Council Regulation (EC) No 2040/2000 of 26 September 2000 on budgetary discipline
Date: 2000-09-26
Institutions: Council of the European Union
Subjects: EAGGF Guarantee Section, budgetary discipline (EU)

29.9.2000

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COUNCIL REGULATION (EC) No 2040/2000

of 26 September 2000

on budgetary discipline

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European
Community, and in particular Articles 37, 279 and 308
thereof,

Having regard to the proposal of the Commission (1),

Having regard to the opinion of the European Parliament (2),

Having regard to the opinion of the Court of Auditors (3),

Whereas:

The European Council meeting in Berlin on 24 and 25
March 1999 agreed that the Union's expenditure must
respect both the imperative of budgetary discipline and
efficient expenditure.

(7)

(1)

(2)

(3)

(4)

(5)

(6)

On 6 May 1999 the European Parliament, the Council
and the Commission concluded an Interinstitutional
Agreement on budgetary discipline and improvement of
the budgetary procedure (4). This
Interinstitutional
Agreement, all the provisions of which apply in full,
stresses that budgetary discipline covers all expenditure
and is binding on all the institutions involved in its
implementation.
It establishes a financial perspective
intended to assure that, in the medium term, European
Union expenditure, broken down by broad category,
develops in an orderly manner and within the limits of
own resources:

The institutions agreed that calculation of the agricul-
tural guideline would remain unchanged. However, with
a view to simplification, a recent reference basis should
be adopted and the statistical concepts should be consis-
tent with those which it is envisaged to adopt in the
future Council Decision, concerning the system of the
European Communities' own resources.

The European Council concluded that the agricultural
guideline would from now on cover expenditure under
the reformed common agricultural policy, the new rural
development measures, veterinary and plant-health
measures, expenditure in connection with the agricul-
tural pre-accession instrument and the amounts available
for accession.

The mechanisms for the depreciation of stocks formed
during the budget year should be retained.

The European Council, meeting in Berlin on 24 and 25
March 1999,
levels of
spending and aiming to stabilise agricultural expenditure
in real terms over the period 2000 to 2006, considered

taking account of

the actual

(1) OJ C 21 E, 25.1.2000, p. 37.
(2) OJ C 189, 7.7.2000, p. 80.
(3) OJ C 334, 23.11.1999, p. 1.
(4) OJ C 172, 18.6.1999, p. 1.

that the reform of the common agricultural policy could
be implemented within a financial framework which it
had determined. It requested the Commission and the
Council to pursue additional savings to ensure that total
expenditure, excluding rural development and veterinary
measures, in the period 2000 to 2006 would not over-
shoot an annual average amount it had fixed. In the light
of its decisions, it considered that the amounts to be
entered in heading 1 of the financial perspective should
not exceed certain annual levels, to which the European
Parliament, the Council and the Commission subscribed
by way of the Interinstitutional Agreement of 6 May
1999.

The ceilings for the ‘Common agricultural policy’ and
the ‘Rural development and accompanying measures’
subheadings are set in the financial perspective forming
an integral part of the Interinstitutional Agreement of 6
May 1999. They can be revised only by a joint decision
of both arms of the budgetary authority, acting on a
proposal from the Commission, in accordance with the
relevant provisions of the Interinstitutional Agreement.

(8) When the Council amends agricultural

legislation and
whenever it deems it to be necessary, the Commission
should therefore point out to the Council, if appropriate,
that there is a considerable risk that the expenditure
arising, in its opinion, from the application of agricul-
tural legislation, may exceed the ceiling for subheading 1
of the financial perspective.

(9) Without prejudice to point 19 of the Interinstitutional
Agreement of 6 May 1999, as such overexpenditure
cannot be taken into account in any proposal for a
review of the ceiling for subheading 1a of the financial
perspective, it is necessary for the Council to be given
the opportunity to adjust agricultural legislation in good
time to ensure that the ceiling is observed.

(10)

Budgetary discipline requires that all legislative measures
proposed and, if appropriate, adopted, and, throughout
the budgetary procedure and when implementing the
budget, appropriations requested, authorised or imple-
mented comply with the amounts laid down in the
financial perspective for expenditure on the common
agricultural policy excluding rural development, which
constitutes compulsory expenditure, and for expenditure
on rural development and accompanying measures.

(11)

It is possible that savings may have to be made in the
short term to ensure compliance with the ceilings laid
down for heading 1. In order to comply with the prin-
ciple of the protection of legitimate confidence,
it is
necessary to warn the parties concerned to enable them

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(12)

(13)

their legitimate expectations to meet

this
to adjust
contingency. Such measures must be taken sufficiently
far in advance and may take effect only from the start of
the following marketing year in each of the sectors
concerned.

In addition, in view of the need to respect the legitimate
expectations of the parties concerned, such measures as
might prove necessary should be taken sufficiently early
and, for this purpose, the medium-term budgetary situa-
tion should be examined annually in the light of fore-
casts which are constantly being improved.

If this examination indicates that there is a considerable
risk that the amounts entered under heading 1 of the
financial perspective will be exceeded, the Commission
should take the appropriate measures to remedy the
situation under the management powers at its disposal
and, if it is unable to take sufficient measures, it should
propose other measures to the Council which, as the
marketing year of several common market organisations
commences on 1 July, should act before that date. If the
Commission subsequently considers that there is still a
considerable risk and it is unable to take sufficient meas-
ures under the management powers at its disposal,
it
should at the earliest opportunity propose other meas-
ures to the Council, which should act as soon as
possible.

if

(14) When implementing the budget, the Commission should
implement a monthly early-warning and monitoring
system for each chapter involving agricultural expendi-
ture, so that,
the ceiling for
there is a risk of
subheading 1a being exceeded, the Commission may at
the earliest opportunity take the appropriate measures
under the management powers at its disposal, and then,
if these measures prove insufficient, propose other meas-
ures to the Council, which should act as soon as
possible.

(15)

(16)

The exchange rate used by the Commission in drawing
up budgetary documents that it submits to the Council
should, allowance being made for the period required
between the drafting and submission by the Commission
of these documents, reflect the latest possible informa-
tion.

It is necessary for the provisions governing the monetary
reserve to be brought into line with the Interinstitutional
Agreement of 6 May 1999. With the gradual
imple-
mentation of the reform of the common agricultural
policy, expenditure is likely to be less sensitive to
changes in the eurodollar rate and the monetary reserve
can therefore be gradually phased out.

(17)

Provision should be made for the possibility of reducing
or temporarily suspending the monthly advances when
the information communicated by the Member States
does not enable the Commission to confirm that the

(18)

(19)

(20)

Community rules applicable have been observed and
indicates a clear misuse of Community funds.

The institutions have agreed that a reserve relating to
loans and loan guarantees to non-member countries and
in those countries must be entered in the budget in the
form of provisional appropriations so that the Guar-
antee Fund for external actions set up by Regulation (EC,
Euratom) No 2728/94 (1), may be funded and any calls
on guarantees exceeding the amount available under the
Fund may be met.

The institutions have agreed that a reserve should be
entered in the budget in the form of provisional appro-
priations to permit a rapid response to specific emer-
countries
gency aid requirements
resulting from unforeseeable events, with priority being
given to humanitarian operations.

in non-member

The institutions have agreed that
the conditions for
calling in and mobilising funds should be the same for
the monetary reserve, the reserve relating to loan guar-
antees and the reserve for emergency aid, according to
the detailed rules which the institutions laid down in the
Interinstitutional Agreement of 6 May 1999.

(21)

For reasons of clarity, Council Decision 94/729/EC of
31 October 1994 on budgetary discipline (2) should be
repealed and replaced by this Regulation,

HAS ADOPTED THIS REGULATION:

Article 1

Budgetary discipline shall apply to all expenditure. Such disci-
pline shall be applied, as appropriate, by the Financial Regula-
tion, this Regulation and the Interinstitutional Agreement of 6
May 1999.

I. EAGGF Guarantee Section expenditure

Article 2

The agricultural guideline, which constitutes for each budget
year the ceiling on agricultural expenditure defined in Article
4(1), must be respected each year. For each budget year, the
Commission shall submit the agricultural guideline at the same
time as the preliminary draft budget.

Article 3

1.
The reference base from which the agricultural guideline
is to be calculated shall be equal to EUR 36 394 million for
1995, that is to say the total corresponding to the calculation
made on the previous base for 1988.

The agricultural guideline for a given year shall be equal

2.
to the reference base laid down in paragraph 1 plus:

(a) the base multiplied by the product of:

— 74 % of the rate of increase in GNP between 1995 (base

year) and the year in question, and

— the GNP deflator estimated by the Commission for the

same period;

(1) OJ L 293, 12.11.1994, p. 1. Regulation as amended by Regulation

(EC, Euratom) No 1149/1999 (OJ L 139, 2.6.1999, p. 1.)

(2) OJ L 293, 12.11.1994, p. 14.

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(b) forecasts of expenditure in the year in question on disposal
of ACP sugar, food aid refunds, payments by producers in
respect of levies provided for by the common organisation
of the sugar market and any other revenue raised from the
agricultural sector in the future.

3.
The statistical base for GNP shall be as defined in Council
Directive 89/130/EEC, Euratom, of 13 February 1989 on the
harmonisation of the compilation of gross national product at
market prices (1).

For the purposes of this Regulation the GNP shall be
4.
defined as the gross national
income (GNI) for the year at
market prices, as determined by the Commission pursuant to
the ESA 95, in accordance with Council Regulation (EC) No
2223/96 of 25 June 1996 on the European system of national
and regional accounts in the Community (2).

Article 4

1.

The agricultural guideline shall cover the sum of:

— the amounts to be entered under Titles 1 to 4 of subsection
B1 of Section III of the budget according to the nomencla-
ture adopted for the 2000 budget,

— the amounts provided for in respect of the agricultural
pre-accession instrument under heading 7 of the financial
perspective,

— the amounts relating to agriculture which are available for

accession under the financial perspective.

2.
Each year Titles 1 and 2 of subsection B1 of the budget
shall contain the appropriations necessary for financing all
costs relating to the depreciation of stocks formed during the
budget year.

Article 5

1.
All the legislative measures proposed by the Commission
or adopted by the Council or by the Commission under the
common agricultural policy shall comply with the amounts
laid down in the financial perspective under the subheading for
expenditure on the common agricultural policy (subheading
1a) and under the subheading for rural development and
accompanying measures (subheading 1b).

2.
Throughout the budgetary procedure and when imple-
menting the budget the appropriations for common agricul-
tural policy expenditure must fall within the amount fixed for
subheading 1a and the appropriations relating to rural develop-
ment and accompanying measures must fall within the amount
fixed for subheading 1b.

3.
The European Parliament, the Council and the Commis-
sion shall use their respective powers in such a way as to
comply with these annual expenditure ceilings during each
budgetary procedure and when implementing the budget for
the year concerned.

for
4. With a view to ensuring that
subheading 1a are complied with,
the Council, acting in
accordance with the procedure laid down in Article 37 of the

the amounts set

(1) OJ L 49, 21.2.1989, p. 26.
(2) OJ L 310, 30.11.1996, p. 1.

Treaty, may decide in good time to adjust the level of the
support measures applicable as from the start of the following
marketing year in each of the sectors concerned.

Article 6

1.
The Commission shall examine the medium-term budget
situation when the preliminary draft budget is established for
each year. It shall submit to the European Parliament and the
Council, together with the preliminary draft budget for finan-
cial year N,
its forecast by product for the financial years
N–1, N and N+1. At the same time, it shall submit an analysis
of the differences between initial forecasts and actual expendi-
ture for the financial years N–2 and N–3 and the measures
taken to improve the quality of forecasts.

If, when the preliminary draft budget is established for a
2.
financial year N it appears that the amounts for subheadings 1a
or 1b of the financial perspective for financial year N may be
exceeded, the Commission shall take appropriate measures to
remedy the situation under the management powers at its
disposal.

If it is unable to take sufficient measures, the Commission
3.
shall propose other measures to the Council,
if appropriate
when setting the levels of support measures, to ensure that the
amounts referred to in Article 5(2) are observed. The Council
shall take a decision on the measures necessary, according to
the procedure and under the conditions laid down in Article
5(4), by 1 July of financial year N–1. The European Parliament
shall deliver its opinion in time for the Council to take note of
it and act within the time limit set.

4.
If the Commission subsequently considers that there is a
risk that the amounts for subheadings 1a or 1b of the financial
perspective for the financial years N or N+1 will be exceeded
and if it is unable to take sufficient measures to remedy the
situation under the management powers at its disposal, it shall
propose other measures to the Council to ensure that the
amounts referred to in Article 5(2) are observed. The Council
shall take a decision on the measures necessary for financial
year N, according to the procedure and under the conditions
laid down in Article 5(4), within two months of receiving the
proposal from the Commission. The European Parliament shall
deliver its opinion in time for the Council to take note of it and
act within the time limit set.

Article 7

the financial perspective are not exceeded,

In order to ensure that the ceilings for subheadings 1a
1.
the
and 1b of
Commission shall
implement a monthly early warning and
monitoring system for each chapter involving expenditure of
the type referred to in Titles 1 to 4 of subsection B1 of the
budget.

2.
Before the start of each financial year the Commission
shall define for this purpose profiles of monthly expenditure
for each budget chapter, based, where appropriate, on the
average monthly expenditure of the three preceding years.

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To monitor expenditure under Title 4 of subsection B1,
3.
the Commission shall also carry out a control
to ensure
compliance with the amount referred to in Article 5(2), as
defined in Commission Regulation (EC) No 1750/1999 of 23
July 1999 laying down detailed rules for the application of
Council Regulation (EC) No 1257/1999 on support for rural
development from the European Agricultural Guidance and
Guarantee Fund (EAGGF) (1).

— as a forecast for the remainder of the year, the average rate
recorded over the most recent three-month period ending
at least 20 days before adoption by the Commission of the
budget document.

Article 9

The statements of expenditure submitted to the Commis-
4.
sion by the Member States every month in accordance with
Article 3(3) of Commission Regulation (EC) No 296/96 (2)
shall be sent by the Commission to the European Parliament
and to the Council for information.

The sum of EUR 500 million shall be entered in a reserve
1.
in the general budget of the European Union, known as ‘the
monetary reserve’, as a provision to cover the developments
caused by movements in the eurodollar market rate in relation
to the rate used in the budget referred to in Article 10

The Commission shall submit to the European Parliament and
to the Council, as a general rule within 30 days of receiving the
information, monthly reports on the development of actual
expenditure in relation to the profiles, including an evaluation
of foreseeable implementation for the financial year.

5.
If it concludes from the examination that there is a risk of
the ceiling for subheading 1a set for year N being exceeded, the
Commission shall take appropriate measures to redress the
situation under the management powers at its disposal. If these
measures prove to be insufficient,
the Commission shall
propose other measures to the Council to ensure that the
amounts referred to in Article 5(2) are observed. The Council
shall take a decision on the measures necessary, according to
the procedure and under the conditions laid down in Article
5(4), within two months of receiving the proposal from the
Commission. The European Parliament shall deliver its opinion
in time for the Council to take note of it and act within the
time limit set.

Article 8

1. When the Commission adopts the preliminary draft
budget or a letter of amendment
to the preliminary draft
in
budget concerning agricultural expenditure,
order to draw up the budget estimates for Titles 1 to 3 of
subsection B 1, the average euro-dollar market rate over the
most recent three-month period ending at least 20 days before
adoption by the Commission of the budget document.

it shall use,

2. When the Commission adopts a preliminary draft supple-
mentary and amending budget or a letter of amendment
thereto, in so far as these documents concern the appropria-
tions under Titles 1 to 3 of subsection B1 of the budget, it shall
use:

— the euro/dollar market exchange rate actually recorded
from 1 August of the previous financial year to the end of
the most recent three-month period ending at least 20 days
before adoption by the Commission of the budget docu-
ment and on 31 July of the current financial year at the
latest,

(1) OJ L 214, 13.8.1999, p. 31.
(2) Commission Regulation (EC) No 296/96 of 16 February 1996 on
data to be forwarded by the Member States and the monthly
booking of expenditure financed under the Guarantee Section of the
European Agricultural Guidance and Guarantee Fund (EAGGF) and
repealing Regulation (EEC) No 2776/88. OJ L 39, 17.2.1996, p. 5.

2.
For financial year 2002 the monetary reserve shall be
reduced to EUR 250 million. The monetary reserve shall be
abolished with effect from financial year 2003.

3.
These appropriations shall not be covered by the agricul-
tural guideline and shall not come under subheading 1a of the
financial perspective.

Article 10

By no later than the end of October each year, the Commission
shall report to the budgetary authority on the impact of move-
ments in the average eurodollar rate on expenditure under
Titles 1 to 3 subsection B1 of the budget.

Article 11

1.
Savings or additional costs resulting from movements in
the eurodollar rate shall be treated in symmetrical fashion.
Where the dollar strengthens against the euro compared with
the rate used in the budget, savings in the Guarantee Section of
up to EUR 500 million in 2000 and 2001 and EUR 250
million in 2002 shall be transferred to the monetary reserve.
Where additional budgetary costs are engendered by a fall in
the dollar against the euro compared with the budget rate, the
monetary reserve shall be drawn on and transfers shall be made
to the EAGGF Guarantee Section headings affected by the fall
shall be
in the dollar. Where necessary,
proposed at the same time as the report referred to in Article
10.

these transfers

2.
There shall be a neutral margin of EUR 200 million.
Savings or additional costs below this amount arising from the
movements referred to in paragraph 1 will not necessitate
transfers to or from the monetary reserve. Savings or additional
costs above this amount shall be paid into, or met from, the
monetary reserve. The neutral margin shall be reduced to
EUR 100 million from 2002.

Article 12

1.
Funds shall be taken from the reserve only if the addi-
tional costs cannot be met from the budget appropriations
intended to cover the expenditure referred to in subheading 1 a
of the financial perspective for the year in question.

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in
The necessary own resources shall be called up,
2.
accordance with Council Decision 94/728/EC, Euratom of 31
October 1994 on the system of the European Communities'
own resources (1) and the provisions adopted pursuant thereto,
to finance the corresponding expenditure.

3.
Any savings made in the EAGGF Guarantee Section
which have been transferred to the monetary reserve in accord-
ance with Article 11(1) and which remain in the monetary
reserve at the end of the financial year shall be cancelled and
entered as a revenue item in the budget for the coming year by
means of a letter of amendment to the preliminary draft budget
for the following year.

Article 13

Articles 9 to 12 shall apply only up to and including financial
year 2002.

Article 14

Payment of

1.
the monthly EAGGF Guarantee Section
advances by the Commission shall be effected on the basis of
the information supplied by the Member States in regard to
expenditure in each chapter.

If

the declarations of expenditure or the information
2.
submitted by a Member State do not enable the Commission to
establish whether the commitment of funds is in conformity
with the relevant Community rules,
the Commission shall
request the Member State to supply further information within
a period which it shall determine according to the seriousness
of the problem and which may not normally be less than thirty
days.

3.
In the event of a reply which is deemed unsatisfactory or
which indicates manifest non-compliance with the rules and a
clear misuse of Community funds, the Commission may reduce
or provisionally suspend the monthly advances to the Member
States.

4.
Such reductions and suspensions shall be without preju-
dice to the decisions which will be taken in connection with
the clearance of accounts.

The Commission shall

inform the Member State
5.
concerned before taking its decision. The Member State shall
make its position known within two weeks. The Commission's
decision, stating the reasons on which it is based, shall be taken
after the EAGGF Committee has been consulted and must be in
keeping with the principle of proportionality.

II. Reserves for external operations

1. R e s e r v e r e l a t i n g t o l o a n s a n d l o a n g u a r a n t e e s

(a) the requirements of

the Guarantee Fund for external

actions;

(b) where necessary,

exceeding the
amount available in the Fund so that these amounts may be
charged to the budget.

activated guarantees

2.
The amount of that reserve shall be the same as that in
the financial perspective that forms part of the Interinstitu-
tional Agreement of 6 May 1999. The arrangements for using
this reserve are those set out in that Interinstitutional Agree-
ment.

2. R e s e r v e f o r e m e r g e n c y a i d

Article 16

1.
A reserve for emergency aid to non-member countries
shall be entered each year in the general budget of the Euro-
pean Union as a provision. The purpose of this reserve shall be
to permit a rapid response to specific emergency aid require-
ments in non-member countries resulting from unforeseeable
events, with priority being given to humanitarian operations.

2.
The amount of that reserve shall be the same as that
adopted in the financial perspective contained in the Interinsti-
tutional Agreement of 6 May 1999. The detailed rules for the
use of the reserve shall be as laid down in the said Interinstitu-
tional Agreement.

3. C o m m o n p r o v i s i o n s

Article 17

The reserves shall be used by means of transfers to the budget
headings concerned in accordance with the provisions of the
Financial Regulation.

Article 18

The own resources necessary for financing the reserves shall
not be called in from the Member States until the reserves are
used in accordance with Article 17. The own resources neces-
sary shall be made available to the Commission as provided in
Council Regulation (EEC, Euratom) No 1150/2000 of 22 May
2000 implementing Decision 94/728/EC, Euratom on the
system of the Community own resources (2).

III. Final provisions

Article 19

Decision 94/729/EC is hereby repealed.

Article 20

Article 15

Each year a reserve shall be entered in the general budget

1.
of the European Union as a provision intended to cover:

This Regulation enters into force on the day of its publication
in the Official Journal of the European Communities.

It applies from 1 October 2000.

(1) OJ L 293, 12.11.1994, p. 9.

(2) OJ L 130, 31.5.2000, p. 1.

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This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 26 September 2000.

For the Council

The President

C. TASCA