A maximum amount of EUR 7 000 million in
2011 prices shall be available for the European satellite navigation programmes
(EGNOS and Galileo) from the EU budget for the period 2014-2020.

Article 15
Mid-term assessment of implementation of the financial framework

In 2016, the Commission shall present an
assessment of the implementation of the financial framework accompanied, where necessary,
by relevant proposals.

Article 16
Transition towards the next financial framework

Before 1 January 2018, the Commission shall present
a proposal for a new multiannual financial framework.

If no Council regulation determining a new multiannual financial framework has been adopted before 31 December
2020, the ceilings and other provisions corresponding to the last
year of the financial framework shall be extended until a regulation determining a
new financial framework is adopted. If new Member States accede
to the Union after 2020, the extended financial framework shall, if necessary, be
adjusted in order to take into account the results of accession negotiations.

Article 17
Entry into force

This Regulation shall enter into force on
the third day following that of its publication in the Official Journal of
the European Union.

This Regulation shall be binding
in its entirety and directly applicable in all Member States.

Done at ...,

For
the Council

The
President

ANNEX

Multiannual Financial Framework table

[1]               Interinstitutional Agreement on budgetary discipline
and improvement of the budgetary procedure, signed by Parliament, the Council
and the Commission on 29 June 1988 (OJ L 185, 15.7.1988, p. 33).

[2]               Interinstitutional Agreement of 17 May 2006 between
the European Parliament, the Council and the Commission on budgetary discipline
and sound financial management (OJ C 139, 14.6.2006, p. 1).

[3]               COM(2010) 72 and COM(2010) 73

[4]               COM(2011) 500, 29.6.2011.

[5]               COM(2010) 185 final of 27.4.2010, chapter 2 (pages 4
to 13).

[6]               COM(2010) 700 final of 19.10.2010, in particular section
4.5 to 4.7 (pages 23 to 25).

[7]               OJ C , , p. .

[8]               OJ C , , p. .

[9]               OJ L 53, 23.2.2002, p. 1

[10]             OJ L 118, 12.5.2010, p. 1.

[11]             OJ L .

[12]             OJ C ...

[13]             OJ L 311, 14.11.2002, p. 3.

[14]             OJ L 406, 30.12.2006, p. 1.

[15]             OJ L , , p.