Council Regulation (EC) No 2040/2000

of 26 September 2000

on budgetary discipline

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 37, 279 and 308 thereof,

Having regard to the proposal of the Commission(1),

Having regard to the opinion of the European Parliament(2),

Having regard to the opinion of the Court of Auditors(3),

Whereas:

(1) The European Council meeting in Berlin on 24 and 25 March 1999 agreed that the Union's expenditure must respect both the imperative of budgetary discipline and efficient expenditure.

(2) On 6 May 1999 the European Parliament, the Council and the Commission concluded an Interinstitutional Agreement on budgetary discipline and improvement of the budgetary procedure(4). This Interinstitutional Agreement, all the provisions of which apply in full, stresses that budgetary discipline covers all expenditure and is binding on all the institutions involved in its implementation. It establishes a financial perspective intended to assure that, in the medium term, European Union expenditure, broken down by broad category, develops in an orderly manner and within the limits of own resources:

(3) The institutions agreed that calculation of the agricultural guideline would remain unchanged. However, with a view to simplification, a recent reference basis should be adopted and the statistical concepts should be consistent with those which it is envisaged to adopt in the future Council Decision, concerning the system of the European Communities' own resources.

(4) The European Council concluded that the agricultural guideline would from now on cover expenditure under the reformed common agricultural policy, the new rural development measures, veterinary and plant-health measures, expenditure in connection with the agricultural pre-accession instrument and the amounts available for accession.

(5) The mechanisms for the depreciation of stocks formed during the budget year should be retained.

(6) The European Council, meeting in Berlin on 24 and 25 March 1999, taking account of the actual levels of spending and aiming to stabilise agricultural expenditure in real terms over the period 2000 to 2006, considered that the reform of the common agricultural policy could be implemented within a financial framework which it had determined. It requested the Commission and the Council to pursue additional savings to ensure that total expenditure, excluding rural development and veterinary measures, in the period 2000 to 2006 would not overshoot an annual average amount it had fixed. In the light of its decisions, it considered that the amounts to be entered in heading 1 of the financial perspective should not exceed certain annual levels, to which the European Parliament, the Council and the Commission subscribed by way of the Interinstitutional Agreement of 6 May 1999.

(7) The ceilings for the "Common agricultural policy" and the "Rural development and accompanying measures" subheadings are set in the financial perspective forming an integral part of the Interinstitutional Agreement of 6 May 1999. They can be revised only by a joint decision of both arms of the budgetary authority, acting on a proposal from the Commission, in accordance with the relevant provisions of the Interinstitutional Agreement.

(8) When the Council amends agricultural legislation and whenever it deems it to be necessary, the Commission should therefore point out to the Council, if appropriate, that there is a considerable risk that the expenditure arising, in its opinion, from the application of agricultural legislation, may exceed the ceiling for subheading 1 of the financial perspective.

(9) Without prejudice to point 19 of the Interinstitutional Agreement of 6 May 1999, as such overexpenditure cannot be taken into account in any proposal for a review of the ceiling for subheading 1a of the financial perspective, it is necessary for the Council to be given the opportunity to adjust agricultural legislation in good time to ensure that the ceiling is observed.

(10) Budgetary discipline requires that all legislative measures proposed and, if appropriate, adopted, and, throughout the budgetary procedure and when implementing the budget, appropriations requested, authorised or implemented comply with the amounts laid down in the financial perspective for expenditure on the common agricultural policy excluding rural development, which constitutes compulsory expenditure, and for expenditure on rural development and accompanying measures.

(11) It is possible that savings may have to be made in the short term to ensure compliance with the ceilings laid down for heading 1. In order to comply with the principle of the protection of legitimate confidence, it is necessary to warn the parties concerned to enable them to adjust their legitimate expectations to meet this contingency. Such measures must be taken sufficiently far in advance and may take effect only from the start of the following marketing year in each of the sectors concerned.

(12) In addition, in view of the need to respect the legitimate expectations of the parties concerned, such measures as might prove necessary should be taken sufficiently early and, for this purpose, the medium-term budgetary situation should be examined annually in the light of forecasts which are constantly being improved.

(13) If this examination indicates that there is a considerable risk that the amounts entered under heading 1 of the financial perspective will be exceeded, the Commission should take the appropriate measures to remedy the situation under the management powers at its disposal and, if it is unable to take sufficient measures, it should propose other measures to the Council which, as the marketing year of several common market organisations commences on 1 July, should act before that date. If the Commission subsequently considers that there is still a considerable risk and it is unable to take sufficient measures under the management powers at its disposal, it should at the earliest opportunity propose other measures to the Council, which should act as soon as possible.

(14) When implementing the budget, the Commission should implement a monthly early-warning and monitoring system for each chapter involving agricultural expenditure, so that, if there is a risk of the ceiling for subheading 1a being exceeded, the Commission may at the earliest opportunity take the appropriate measures under the management powers at its disposal, and then, if these measures prove insufficient, propose other measures to the Council, which should act as soon as possible.

(15) The exchange rate used by the Commission in drawing up budgetary documents that it submits to the Council should, allowance being made for the period required between the drafting and submission by the Commission of these documents, reflect the latest possible information.

(16) It is necessary for the provisions governing the monetary reserve to be brought into line with the Interinstitutional Agreement of 6 May 1999. With the gradual implementation of the reform of the common agricultural policy, expenditure is likely to be less sensitive to changes in the eurodollar rate and the monetary reserve can therefore be gradually phased out.

(17) Provision should be made for the possibility of reducing or temporarily suspending the monthly advances when the information communicated by the Member States does not enable the Commission to confirm that the Community rules applicable have been observed and indicates a clear misuse of Community funds.

(18) The institutions have agreed that a reserve relating to loans and loan guarantees to non-member countries and in those countries must be entered in the budget in the form of provisional appropriations so that the Guarantee Fund for external actions set up by Regulation (EC, Euratom) No 2728/94(5), may be funded and any calls on guarantees exceeding the amount available under the Fund may be met.

(19) The institutions have agreed that a reserve should be entered in the budget in the form of provisional appropriations to permit a rapid response to specific emergency aid requirements in non-member countries resulting from unforeseeable events, with priority being given to humanitarian operations.

(20) The institutions have agreed that the conditions for calling in and mobilising funds should be the same for the monetary reserve, the reserve relating to loan guarantees and the reserve for emergency aid, according to the detailed rules which the institutions laid down in the Interinstitutional Agreement of 6 May 1999.

(21) For reasons of clarity, Council Decision 94/729/EC of 31 October 1994 on budgetary discipline(6) should be repealed and replaced by this Regulation,

HAS ADOPTED THIS REGULATION:

Article 1

Budgetary discipline shall apply to all expenditure. Such discipline shall be applied, as appropriate, by the Financial Regulation, this Regulation and the Interinstitutional Agreement of 6 May 1999.

I. EAGGF Guarantee Section expenditure

Article 2

The agricultural guideline, which constitutes for each budget year the ceiling on agricultural expenditure defined in Article 4(1), must be respected each year. For each budget year, the Commission shall submit the agricultural guideline at the same time as the preliminary draft budget.

Article 3

1. The reference base from which the agricultural guideline is to be calculated shall be equal to EUR 36394 million for 1995, that is to say the total corresponding to the calculation made on the previous base for 1988.

2. The agricultural guideline for a given year shall be equal to the reference base laid down in paragraph 1 plus:

(a) the base multiplied by the product of:

- 74 % of the rate of increase in GNP between 1995 (base year) and the year in question, and

- the GNP deflator estimated by the Commission for the same period;

(b) forecasts of expenditure in the year in question on disposal of ACP sugar, food aid refunds, payments by producers in respect of levies provided for by the common organisation of the sugar market and any other revenue raised from the agricultural sector in the future.

3. The statistical base for GNP shall be as defined in Council Directive 89/130/EEC, Euratom, of 13 February 1989 on the harmonisation of the compilation of gross national product at market prices(7).

4. For the purposes of this Regulation the GNP shall be defined as the gross national income (GNI) for the year at market prices, as determined by the Commission pursuant to the ESA 95, in accordance with Council Regulation (EC) No 2223/96 of 25 June 1996 on the European system of national and regional accounts in the Community(8).

Article 4

1. The agricultural guideline shall cover the sum of:

- the amounts to be entered under Titles 1 to 4 of subsection B1 of Section III of the budget according to the nomenclature adopted for the 2000 budget,

- the amounts provided for in respect of the agricultural pre-accession instrument under heading 7 of the financial perspective,

- the amounts relating to agriculture which are available for accession under the financial perspective.

2. Each year Titles 1 and 2 of subsection B1 of the budget shall contain the appropriations necessary for financing all costs relating to the depreciation of stocks formed during the budget year.

Article 5

1. All the legislative measures proposed by the Commission or adopted by the Council or by the Commission under the common agricultural policy shall comply with the amounts laid down in the financial perspective under the subheading for expenditure on the common agricultural policy (subheading 1a) and under the subheading for rural development and accompanying measures (subheading 1b).

2. Throughout the budgetary procedure and when implementing the budget the appropriations for common agricultural policy expenditure must fall within the amount fixed for subheading 1a and the appropriations relating to rural development and accompanying measures must fall within the amount fixed for subheading 1b.

3. The European Parliament, the Council and the Commission shall use their respective powers in such a way as to comply with these annual expenditure ceilings during each budgetary procedure and when implementing the budget for the year concerned.

4. With a view to ensuring that the amounts set for subheading 1a are complied with, the Council, acting in accordance with the procedure laid down in Article 37 of the Treaty, may decide in good time to adjust the level of the support measures applicable as from the start of the following marketing year in each of the sectors concerned.

Article 6

1. The Commission shall examine the medium-term budget situation when the preliminary draft budget is established for each year. It shall submit to the European Parliament and the Council, together with the preliminary draft budget for financial year N, its forecast by product for the financial years N-1, N and N+1. At the same time, it shall submit an analysis of the differences between initial forecasts and actual expenditure for the financial years N-2 and N-3 and the measures taken to improve the quality of forecasts.

2. If, when the preliminary draft budget is established for a financial year N it appears that the amounts for subheadings 1a or 1b of the financial perspective for financial year N may be exceeded, the Commission shall take appropriate measures to remedy the situation under the management powers at its disposal.

3. If it is unable to take sufficient measures, the Commission shall propose other measures to the Council, if appropriate when setting the levels of support measures, to ensure that the amounts referred to in Article 5(2) are observed. The Council shall take a decision on the measures necessary, according to the procedure and under the conditions laid down in Article 5(4), by 1 July of financial year N-1. The European Parliament shall deliver its opinion in time for the Council to take note of it and act within the time limit set.

4. If the Commission subsequently considers that there is a risk that the amounts for subheadings 1a or 1b of the financial perspective for the financial years N or N+1 will be exceeded and if it is unable to take sufficient measures to remedy the situation under the management powers at its disposal, it shall propose other measures to the Council to ensure that the amounts referred to in Article 5(2) are observed. The Council shall take a decision on the measures necessary for financial year N, according to the procedure and under the conditions laid down in Article 5(4), within two months of receiving the proposal from the Commission. The European Parliament shall deliver its opinion in time for the Council to take note of it and act within the time limit set.

Article 7

1. In order to ensure that the ceilings for subheadings 1a and 1b of the financial perspective are not exceeded, the Commission shall implement a monthly early warning and monitoring system for each chapter involving expenditure of the type referred to in Titles 1 to 4 of subsection B1 of the budget.

2. Before the start of each financial year the Commission shall define for this purpose profiles of monthly expenditure for each budget chapter, based, where appropriate, on the average monthly expenditure of the three preceding years.

3. To monitor expenditure under Title 4 of subsection B1, the Commission shall also carry out a control to ensure compliance with the amount referred to in Article 5(2), as defined in Commission Regulation (EC) No 1750/1999 of 23 July 1999 laying down detailed rules for the application of Council Regulation (EC) No 1257/1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF)(9).

4. The statements of expenditure submitted to the Commission by the Member States every month in accordance with Article 3(3) of Commission Regulation (EC) No 296/96(10) shall be sent by the Commission to the European Parliament and to the Council for information.

The Commission shall submit to the European Parliament and to the Council, as a general rule within 30 days of receiving the information, monthly reports on the development of actual expenditure in relation to the profiles, including an evaluation of foreseeable implementation for the financial year.

5. If it concludes from the examination that there is a risk of the ceiling for subheading 1a set for year N being exceeded, the Commission shall take appropriate measures to redress the situation under the management powers at its disposal. If these measures prove to be insufficient, the Commission shall propose other measures to the Council to ensure that the amounts referred to in Article 5(2) are observed. The Council shall take a decision on the measures necessary, according to the procedure and under the conditions laid down in Article 5(4), within two months of receiving the proposal from the Commission. The European Parliament shall deliver its opinion in time for the Council to take note of it and act within the time limit set.

Article 8

1. When the Commission adopts the preliminary draft budget or a letter of amendment to the preliminary draft budget concerning agricultural expenditure, it shall use, in order to draw up the budget estimates for Titles 1 to 3 of subsection B 1, the average euro-dollar market rate over the most recent three-month period ending at least 20 days before adoption by the Commission of the budget document.

2. When the Commission adopts a preliminary draft supplementary and amending budget or a letter of amendment thereto, in so far as these documents concern the appropriations under Titles 1 to 3 of subsection B1 of the budget, it shall use:

- the euro/dollar market exchange rate actually recorded from 1 August of the previous financial year to the end of the most recent three-month period ending at least 20 days before adoption by the Commission of the budget document and on 31 July of the current financial year at the latest,

- as a forecast for the remainder of the year, the average rate recorded over the most recent three-month period ending at least 20 days before adoption by the Commission of the budget document.

Article 9

1. The sum of EUR 500 million shall be entered in a reserve in the general budget of the European Union, known as "the monetary reserve", as a provision to cover the developments caused by movements in the eurodollar market rate in relation to the rate used in the budget referred to in Article 10

2. For financial year 2002 the monetary reserve shall be reduced to EUR 250 million. The monetary reserve shall be abolished with effect from financial year 2003.

3. These appropriations shall not be covered by the agricultural guideline and shall not come under subheading 1a of the financial perspective.

Article 10

By no later than the end of October each year, the Commission shall report to the budgetary authority on the impact of movements in the average eurodollar rate on expenditure under Titles 1 to 3 subsection B1 of the budget.

Article 11

1. Savings or additional costs resulting from movements in the eurodollar rate shall be treated in symmetrical fashion. Where the dollar strengthens against the euro compared with the rate used in the budget, savings in the Guarantee Section of up to EUR 500 million in 2000 and 2001 and EUR 250 million in 2002 shall be transferred to the monetary reserve. Where additional budgetary costs are engendered by a fall in the dollar against the euro compared with the budget rate, the monetary reserve shall be drawn on and transfers shall be made to the EAGGF Guarantee Section headings affected by the fall in the dollar. Where necessary, these transfers shall be proposed at the same time as the report referred to in Article 10.

2. There shall be a neutral margin of EUR 200 million. Savings or additional costs below this amount arising from the movements referred to in paragraph 1 will not necessitate transfers to or from the monetary reserve. Savings or additional costs above this amount shall be paid into, or met from, the monetary reserve. The neutral margin shall be reduced to EUR 100 million from 2002.

Article 12

1. Funds shall be taken from the reserve only if the additional costs cannot be met from the budget appropriations intended to cover the expenditure referred to in subheading 1 a of the financial perspective for the year in question.

2. The necessary own resources shall be called up, in accordance with Council Decision 94/728/EC, Euratom of 31 October 1994 on the system of the European Communities' own resources(11) and the provisions adopted pursuant thereto, to finance the corresponding expenditure.

3. Any savings made in the EAGGF Guarantee Section which have been transferred to the monetary reserve in accordance with Article 11(1) and which remain in the monetary reserve at the end of the financial year shall be cancelled and entered as a revenue item in the budget for the coming year by means of a letter of amendment to the preliminary draft budget for the following year.

Article 13

Articles 9 to 12 shall apply only up to and including financial year 2002.

Article 14

1. Payment of the monthly EAGGF Guarantee Section advances by the Commission shall be effected on the basis of the information supplied by the Member States in regard to expenditure in each chapter.

2. If the declarations of expenditure or the information submitted by a Member State do not enable the Commission to establish whether the commitment of funds is in conformity with the relevant Community rules, the Commission shall request the Member State to supply further information within a period which it shall determine according to the seriousness of the problem and which may not normally be less than thirty days.

3. In the event of a reply which is deemed unsatisfactory or which indicates manifest non-compliance with the rules and a clear misuse of Community funds, the Commission may reduce or provisionally suspend the monthly advances to the Member States.

4. Such reductions and suspensions shall be without prejudice to the decisions which will be taken in connection with the clearance of accounts.

5. The Commission shall inform the Member State concerned before taking its decision. The Member State shall make its position known within two weeks. The Commission's decision, stating the reasons on which it is based, shall be taken after the EAGGF Committee has been consulted and must be in keeping with the principle of proportionality.

II. Reserves for external operations

1. Reserve relating to loans and loan guarantees

Article 15

1. Each year a reserve shall be entered in the general budget of the European Union as a provision intended to cover:

(a) the requirements of the Guarantee Fund for external actions;

(b) where necessary, activated guarantees exceeding the amount available in the Fund so that these amounts may be charged to the budget.

2. The amount of that reserve shall be the same as that in the financial perspective that forms part of the Interinstitutional Agreement of 6 May 1999. The arrangements for using this reserve are those set out in that Interinstitutional Agreement.

2. Reserve for emergency aid

Article 16

1. A reserve for emergency aid to non-member countries shall be entered each year in the general budget of the European Union as a provision. The purpose of this reserve shall be to permit a rapid response to specific emergency aid requirements in non-member countries resulting from unforeseeable events, with priority being given to humanitarian operations.

2. The amount of that reserve shall be the same as that adopted in the financial perspective contained in the Interinstitutional Agreement of 6 May 1999. The detailed rules for the use of the reserve shall be as laid down in the said Interinstitutional Agreement.

3. Common provisions

Article 17

The reserves shall be used by means of transfers to the budget headings concerned in accordance with the provisions of the Financial Regulation.

Article 18

The own resources necessary for financing the reserves shall not be called in from the Member States until the reserves are used in accordance with Article 17. The own resources necessary shall be made available to the Commission as provided in Council Regulation (EEC, Euratom) No 1150/2000 of 22 May 2000 implementing Decision 94/728/EC, Euratom on the system of the Community own resources(12).

III. Final provisions

Article 19

Decision 94/729/EC is hereby repealed.

Article 20

This Regulation enters into force on the day of its publication in the Official Journal of the European Communities.

It applies from 1 October 2000.

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

Done at Brussels, 26 September 2000.

For the Council

The President

C. Tasca

(1) OJ C 21 E, 25.1.2000, p. 37.

(2) OJ C 189, 7.7.2000, p. 80.

(3) OJ C 334, 23.11.1999, p. 1.

(4) OJ C 172, 18.6.1999, p. 1.

(5) OJ L 293, 12.11.1994, p. 1. Regulation as amended by Regulation (EC, Euratom) No 1149/1999 (OJ L 139, 2.6.1999, p. 1.)

(6) OJ L 293, 12.11.1994, p. 14.

(7) OJ L 49, 21.2.1989, p. 26.

(8) OJ L 310, 30.11.1996, p. 1.

(9) OJ L 214, 13.8.1999, p. 31.

(10) Commission Regulation (EC) No 296/96 of 16 February 1996 on data to be forwarded by the Member States and the monthly booking of expenditure financed under the Guarantee Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) and repealing Regulation (EEC) No 2776/88. OJ L 39, 17.2.1996, p. 5.

(11) OJ L 293, 12.11.1994, p. 9.

(12) OJ L 130, 31.5.2000, p. 1.