EXPLANATORY MEMORANDUM

1. CONTEXT OF THE PROPOSAL

On 9 December 2011, the Treaty concerning the Accession of the Republic of Croatia to the European Union was signed. It paves the way for the ratification procedures that should allow Croatia to become the 28th Member State of the European Union on 1 July 2013.

2. LEGAL ELEMENTS OF THE PROPOSAL

Article 312(2) of the Treaty on the Functioning of the European Union provides that the Council shall unanimously adopt a Regulation laying down the multiannual financial framework after obtaining the consent of the European Parliament. On 3 March 2010, the Commission made a proposal for a Council regulation laying down the multiannual financial framework for the years 2007 to 2013 and for an accompanying Interinstitutional Agreement[1]. So far, the European Parliament and the Council have failed to agree on these proposals.

Pending that agreement, the Interinstitutional Agreement between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management of 17 May 2006 (IIA)[2] remains applicable.

The present proposal is thus based on Point 29 of the IIA (adjustment of the financial framework to cater for enlargement). Point 29 of the IIA provides that, if new Member States accede to the European Union during the period covered by the financial framework, the European Parliament and the Council, acting on a proposal from the Commission, will jointly adjust the financial framework to take account of the expenditure requirements resulting from the outcome of the accession negotiations.

3. ADJUSTMENT OF THE FINANCIAL FRAMEWORK FOR THE PERIOD FROM 1 JULY TO 31 DECEMBER 2013

3.1. Amounts foreseen for the accession of Croatia

The proposed adjustment of the financial framework is based on the relevant articles of the Treaty concerning the accession of the Republic of Croatia to the European Union[3] and on the EU common position on Chapter 33 (Financial and Budgetary provisions)[4]. The commitment and payment appropriations needed to take account of the accession of Croatia are shown in the below table:

Croatia financial package (EUCP), accession on 1 July 2013 (EUR millions, current prices) || 2013

||

1. Sustainable growth || 496.8

1a Competitiveness for growth and employment1) || 47.4

1b Cohesion for growth and employment || 449.4

of which Structural Funds || 299.6

of which Cohesion Fund || 149.8

||

2. Preservation and management of natural resources || 20.4

market related expenditure 1) || 9.0

direct payments || 0

demining reserve || 0

rural development || 0

European Fisheries Fund || 8.7

Other CFP support, Life + 1) || 2.7

||

3. Citizenship, freedom, security and justice || 73.3

3a Freedom, security and justice1) || 2.1

Schengen facility || 40.0

3b Citizenship1) || 2.2

Transition Facility || 29.0

||

4. EU as a global player || 0

||

5. Administration || 22.0

||

6. Compensations (Cash-flow facility) || 75.0

||

Total commitment appropriations || 687.5

Total payments appropriations || 396.3

1) Non pre-allocated expenditure given for illustrative purposes only.

3.2. Adjustment of the financial framework for enlargement – appropriations for commitments

In accordance with Point 29 of the IIA, the Commission proposes to adjust the financial framework for the year 2013 by fully taking account of the expenditure requirements for EU policies which result from the accession negotiations as detailed in the above table. Given that the financial framework is expressed in million euros, figures are rounded as appropriate for the purpose of its adjustment.

As part of its ongoing commitment to limit the costs of administering EU policies, the Commission proposes not to increase the ceiling for commitment appropriations for heading 5. The proposal is therefore to increase the 2013 ceiling for commitment appropriations by EUR 666 million in current prices with a breakdown as indicated in the table hereafter under point 3.4.

3.3. Adjustment of the financial framework for enlargement – appropriations for payments

The Commission proposes to increase the 2013 ceiling for payment appropriations by EUR 374 million in current prices to cover the expenditure requirements of the EU policies resulting from the accession negotiations as detailed in the above table.

As part of its ongoing commitment to limit the costs of administering EU policies, the Commission proposes not to take the additional payment appropriations relating to heading 5 into account.

3.4. Financial Framework adjusted to enlargement in current and 2004 prices

The above changes to the financial framework 2007-2013 are summarised in the below table (current prices):

The financial framework adjusted to enlargement (EU-28) expressed in current prices is shown below. It is based on the results of the technical adjustment for 2013 (Point 16 of the IIA).

The formal decision amending the IIA as regards the financial framework must refer to the basic table agreed in the IIA which is expressed in constant 2004 prices. For this purpose, the amounts of the financial framework adjusted to enlargement (EU-28) expressed in current prices have to be converted into 2004 prices by means of a fixed deflator of 2% a year, in accordance with Point 16 of the IIA. The resulting financial framework table expressed in 2004 prices is annexed to the proposed Decision of the European Parliament and of the Council.

FINANCIAL FRAMEWORK 2007-2013 ADJUSTED FOR ENLARGEMENT (EU-28), IN CURRENT PRICES

4. FINAL REMARKS

For Croatia's accession to the European Union to take effect on 1 July 2013, each signatory State’s instruments of ratification must be deposited with the Government of the Italian Republic on 30 June 2013 at the latest, in compliance with Article 3 of the Accession Treaty.

Should any signatory to the Accession Treaty, according to its own ratification procedure, reject the Accession Treaty or not ratify it within the prescribed period, the Accession Treaty will not enter into force on 1 July 2013.

Proposal for a

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

amending the Interinstitutional Agreement of 17 May 2006 on budgetary discipline and sound financial management as regards the multiannual financial framework, to take account of the expenditure requirements resulting from the accession of Croatia to the European Union

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Interinstitutional Agreement between the European Parliament, the Council and the Commission of 17 May 2006 on budgetary discipline and sound financial management[5], and in particular to Point 29 thereof,

Having regard to the proposal from the European Commission,

Whereas:

(1) The Treaty concerning the accession of the Republic of Croatia to the European Union[6] lays down transitory provisions in budgetary matters.

(2) The Accession Conference of 30 June 2011 has endorsed the results of the negotiations which have determined expenditure requirements resulting from the accession of Croatia to the European Union on 1 July 2013.

(3) The accession of Croatia requires an adjustment of the multiannual financial framework 2007-2013, so as to raise the ceilings for commitment appropriations for the year 2013 by EUR 47 million for subheading 1a, by EUR 450 million for subheading 1b, by EUR 21 million for heading 2, by EUR 42 million for subheading 3a, and by EUR 31 million for subheading 3b, and to provide for compensations amounting to EUR 75 million under Heading 6, in current prices.

(4) The accession of Croatia also requires and adjustment of the ceiling for payment appropriations for 2013, to be raised by an amount of EUR 374 million in current prices.

(5) The financial framework for the European Union agreed upon in the Interinstitutional Agreement on budgetary discipline and sound financial management should be adjusted to take account of the accession of Croatia for the period from 1 July to 31 December 2013.

(6) Annex I of the Interinstitutional Agreement on budgetary discipline and sound financial management should therefore be amended accordingly[7],

HAVE ADOPTED THIS DECISION:

Sole Article

Subject to the entry into force of the Treaty concerning the accession of the Republic of Croatia to the European Union on 1 July 2013, Annex I to the Interinstitutional Agreement on budgetary discipline and sound financial management is replaced by the Annex to this Decision.

Done at Brussels,

For the European Parliament For the Council

The President The President

ANNEX

[1] COM(2010) 72 and COM(2010) 73 of 3.3.2010.

[2] OJ C 139, 14.6.2006, p. 1.

[3] Part Four, Title III, notably Articles 29 to 34.

[4] Conference on Accession to the European Union – Croatia, Accession Document No 30/11 (CONF-HR 17/11) of 29.6.2011.

[5] OJ C 139, 14.6.2006, p. 1.

[6] OJ xxx

[7] For that purpose, the figures resulting from the above agreement are converted into 2004 prices.