Communication from the Commission to the Council and the European Parliament - 2000-2006 financial programming of heading 4
Date: 2000-05-03
Institutions: European Commission
Subjects: EU programme, Western Balkans, economic reconstruction, financial aid, foreign policy

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 3.5.2000
COM(2000) 268 final

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

2000-2006 FINANCIAL PROGRAMMING OF HEADING 4

THE PERIOD 2000-2006: OVERALL ASSESSMENT

1.

2.

3.

4.

5.

6.

Following the geopolitical events in the last decade in the Central and Eastern
European Countries (CEEC), the external action of the EU became a field of the
Community policy in rapid expansion. The assistance programmes to those countries
(PHARE and TACIS) were created in 1989 and 1992, respectively. In particular
from 1995, the Community adopted new strategies concerning the enlargement of the
European Union to the associated CEEC and the reinforcement of the partnerships
the New
between the European Union and the Third Mediterranean Countries,
Independent States (NIS) and the Developing Countries of Asia and Latin America.
Following the different conflicts and natural disasters in Central Africa, ex-
Yugoslavia (Bosnia-Herzegovina), NIS, Central America (Mitch), Afghanistan, Irak
and recently in the Western Balkans (Kosovo) and East Timor the EC crisis
interventions have substantially increased -
114 million in 1990 to
€

from

€

810 million in 1999 (general budget + European Development Fund).

€

In the community budget, the annual commitment appropriations for the external
policies increased from
6.4 billion for 1999 and
1.9 billion for 1990 to
€
the pre-accession strategy, which was
1 411 million in 1999 for PHARE and is in 2000 1 587 million for PHARE,
1 058 million for ISPA and 529 million for SAPARD).

8.2 billion for 2000 (taking in account

€

€

4,627 million in 2000 to

In the framework of the Agenda 2000 and in particular of the financial perspective
adopted following the European Council of Berlin in 1999, the ceiling for heading 4
€
4 787 at constant 2006 prices (Assuming
increases from
a deflator of 2%, the figure for 2006 would be
5,285 million). As has been set up
by the Commission’s programming at the time of the 2000 PDB, this amount still
permits to cater for the existing priorities. The amount foreseen for the co-operation
with the Western Balkans countries was of about
1.85 billion for the 2000-2006
period and 280 million originally in 2000. Even if the Berlin financial perspective is
more restricted in comparison with the initial proposal of the Commission, it was
believed that the remaining envelope would provide the adequate funding for all the
other programmes.

€

€

The Kosovo crisis and the ensuing bombardment shifted the political priorities of the
EU towards the Balkans, a fact which has not been taken into account in the Berlin
Financial perspectives. A declaration annexed to the inter-institutional agreement
furthermore foresees the possibility to revise the financial perspectives “in the light
of the situation in the Balkans”. The Commission considers that the figures initially
foreseen should be adjusted upwards to take into account the new political priority of
stabilisation and development of the Balkans region.

€

The supplementary needs for 2000 to be available for Kosovo were found by making
full use of the flexibility instrument and some redeployment within heading 4. Since
40 million will have to be found by redeployment in the course of 2000,
a further
€
€
15 million are foreseen for a macro-
financial assistance to Bosnia-Herzegovina, the total amount for Western Balkans
countries in 2000 will be

30 million were carried over from 1999 and

540 million.

€

In the framework of the second reading by the Parliament of the 2000 budget, a
declaration was issued to the decision of the European Parliament and the Council on
the use of the flexibility instrument to finance the Kosovo’s reconstruction. It states

2

that the Commission will present to the Budgetary Authority an integrated assistance
programme for the Western Balkans, the financial envelope of which will imply that
the Commission presents a revision of the financial perspective and a Category 4
programming in time for the 2001 PDB. The present document
is part of this
package.

THE FINANCING NEEDS FOR THE BALKANS

7.

8.

9.

A new Council regulation proposed simultaneously will consolidate the legal
framework for EU/Western Balkans co-operation establishing an integrated
reconstruction and economic development programme CARDS - Community
Assistance to Reconstruction Development and Stabilisation). The new CARDS
programme will be a comprehensive programme encompassing regional co-
operation, reconstruction and economic development covering Albania, Bosnia-
Herzegovina, Croatia, the Former Yugoslav Republic of Macedonia and the Federal
Republic of Yugoslavia (including Montenegro and Kosovo) for 2000-2006. The
extent of participation in the programme will be conditional on the respect of certain
criteria relating to the basic principles of democracy, the rule of law and human
rights. The financial envelope of the programme (max
5.5 billion) itself will cover
reconstruction and co-operation as well as macro-financial assistance, excluding
humanitarian aid and assistance in favour of democracy.

€

€

• As recalled above, the initial Agenda 2000 programming foresaw an amount of
1.85 billion for the Western Balkans for the period 2000-2006. The situation has
is,

5.5 billion for the region, that

changed with estimated needs of up to
€

€

3.65 billion more than foreseen in April-May 1999.

€

• Taking into account the amount for the Western Balkans available in 2000
540 million) which includes already 200 million from the flexibility instrument,
5 billion or

(
the need for the period 2001-2006 for that region still amounts to
3.4 billion in addition to what was already programmed.

€

• It is not possible to cover this additional need entirely from within heading 4
without any review of the ceiling of the financial perspectives for that period.

€

5.5 billion is based on the assumption of an economic
The indicative amount of
reconstruction programme in Serbia of
2.3 billion for 2001-2006. EC assistance to
that country is of course conditional on a favourable development of its political
300 million over 2001-2006) to
regime, otherwise only minimal assistance (about
strengthen the opposition forces in Serbia is proposed.

€

€

For the 2001 financial year, even with no reconstruction in Serbia, an increase of the
ceiling of heading 4 for 300 million will be necessary, mainly due to the front-
loading of the reconstruction in Kosovo. Should Serbia become democratic in 2001,
for max
the Commission would propose to use the flexibility instrument
€

200 million.

€

In conformity with the results of the Commission’s 2001 orientation debate and
540 million foreseen in 2000 and based on this hypothesis,
taking into account the
5 billion for the
the Commission elaborated a scenario whereby the remaining
period 2001-2006 should be
category 4
covered by redeployment
inside
€
2 billion for that period i.e. a
(

1.4 billion) and an increase of the ceiling of max

€

€

3

10.

11.

€

revision of
300 million p.a. from 2001 to 2006 and possibly the use of the
flexibility instrument in 2001. The estimation of needs is of course dependent on the
development of the political situation in the region, notably as concerns Serbia.

Table 2 attached presents a simulation for a financial programming aiming at
reducing the financial effects of the Western Balkans Programme and for the other
regions. This scenario would front load the financial effort and gradually allow to
build up a margin to cover future unforeseen events in the external relations and
possible adjustments related to the estimate of the deflator.

This proposal for the financial programming of Category 4 takes into account full
support for Serbia in 2002 under the assumption that the change in the regime in
Serbia occurred in 2002. The overall amount for the whole region would reach
€
800 million for the region in 2001, with the possibility to reach
€

5.3 billion with
5.5 billion if the flexibility instrument was fully mobilised in 2001.

€

THE NEW PROGRAMMING OF HEADING 4: EVOLUTION OF THE DIFFERENT COMPONENTS OF
THE EXTERNAL POLICIES

12.

13.

€

3.4 billion (about

Indeed, the hypothesis of coverage by redeployment alone would entail serious
consequences for almost all areas covered by heading 4. A redeployment of
€
570 million/year) would put into question the existing financial
programming, political commitments and expectations created by the 1999 and 2000
budget, as well by the co-operation agreements, strategic communications and
regulations adopted in the past two years. All geographical assistance programmes
would be seriously cut in real terms.

As it appears from the table, the other programmes in heading 4 as a whole would
not, under the present scenario, have to suffer a decrease of financial means available
in nominative terms between 2000 and 2006. According to the IIA a redeployment
should be used before having recourse to an increase of the financial perspectives.
The redeployment takes into account the following 3 considerations:

- the geo-political weight and priorities attached to certain regions;

- the poverty focus of the programmes;

- past and present performance of the different programmes in terms of absorption
capacity and evolution.

The comparison shows that despite the fact that cuts have been made on the basis of
the financial programming from May 1999 – prior to the Balkans crisis-, the total of
heading 4 still presents an increase for 2000-2006 as compared to the previous period
1993-1999.

14.

On this basis, the Commission has come to the conclusion that for the geographic
budget lines, apart from Western Balkans and ex-Yugoslavia, it wishes to maintain
first of all the increase for Asia. The programme for Asia is highly poverty focused
and any decrease would directly affect the poor. The geographical envelope will

4

15.

16.

increase by 8.5% between 2000 and 2006. The envelope for the new period will thus
be 12% higher than appropriations for 1993 and 19991.

The South Africa programme has both considerable political importance as well as a
high poverty focus and it will only be reduced slightly over 2000-2006. The
proposed amount for South Africa is therefore the result of an almost
linear
continuation of
123.5 million as already decided
120-122 million per year against
for the 2000 budget. The programme is stabilised.

€

€

The programmes for Mediterranean third countries, NIS and Latin America,
in
contrast, are supposed to be reduced somewhat compared to the May 1999 financial
programming, given their more limited poverty focus and poorer performance
record.

Specifically, and in the line with the conclusions from the Commission’s orientation
debate, the back-log (Reste A Liquider) was a key factor in deciding for a lesser
increase in new commitment appropriations and helps explaining the reduction in the
envelope foreseen for Latin America over 2000-2006, which nevertheless received
an important
increase in 2000. While the main goal of financial and technical
assistance is to aid the poorest segments of society through programmes and projects
in specific area of EU’s expertise, the economic co-operation aims at creating the
ideal environment for economic growth. For Latin America the average annual
growth rate over 2000-2006 will be – 1.1% as compared to +4.5% over 1993-1999.
The total envelope 2000-2006 will thus be 17% higher than it was in the period
1993-1999, a fact which is to be explained by the high growth rate over 1993-1999
For the NIS, the financial reference amount contained in the new TACIS regulation
of
is below the Agenda 2000
programming and justifies a reduction of the amount programmed. TACIS has been
cut in 1998, 1999 and 2000 as compared to the previous year. Over 1993-1999 the
yearly average growth was –2.2%, a decrease in real terms. The NIS region however,
than expected economic transition period, becomes more
despite the longer
important politically in the light of the future enlargement. Therefore the average
annual growth 2000-2006 will be +3.6%. In addition, it appears likely that this
envelope will have to finance a new EC contribution to the Chernobyl shelter fund. It
is also worth noting that even before the new legal basis focused more on
concentration of efforts, the management performance of TACIS was such that its
back-log could be reduced over the last year.

3,138 million, whilst being indicative only,

€

17.

The MEDA programme will evolve by 13.6% over 2000-2006, or an average of
2.1% annually. In the coming years this programme will have to finance the second
phase of the establishment of a free-trade zone EU/MED and consequently the
reinforcement of the partnership with those countries to attenuate commercial, social
and economic consequences. Turkey, which newly acquired a candidate status
benefits from the MEDA envelope to an extent which has been significantly
increased in comparison to 1999. The low level of 1999 implementation for MEDA
has undoubtedly been a factor in the decision to reduce the 2001 allocation; in
addition, the high level of backlog (RAL) has also called for such a reduction. An
effort will be made to stabilise the back-log before the programme’s financial

1

The figures for the period 1993-1999 are not strictly comparable since the financial perspectives
1993-1999 have been increased in 1995 to take into account the enlargement.

5

18.

19.

20.

21.

envelope will increase again from 2002 onwards. The Commission will also prolong
its active involvement in the Middle-East peace process, which could, if successful,
give rise to substantial financing needs in the medium term. Compared to 1993–99, it
is the MEDA envelope which increases most– apart obviously from the increase for
the Western Balkans.

€

€

3.851 million over 1993-1999 to

On the thematic side, the Commission proposes to decrease slightly the food aid
allocation from
3,458 million for 2000-2006.
Food aid has been decreasing by a yearly average of 2.1% over 1993-1999 and will
increase by 2.7% on average over 2000-2006. Food aid is aimed at the poor and the
proposed reduction comparatively to the May 1999 programming should therefore be
as small as possible.
As far as “other co-operation” is concerned, the Commission wishes to limit the
decrease by comparison with Agenda 2000. This envelope will be stabilised at an
average annual growth rate of 0.5% which represents a 2000-2006 envelope lower
than that for 1993-1999. An important effort of rationalisation has already been
undertaken in the sense that budget lines have been regrouped according to their
thematic orientation: geographic, environmental, social or their end user (NGOs).
The fisheries agreements under ‘other co-operation’ are, at least in the short term,
inflexible expenditure and will be stabilised over the period. At the same time, a new
instrument, the ‘Rapid Reaction Facility’ will be created in this area. The already
tight budgetary situation within this collective group of interventions does not permit
any further reductions.

Humanitarian aid should not be cut because of its good performance, visibility and
targeting of the poorest populations hit by a crisis. It will be stabilised at the high
level it reached after average yearly growth of 13.2 % over 1993-1999.

The present programming allows to gradually build up over the entire period a
margin that leaves some room for contingencies in the unpredictable area of external
relations, as well as for possible deflator fluctuations. The multi-annual programme
is indicative.

In conclusion, the Commission thinks that the present proposal is in line with our
medium-term objectives and recent policy statements. It shows our dual commitment
to supporting on the one hand the regions of geo-political importance to the EU and
on the other hand the poorer regions in the world as a whole. It also respects the
constraints imposed by the financial perspectives and takes account of the past and
present performance record of the various programmes involved.

Annex :

1- comparison 1993-1999 to 2000-2006

2- new programming of heading 4 for 2000-2006

3- CARDS programme for south-east Europe

6

ANNEX 1 - Comparison 1993-1999 to 2000-2006

DELORS II / BERLIN (April 1999) / REVISION FINANCIAL PERSPECTIVE (April 2000)

€

Million (current prices, 2000 nomenclature)

BUDGET

average annual

NEW PROPOSAL

average annual

(New proposal) /

(total 1993-1999)

growth rate

(total 2000-2006)

growth rate

(1993-1999 budget)

(1)

1993-1999

(3)

2000-2006

(3)/(1) %

CATEGORY 4 CEILING (adjusted for the 1993-1999 period by subtraction of Phare pre-accession

29.514

9,6%

36.663

2,2%

24,2%

appropriations which belongs to the new Category 7 in 2000-2006)

ECONOMICAL, TECHNICAL AND FINANCIAL COOPERATION BY GEOGRAPHIC ZONES

Cooperation with Ex-Yugoslavia and Western Balkans Countries (B7-54, B7-53 and B7-664 in part)

Mediterranean Countries (including Chyprus, Malta, Turkey, Near and Middle East) (B7-4, B7-664 in part)

New Independent States and Mongolia (B7-52, B7-53 and B7-664 in part)

South Africa (B7-320)

Latin America (B7-31)

Asia (B7-30)

Subtotal Geographic Programmes (except ex-Yougoslavia and Western Balkans)

Geographic Cooperation Programmes

Food Aid (B7-20)

Humanitarian Aid (B7-21)

OTHER COOPERATION ACTIONS (Human rights, external commercial policy, , other development aid,

cooperation with developed countries; except B7-664:European Training Foundation and macro-financial

assistance which is covered by geographical programmes)

CFSP (B8) and UNMIK OHR

Subtotal Food and Humanitarian aid, other cooperation actions

TOTAL CATEGORY 4

Ceiling - Total

European Development Fund

26,1%

18,2%

-0,7%

6,0%

4,5%

1,8%

7,1%

8,8%

-2,1%

13,2%

4,3%

3,6%

6,6%

1.526

5.506

3.599

838

1.864

2.878

14.684

16.210

3.851

2.203

5.832

260 _

12.147

28.356

1.158

12.109

5,5%

2,4%

3,2%

-0,5%

-1,1%

1,0%

1,8%

2,7%

2,7%

1,0%

0,5%

1,0%

1,2%

2,1%

248%

47%

2%

1%

17%

12%

23%

44%

-10%

54%

-5%

33%

5%

27%

(1)

5.302

8.100

3.680

850

2.190

3.210

18.030

23.392

3.458

3.398

5.530

347

12.733

36.125

538

22.000

(1) - The total amount foreseen for Western Balkans is

€

5.5 billion if Serbia becomes democratic in 2001. The additional need would be financed by the flexibility instrument for

€

200 million.

7

ANNEX 2 - New programming of heading 4 for 2000-2006

EXTERNAL ACTIONS
INTERNAL SIMULATION OF A MULTI-ANNUAL FINANCIAL PROGRAMMING WITH REVISION OF THE FINANCIAL
PERSPECTIVES FOR 2001-2006

CATEGORY 4 CEILING -
1999 to be comparable to 2000-2006

€

1409,55 M (Phare pre-accession) in

ECONOMICAL,
COOPERATION BY GEOGRAPHIC ZONES

TECHNICAL

AND

FINANCIAL

Cooperation with Ex-Yugoslavia and Western Balkans Countries
(B7-54, B7-53 and B7-664 in part)

Mediterranean Countries (including Chyprus, Malta, Turkey, Near and
Middle East) (B7-4, B7-664 in part)

New Independent States and Mongolia (B7-52, B7-53 and B7-664 in
part)
South Africa (B7-320)

Latin America (B7-31)

Asia (B7-30)

Subtotal Geographic Programmes (except ex-Yougoslavia and
Western Balkans)
Geographic Cooperation Programmes

Food Aid (B7-20)

Humanitarian Aid (B7-21)

external
OTHER COOPERATION ACTIONS (Human
commercial policy, Rapid reaction facility, other development aid,
cooperation with developed countries;
except B7-664:European
Training Foundation and macro-financial assistance which is covered
by geographical programmes)

rights,

Budget 1999
+ SAB n°4/99

Budget 2000

2001

2002

2003

2004

2005

2006

Total 2000-
2006

Growth rate
2001/2000

Growth rate
2006/2000

Average
annual
growth rate
2006/2000

5.458,950

4.627,000

4.735,000

4.840,000

4.948,000

5.058,000 5.170,000 5.285,000 34.663,000

2,3%

2,2%

14,2%

421,500

542,440

800,000

880,000

830,000

750,000

750,000

750,000

5.302,440

47,5%

5,5%

38,3%

(2)

(1) '(2)

1.094,000

1.144,543

1.027,000

1.060,000

1.130,000

1.200,000 1.239,000 1.300,000

8.100,543

-10,3%

2,1%

13,6%

489,460

476,619

485,000

495,000

524,000

550,000

560,000

590,000

3.680,619

1,8%

3,6%

23,8%

127,500

314,050

438,500

123,540

335,914

446,284

120,000

305,000

425,000

121,000

306,000

445,000

121,000

310,000

460,000

121,000

122,000

122,000

850,540

310,000

310,000

314,000

2.190,914

470,000

480,000

484,000

3.210,284

2.463,510

2.526,900

2.362,000

2.427,000

2.545,000

2.651,000 2.711,000 2.810,000 18.032,900

-2,9%

-9,2%

-4,8%

-6,5%

-0,2%

-1,1%

1,4%

1,8%

-1,2%

-6,5%

8,5%

11,2%

2.885,010

3.039,340

3.162,000

3.307,000

3.375,000

3.401,000 3.461,000 3.560,000 23.305,340

4,0%

2,7%

17,1%

(4)

(4)

505,000

360,850

855,930

463,406

472,590

775,444

455,000

473,000

804,000

470,000

480,000

770,000

485,000

485,000

780,000

505,000

535,000

545,000

3.458,406

490,000

495,000

502,000

3.397,590

800,000

800,000

801,000

5.530,444

-1,8%

0,1%

3,7%

CFSP (B8) and UNMIK, OHR

27,000

47,000

51,000

49,000

50,000

50,000

50,000

50,000

347,000

Subtotal Food and Humanitarian aid, other cooperation actions

1.748,780

1.758,440

1.783,000

1.769,000

1.800,000

1.845,000 1.880,000 1.898,000 12.733,440

TOTAL CATEGORY 4

4.633,790

4.797,780

4.945,000

5.076,000

5.175,000

5.246,000 5.341,000 5.458,000 36.038,780

8,5%

1,4%

3,1%

8

2,7%

1,0%

0,5%

1,0%

1,3%

2,2%

17,6%

6,2%

3,3%

6,4%

7,9%

13,8%

MARGIN

CEILING INCREASE

NEW MARGIN

825,160

-170,780

-210,000

-236,000

-227,000

-188,000 -171,000 -173,000

200,000

300,000

300,000

300,000

300,000

300,000

300,000

2.000,000

29,220

90,000

64,000

73,000

112,000

129,000

127,000

624,220

(3)

EMERGENCY AID RESERVE

346,000

203,000

208,000

212,000

216,000

221,000

225,000

230,000

1.515,000

2,5%

CATEGORY 4 + EMERGENCY AID RESERVE

4.979,790

5.000,780

5.153,000

5.288,000

5.391,000

5.467,000 5.566,000 5.688,000 37.553,780

3,0%

2,1%

2,2%

13,3%

13,7%

CATEGORY 7 CEILING

3.174,000

3.240,000

3.305,000

3.371,000

3.438,000 3.508,000 3.578,000 23.614,000

2,1%

2,0%

12,7%

SAPARD

ISPA

PHARE - Central and Eastern Europe Countries Candidates (+B7-
664 in part)

CATEGORY 4 + EMERGENCY AID RESERVE + CATEGORY 7)

529,000

540,000

551,000

562,000

573,000

585,000

596,000

3.936,000

1.058,000

1.080,000

1.102,000

1.124,000

1.146,000 1.169,000 1.193,000

7.872,000

1.411,050

1.587,000

1.620,000

1.652,000

1.685,000

1.719,000 1.754,000 1.789,000 11.806,000

2,1%

2,1%

2,1%

2,0%

2,0%

2,0%

12,7%

12,8%

12,7%

(1)

(2)

(3)

€

200 million.

The total amount foreseen for Western Balkans is
instrument for
Western Balkans : The amount of
€
redeployment from other actions +
The margin for 2000 remains

€

€

542 million for the 2000 financial year is composed by

30 million carried over from 1999 to 2000.

29,220 million (figure ajusted to take in account the carry over above mentioned).

6.390,840
€

8.174,780

8.393,000

8.593,000

8.762,000

8.905,000 9.074,000 9.266,000 61.167,780

2,7%

2,1%

13,3%

5.5 billion if Serbia becomes democratic in 2001. The additional need wold have to be covered by the flexibility

€

472 million entered in the 2000 budget +

€

40 million to find by

9

ANNEX 3 – CARDS programme for south-east Europe

ALBANIA
BiH incl. MFA 00
CROATIA
FYROM
MONTENEGRO
Sub-total
SERBIA

KOSOVO
REGIONAL COOP
Macro Finc. Ass

Total CARDS

2000
35
115
13
20
20
203

2001
45
100
50
40
20
255

2002
45
80
50
40
15
230

310(1)
28

pm (4)

40 (2)
350
80
75 pm (4)

541

800

320
240
90

880

pm

2003
45
60
50
40
15
210

420
110
90

830

pm

2004
45
60
50
40
15
210

420
30
90

750

pm

2005
45
50
50
40
15
200

430
30
90

750

pm

2006
45
50
50
40
15
200

430
30
90

750

Total
305
515
313
260
115
1508

2060 (3) 2260
1100
558
75

5301 (3) 5501

(1) 240 + 30 (carry-over) + 40 (redeployments)
(2) If Serbia became democratic in 2001, the additional need would have to be covered by the flexibility instrument
(3) In case the flexibility instrument is used in 2001
(4) Not yet programmed

10