COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 18.03.1998 
COM(1998) 165 final 
REPORT ON THE IMPLEMENTATION OF THE INTERINSTITUTIONAL 
AGREEMENT OF 29 OCTOBER 1993 ON BUDGETARY DISCIPLINE AND 
IMPROVEMENT OF THE BUDGETARY PROCEDURE 
PROPOSALS FOR RENEWAL 
(presented by the Commission) 

SUMMARY 
In accordance with paragraph 25 of the Interinstitutional Agreement of 29 October 1993 
the Commission is presenting this report to the budgetary authority on the application of 
the Interinstitutional Agreement and on the amendments which need to be made to it in 
the light of experience. 
Implementation of the Interinstitutional Agreement of 29 October 1993 
The Commission has reviewed both the application of the financial framework over the 
period 1993-99 and the implementation of the provisions of the Agreement designed to 
improve the budgetary procedure. 
• The period divides into two as regards application of the financial framework. From 
1993 to 1996 economic growth was not as high as expected, demonstrating that a 
margin for unforeseen expenditure of 0.01% (iNP was inadequate; annua! budgets 
were at levels very close to the financial perspective ceilings and there was significant 
underspending in 1994 and 1995. By contrast, from 1997 onwards economic growth 
picked up, a stricter budgetary policy was introduced leaving substantial margins 
beneath the financial perspective ceilings and outturn figures improved distinctly. 
• From the point of view of the improvement of the budgetary procedure, the 1993 
Interinstitutional Agreement has failed to produce lasting solutions to the problems of 
classification of expenditure and legal bases. On the other hand, in accordance with 
their pledge to improve implementation of the 1982 Joint Declaration, the institutions 
came to an agreement on the question of entering financial provisions in legislative 
instruments (Joint Declaration of 6 March 1995). Moreover, even though the first 
application resulted in a dispute, the interinstitutional collaboration procedure set up 
by the 1993 Interinstitutional Agreement worked satisfactorily, going beyond what 
had been agreed by the institutions. This must, however, still be confirmed in the 
budgetary procedure for 1999. 
Guidelines for a new agreement 
Since the verdict on the 1993 Interinstitutional Agreement is broadly positive, it is 
proposed that the fundamental rules be retained. 
However, certain provisions could be amended in the light of experience and also 
because of the tighter financial constraints proposed by Agenda 2000. The proposals 
concern the management of the financial framework and the budgetary procedure proper. 
For reasons of simplification and rationalisation, the Commission is also taking the 
opportunity offered by the renewal of the Inlcrinstitulional Agreement to propose 
updating and consolidating all the interinstitutional agreements and joint declarations on 
budgetary matters. 
c^. 
• The amendments or additions which the Commission is proposing to provisions 
relating to the management of the financial framework are essentially on three points: 
In a context where the financial framework will offer less latitude over the period 
2000-2006, the Commission is proposing that the management of the financial 
perspective be given an extra margin of flexibility. The aim would be to allow 
transfers, during and in accordance with the budgetary procedure, of allocations 
between headings 3 and 4 up to a limited amount, without escaping the need to leave a 
margin unused. Part of any balance remaining at the end of a year could give rise to a 
limited amount of additional expenditure in the course of the following year on 
requirements of significant political importance to be agreed in advance. 
In line with the new financial management arrangements proposed for the Structural 
Funds, the Commission takes the view that it is no longer necessary to provide in 
principle for the transfer to subsequent years of allocations for the Funds which have 
not been used. Decommitments would be governed by the relevant provisions of the 
Financial Regulation. 
The financial perspective will have to be adjusted if new Member States join the 
Community by incorporating, beneath the expenditure ceilings, the margins left 
available with an eye to enlargement. The Interinstitutional Agreement should leave 
open the possibility of revising the financial framework on this occasion should the 
allocations planned for enlargement prove inadequate. 
As regards improvement of the budgetary procedure and interinstitutional 
collaboration, the Commission is proposing, in addition to the consolidation of 
existing agreements and joint declarations, 
to determine in the Interinstitutional Agreement the classification of existing budget 
headings and to have the classification of new headings agreed by the two arms of the 
budgetary authority under the conciliation procedure; should they fail to agree, the 
Commission's proposal would be deemed approved; 
to relax the provisions of the Joint Declaration of 6 March 1995 on the entry of 
financial provisions in legislative instruments in order to restore a certain margin of 
manoeuvre to the budgetary authority in a context where the scope of legislative 
codecision has been extended by the Treaty of Amsterdam; 
to clarify, if it has not already been done, the issue of legal bases; 
to formalise the recently observed conciliation practice which has been extended to 
cover all expenditure. 
1b 
CONTENTS 
INTRODUCTION 1 £ 
I. IMPLEMENTATION OF THE INTEKINS HÏTJ TIONAL AGREEMENT 
OF 29 OCTOBER 1993 1 # 
A. APPLICATION OF TUB FINANCIAL FRAMEWORK 1 
/. The macroeconomic context and budgetary guidelines 2 
(a) 1993 to 1996 2 
(b) From 1997 onwards 3 
2. The main conclusions 4 
B. IMPROVEMENT OF THE BUDGETARY PROCEDURE 8 
/. Collaboration between the institutions has gradually gained substance...H 
2. Continuing problem of the classification of expenditure 9 
3. Improvement of the application of the 19H2 Joint Declaration: 
results still incomplete 10 
(a) rintry of financial provisions in legislative instruments 10 
(b) The issue of legal bases 10 
4. Use of budget reserves // 
II. GUIDELINES FOR A NEW AGREEMENT 11 
A. MANAGEMENT OF THE FINANCIAL FRAMEWORK 12 
/. Retention of existing provisions 12 
2. Provisions concerning certain categories of expenditure 12 
(a) Heading 2 12 
(b) Heading 6 13 
3. Increased flexibility in management of the financial framework ...14 
(a) Between certain headings of the financial perspective 14 
7 C 
(b) From one year to the next 15 
4. Duration of the financial perspective 15 
(a) An adjustment clause for the financial perspective 15 
(b) Extension of the financial perspective 16 
B. BUDGETARY PROCEDURE AND INTERINSTITUTIONAL 
COLLABORATION 16 
1. The new provisions and the changes to be made to the 
existing agreement 16 
(a) Classification of expenditure 16 
(b) Interplay between legislative powers and budgetary powers 17 
2. Consolidation of the existing provisions 19 
(a) Application of the maximum rate of increase 19 
(b) Late presentation of a letter of amendment for agriculture 19 
(c> Coordination of the most recent agreements I() 
3. Enlarged scope for the conciliation procedure 20 
ANMEX 
1JL 
INTRODUCTION 
Paragraph 25 of the Interinstitutional Agreement of 29 October 1993 requires the 
Commission to present, before 1 July 1998, a report on the application of the Agreement 
and on the amendments which need to be made to it in the light of experience. 
The current agreement followed on from the one concluded in 1988. It took over most of 
the principles and objectives of the earlier one, subject to certain clarifications and 
additional provisions. Its aims are twofold: to impose budgetary discipline in a 
framework ensuring that adequate resources are available and offering scope for an 
orderly growth in expenditure to match the priorities set in the medium term, and to 
improve the annual budgetary procedure by means of closer collaboration between the 
institutions. 
This report sets out what can be learned from the application of the 1993 Agreement and 
proposes a number of guidelines for renewal beyond 1999. These proposals are 
consistent with others presented by the Commission concerning the new financial 
framework, the reform of the CAP, the new Structural Funds regulations, the introduction 
of pre-accession aid and the operation of the Guarantee fund. 
Immediately after presenting this report, the Commission will propose a new 
interinstitutional agreement, with a financial perspective framework, to be agreed by the 
institutions for 2000-2006, as an integral part. The new agreement should be concluded 
in time to be applied for the preparation of the 2000 budget, the first one to be concerned. 
The Commission will also present proposals for appropriate amendments to the Council 
Decision of 31 October 1994 on budgetary discipline. 
I. IMPLEMENTATION OF THE INTERINSTITUTIONAL AGREEMENT 
OF 29 OCTOBER 1993 
A. Application of the financial framework1 
The financial framework for 1993-99 was set by the Edinburgh European Council in 
December 1992. It was endorsed by the European Parliament in October Î993 when the 
Interinstitutional Agreement was concluded. At that point some of the 1994 expenditure 
ceilings were raised by small amounts to allow non-compulsory expenditure to grow that 
year in line with the maximum rate of increase. 
Apart from the unavoidable adjustment which had to be made in 1995 to accommodate 
the new resources and requirements of a Union with three new Member States, the 
financial framework has not been amended,2 whereas the previous financial perspective 
The principal figures on the application of the financial framework are shown in the tables and charts 
annexed. 
I he financial framework applying from 1993 to 1999, with the technical adjustments in line with 
movements in prices and GNP and adjustments required by conditions of implementation, is set out in 
Table I. Table 2 compares this framework with the appropriations entered in the budget and the 
outturn figures. 
table for 1988-92 was revised seven times. What is more, the present framework looks 
set to expire leaving substantial margins available beneath the ceilings. 
Apart from the specific features of the original financial framework, the main 
explanations of these results lie in the development of the macroeeonomic situation 
throughout the period and the budgetary policy guidelines governing the Union's 
finances. It is against this backdrop that the actual application of the Agreement's 
provisions on budgetary discipline must be viewed. 
/. The macroeeonomic context and budgetary guidelines 
The application of the financial framework can be divided into two periods. 
(a) 1993 to 1996 
• Growth appreciably lower than expected 
The growth assumption underlying the financial perspective table was an annual average 
rate in real terms of 2.5% over the entire period. Actual growth from 1993 to 1996 in 
relation to 1992, on the basis of the most recent figures currently available 
(November 1997), was only an annual average of 1.5%. This average did, indeed, cover 
some fairly substantial fluctuations which were not accurately re I lee ted in the forecasts 
used for the successive annual technical adjustments (see Chart I ). 
This unexpectedly low real growth rate had two consequences: 
the narrow safety margin of 0.01% of (iNP which had been left available between the 
own resources ceiling and the limit on total appropriations for payments was used up 
completely at the very outset (see Table 2 and Chart 2); 
actual own resources fell well short of the forecasts used for drawing up the budget, 
generating negative balances which had to be accommodated beneath the ceiling. 
The adjustment of the financial perspective following enlargement of the Union in 1995 
eased these tight constraints which otherwise would probably have meant lowering the 
ceilings in the financial framework itself, as is allowed by the second subparagraph of 
paragraph 8 of the Agreement, in order to ensure compliance with the own resources 
ceiling. In addition to raising the ceilings to cover the requirements connected with 
enlargement, this adjustment restored the margin available beneath (he own resources 
ceiling and then raised it to 0.02% of GNP for the end of the period. 
• Annual budgets very close to the expenditure ceilings 
During the first four years of application of the financial framework, the budgets adopted 
each year (including supplementary and amending budgets) left only very small margins 
in appropriations for commitments beneath the ceilings set in the financial perspective 
(see Table 3 and Chart 3). For the most part these margins were beneath the agricultural 
guideline. The margins for headings 3, 4 and 5 were negligible. Although the margins in 
total appropriations for payment were bigger, they were still on the small side. 
• Marked underspending in 1994 and 1995 
for both these years appropriations totalling around IX'U 5 billion for commitments and 
KCU 8.5 billion for payments were not used and not carried over to the following year. 
In terms of amounts, two areas of expenditure were mainly concerned by this 
under-utilisation (see fable 3 and Charts 3 to 5): 
- expenditure on the common agricultural policy, mainly because of the relatively 
favourable conditions on a number of markets and an increase in costs connected with 
the 1992 reform that was not as high as expected. The volume of appropriations not 
used dropped sharply, however, in 1996; 
- expenditure on the Structural Funds, the reason being the time taken to adopt and 
introduce the arrangements for the new programming period which started in 1994. 
This mainly concerned objectives 2, 5a and 5b and the Community initiatives. 
Utilisation for objective 1 operations was satisfactory. In accordance with 
paragraph 10 of the Agreement the allocations not used in 1994 and 1995 gave rise to 
transfers of HCU 3.1 billion in appropriations for commitments to subsequent years. 
Utilisation rates for appropriations for payments were even lower. However, there 
was a marked upturn in 1996: during that year the outturn in commitments was 
slightly (FCU 300 million) higher than the initial allocation for the Structural Funds, 
thus clearing a little of the accumulated backlog. The improvement in utilisation rates 
was even more marked for payments. 
In relative terms there was also an appreciable slowdown, from 1995 onwards, in the 
clearance of commitments for external action and, to a lesser extent, internal policies. 
(b) From 1997 onwards 
In a number of respects 1997 marked a major turning point in the application of the 
financial framework. 
• A more favourable economic situation 
According to the most recent economic forecasts available, the real growth rate for the 
Union's GNP in the last three years of the period covered by the financial perspective 
should average just over 2.5% a year (see ('hart 1). The margin between the own 
resources ceiling and the limit on total appropriations for payments should therefore be 
0.03% of GNP as forecast at the time of enlargement. 
• A new approach to budget policy 
A new budget policy approach became evident in 1997, was accentuated when the 1998 
budget was established and should continue in 1999, at least in the preliminary draft 
budget that the Commission will be presenting. 
Prior to this the budget was drafted mainly by reference to the ceiling set by the financial 
perspective. The margins which could be left available beneath these ceilings were 
therefore at the heart of the debate between the institutions and tended inevitably to 
contract as the budgetary procedure advanced and compromises had to be found on the 
priorities to be set. From 1997 onwards the limit on the increase in total spending, linked 
to the budgetary restrictions applied by Member States at national level became the main 
reference marker for spending both on operations and on the institutions' staff. 
The budgets adopted for 1997 and 1998 are based on a very small increase in total 
appropriations for payments of 0.5% and 1.4% respectively in nominal terms, thereby 
leaving very substantial margins (0.07% then 0.13% of GNP) beneath an own resources 
ceiling which itself was rising (see Table 2 and Chart 2). 
Total appropriations for commitments increased by more (3% in 1997 and 2.1% in 1998), 
meaning that the underlying ratio between commitments and payments in the financial 
framework was increased. Account was thus taken of the pattern in earlier years of a 
slower rate of clearance of commitments. Moreover, as the allocations in commitments 
for structural operations had privileged status, they had to be entered in the budget in full. 
As a result, the margins available in the 1997 budget beneath the expenditure ceilings in 
commitments are still very small and mainly concern agricultural spending. In the 1998 
budget, on the other hand, large margins are left for all the headings with the sole 
exception of structural operations, where the allocations have privileged status 
(sec Table 3). 
• The improvement in outturn was confirmed in 1997 
The improvement in budget outturn which began to show through in 1996 was by and 
large confirmed in 1997. All headings were concerned for commitments with the 
exception of heading 2. The improvement was even more marked in payments for all 
headings. 
There was a deterioration in the level of utilisation in appropriations for commitments for 
structural operations in relation to 1996, with an underspend of around ECU 1.5 billion. 
Two points do, however, need to be made. 
- First, the appropriations entered in the budget for 1997 included, in addition to the 
initial allocation, the amounts not used in 1994 and 1995. While it was not possible to 
eliminate the backlog accumulated in these two years, the basic allocation for 1997 
was used almost in full. 
Second, undcr-utilisation in commitments essentially concerned Community 
initiatives, whereas outturn was satisfactory or at any rate better than the previous year 
for all the other structural operations. 
2. The main conclusions 
Since it was renewed in 1992 the financial perspective framework has confirmed its value 
as an instrument of budgetary discipline which can be applied in whatever economic and 
budgetary context. The rules of operation now seem well established and accepted. 
Some more specific conclusions can nevertheless be drawn from this experience. 
• Margin beneath own resources ceiling too narrow to begin with 
The margin of 0.01% of GNP left available for contingencies in the financial framework 
agreed at Iklinburgh proved inadequate for coping with the uncertainties of 
macroeconomic developments. In the very first year that the new financial framework 
4 
was applied, the margin was used up as a result of the slowdown in economic activity, 
and the expenditure estimates in the budget could only be covered in full because "other 
revenue" was available in addition to own resources. Had it not been for the adjustment 
of the financial perspective in connection with enlargement, the amount of own resources 
available would have been below the ceiling originally set for total appropriations for 
payments throughout the entire period. 
• A degree of constraint not evenly applied between the different categories of 
expenditure 
The priorities and the forecasts of budget requirements by major category of expenditure 
on which the financial framework was originally based can change over time. The 
revision procedure provided for in paragraphs 11-13 of the Agreement would allow any 
necessary adjustments to be made, provided the own resources ceiling is not exceeded 
and due account is taken of the possibilities of reallocating expenditure. No use was 
made of this procedure during the reference period. It would not have been feasible at 
the start of the period because no margins were available either beneath the ceilings for 
the individual headings or beneath the own resources ceiling. The proposal which the 
Commission presented in 1996 for redeploying and reclassifying expenditure in 
individual headings in order to strengthen certain internal policies which could promote 
growth and employment was not endorsed by the Council. 
All in all, the degree of constraint imposed by the initial ceilings was uneven as between 
the categories of expenditure. 
- By the end of 1992 it was already clear that a margin would probably be available at 
the end of the period beneath the agricultural guideline. This has proved to be true, 
despite the difficulties on the beef market, and each year the actual expenditure 
outturn has been well below the allocations entered in the budget. Although the 
guideline may have imposed some constraint in decisions on agricultural legislation, 
this was not really the case in terms of budget execution. Attention has focused more 
on ways of improving expenditure forecasts in this area and of monitoring 
developments when the budget is being implemented. 
- The allocations for heading 2 (Structural operations) were set in terms of expenditure 
targets. They increased significantly over the period (see Table 4). Implementation of 
the Structural Funds fell behind schedule at the start of the programming period 
mainly for objectives 2, 5a and 5b and the Community initiatives. This shows that a 
rapid rise in planned allocations can, initially at least, encounter problems of 
management and of installation of joint financing arrangements which do not 
particularly concern the main beneficiaries. 
- The allocations for heading 4 (External action) have the highest rate of increase over 
the period (see Table 4). In this connection it should be borne in mind that there were 
no upheavals with financial consequences on the international scene on the scale of 
the events during the earlier period, and the heading 4 allocations were afforded a 
large measure of protection from various uncertainties by the introduction of reserves 
for emergency aid and loan guarantees (see below). 
- The growth allowed for headings 3 (Interna! policies) and 5 (Administrative 
expenditure) was much smaller over the period, and the ceilings imposed much more 
5 
^ 
of a constraint. Evidence of this can be seen in the fact that heading 3 was regularly at 
the heart of the budgetary debate between the institutions even though it represents 
only about 6% of total expenditure. As regards administrative expenditure, given the 
major building programmes undertaken by certain institutions and the growth in 
expenditure on pensions, the ceiling set meant that other than for enlargement staff 
numbers have remained virtually unchanged and sustained efforts have been made in 
terms of redeployment and rationalisation. 
• Relationship between appropriations for commitments and appropriations for 
payments 
In the financial perspective the ceiling on appropriations for payments required is set on 
the assumption that the full amounts available under the ceilings of the various headings 
in appropriations for commitments will be entered in the budget and actually used. It is 
also based on payment schedules by category of expenditure which are considered 
normal for systems which are fully operational with existing regulations and experience 
acquired. On the basis of actual outturn and development of outstanding commitments, it 
is in fact possible, under the first subparagraph of paragraph 10 of the Agreement, to 
adjust the level of the ceiling on appropriations for payments if this is considered 
necessary. 
At the start of the period the increase in the volume of outstanding commitments was 
much stronger than implicitly allowed for in the financial perspective, mainly because of 
the sluggish progress of implementation of the Structural Funds, which would eventually 
produce, by a catching-up phenomenon, an increase in payment requirements. It was not, 
however, felt necessary to alter the growth path for the ceiling on appropriations for 
payments, since this appeared high enough to cover foreseeable needs. In addition the 
budgetary authority, when adopting the 1997 and 1998 budgets, opted to place much 
tighter limits on the growth of appropriations for payments than on that of appropriations 
for commitments. 
But this policy could only go so far, firstly because the utilisation rate in payments 
picked up significantly from 1996 onwards, and secondly, unless there is to be a constant 
slackening in the rate of clearance of commitments or systematic underutilisation of 
commitment appropriations, the growth in appropriations for payments must inevitably 
catch up with that of appropriations for commitments. 
• Re-entry in the budget of allocations not used for structural operations 
When the Delors I and II packages were adopted, the institutions wanted to underscore 
the priority attached to strengthening economic and social cohesion by giving the 
heading 2 allocations in the financial perspective a privileged status. In particular they 
decided that unused allocations should be transferred automatically to subsequent years 
as amounts in excess of the ceiling. 
Experience has shown that there are limits and risks involved with the near automatic 
nature of these transfers: 
- re-entry of unused appropriations in budgets for subsequent years is possible only if a 
margin is available beneath the own resources ceiling. However, the size of this 
margin cannot always be calculated accurately when the transfer decision has to be 
taken; 
» 
- there is a good case for using this mechanism if the reason for the underspend is 
temporary difficulties in implementing programmes. In the event of permanent 
implementation and absorption problems, successive transfers produce a snowball 
effect and provide no incentive to get to the root of the problems; 
- the effect of such transfers is that the same expenditure is repeatedly entered in the 
financial perspective and successive budgets until it is implemented. This could give 
a distorted image of actual budget developments. When the budget policy line is to 
set an overall limit on the increase in total expenditure from one year to the next, as 
has been the case since. 1997, the need to allow for amounts to be re-entered in the 
budget imposes further restrictions on the possible growth of other categories of 
expenditure. 
• Implementation of the reserves in heading 6 of the financial perspective 
In 1993 the institutions decided to set up two new reserves alongside the monetary 
reserve - the emergency aid reserve and the loan guarantee reserve - with two objectives 
in mind: first of all., to avoid too frequent application of the revision procedure and 
second to make it possible to mobilise quickly the resources required to deal with 
unforeseen events. 
- Monetary reserve 
For a temporary period up to the end of 1997 this reserve was given the broader 
assignment of covering the permanent cost of the monetary realignments within the EMS 
between 1 September 1992 and 31 October 1994. But the reserve was not mobilised 
during the period. In 1995 and 1996 expenditure resulting from fluctuations in the 
ecu/dollar parity was financed from the appropriations available in heading 1. What is 
more, in 1997 ECU 44 million in savings resulting from the favourable shift in the 
ecu/dollar parity was transferred to the reserve. 
- Reserve for loan guarantees3 
The purpose of this reserve is to endow the Guarantee fund and, should that Fund not 
have sufficient resources, to make additional direct payments in the event of a debtor 
defaulting on a loan guaranteed by the general budget. This Guarantee 
Reserve-Guarantee Fund mechanism performed its assigned role perfectly. 
It served as a framework for the development of lending operations guaranteed by the 
general budget, prompting the Council and the EIB to improve the programming of their 
lending to non-member countries. 
The resources available to the mechanism were adequate, from 1994 to 1997 just over 
80% of the reserve's allocation was used, guaranteeing a total volume of new lending 
The operation of the Guarantee Reserve-Guarantee Fund mechanism is analysed in detail in the 
specific report presented by the Commission. 
operations of ECU 7.5 billion. The Fund's resources have now reached the target figure 
set in the regulation of 10% of guaranteed loans outstanding. The defaults that the Fund 
has had to cover have never resulted in aggregate disbursements in excess of 5% of the 
amount outstanding. 
The result has been that the allocations under heading 4 of the financial perspective for 
expenditure on external action have been shielded from the unforeseeable impact which 
activation of the guarantee would have had if this mechanism had not existed. 
- Reserve for emergency aid 
This reserve was used, as intended, to cover specific aid requirements in non-member 
countries, primarily for humanitarian operations, in circumstances which could not be 
foreseen when the budget was drawn up, either as a result of new events or of a major 
and unexpected development in existing situations. Calls were made on (he reserve each 
year except in 1997, when additional humanitarian aid needs of ECU 120 million in 
appropriations for commitments and ECU 150 million in appropriations for payments 
were covered by transfers from other items in heading 4. from 1993 to 1996 the average 
rate of use of the reserve was just over 75%; without it there would have had to be some 
very tricky juggling of appropriations in heading 4 during the year or even revisions of 
the ceiling. However, some of the practical arrangements for drawing on the reserve 
weakened the specific character of the instrument and hence the reason for its existence. 
It is not because the reserve exists that there is no need to make adequate allocation under 
heading 4 for humanitarian aid to cope with average foreseeable requirements each year. 
But it was found that these allocations were constantly underestimated during the period 
and extra resources had to be found during the year by calling on the reserve even though 
it was not always clearly demonstrated that the events in question were entirely 
unforeseen. 
On the other hand the reserve should be mobilised as soon as unforeseen situations arise, 
involving large and urgent requirements, in order not to compromise humanitarian aid 
operations already programmed. 
B. Improvement of the budgetary procedure 
The new procedures introduced in the 1993 Agreement have gradually given life to a 
very encouraging practice of collaboration between the institutions. Some difficulties, 
connected with the classification of expenditure, were still encountered at the start of the 
period, as was demonstrated by the dispute between the two arms of the budgetary 
authority over the 1995 budget. The objective set by the institutions in 1993 of 
improving implementation of the 1982 Joint Declaration was not fully achieved. 
/. Collaboration between the institutions has gradually gained substance 
The 1993 Agreement introduced an inlerinstitutional collaboration procedure involving 
an exchange of views on budget priorities and conciliation on compulsory expenditure. 
Although initially this procedure did not live up to the high expectations placed in it, it 
did gradually generate a conciliation mentality which tended to gather momentum and 
continue throughout the budgetary procedure. 
The trialogue meeting on budget priorities is held before the Commission takes its 
decision on the preliminary draft budget. The discussion at this stage between the two 
arms of the budgetary authority remained fairly formal to begin with, as the Council was 
not always in a position to express its own priorities. The discussion on the 1998 budget, 
however, demonstrated that this procedure could produce satisfactory results if it was 
launched, upstream, by an informal trialogue meeting coming just after the 
Commission's internal discussion on budget priorities and provided the institutions were 
prepared to continue discussion in the subsequent stages of the budgetary procedure, 
dealing impartially with the entire budget. In this way it was possible to come to an 
agreement for 1998 on the principle and detailed arrangements of a strict budgetary 
policy covering all items of expenditure. 
After the first application of the procedure ended in a dispute in 1994, conciliation on 
compulsory expenditure has also gradually produced satisfactory results. The two arms 
of the budgetary authority were able to agree on the amounts to be entered in the EAGGF 
Guarantee items of the budget in which Parliament had special interest, which made it 
possible to overcome, without necessarily settling, the differences of opinion about 
classification of expenditure. Further advances were made with the conciliation 
procedure as a result of the compromise reached by the institutions at the trialogue 
meeting on 8 April 1997 on the possibility of presenting a letter of amendment in 
October, after the normal deadline, to adjust the forecasts of agricultural expenditure. 
The institutions held a trialogue meeting at the end of November 1997 to discuss the 
ad-hoc letter of amendment on the EAGGF Guarantee Section. 
A further spin-off from conciliation in the budgetary procedure for 1997 was the adoption 
of the Joint Declaration of 12 December 1996 on improving information for the 
budgetary authority on fisheries agreements. 
Even though the 1993 Interinstitutional Agreement restricts conciliation to compulsory 
expenditure alone, it has by and large been extended in practice to the entire budget and 
has continued to be applied by the institutions beyond the Council's first reading. Even 
though these good results were confirmed with the establishment of the lc)()8 budget, 
they are still fragile and will have to be consolidated in the budgetary procedure for ll)()() 
2. Continuing problem of the classification of expenditure 
This issue is still unresolved for the headings on which no compromise was reached in 
the Agreement (headings 2 and 3), i.e. essentially heading 1. 
The new conciliation procedure on compulsory expenditure was initially used by 
Parliament as an opportunity not only to discuss the amounts involved (which is what the 
Council and the Commission considered was the purpose) but also to argue about 
classification. After Parliament had unilaterally classified certain EAGGF Guarantee 
items as non-compulsory expenditure in the 1995 budget, the Council brought an action 
before the Court of Justice which annulled the budget. Since then the institutions have 
not really got down to discussing classification of all items of expenditure, despite the 
undertaking given when agreement was reached on the 1995 budget. 
3. Improvement of the application of the 1982 Joint Declaration: results still 
incomplete 
The Joint Declaration of 30 June 1982, which is one of the fundamental instruments for 
Community public finances, sets the stage for balanced interinstitutional relations 
between the two arms of the budgetary authority and also between the legislative 
authority and the budgetary authority. This includes the undertaking by the Council not 
to enter maximum amounts in basic instruments and in return Parliament's acceptance of 
the need for a proper legal basis before appropriations entered in the budget can be used. 
The need for a legal basis was restated in the 1998 Interinstitutional Agreement and then 
again in the 1993 Interinstitutional Agreement. What is more a statement annexed to the 
1993 Agreement confirmed the validity of the principles set out in the 1982 
Joint Declaration concerning legal bases and maximum amounts and pledged action by 
the institutions to improve application of these principles. 
On 6 July 1994 the Commission accordingly sent to the budgetary authority a 
communication covering the two issues of "amounts deemed necessary" and legal bases. 
(a) Entry of financial provisions in legislative instruments 
On 6 March 1995 Parliament, the Council and the Commission signed a joint declaration 
in which they rejected the practice of "amounts deemed necessary" and made allowance 
for the new legal situation resulting from the introduction, in certain areas, of the 
legislative codecision procedure. This joint declaration provides that: 
• multiannual programmes adopted under the codecision procedure will include 
reference amounts which are binding on the institutions during the annual budgetary 
procedure; 
• multiannual programmes based on instruments not covered by the codecision 
procedure will not include such amounts. Should the Council still wish to enter a 
financial reference in such an instrument, it will be taken as illustrative of the will of 
the legislative authority. The financial reference is not, therefore, binding on the 
institutions during the budgetary procedure. 
In practice, however, the Council has systematically entered financial references in the 
instruments it has adopted. 
(b) The issue of legal bases 
Article 22 of the Financial Regulation, taking up the wording of Title IV, paragraph 3 (c) 
of the 1982 Joint Declaration, lays down the principle that appropriations entered in the 
budget for any significant Community action may not be used until a basic instrument 
has first been adopted. The interpretation of this hard-won compromise between the 
institutions involved in the budgetary debate has given rise to disputes and the budget 
even today still has many items without a legal basis which cannot always be clearly 
justified. 
This has prompted the institutions to try to negotiate, on the basis of a Commission 
proposal, new rules and procedures in a bid to improve interinstitutional collaboration 
10 
and sound financial management. These negotiations arc currently on hold because of 
the cases brought before the Court of Justice. Agreement needs to be found as a matter of 
urgency, otherwise it will not be possible to implement the budget properly. 
4. Use of budget reserves 
Article 19 of the Financial Regulation provides that the budget may include "provisional 
appropriations" and "contingency reserves". The Commission's view is that the purpose 
of such reserves should be to facilitate budget management by making it possible to 
allocate appropriations to a budget heading during the year for an operation which had 
not been fully finalised when the budget was voted, in particular where the legal basis 
had still not been adopted. In recent years Parliament has tended to make more and more 
use of this instrument, making the release of the appropriations subject to all kinds of 
conditions, often very remote from the purpose of the budgetary heading concerned. Its 
interpretation of the use which could be made of the budgetary reserve has been very 
broad and debatable on certain points. 
While the appropriations for a given year are authorised by what ought to be a single 
budgetary act, this widespread use of reserves results in authorisation being given on 
various occasions during the year. The mobilisation of the appropriations entered in 
reserve also allows the budgetary authority to interfere in budget execution even though 
this is a matter exclusively for the Commission. Finally, although budget 
implementation is subject to ex post control, Parliament's practice means that it is 
de facto subject to ex ante control, in that the Commission may have to state how it 
intends to use appropriations before they can be transferred to the operational headings. 
There is therefore a good case for clarifying in the Financial Regulation the rules 
governing the use of budget reserves 
II. GUIDELINES FOR A NEW AGREEMENT 
As the Interinstitutional Agreement has on the whole worked satisfactorily, there is 
therefore no need for far-reaching changes to the existing rules. 
On the other hand there have in recent years been many declarations and interinstitutional 
agreements on budget matters, and this has rather blurred the legal situation in this area. 
Because of this complexity and of the existence in certain instruments of provisions 
which no longer have any raison d'être given past experience or new rules, the 
Commission believes that the renewal of the Interinstitutional Agreement should be taken 
as an opportunity to update and coordinate all the interinstitutional agreements and joint 
declarations on budgetary matters. 
The Commission's proposal is that various points should be added or clarified to make a 
clear distinction between the two purposes of the Interinstitutional Agreement, namely 
implementation of the financial perspective and improvement of the budgetary procedure. 
11 
A. Management of the financial framework 
I he proposals concerning the structure, content and amount of the various headings in 
the financial framework are contained in the communication on the renewal of the 
financial perspective. This communication deals only with the provisions governing 
application of the financial framework. 
These provisions remain valid for the same length of time as the financial perspective, 
and this could be stipulated in the Agreement. 
On the question of changes to be made, the Commission believes that maintaining the 
own resources ceiling at 1.27% of GNP, as proposed in the communication on the 
renewal of the financial perspective, must be offset by more flexible management of the 
financial framework, in particular to make it possible to contend with unforeseen 
requirements. 
/. Retention of existing provisions 
Subject to certain clarifications or possible redrafting, the Commission is proposing that 
the principle and procedures for the following provisions be kept unchanged: 
- the concept of ceiling applicable to the various headings and, for heading 1, the 
principle of the agricultural guideline for which the method of calculation and scope 
are set out in the Decision on budgetary discipline; 
- the establishment of these ceilings in constant prices and the annual technical 
adjustment in line with inflation and GNP growth; 
acceptance of the maximum rate of increase deriving from budgets established within 
the limit of the financial perspective; 
the undertaking by the two arms of the budgetary authority to leave, as a rule, margins 
available beneath the ceilings of the financial perspective; 
}' 
the possibility of an adjustment in line with the conditions of implementation in order 
to ensure an orderly progression between commitments and payments; 
- the possibility of revising the financial perspective by the majority required for budget 
decisions; 
- the procedures in force for the mobilisation of the reserves. 
2. Provisions concerning certain categories of expenditure 
(a) Heading 2 
The relatively privileged status of the allocations for heading 2 is maintained in the rules 
governing the Structural Funds and the Cohesion Fund, the new Interinstitutional 
Agreement should again contain an undertaking by the two arms of the budgetary 
authority to comply with the allocations provided for in the financial perspective for the 
Structural Funds and the Cohesion Fund (paragraph 21 of the 1()()3 Agreement). 
12 
Two of the amendments proposed in the new Structural Funds regulations should, 
however, be reflected in the new Agreement. 
The first concerns the conditions of implementation of the Structural Funds. Each year 
the budget commitments would correspond to the annual programming instalments. 
Amounts committed but not paid in the two years following their entry in the budget 
would be automatically cancelled and a decision on whether to make the appropriations 
available again would be governed by the existing provisions of the Financial Regulation. 
This new approach to the management of the Structural funds would mean that it should 
no longer be necessary to arrange for the transfer to subsequent years of amounts not 
used in a given year, which would involve raising the ceiling of the corresponding 
heading of the financial perspective. However, should there be delays at the start of the 
period in preparing the programming, such a transfer would be authorised for allocations 
not used during the first year covered by the financial perspective. 
The second amendment concerns the index-linking of the allocations for the Structural 
Funds. To facilitate the programming of Structural Fund operations, the deflators to be 
used for adjusting, prior to entry in the budget, the annual allocations originally set in 
constant prices should be set in advance in the new rules. The lnterinstitutional 
Agreement should therefore provide that for the "Structural funds" subheading the 
annual technical adjustment would be based on the same deflators. There could be a 
mid-term review of the index base in the light of actual inflation but without any ex post 
adjustment of allocations for earlier years. 
(b) Heading 6 
- Monetary reserve 
The usefulness of this reserve was not confirmed during the period 1993-99. What is 
more, fluctuations in the dollar rate should have less influence on agricultural 
expenditure in future as a result of the proposed reform of the CAP and assuming that it 
will be agreed to adjust the euro/dollar parity in the letter of amendment presented in the 
autumn. For this reason it is planned to gradually eliminate the allocations for this 
reserve as proposed in the communication on the renewal of the financial perspective. 
During this period the provisions of the lnterinstitutional Agreement governing the 
operation of this reserve would continue to apply. 
- Reserve for loan guarantees 
As the Guarantee Reserve - Guarantee Fund mechanism has served its assigned purpose, 
it is proposed that the operating rules currently contained in the lnterinstitutional 
Agreement for this reserve be kept unchanged. 
The new parameters proposed in the report on the operation of this mechanism would 
nevertheless result in a reduction in the allocation for the loan guarantee reserve provided 
that this did not add any further constraint on lending capacity. 
- Reserve for emergency aid 
In order to restore the emergency aid reserve to its genuine function, which is to provide 
a rapid response to specific and unforeseeable needs, three amendments are proposed. 
13 
Provided that the corresponding operational headings are allocated sufficient resources to 
cover average requirements each year, the first step could be to clarify the criterion for 
mobilising the reserve. In future the reserve should not be called on to cover needs which 
exceed what was expected in existing situations. Only needs arising out of genuinely 
new and unforeseeable events would be covered by the reserve. 
Secondly, it is proposed that it be stipulated that the reserve must be drawn on when such 
a requirement is identified, even if amounts are still available in the relevant operational 
items under heading 4 of the financial perspective, provided that the programmed 
spending indicates that the amounts will be used in full. 
Finally the reserve should be mobilised only for significant amounts. The Commission is 
therefore proposing that the text of the Interinstitutional Agreement should leave a 
neutral margin of at least EUR 15 million to be covered by redeployment. 
In this way it would be possible to reduce the allocation for the reserve as proposed in the 
communication on the renewal of the financial perspective. 
3. Increased flexibility in management of the financial framework 
The procedure for revising the financial perspective, the arrangements for which are to 
remain unchanged, must be reserved for relatively large and lasting alterations to the 
financial framework and must be applied ahead of the preparation of the budgets 
concerned. For more specific requirements arising while the budget is being drawn up or 
implemented in a financial framework which in future will offer less latitude, it is 
proposed that the new Agreement offer additional but limited margins of flexibility. 
(a) Between certain headings of the financial perspective 
The possibility would be provided of transferring, for a given year, allocations between 
certain headings of the financial perspective by means of a more flexible procedure than 
that of revision. 
In the light of experience and following the same reasoning that was used for setting the 
various expenditure ceilings, this possibility would be restricted to headings 3 (Internal 
policies) and 4 (External action). Heading 1 continues to be governed by the agricultural 
guideline, the principle of which is laid down in the Decision on budgetary discipline. 
The allocations for heading 2 have privileged status. Administrative expenditure under 
heading 5 cannot really be considered interchangeable with operational expenditure. 
Finally, heading 6 covers reserves specifically intended to enable the Union to contend 
with unforeseen expenditure without jeopardising the financing of current policies. 
To ensure that the financial perspective continues to act as an expenditure framework, the 
possibility of transferring allocations between the two headings would be restricted as 
follows: 
- the transferable amount would be subject to a ceiling, set as an absolute amount of, 
say, EUR 100 million; 
14 
- a margin would at all events have to remain available beneath the ceiling of the 
original heading. This means that the margin beneath the original heading would have 
to be say EUR 100 million more than the transfer made; 
- the facility could not be used for the same reasons, i.e. to provide additional resources 
for the same budget items, the following year. 
The transfer would be possible during the annual budgetary procedure (or the procedure 
concerning a supplementary and amending budget), without formal adjustment of the 
ceilings concerned. The Commission, however, would not be allowed to make use of the 
possibility when presenting its preliminary draft. There would be conciliation between 
the two arms of the budgetary authority, in accordance with the arrangements laid down, 
before this transfer mechanism could be applied. 
(b) From one year to the next 
Underutilisation of appropriations for payments in the outturn for a given year gives rise 
to positive balances which are entered in the budget for the following year by means of a 
supplementary and amending budget and are deducted from the amount of own resources 
called in for that year. An estimate of the balance can also be entered in the draft budget, 
during the budgetary procedure, by means of a letter of amendment. 
The Commission is proposing that the new Agreement should provide for part of any 
positive budget balance from the previous year to be used to cover significant political 
requirements agreed in advance. It could be agreed that the budgetary authority would be 
allowed to vote expenditure - in appropriations for commitments and outside the financial 
perspective ceilings - for a maximum of say EUR 500 million, provided that these 
appropriations were covered by corresponding underutilisation in the previous budget 
and that the positive balance from the previous year was at least equal to this amount. 
The two arms of the budgetary authority would have to reach explicit agreement on the 
use of this possibility and on the corresponding amount within the limit set. 
4. Duration of the financial perspective 
(a) An adjustment clause for the financial perspective 
The new financial framework for 2000-2006 comes at a point in time when it will have to 
finance both the development of Community policies and the requirements of 
enlargement to include new Member States. 
The financial framework which will be adopted for a fifteen-member Union with 
amounts being left available for an initial enlargement will have to be adjusted, by 
agreement between the two arms of the budgetary authority, when the new members 
actually arrive. This will mean restoring to the various headings of the financial 
perspective all or part of the amounts left available and if these are not sufficient to meet 
the needs of enlargement, to revise the financial perspective without exceeding the own 
resources ceiling. A clause providing for this should be included in the new Agreement. 
15 
(b) Extension of the financial perspective 
The rule governing the extension of the financial perspective, as contained in 
paragraph 25 of the current Agreement, could be clarified and simplified. 
It should first be confirmed that unless one of the parties expressly refuses any extension, 
the agreement will continue to be extended year by year until the entry into force of a 
new financial perspective. 
As the current Agreement provides that the ceilings will be adjusted on the basis of the 
average increase observed over the preceding period, it does not guarantee compatibility 
between expenditure and the own resources ceiling. 
In order to be consistent with the general philosophy of the financial perspective, there 
should be a link in the extension clause with the past growth of expenditure and also with 
the own resources available. The Commission is therefore proposing that in the event of 
the financial perspective being extended, the ceilings in force will be raised by the 
average annual rate of increase over the period 2000-2006 with the rate of increase of 
each of the headings being restricted to the increase in GNP. 
B. Budgetary procedure and intcrinstitutional collaboration 
The Commission is proposing that all the provisions in this area be consolidated, subject 
to appropriate adjustments or additions in particular in the procedures for 
intcrinstitutional collaboration. 
As the provisions concerned are not directly linked to the existence of a financial 
framework, they must be of a permanent nature. This means that the legal instrument 
constituted by the Interinstitutional Agreement should be concluded for an indefinite 
period even if: 
- allowance should be made for the possibility of adding further provisions if new 
agreements were to be reached between the institutions on specific points; 
- the provisions relating to the management of the financial framework would cease to 
apply if no such financial framework existed. 
/. 77w? new provisions and the changes to be made to the existing agreement 
(a) Classification of expenditure 
The 1982 Joint Declaration, which addresses the compulsory - non-compulsory issue 
from the angle of classification criteria and classification procedure, has not produced a 
satisfactory solution. 
It would appear that any attempt to define new objective criteria, compatible with the 
Treaty, for distinguishing between the two types of expenditure and providing an 
unassailable classification is doomed to failure. 
The Commission therefore believes that the institutions should agree on the classification 
of expenditure in the Interinstitutional Agreement. The Commission proposes that rural 
development measures and all other expenditure financed by the EAGGF Guarantee 
16 
Section which is not linked to common market organisations (veterinary measures, 
promotion schemes) should be included in the category of non-compulsory expenditure. 
The same would also apply to headings 2 and 3 expenditure, as agreed in the 1993 
Agreement. Under heading 4 the Commission proposes that the Community's 
contribution to the EBRD capital and to fisheries agreements (other than those to 
international organisations) should be considered compulsory expenditure. For heading 5 
the classification would be that of the present budget. 
The Commission is proposing that the classification of new budget items be agreed under 
a conciliation procedure extended to the entire budget. In the absence of agreement 
between the two arms of the budgetary authority on the classification of expenditure, the 
Commission's proposed classification in its preliminary draft budget would be deemed 
approved (cf. negative codecision procedure which already applies for mobilisation of 
reserves). 
(b) Interplay between legislative powers and budgetary powers 
• Entry of financial provisions in legislative instruments 
The Treaty of Amsterdam extends the scope of legislative codecision, to include areas 
where financial aspects are substantial. This procedure now concerns the following 
areas:4 
- non-discrimination on the grounds of nationality (Article 6) 
free movement of Union citizens (Article 8a) 
free movement of workers, including social security for migrant workers (Articles 49 
and 51 ) 
right of establishment, including coordination of special provisions on grounds of 
public policy, public security or public health (Articles 54 and 56) 
- access to activities as self-employed persons and in particular mutual recognition of 
diplomas, certificates and other evidence of formal qualifications (Article 57) 
- services (Article 66) 
- transport (Articles 75 and 84) 
- harmonisation of national legislation for the establishment and functioning of the 
single market (Article 100a) 
- incentive measures in the field of employment (Article 109r) 
- customs cooperation (Article 116) 
social policy (Article 118) 
4 The Treaty articles mentioned correspond to the old numbering which is still in force. 
17 
- equal opportunities and pay for men and women (Article 119) 
- implementing decisions relating to the European Social Fund (Article 125) 
- education, vocational training and youth (Articles 126 and 127) 
- culture (Article 128) 
public health (Article 129) 
- consumer protection (Article 129a) 
- trans-European networks (Article 129d) 
- implementing decisions relating to the European Regional Development Fund 
(Article 130e) 
- research and technological development (Articles 130i and 130o) 
- environment (Article 130s) 
- development cooperation (Article 130w) 
- fight against fraud (Article 209a) 
statistics (Article 213a) 
- establishment of an independent supervisory body for the protection of personal data 
(Article 213b). 
This extension of the use of the codecision procedure, combined with the provisions of 
the Joint Declaration of 6 March 1995, may severely hamstring the budgetary authority, 
even though it should be allowed a certain amount of discretion for reasons of 
institutional balance and budgetary policy. The Commission accordingly takes the view 
that the content of the Joint Declaration should be reviewed in the light of the new 
situation created by the Treaty of Amsterdam. 
The principle set out in the Joint Declaration of 6 March 1995, whereby the institutions 
undertake to comply during the budgetary procedure with the reference amounts set in 
the legislative codecision procedure, can be retained. However, the two arms of the 
budgetary authority should be given the possibility of agreeing during the conciliation 
procedure to depart from these amounts.5 If the Council and Parliament fail to agree on 
an amount other than that set by the legislative authority, the arm of the budgetary 
authority which has the last say would be allowed to depart by up to 10% from the 
reference amount. 
This margin of manoeuvre would not, however, apply to Social Fund and ERDF expenditure, given 
their privileged status, nor to research expenditure, since the Treaty states that the allocations set in the 
framework programme constitute a maximum amount. 
18 
• Legal bases 
The new Agreement could state what is offered in return for recognition of the principle 
that appropriations earmarked for a Community operation cannot be used until a legal 
basis exists: 
- items with an allocation of less than a certain amount, subject to the principle of 
budget specification, 
- preparatory action and pilot projects, with an indication of how long they may 
continue without a legal basis, 
autonomous operations, i.e. generic action for which the Treaty alone constitutes an 
adequate legal basis. 
2. Consolidation of the existing provisions 
(a) Application of the maximum rate of increase 
The issues relating to the application of the weighted average rate are addressed in the 
Joint Declaration of 30 June 1982. The agreement stales in particular to what the 
maximum rate of increase applies, the circumstances in which the two arms of the 
budgetary authority can agree to set a new maximum rate and Parliament's margin of 
manoeuvre. 
The Commission proposes that these provisions be kept unchanged in the new 
Interinstitutional Agreement, since they are only really relevant if the financial 
perspective is not applied. 
(b) Late presentation of a letter of amendment for agriculture 
The Commission is proposing that the new Interinstitutional Agreement should formalise 
the consensus reached that such a letter of amendment should be given only one reading. 
The scope of the letter of amendment could be extended to cover expenditure on fisheries 
agreements. It should be the opportunity to adjust the distribution between amounts 
entered against the heading and those contained in reserve in the preliminary draft budget 
on the basis of the agreements which will be in force on I January of the budget year in 
question. 
(c) Coordination of the most recent agreements 
• Joint Declaration of 12 December 1996 on improving information to the budgetary 
authority on fisheries agreements 
The purpose of this declaration was to guarantee Parliament better information about the 
budgetary implications of agreements being negotiated. It also states that Parliament and 
the Council will endeavour to agree on the amount of appropriations involved during the 
ad hoc conciliation procedure on compulsory expenditure provided for in Annex II of the 
1993 Interinstitutional Agreement. 
19 
The institutions have not seen eye-to-eye on the distribution of appropriations to be 
entered under the operational heading and those to be held in reserve, and also on 
whether authorisation should be given to implement an agreement provisionally without 
waiting until Parliament has delivered its opinion. These points should be clarified when 
the new Interinstitutional Agreement is negotiated. 
- On the first point it should be stated that the operational heading will carry all 
appropriations corresponding to fisheries agreements which are certain to enter into 
force during the year. 
On the second point, a sufficient lapse of time - 6 months say - should be allowed 
between Parliament being informed about the terms and financial implications of the 
agreement and the corresponding appropriations actually being used, so that 
Parliament can deliver its opinion in advance. After the 6 months the appropriations 
could be used. 
• The Interinstitutional Agreement of 17 July 1997 on the financing of the common 
foreign and security policy 
This Interinstitutional Agreement, which was negotiated in parallel with the Treaty of 
Amsterdam, is designed to prevent potential conflicts between the political decision to 
initiate a joint action and the financing of such action which is a matter for Parliament to 
decide since the expenditure is non-compulsory. The institutions agreed to step up 
budgetary conciliation, by trying to secure agreement on the amounts to be entered in the 
budget, and the exchange of information on the content of the joint action. 
3. Enlarged scope for the conciliation procedure 
The Commission believes that the broader scope now given to the conciliation procedure, 
which has developed into a key instrument in the budgetary procedure, should be written 
into the Interinstitutional Agreement. 
This conciliation should be extended to the entire budget, i.e. including non-compulsory 
expenditure. In view of the other proposals made in this report, a number of additional 
questions should be addressed by the conciliation procedure. 
- The first concerns the classification of expenditure. 
- The second concerns application of the proposed flexibility between headings 3 and 4 
of the financial perspective. At the conciliation stage the two arms of the budgetary 
authority should consider whether any "transfers" envisaged by one or other arm of 
the budgetary authority should in fact be made and what the amount should be. 
- Thirdly, the institutions should use the conciliation procedure to secure agreement on 
the amounts to be entered in the budget for fisheries agreements and the CFSP, as 
provided in the Joint Declaration of 12 December 1996 and the interinstitutional 
agreement of 17 July 1997. 
- If necessary the institutions could also agree, under this procedure, to depart from the 
reference amounts set by the legislative authority, in accordance with the Joint 
Declaration of 6'March 1995, for multiannual programmes adopted by codecision. 
20 
This conciliation stage would, as at present, come before the Council's first reading. It 
would resume after the two arms of the budgetary authority had each given the budget its 
first reading. This second stage would be held at the same time as the Council's second 
reading, which would allow the institutions to discuss the letter of amendment for 
agriculture to be presented in October. 
21 
ANNEX 
Application of the financial framework 1993-99 
List of tables and charts 
Table 1 : Financial framework actually applied from 1993 to 1999. Appropriations 
for commitments. ECU million. 
Table 2: Comparison between financial perspective, budget and outturn, from 
1993 to 1998. ECU million. 
Chart 1 : Cumulative GNP growth rates for the Union. Percentage in real terms. 
Base 1992. 
(hart 2: Total appropriations for payments. Budget and outturn. Percentage of 
(iNP (data and forecasts from November l()()7). 
fable 3: Margins beneath the financial perspective ceilings. Budget and outturn. 
ECU million at current prices. 
Chart 3: Margins beneath the financial perspective ceilings. Total expenditure in 
commitments and payments. Budget and outturn. ECU million at 
current prices. 
Chart 4: Appropriations for commitments not implemented. ECU million at 
current prices. 
Chart 5: » Appropriations for payments not implemented. I leadings 2, 3 and 4. 
ECU million at current prices. 
fable 4: Average annual rate of increase, 1993-1999 in real terms, of expenditure 
ceilings in initial financial perspective. 
âÀ 
TABLE 1 
Financial framework actually applied from 1993 to 1999 
APPROPRIATIONS FOR COMMITMENTS 
ECU MILLION 
1. COMMON AGRICULTURAL POLICY 
2. STRUCTURAL OPERATIONS 
Structural Funds 
Cohesion Fund 
EEA financial mechanism 
3. INTERNAL POLICIES 
4. EXTERNAL ACTION 
5. ADMINISTRATIVE EXPENDITURE 
6. RESERVES 
Monetary reserve 
Guarantee reserve 
Emergency aid reserve 
7. COMPENSATION 
8. TOTAL APPROPRIATIONS FOR COMMITMENTS 
9. TOTAL APPROPRIATIONS FOR PAYMENTS 
Appropriations for payments as % of GNP 
MARGIN (% of GNP) 
OWN RESOURCES CEILING (% of GNP) Current prices 
1993 
36657 
22192 
20627 
1565 
0 
4109 
4120 
3421 
1522 
1000 
313 
209 
0 
72021 
68611 
1,20 
0,00 
1,20 1994 
36465 
23176 
21323 
1853 
0 
4370 
4311 
3634 
1530 
1000 
318 
212 
0 
73486 
70352 
1,20 
0,00 
1,20 1995 
37944 
26329 
24069 
2152 
108 
5060 
4895 
4022 
1146 
500 
323 
323 
1547 
80943 
77229 
1,20 
0,01 
1,21 1996 
40828 
29131 
26579 
2444 
108 
5337 
5264 
4191 
1152 
500 
326 
326 
701 
86604 
82223 
1,20 
0,02 
1,22 1997 
41805 
31477 
28620 
2749 
108 
5603 
5622 
4352 
1158 
500 
329 
329 
212 
90229 
85807 
1,22 
0,02 
1,24 1998 
43263 
33461 
30482 
2871 
108 
6003 
6201 
4541 
1176 
500 
338 
338 
99 
94744 
90581 
1,23 
0,03 
1,26 1999(*) 
45205 
39025 
35902 
3118 
5 
6386 
6870 
4723 
1192 
500 
346 
346 
0 
103401 
96380 
1,23 
0,04 
1,27 
(*) Provisional amounts for heading 2 (proposal by the Commission for the adjustment to take account of the conditions of implementation) 
IMPACT OF REVISIONS AND ADJUSTMENTS IN LINE WITH THE CONDITIONS OF IMPLEMENTATION 
Revision (October 1993) 
Heading 3: stimulation of economic activity (commitments) 
Heading 4: Middle-East peace process (commitments) 
Heading 5; depreciation of ecu against BEF (commitments) 
Overall ceiling - appropriations for commitments 
Ceiling - appropriations for payments 
Adjustment in line with conditions of implementation (April 1995) 
Heading 2: Transfer for Structural Funds (commitments) 
Overall ceiling - appropriations for commitments 
Ceiling - appropriations for payments 
Adjustment in line with conditions of implementation (April 1996) 
Heading 2; Transfer for Structural Funds (commitments) 
Heading 2: Transfer for Cohesion Fund (commitments) 
Overall ceiling - appropriations for commitments 
Ceiling - appropriations for payments 
Adjustment in line with conditions of implementation (April 1997) 
Heading 2. Transfer for Structural Funds (commitments) 
Heading 2: Transfer for Cohesion Fund (commitments) 
Overall ceiling - appropriations for commitments 
Ceiling - Appropriations for payments 1993 1994 
45 
75 
55 
175 
120 1995 1996 
869 
869 
935 1997 
869 
869 
696 
380 
11 
391 
186 1998 
434 
1000 
1000 
633 
-500 
-300 1999 
173 
693 
693 
632 
1045 
17 
1062 
300 
3$ 
Table 2 
Comparison between financial perspective, budget and outturn, from 1993 to 1998 
ECU million 
r~ 
Appropriations for commitments 
1. Common agricultural policy 
2. Structural operations 
Structural Funds 
Cohesion Fund 
EEA financial mechanism 
3. Internal policies 
4. External action (1) 
5. Administrative expenditure 
6. Reserves 
Monetary reserve 
Loan guarantee reserve 
Emergency aid reserve 
7. Compensation 
Total approps. for commitments 
Total appropriations for payments 1993 
FP 
36.657 
22.192 
20.627 
1.565 
'4.109 
4.120 
3.421 
1.522 
1.000 
313 
209 
72.021 
68.611 Budget 
35.352 
22.192 
20.627 
1.565 
4.108 
4.115 
3.417 
1.224 
1.000 
15 
209 
70.408 
66.858 Outturn 
35.032 
22.178 
20.614 
1.565 
4.066 
4.294 
3.365 
14 
0 
14 
0 
68.949 
64.783 1994 
FP 
36.465 
23,176 
21.323 
1.853 
4.370 
4.311 
3.634 
1.530 
1.000 
318 
212 
73.486 
70.352 Budget 
34.787 
23.176 
21.323 
1.853 
4.365 
4.297 
3.634 
1.530 
1.000 
318 
212 
71.789 
68.355 Outturn 
32.970 
21.430 
19.577 
1.853 
4.339 
4.483 
3.581 
294 
0 
294 
0 
67.098 
59.273 1995 
FP 
37.944 
26.329 
24.069 
2.152 
108 
5.060 
4.895 
4.022 
1.146 
500 
323 
323 
1.547 
80.943 
77.229 Budget 
36.894 
26.329 
24.069 
2.152 
108 
5.055 
4.873 
3.999 
1.146 
500 
323 
323 
1.547 
79.843 
75.438 Outturn 
34.503 
24.243 
22.001 
2.152 
90 
5.018 
5.061 
3.924 
251 
0 
251 
0 
1.547 
74.546 
66.547 1996 
FP 
40.828 
29.131 
26.579 
2.444 
108 
5.337 
5.264 
4.191 
1.152 
500 
326 
326 
701 
86.604 
82.223 Budget 
40.828 
29.131 
26.579 
2.444 
108 
5.321 
5.264 
4.184 
1.152 
500 
326 
326 
701 
86.580 
81.943 Outturn 
39.360 
28.614 
26.083 
2.444 
87 
5.219 
5.524 
4.121 
235 
0 
235 
0 
701 
83.773 
77.089 1997 
FP 
41.805 
31.477 
28.620 
2.749 
108 
5.603 
5.622 
4.352 
1.158 
500 
329 
329 
212 
90.229 
85.807 Budget 
40.805 
31.477 
28.620 
2.749 
108 
5.601 
5.601 
4.284 
1.158 
500 
329 
329 
212 
89.137 
82.366 nuviaiuirar 
I 
40.423 
30.078 
27.226 
2.749 
103 
5.519 
5.476 
4.209 
286 
0 
286 
0 
212 
86.203 
79.342 1998 
FP 
43.263 
33.461 
30.482 
2.871 
108 
6.003 
6.201 
4.541 
1.176 
500 
338 
338 
99 
94.744 
90.581 Budget 
40.437 
33.461 
30.482 
2.871 
108 
5.756 
5.731 
4.353 
1.176 
500 
338 
338 
99 
91.013 
83.529 Outturn 
(1) The outturn figures include the transfer of ECU 209 million from the emergency aid reserve in 1993, ECU 212 million in 1994. ECU 235.5 million in 1995 and ECU 326 million 
in 1996. 
^ 
25 Chart 1 
Cumulative GNP growth rates for the Union. 
Percentage in real terms. Base 1992. 
20 
1992 1993 1994 1995 1996 1997 1998 1999 
— 1: Initial assumption of 2.5% per year 
—2: Growth rate envisaged at time of annual technical adjustments 
- 3: Actual growth rate (or end-1997 forecast) 
su 1.3 
1.25 
1.2 
1.15 
1.1 
1.05 Chart 2 
Total appropriations for payments. Budget and outturn 
Percentage of GNP 
(November 1997 figures and forecasts) 
11 - * s 
™ • • • • * * 
•' 
A £^*. ^ 
/ ^ 
\ 
\ ^ 
\ / 
V-— •/• ----- -
1993 1994 1995 1996 1997 
••• Own resources ceiling 
I - Payments-budget 
•—Payments-outturn (provisional figures for 1997) 1998 1999 
Table 3 
largins beneath the financial perspective ceilings. Budget (B) and outturn (0), 
ECU million at current prices 
1. Common agri. policy 
Monetary reserve 
2. Structural operations 
Structural Funds 
Cohesion Fund 
EEA financial mechanism 
3. Internal policies 
4. External action 
Emergency aid reserve 
5. Administration 
Loan guarantee reserve 
7. Compensation 
Total commitments 
Total payments 1993 
B 
1.305 
0 
0 
0 
0 
1 
5 
0 
4 
298 
-
1.613 
1.753 0 
1.625 
1.000 
14 
14 
0 
43 
35 
56 
299 
-
3.072 
3.828 1994 
B 
1.678 
0 
0 
0 
0 
5 
14 
0 
0 
0 
-
1.697 
1.997 O 
3.495 
1.000 
1.746 
1.746 
0 
31 
40 
53 
24 
-
6.389 
11.079 1995 
B 
1.050 
0 
0 
0 
0 
0 
5 
22 
0 
23 
0 
0 
1.100 
1.791 O 
3.441 
500 
2.086 
2.068 
0 
18 
42 
157 
98 
72 
0 
6.397 
10.682 1996 
B 
0 
0 
0 
0 
0 
0 
16 
0 
0 
7 
0 
0 
24 
280 O 
1.468 
500 
517 
496 
0 
21 
118 
66 
70 
91 
0 
2.831 
4.910 1997 
B 
1.000 
0 
0 
0 
0 
0 
2 
21 
0 
68 
0 
0 
1.092 
3.441 Provis. O 
1.382 
500 
1.399 
1.394 
0 
5 
84 
146 
143 
43 
0 
4.026 
6.465 1998 
B 
2.826 
0 
0 
0 
0 
0 
247 
470 
0 
188 
0 
0 
3.731 
7.052 O 1999 
B O 
SU 
Chart 3 
Margins beneath the financial perspective ceilings. Total expenditure in commitments and payments. 
Budget and outturn. ECU million at current prices. 
1993 1994 1995 1996 1997 1998 1999 
-1000 
-2000 
-3000 
-4000 
-5000 
-6000 
-7000 
-8000 
-9000 
-10000 
-11000 
-12000 
• Commitments-Budget 
- •• Payments-Budget 
—•—Commits.-Outturn (provis.figs. for 1997) 
- A - Payments-Outturn (provis.figs. for 1997) 
1993 
-1000 
-2000 
-3000 
-4000 
-5000 
-6000 Chart 4 
ions for commitments not implemented. 
ECU million (at current prices) 
1994 1995 1996 '997 
• Others 
H Heading 2 
• Heading 1 
% Provisional figures for " 99" 
tf 1993 
-1000 
-2000 
-3000 
-4000 
-5000 
-6000 
-7000 Chart 5 
Appropriations for payments not implemented. 
Headings 2, 3 and 4 
ECU million (at current prices) 
1994 1995 1996 1997 
• Heading 4 
• Heading 3 
• Heading 2 
Provisional figures for 1997 
Table 4: 
Average annual rate of increase, 1993 to 1999 in real 
terms, of expenditure ceilings in initial financial 
perspective 
• II i 
_ ... Average annual growth rate (%). Ceilings A. . 
3 At current prices 
Initial financial perspective Financial perspective after 
for EUR 12 adjustment for enlargement 
1. Common agricultural policy Guideline 
2. Structural operations 5,5 6,4 
3. Internal policies 4,4 5,8 
4. External action 6,0 7,1 
5. Administrative expenditure 2,9 3,8 
Total appropriations for commitment 3,3 3,9 
Total appropriations for payments 3,3 3,9 
2! 
ISSN 0254-1475 
COM(98) 165 final 
DOCUMENTS 
EN 01 11 06 09 
Catalogue number : CB-CO-98-193-EN-C 
ISBN 92-78-32500-7 
Office for Official Publications of the European Communities 
L-2985 Luxembourg 
U