EUROPEAN COMMISSION Brussels, 15.5.2019 COM(2019) 310 final COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Technical adjustment of the financial framework for 2020 in line with movements in GNI (ESA 2010)(Article 6 of Council Regulation No 1311/2013 laying down the multiannual financial framework for the years 2014-2020)



1.introduction The regulation laying down the multiannual financial framework (MFF regulation) for the years 2014-2020 as last amended by Council Regulation (EU, Euratom) No 2017/1123 of 20 June 2017 and adjusted as shown in the technical adjustment for 2019 contains the financial framework table for the period 2014-2020, expressed in 2011 prices (Table 1). According to Article 6(1) of the MFF regulation, the Commission makes each year, ahead of the budgetary procedure for year n+1, a technical adjustment to the multiannual financial framework (MFF) in line with movements in the EU's gross national income (GNI) and prices and communicates the results to the Council and the European Parliament. As far as prices are concerned, expenditure ceilings at current prices are established using the fixed 2% annual deflator as provided for in Article 6(2) of the MFF Regulation. As far as movements in GNI are concerned, the present Communication includes the latest economic forecasts available. At the same time the Commission calculates the margin available under the own-resources ceiling set in accordance with the new Own Resource Decision 2014/335/EU, Euratom (ORD2014), the absolute amount of the Contingency Margin provided for in Article 13 of the MFF Regulation, the global margin for payments provided for in Article 5, the global margin for commitments provided for in Article 14 and the amounts to be made available to the Flexibility Instrument under the second subparagraph of Article 11(1). In addition, the sub-ceiling for heading 2 concerning market related expenditure and direct payments shall be adjusted following transfers between pillar I and rural development. With the ORD 2014 in force the ceilings of own resources and the ceiling for appropriations for commitments were adapted to the new GNI data according to the European System of Accounts (ESA 2010). The maximum amount of own resources is now established at 1,20% of GNI (previously set at 1,23%) and the maximum amount of commitments at 1,26% of GNI (previously set at 1,29%). The United Kingdom notified its intention to leave the European Union, pursuant to Article 50 of the Treaty on the European Union (TFEU), on 29 March 2017. On 21 March 2019, the European Council has decided, in agreement with the United Kingdom, to an extension, under conditions, of that date and, on 11 April 2019, to a further extension, under conditions, until 31 October 2019, during which the United Kingdom remains a Member State of the Union. Under the terms of the draft Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community, agreed between the European Union and the United Kingdom on 25 November 2018 but not yet ratified, the Treaties would cease to apply to the United Kingdom on 1st January 2021. The purpose of this communication is to present to the Council and the European Parliament the result of the technical adjustments for 2020 according to Article 6 of the MFF Regulation. 2.Terms of the adjustment of the MFF table (Annex - tables 1-2) Table 1 shows the financial framework for EU-28 in 2011 prices as included in Annex I of the MFF regulation adjusted according to Articles 3(1) and 5. Table 2 shows the financial framework for EU-28 adjusted for 2020 (i.e. in current prices). The financial framework expressed in percentage of GNI is updated with the latest economic forecasts available (Spring 2019) and is adjusted according to Articles 3(1) and 5 of the MFF regulation. 2.1.Total figure for GNI According to the latest forecast available, the GNI for 2020 is established at EUR 16 989 408 million in current prices for EU-28. According to Article 6 (4) of the MFF regulation no further technical adjustments are made in respect of the year concerned, either during the year or as ex-post corrections during subsequent years. Therefore for information only, the updated GNI according to ESA 2010 is established at EUR 14 063 162 million for 2014, EUR 14 754 468 million for 2015, EUR 14 902 144 million for 2016, EUR 15 386 916 million for 2017, EUR 15 886 713 million for 2018 and EUR 16 427 139 million for 2019. For the same reason, the own resources ceiling currently established at 1,20% of GNI (ESA 2010) is adjusted only from 2018 onwards in the MFF table in the annex. For 2017 and previous years the own resources ceiling is shown at 1,23% of GNI based on ESA95. 2.2.Main results of the technical adjustment of the MFF for 2020 The overall ceiling for commitment appropriations for 2020 (EUR 168 797 million) equals 0,99% of GNI. The corresponding overall ceiling concerning the payment appropriations (EUR 172 420 million) is equivalent to 1,01% of GNI. On the basis of the latest economic forecasts, this leaves a margin beneath the 1,20% own resources ceiling of EUR 31 453 million (or 0,19% of GNI) for EU-28. 2.3.Adjustment of the sub-ceiling for Heading 2

According to Article 3(1) of the MFF regulation, the sub-ceiling for heading 2 for market related expenditure and direct payments (first pillar) in the period 2014 to 2020 shall be adjusted following the transfers between the first and second pillars in accordance with the legal act establishing these transfers. The total amount of the Heading 2 ceiling does not change. First adjustment: The sub-ceiling of Heading 2 was adjusted for the first time in the technical adjustment of the MFF for 2015. This adjustment as detailed in the first table below was reflected in Commission Implementing Regulation (EU) No 367/2014 of 10 April 2014. Second adjustment: Two rounds of transfers between pillars of the common agricultural policy (CAP) were reflected in the technical adjustment of the MFF for 2016 (see second table below). These transfers covered the flexibility between pillars in accordance with Article 136a of Council Regulation (EC) No 73/2009 and Article 14 of Regulation (EU) No 1307/2013, and also the estimated product of reductions to direct payments in accordance with Article 7(2) of this last regulation. The first round of transfers is set out in Commission Delegated Regulation (EU) No 994/2014 of 13 May 2014 and reflected in Commission Implementing Regulation (EU) No 1089/2014 of 16 October 2014. The second round of transfers is set out in Commission Delegated Regulation (EU) No 1378/2014 of 17 October 2014 and reflected in Commission Implementing Regulation (EU) 2015/141 of 29 January 2015. An unforeseen minor adjustment was made when the legislation implementing the Union rules on direct payments in Wales was annulled by a national court order in 2015. This change is set out in Commission Delegated Regulation (EU) 2016/142 of 2 December 2015 and is reflected in Commission Implementing Regulation (EU) 2016/257 of 24 February 2016. A review of transfers between pillars in respect of financial years 2019 and 2020 was notified to the Commission by 1 August 2017 and they are set out in Commission Delegated Regulation (EU) 162/2018 of 23 November 2017 and is reflected in Commission Implementing Regulation (EU) 2018/288 of 19 February 2018 (see the fourth table below). The deadline for submitting notifications to the Commission for the last round of transfers within this MFF was 1 August 2018. One Member State notified the Commission about its decision to reduce the amount of direct payments and the estimated product of reduction. The result was set out in Commission Delegated Regulation (EU) 2019/71 of 9 November 2018 and is reflected in Commission Implementing Regulation 2019/445 of 19 March 2019 (see the fifth table below). The modification of the sub-ceiling in Heading 2 in current prices needs to be translated into 2011 prices in order to technically adjust the MFF table in 2011 prices. For this purpose the net balance is first transformed into 2011 prices by using the 2% fixed deflator. This is then rounded up to obtain the adjusted sub-ceiling as the MFF ceilings are only expressed in millions of euros. Only with this rounding-up procedure it can be ensured that the MFF sub-ceiling is always higher than the net balance available for expenditure under the European Agricultural Guarantee Fund (EAGF). The resulting small difference does not constitute an available margin, but is exclusively arising from the rounding operation as all figures in the MFF table need to be expressed in millions of euro. For each annual budget, the Commission will use the exact amounts of the net balance available for EAGF expenditure. The same approach was applied in the previous technical adjustments of the MFF. The table below shows the net result of the transfers between the two pillars of CAP and their impact for Heading 2 sub-ceiling. 3.Global Margin for Payments (GMP) According to Article 5 of the MFF Regulation, the Commission shall adjust the payment ceiling for the years 2015-2020 upwards by an amount equivalent to the difference between the executed payments and the MFF payment ceiling of the year n-1. Any upward adjustment shall be fully offset by a corresponding reduction of the payment ceiling for year n-1 in constant 2011 prices. In the technical adjustment for 2016, the remaining margin of 2014 (EUR 104 million in current prices) was transferred to 2015 (EUR 106 million in current prices) and the ceilings were adjusted accordingly. In the technical adjustment for 2017 the remaining margin of 2015 (EUR 1 288 million) was transferred to the years 2018-2020. In the technical adjustment for 2018 the remaining margin of 2016 (EUR 13 991 million) was transferred to the years 2018-2020. In the technical adjustment for 2019 the remaining margin of 2017 (EUR 16 414 million) was transferred to the years 2019-2020. In this year's technical adjustment the GMP for 2018 is calculated. The payments for other special instruments are treated as being over and above the MFF ceilings. The 2018 payment ceiling was EUR 154 565 million in current prices. The payments executed in 2018 amount to EUR 144 369,8 million. This amount consists of the executed payments of the payment appropriations authorised in the 2018 budget (EUR 142 694,6 million;) and carry-overs from 2018 to 2019 (EUR 1 675,1 million). The payments for special instruments are excluded from the execution (EUR 1 060,8 million, consisting of EUR 1 060,6 million executed and EUR 0,2 million carried-over). Therefore the execution taken into account for the calculation of the GMP is EUR 143 309,0 million (EUR 142 694,6 million + EUR 1 675,1 million – EUR 1 060,8 million). All carry-overs from 2017 to 2018 were counted as executed for the purposes of the calculation of the 2017 GMP but not all of them were actually executed. Therefore the lapsed carry-overs need to be added to the calculation as they in fact constitute underexecution. The lapsed carry-overs from 2017 to 2018 amount to EUR 129,7 million, of which EUR 0,07 million for the special instruments. The total amount of the lapsed carry-overs taken into account is thus EUR 129,6 million. The remaining margin under the 2018 payment ceiling is EUR 11 385,5 million in current prices (i.e. EUR 154 566 million - EUR 143 309,0 million + EUR 129,6 million). As a result of the GMP transfers in previous years only EUR 183 million (2011 prices) is transferred to 2020 i.e. the remaining amount below the threshold of EUR 13 billion. This results in an unchanged overall payment ceiling for the period 2014-2020 in 2011 prices and an increase of the overall payment ceiling by EUR 9 million in current prices.

The table below shows the details of the calculation of the GMP for 2018. The table below shows the corresponding adjustments of the payment ceilings: 4.Special Instruments A number of instruments are available outside expenditure ceilings agreed in the financial framework 2014-2020. These instruments aim to provide rapid response to exceptional or unforeseen events, and provide some flexibility beyond the agreed expenditure ceilings within certain limits. 4.1.Emergency Aid Reserve According to Article 9 of the amended MFF regulation the Emergency Aid Reserve can be mobilised up to a maximum amount of EUR 300 million per year in 2011 prices, or EUR 358,5 million in 2020 at current prices (EUR 2 301,4 million for the whole period in current prices). The portion of the unused amount of the previous year can be carried over to the following year. The carry-over from 2018 to 2019 amounts to EUR 34,1 million. The table below shows the details of the annual availabilities and usage of the EAR since 2014: 4.2.European Union Solidarity Fund According to Article 10 of the MFF regulation, the EU Solidarity Fund can be mobilised up to a maximum amount of EUR 500 million per year in 2011 prices. or EUR 597,5 million in 2020 at current prices (EUR 3 944,7 million for the whole period in current prices). The portion of the unused amount of the previous year can be carried over to the following year. The carry-over from 2018 to 2019 amounts to EUR 265,3 million. No amount lapsed at the end of 2018. EUR 294 million of the 2018 portion was frontloaded to 2017, in order to provide sufficient financing to the needs (earthquakes in Italy). The table below shows the details of the annual availabities and usage of the EUSF since 2014: 4.3.Flexibility Instrument According to Article 11 of the amended MFF regulation the Flexibility Instrument can be mobilised up to a maximum annual amount of EUR 600 million in 2011 prices, or EUR 717 million in 2020 in current prices (EUR 4 315 million for the whole period in current prices). The portion of the unused annual amounts of the previous 3 years may be carried over. According to Article 6(1)f refering to Art 11(1) second subparagraph each year, starting in 2017, the annual amount available for the Flexibility Instrument shall be increased by the amounts equivalent to the portion of the annual amount for the European Union Solidarity Fund and the European Globalisation Adjustment Fund which have lapsed in the previous year. The table below shows the details of the annual availabilities and usage of the Flexibility Instrument since 2014:

4.4.European Globalisation Adjustment Fund According to Article 12 of the MFF regulation, the European Globalisation Adjustment Fund can be mobilised up to a maximum of EUR 150 million per year in 2011 prices, or EUR 179,3 million in 2020 in current prices (EUR 1 183,4 million for the whole period in current prices). Unused amounts of previous year cannot be carried over. The amount of EUR 144 million which lapsed at the end of 2018 is used to increase Flexibilty Instrument in 2019. The table below shows the details of the annual availabilities and usage of the EGF since 2014: 4.5.Contingency Margin According to Article 13 of the MFF regulation, a Contingency Margin of up to 0,03% of the Gross National Income of the Union shall be constituted outside the ceilings of the financial framework for the period 20142020. The absolute amount of the Contingency Margin for the year 2020 is EUR 5 096,8 million. The table below shows the details of the annual availabilities and usage of the Contingency Margin since 2014: 4.6. Global Margin for Commitments (GMC) for growth and employment, in particular youth employment, and for migration and security measures According to Article 14 of the MFF regulation, as amended by Council Regulation (EU, Euratom) No 2017/1123, margins left available below the MFF ceilings for commitment appropriations shall constitute a Global MFF Margin for commitments, to be made available over and above the ceilings established in the MFF for the years 2016 to 2020 for policy objectives related to growth and employment, in particular youth employment, and to migration and security. In the final budget 2018 the margin left available under the commitment ceiling amounts to EUR 1 390,9 million. The commitments on Special instruments (including the use of GMC and the Contingency margin) are not taken into account as they are implemented over and above the MFF ceilings. According to Article 6(2) of the MFF regulation, the 2% annual deflator shall be used for the calculation of the GMC. The amount of the remaining margin from 2018 which shall be made available for 2019 corresponds to EUR 1 390,9 million in current prices in 2018 or EUR 1 418,7 million in current prices in 2019 (EUR 1 447,1 million in current prices in 2020). The amount of GMC in 2011 prices corresponds to EUR 1 210,9 million. The table below shows the details of the calculation of the GMC 2018: Currently there is no remaining portion of previous GMC (2014 to 2017). The overall current availability of the GMC for 2019 is therefore limited to the 2018 portion. The table below shows the details of the availabilities and usage of the GMC since 2014: