Report on the implementation of the Interinstitutional Agreement of 29 October 1993 on budgetary discipline and improvement of the budgetary procedure - Proposals for renewal
Date: 1998-03-18
Institutions: European Commission
Subjects: budget policy, budgetary discipline (EU), budgetary procedure, interinstitutional agreement

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. 

regards 

improvement  of 

As 
interinstitutional 
collaboration,  the  Commission  is  proposing,  in  addition  to  the  consolidation  of 
existing agreements and joint declarations, 

the  budgetary  procedure  and 

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 
1  # 

OF 29 OCTOBER  1993 

A.  APPLICATION  OF TUB FINANCIAL FRAMEWORK 

/.  The macroeconomic context and budgetary guidelines 

(a)  1993 to  1996 

(b)  From  1997 onwards 

2.  The main conclusions 

B.  IMPROVEMENT OF THE BUDGETARY PROCEDURE 

1 

2 

2 

3 

4 

8 

/.  Collaboration between the institutions has gradually gained substance...H 

2.  Continuing problem of the classification of expenditure 

3.  Improvement of the application of the 19H2 Joint Declaration: 

results still incomplete 

(a)  rintry of financial provisions in legislative  instruments 

(b)  The issue of legal bases 

4.  Use of budget reserves 

II.  GUIDELINES FOR A NEW AGREEMENT 

A.  MANAGEMENT OF THE FINANCIAL  FRAMEWORK 

/.  Retention of existing provisions 

2.  Provisions concerning certain categories of expenditure 

(a) Heading 2 

(b) Heading 6 

9 

10 

10 

10 

// 

11 

12 

12 

12 

12 

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 

4.  Duration of the financial perspective 

(a)  An adjustment  clause  for the financial perspective 

(b)  Extension of the financial perspective 

B.  BUDGETARY  PROCEDURE AND  INTERINSTITUTIONAL 

COLLABORATION 

1.  The new provisions  and the changes to be made to the 

existing agreement 

(a)  Classification  of expenditure 

(b)  Interplay between legislative powers and budgetary powers 

2.  Consolidation of the existing provisions 

(a)  Application of the maximum rate of increase 

(b)  Late presentation of a letter of amendment  for agriculture 

(c>  Coordination of the most recent agreements 

3.  Enlarged scope for the conciliation procedure 

15 

15 

15 

16 

16 

16 

16 

17 

19 

19 

19 

I() 

20 

ANMEX 

1JL 

INTRODUCTION 

the 
Paragraph  25  of  the  Interinstitutional  Agreement  of  29  October  1993  requires 
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. 
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. 

Its  aims  are  twofold: 

This  report  sets  out  what  can  be  learned  from  the  application  of  the  1993  Agreement  and 
These  proposals  are 
proposes  a  number  of  guidelines  for  renewal  beyond  1999. 
financial 
consistent  with  others  presented  by  the  Commission  concerning  the  new 
framework,  the  reform  of the  CAP, the new  Structural  Funds  regulations,  the  introduction 
of pre-accession  aid  and  the operation  of the  Guarantee  fund. 

the  Commission  will  propose  a  new 
Immediately  after  presenting 
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. 

report, 

this 

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. 

from 

features  of 

the  specific 

Apart 
the  main 
explanations  of  these  results  lie  in  the  development  of  the  macroeeonomic  situation 
the  Union's 
throughout  the  period  and  the  budgetary  policy  guidelines  governing 
finances. 
It  is  against  this  backdrop  that  the  actual  application  of  the  Agreement's 
provisions  on  budgetary  discipline  must  be  viewed. 

the  original 

framework, 

financial 

/. 

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 
figures  currently  available 
the  most 
(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 ). 

the  basis  of 

to  1992,  on 

recent 

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 
this 
under-utilisation  (see  fable  3 and  Charts  3 to 5): 

two  areas  of  expenditure  were  mainly  concerned  by 

terms  of  amounts, 

-  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 
In  accordance  with 
for  objective  1  operations  was  satisfactory. 
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 
status 
(sec  Table  3). 

the  allocations  have  privileged 

•  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 
concerned  Community 
in  commitments  essentially 
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 
the  uncertainties  of 
inadequate 
Iklinburgh  proved 
agreed  at 
In  the  very  first  year  that  the  new  financial  framework 
macroeconomic  developments. 

for  coping  with 

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 
individual  headings  in  order  to  strengthen  certain  internal  policies  which  could  promote 
growth  and  employment  was  not endorsed  by the  Council. 

in  1996  for  redeploying  and  reclassifying  expenditure 

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 
this  area  and  of  monitoring 
in 
improving  expenditure 
on  ways  of 
developments  when  the  budget  is being  implemented. 

forecasts 

-  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 

(Administrative 
expenditure)  was  much  smaller  over  the  period,  and  the  ceilings  imposed  much  more 

for  headings  3  (Interna!  policies)  and  5 

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 
This  Guarantee 
Reserve-Guarantee  Fund mechanism performed  its assigned  role  perfectly. 

loan  guaranteed  by 

the  general  budget. 

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 
in  question  were  entirely 
it  was  not  always  clearly  demonstrated 
unforeseen. 

that  the  events 

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 
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, 
In  this  way  it  was  possible  to  come  to  an 
dealing  impartially  with  the  entire  budget. 
agreement  for  1998  on  the  principle  and  detailed  arrangements  of  a  strict  budgetary 
policy  covering  all  items  of  expenditure. 

trialogue  meeting  coming 

just  after 

informal 

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. 
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. 

Further  advances  were  made  with 

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 
the 
budgetary  authority  on  fisheries  agreements. 

information  for 

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 
the  1982 
1993  Agreement  confirmed 
Joint  Declaration  concerning  legal  bases  and  maximum  amounts  and  pledged  action  by 
the institutions to improve  application  of these  principles. 

the  principles  set  out 

the  validity  of 

in 

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 

include 
reference  amounts  which  are  binding  on  the  institutions  during  the  annual  budgetary 
procedure; 

the  codecision  procedure  will 

•  multiannual  programmes  based  on 

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. 

instruments  not  covered  by 

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 
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. 

is  a  matter  exclusively  for 

the  Commission. 

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 
the  requirements  of 
finance  both 
enlargement  to  include  new  Member  States. 

the  development  of  Community  policies  and 

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 
paragraph 25 of the current Agreement, could be clarified  and  simplified. 

in 

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 
for 
to  appropriate  adjustments  or  additions 
intcrinstitutional  collaboration. 

the  procedures 

in  particular 

in 

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 
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. 

that 

The Commission  is proposing that the classification  of new budget  items be agreed  under 
In  the  absence  of  agreement 
a  conciliation  procedure  extended  to  the  entire  budget. 
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 
Interinstitutional  Agreement,  since 
perspective  is not  applied. 

that  these  provisions  be  kept  unchanged 

they  are  only  really  relevant 

in 
if  the 

the  new 
financial 

(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 
It  should  be  the  opportunity  to  adjust  the  distribution  between  amounts 
agreements. 
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 
that 
agreement  and 
Parliament  can  deliver  its  opinion  in  advance.  After  the  6 months  the  appropriations 
could  be  used. 

the  corresponding  appropriations  actually  being  used,  so 

•  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 : 

Table 2: 

Chart  1 : 

(hart  2: 

fable  3: 

Chart 3: 

Financial framework  actually applied from  1993 to  1999. Appropriations 
for commitments. ECU million. 

Comparison between financial perspective, budget and outturn,  from 
1993 to  1998.  ECU million. 

Cumulative GNP growth rates for the Union.  Percentage in real terms. 
Base 1992. 

Total appropriations for payments. Budget and outturn. Percentage of 
(iNP (data and  forecasts  from  November  l()()7). 

Margins beneath the financial perspective ceilings. Budget and outturn. 
ECU million at current prices. 

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 

36657 

36465 

37944 

40828 

41805 

43263 

45205 

1993 

1994 

1995 

1996 

1997 

1998 

1999(*) 

Current prices 

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 

22192 

23176 

26329 

29131 

31477 

20627 

21323 

24069 

26579 

28620 

1565 

1853 

0 

0 

4109 

4370 

2152 

108 

5060 

4120 

4311 

4895 

3421 

1522 

1000 
313 
209 

0 

3634 

4022 

1530 

1000 
318 
212 

1146 

500 
323 
323 

0 

1547 

2444 

108 

5337 

5264 

4191 

1152 

500 
326 
326 

701 

2749 

108 

5603 

5622 

4352 

1158 

500 

329 

329 

212 

33461 

30482 

2871 

108 

6003 

6201 

4541 

1176 

500 

338 

338 

99 

39025 

35902 

3118 

5 

6386 

6870 

4723 

1192 

500 
346 
346 

0 

8. TOTAL APPROPRIATIONS  FOR  COMMITMENTS 

72021 

73486 

80943 

86604 

90229 

94744 

103401 

9. TOTAL APPROPRIATIONS  FOR  PAYMENTS 

68611 

70352 

77229 

82223 

85807 

90581 

96380 

Appropriations  for  payments as % of GNP 

MARGIN (% of GNP) 

OWN  RESOURCES  CEILING  (% of GNP) 

1,20 

0,00 

1,20 

1,20 

0,00 

1,20 

1,20 

0,01 

1,21 

1,20 

0,02 

1,22 

1,22 

0,02 

1,24 

1,23 

0,03 

1,26 

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 

1993 

1994 

1995 

1996 

1997 

1998 

1999 

45 
75 
55 
175 
120 

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 

869 

869 

935 

869 

869 

696 

380 
11 
391 
186 

434 

1000 

1000 
633 

- 5 00 

- 3 00 

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~ 

1993 

1994 

1995 

1996 

1997 

1998 

FP 

Budget 

Outturn 

FP 

Budget 

Outturn 

FP 

Budget 

Outturn 

FP 

Budget 

Outturn 

FP 

Budget 

nuviaiuirar 
I 

FP 

Budget 

Outturn 

Appropriations  for  commitments 

1. Common agricultural  policy 

36.657 

35.352 

35.032 

36.465 

34.787 

32.970 

37.944 

36.894 

34.503 

40.828 

40.828 

39.360 

41.805 

40.805 

40.423 

43.263 

40.437 

2. Structural  operations 

22.192 

22.192 

22.178 

23,176 

23.176 

21.430 

26.329 

26.329 

24.243 

29.131 

29.131 

28.614 

31.477 

31.477 

30.078 

33.461 

33.461 

Structural Funds 

Cohesion Fund 

EEA financial mechanism 

3. Internal policies 

4. External action (1) 

20.627 

20.627 

20.614 

21.323 

21.323 

19.577 

24.069 

24.069 

22.001 

26.579 

26.579 

26.083 

28.620 

28.620 

27.226 

30.482 

30.482 

1.565 

1.565 

1.565 

1.853 

1.853 

1.853 

2.152 

2.152 

2.152 

2.444 

2.444 

2.444 

2.749 

2.749 

2.749 

2.871 

2.871 

'4.109 

4.108 

4.066 

4.370 

4.365 

4.339 

5.060 

5.055 

5.018 

5.337 

5.321 

5.219 

5.603 

5.601 

5.519 

6.003 

5.756 

4.120 

4.115 

4.294 

4.311 

4.297 

4.483 

4.895 

4.873 

5.061 

5.264 

5.264 

5.524 

5.622 

5.601 

5.476 

6.201 

5.731 

108 

108 

90 

108 

108 

87 

108 

108 

103 

108 

108 

5. Administrative  expenditure 

3.421 

3.417 

3.365 

3.634 

3.634 

3.581 

4.022 

3.999 

3.924 

4.191 

4.184 

4.121 

4.352 

4.284 

4.209 

4.541 

4.353 

6. Reserves 

Monetary reserve 

Loan guarantee reserve 

Emergency aid reserve 

7. Compensation 

1.522 

1.224 

14 

1.530 

1.530 

294 

1.146 

1.146 

251 

1.152 

1.152 

235 

1.158 

1.158 

286 

1.176 

1.176 

1.000 

1.000 

0 

1.000 

1.000 

313 

209 

15 

209 

14 

0 

318 

212 

318 

212 

0 

294 

0 

500 

323 

323 

500 

323 

323 

0 

251 

0 

1.547 

1.547 

1.547 

500 

326 

326 

701 

500 

326 

326 

701 

0 

235 

0 

701 

500 

329 

329 

212 

500 

329 

329 

212 

0 

286 

0 

212 

500 

338 

338 

99 

500 

338 

338 

99 

Total approps. for commitments 

72.021 

70.408 

68.949 

73.486 

71.789 

67.098 

80.943 

79.843 

74.546 

86.604 

86.580 

83.773 

90.229 

89.137 

86.203 

94.744 

91.013 

Total appropriations for payments 

68.611 

66.858 

64.783 

70.352 

68.355 

59.273 

77.229 

75.438 

66.547 

82.223 

81.943 

77.089 

85.807 

82.366 

79.342 

90.581 

83.529 

(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. 

^ 

Chart 1 
Cumulative GNP growth rates for the Union. 
Percentage in real terms. Base 1992. 

25 

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) 

Chart 2 
Total appropriations for payments. Budget and outturn 
Percentage of GNP 
(November 1997 figures and forecasts) 

1.3 

1.25 

1.2 

1.15 

A 

\ 

1.1 

\ 

\ 

1.05 

11  - 
• 
™ 

• 

• 

• 

* 

* 

•' 

s 

* 

£^*. 

^ 

/ 

^ 

^ 

/ 

V-— •/• 

----- 

-

1993 

1994 

1995 

1996 

1997 

1998 

1999 

su 

• •• Own  resources ceiling 

I -  Payments-budget 

•—Payments-outturn (provisional figures for 1997) 

Table 3 
largins beneath the financial perspective ceilings. Budget (B) and outturn (0), 
ECU million at current prices 

1993 

1994 

1995 

1996 

1997 

1998 

1999 

B 

0 

B 

O 

B 

O 

B 

O 

B 

Provis. O 

B 

O 

B 

O 

1. Common  agri.  policy 

1.305 

1.625 

1.678 

3.495 

1.050 

3.441 

Monetary  reserve 

2. Structural  operations 

Structural Funds 

Cohesion Fund 

EEA financial mechanism 

3. Internal  policies 

4. External  action 

Emergency  aid reserve 

5. Administration 

0 

0 

0 

0 

1 

5 

0 

4 

Loan guarantee reserve 

298 

1.000 

14 

14 

0 

43 

35 

56 

299 

0 

0 

0 

0 

5 

14 

0 

0 

0 

1.000 

1.746 

1.746 

0 

31 

40 

53 

24 

-

-

-

-

0 

0 

0 

0 

0 

5 

22 

0 

23 

0 

0 

500 

2.086 

2.068 

0 

18 

42 

157 

98 

72 

0 

0 

0 

0 

0 

0 

0 

16 

0 

0 

7 

0 

0 

1.468 

1.000 

1.382 

2.826 

500 

517 

496 

0 

21 

118 

66 

70 

91 

0 

0 

0 

0 

0 

0 

2 

21 

0 

68 

0 

0 

500 

1.399 

1.394 

0 

5 

84 

146 

0 

0 

0 

0 

0 

247 

470 

0 

143 

188 

43 

0 

0 

0 

1.613 

3.072 

1.697 

6.389 

1.100 

6.397 

24 

2.831 

1.092 

4.026 

3.731 

1.753 

3.828 

1.997 

11.079 

1.791 

10.682 

280 

4.910 

3.441 

6.465 

7.052 

7.  Compensation 

Total  commitments 

Total  payments 

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 

1994 

1995 

1996 

'997 

Chart 4 

ions for commitments  not  implemented. 
ECU million  (at current  prices) 

-1000 

-2000 

-3000 

-4000 

-5000 

-6000 

Provisional figures for  " 99" 

% 

•  Others 

H Heading 2 

•  Heading 1 

Chart 5 
Appropriations for payments not implemented. 
Headings 2, 3 and 4 
ECU million (at current prices) 

1993 

1994 

1995 

1996 

1997 

-1000 

-2000 

-3000 

-4000 

-5000 

-6000 

tf 

-7000 

Provisional figures for 1997 

•  Heading 4 
•  Heading 3 
•  Heading 2 

Table 4: 
Average annual rate of increase, 1993 to 1999 in real 
terms, of expenditure ceilings in initial financial 
perspective 

• 
_  ... 
Ceilings 
3 

II 

i 

Average annual growth rate (%). 
. 
A. 
At current prices 

Initial financial perspective 
for EUR  12 

Financial perspective after 
adjustment for enlargement 

1. Common agricultural policy 

Guideline 

2. Structural operations 

3. Internal policies 

4.  External action 

5. Administrative expenditure 

Total appropriations for commitment 

Total appropriations for payments 

5,5 

4,4 

6,0 

2,9 

3,3 

3,3 

6,4 

5,8 

7,1 

3,8 

3,9 

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