Proposal for a Decision of the European Parliament and of the Council on the revision of the financial perspective 2000-2006
Date: 2004-10-13
Institutions: European Commission
Subjects: Cohesion Fund, Ireland, Northern Ireland, Structural Funds, commitment of expenditure, peacekeeping, revision of financial perspectives, rural development

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.10.2004 
COM(2004) 666 final 

Proposal for a 

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on the revision of the financial perspective 2000-2006 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

Heading 1 ‘Agriculture’ 

The  reform  of  the  common  agricultural  policy  (CAP)  adopted  by  the  Council  in  September 
20031  foresees  a  reduction  in  direct  payments  (‘modulation’)  to  finance  rural  development 
policy. That will entail a system of progressive reductions in direct payments to be introduced 
on  a  compulsory  Community-wide  basis  for  the  years  2005  to  2012,  to  achieve  a  better 
balance between policy tools designed to promote sustainable agriculture and those designed 
to promote rural development and to finance the additional rural development measures. 

All  direct  payments  above  € 5,000  will  be  reduced  by  a  given  percentage  each  year.  The 
resulting savings will be used to finance additional measures under rural development policy 
and allocated to Member States according to objective criteria. The modulation rate will start 
in 2005 at 3% of amounts to be granted to farmers, rising to 4% in 2006 and reaching 5% for 
the period 2007-2012.  

As  a  result,  part  of  the  commitment  appropriations  currently  foreseen  for  direct  payments 
under  subheading  1a  ‘Common  agricultural  policy’  of  the  financial  perspective  will  be 
transferred to subheading 1b ‘Rural development’. This transfer, however, will have no effect 
on the overall ceiling of heading 1 ‘Agriculture’ since modulation simply implies a zero-sum 
game between its two subheadings. 

The  first  year  (calendar  year  2005  =  budget  year  2006)  of  this  transfer  of  appropriations 
coincides with the last year of the current financial perspective.  

Modulation  will  not  apply  in  the  new  Member  States  during  the  period  of  phasing  in  of  the 
direct payments. 

Current estimates for the commitment appropriations to be transferred from subheading 1a to 
subheading 1b for the budget 2006 point to a figure of about € 655 million. 

Point 10 of the Interinstitutional Agreement (IIA) of 1999 stipulates that "The 2000 to 2006 
financial  perspective  establishes,  for  each  of  the  years  and  for  each  heading  or  subheading, 
amounts  of  expenditure  in  terms  of  appropriations  for  commitments."  Point  11.1  adds  that 
"The institutions acknowledge that each of the absolute amounts shown in the 2000 to 2006 
financial perspective represents an annual ceiling on expenditure under the general budget of 
the European Communities." 

The  introduction  of  modulation  therefore  requires  the  financial  perspective  to  be  revised  in 
accordance with the procedure set out in points 19 to 21 of the IIA. 

Since the overall ceiling of heading 1 will not change, the Commission proposes to insert the 
following footnote in the financial perspective tables for the year 2006 for heading 1: 

"The respect of the ceilings of the financial perspective does not prevent, in 2006, the 
transfer  of  appropriations  under  subheading  1a  to  subheading  1b,  on  account  of 
modulation,  under  the  conditions  and  within  the  limits  laid  down  in  Article  10  of 
Council Regulation No 1782/03." 

1 

Regulation (EC) No 1782/2003. 

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With  this  modification  of  the  financial  perspective,  the  Commission  will  then  be  able  to 
establish the 2006 preliminary draft budget in accordance with the provisions of the 2003 CAP 
reform. 

Heading 2 ‘Structural actions’ 

The consolidation of the peace process in Northern Ireland, to which the PEACE programme 
has  made  an  essential  and  original  contribution  during  the  period  2000-2004,  still  requires 
some  financial  support  from  the  European  Union  for  the  remaining  period  of  the  financial 
perspective 2000-2006. In this regard, the European Council of 17 and 18 June 2004 notably 
invited the Commission to examine the possibility of aligning the PEACE II interventions with 
other structural actions which come to an end in 2006, including their financial implications. 

Due to the specific nature of subheading 'Structural funds' in the financial perspective and the 
absence of margin under this subheading, the supplementary expenditure for PEACE II for the 
years  2005  and  2006  entails  raising  the  ceiling  for  commitment  appropriations  of  the 
subheading  ‘Structural  funds’  by  the  relevant  amounts.  These  amounts  are  foreseen  in  the 
Council  Regulation  No  […]  modifying  the  EC  Regulation  No  1260/1999  of  21  June  1999 
laying  down  general  provisions  on  the  Structural  funds  and  should  be  added  to  the 
commitment appropriations currently foreseen for the subheading ‘Structural funds’. 

In accordance with Article 2 of Council Regulation (EC) No 1164/94 establishing a Cohesion 
Fund,  the  Commission  conducted  an  eligibility  mid-term  review.  The  Regulation  stipulates 
that  any  Member  State  whose  gross  national  product  (GNP)  per  capita,  measured  in 
purchasing power parities, exceeds 90% of the Community average shall lose its entitlement to 
assistance from the Fund for new projects. On this basis, the mid-term review concluded that 
Ireland was no longer eligible to the Cohesion Fund as from 2004. The financial implications 
of  this  loss  of  eligibility  are  explained  in  a  Communication  from  the  Commission  to  the 
Council and the European Parliament2. 

Article 4 of that regulation stipulates that, in the event of a Member State becoming ineligible, 
resources for the Cohesion Fund will be reduced accordingly. The commitment appropriations 
set  out  for  the  subheading  ‘Cohesion  fund’  in  heading  2  of  the  financial  perspective  should 
therefore be reduced by the corresponding amounts. 

The Commission therefore proposes the following adjustments  necessary to the continuation 
of the PEACE programme and to the loss of eligibility of Ireland to the Cohesion Fund:  

– 

– 

2 

to  increase  the  ceiling  for  commitment  appropriations  of  subheading  'Structural 
funds', decrease that of subheading ‘Cohesion fund’, and adjust the ceiling of heading 
2 'Structural actions' accordingly for the years 2005 and 2006, at 1999 prices; 

to make the technical adjustment of these amounts for the year 2005, in line with the 
evolution of prices and GNI (gross national income). 

COM(2004)  191  final,  24.3.2004:  communication  from  the  Commission  to  the  Council  and  the 
European Parliament on the results of the eligibility mid-term review in accordance with article 2 of the 
Council Regulation (EC) No 1164/94 establishing a Cohesion Fund. 

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Proposal for a 

DECISION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on the revision of the financial perspective 2000-2006 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having regard to the Interinstitutional Agreement (IIA) of 6 May 1999 between the European 
Parliament, the Council and the Commission on budgetary discipline and improvement of the 
budgetary procedure, and in particular to points 19, 20 and 21 thereof3, 

Having regard to the proposals from the Commission4, 

Acting in accordance with the procedure laid down in the fifth subparagraph of Article 272(9) 
of the Treaty5, 

Whereas: 

(1) 

(2) 

3 
4 
5 
6 
7 
8 

The  reform  of  the  common  agricultural  policy  adopted  by  the  Council  in  September 
20036  provides  for  a  reduction  in  direct  payments  (‘modulation’)  to  finance  rural 
development  policy  to  achieve  a  better  balance  between  policy  tools  designed  to 
promote sustainable agriculture and those designed to promote rural development and 
to finance additional rural development measures. The financial perspective set out in 
Annex I to the Interinstitutional Agreement on budgetary discipline and improvement 
of  the  budgetary  procedure  as  revised  by  Decision  2003/430/EC  of  the  European 
Parliament and of the Council7, hereinafter referred to as the "financial perspective", 
should therefore be modified to take into account the effect of 'modulation' for the year 
2006.  As  a  consequence,  commitment  appropriations  from  subheading  1a  ‘Common 
Agricultural Policy’ can be used to finance additional measures under subheading 1b 
‘Rural development’, with no change in the ceiling of heading 1 ‘Agriculture’. 

The  PEACE  programme  set  up  in  accordance  with  Council  Regulation  (EC)  No 
1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds8 
has brought an essential contribution to the peace process in Northern Ireland during 
the period 2000-2004. The consolidation of that process continues to require financial 
support  from  the  Community  for  the  remaining  period  of  the  financial  perspective. 
Due to the specific nature of subheading ‘Structural funds’ in the financial perspective 

OJ C 172, 18.6.1999, p. 1. 
OJ C […], […], p. […]. 
Decision of the European Parliament of […] and Decision of the Council of […] 
Regulation (EC) No 1782/2003. 
OJ L 147, 14.6.2003, p. 31. 
OJ L 161, 26.6.1999, p. 1, Regulation as last amended by Regulation (EC) No […] 

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and the absence of  margin  under this subheading, the supplementary expenditure  for 
the  PEACE  programme  requires  an  increase  in  the  ceiling  for  commitment 
appropriations  corresponding  to  the  amounts  laid  down  in  Regulation  No  1260/1999 
as amended by Regulation (EC) No […]. This adjustment should be reflected also in 
the ceilings of heading 2 ‘Structural actions’. 

(3) 

In accordance with Article 2 of the Council Regulation (EC) No 1164/94 of 16 May 
1994  establishing  a  Cohesion  Fund9,  the  Commission  conducted  an  eligibility  mid-
term review and concluded that Ireland was no longer eligible for the Cohesion Fund 
as from 2004. The financial implications of that ineligibility are that the total resources 
for commitments in the period 2004 to 2006 will be reduced by € 164 million (1999 
prices)10.  The  financial  perspective  should  therefore  be  revised  by  reducing  the 
commitment appropriations under the sub-heading ‘Cohesion fund’, accordingly. This 
adjustment should be reflected also in the ceilings of heading 2 ‘Structural actions’. 

HAVE DECIDED AS FOLLOWS: 

Article 1 

The financial perspective set out in Annex I to the Interinstitutional Agreement on budgetary 
discipline and improvement of the budgetary procedure as revised by Decision 2003/430/EC 
is revised as follows: 

(1) 

In heading 1 'Agriculture' of Table 1a, Table 1b, Table 2a and Table 2b the following 
footnote shall be added to the column for the year 2006: 

"The respect of the ceilings of the financial perspective does not prevent, in 2006, the 
transfer  of  appropriations  under  subheading  1a  to  subheading  1b,  on  account  of 
modulation,  under  the  conditions  and  within  the  limits  laid  down  in  Article  10  of 
Council Regulation No 1782/2003." 

(2) 

The  annual  ceilings  for  appropriations  for  commitments  subheading  ‘Structural 
funds’ in heading 2 of Table 1a, Table 1b, Table 2a and Table 2b shall be amended 
as follows: 

(a) 

the figure for the subheading 'Structural funds' shall be raised in 2005 and 2006 
by the amount corresponding to the continuation of the PEACE programme; 

Additional amounts in structural funds for PEACE II 
programme 

2005 

2006 

€ million at 1999 prices 

€ million at 2005 prices 

+53 

+60 

+52 

+59 

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10 

OJ L 130, 25.5.1994, p. 1. Regulation last amended by the Act of Accession 2003. 
COM(2004) 191 final. 

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(b) 

the  figure  for  the  subheading  'Cohesion  fund'  shall  be  reduced  in  2005  and 
2006 by the amounts corresponding to the loss of eligibility of Ireland for the 
Cohesion Fund as from 2004: 

Reduced amounts for cohesion fund for Ireland 

2005 

2006 

€ million at 1999 prices 

€ million at 2005 prices 

-55 

-61 

-54 

-60 

(c) 

the resulting consolidated change in commitment appropriations for heading 2 
'Structural actions' shall be as follows: 

Change in heading 2 structural actions 

2005 

2006 

€ million at 1999 prices 

€ million at 2005 prices 

-2 

-1 

-2 

-1 

Article 2 

1. 

2. 

The financial perspective for the European Union, in 1999 prices, is set out in Tables 
1a and 1b in the Annex. 

The corresponding financial perspective resulting from the technical adjustment for 
2005, in line with movements in Gross National Income (GNI) and prices, is set out 
in Tables 2a and 2b in the Annex. 

Done at Brussels,  

For the European Parliament 
The President 

For the Council 
The President   

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TABLE 1a: REVISED FINANCIAL PERSPECTIVE (EU-25) AT 1999 PRICES 

ANNEX 

(EUR million)

COMMITMENT APPROPRIATIONS
1. AGRICULTURE
1a Common Agricultural Policy
1b Rural development
2. STRUCTURAL ACTIONS
Structural funds
Cohesion fund
3. INTERNAL POLICIES
4. EXTERNAL ACTIONS
5. ADMINISTRATION (2)
6. RESERVES 
Monetary reserve
Emergency aid reserve
Guarantee reserve
7. PRE-ACCESSION STRATEGY
Agriculture
Pre-accession structural instrument
PHARE (applicant countries)
8. COMPENSATION
TOTAL APPROPRIATIONS FOR COMMITMENTS
TOTAL APPROPRIATIONS FOR PAYMENTS
Ceiling, appropriations for payments as % of GNI (ESA 95)
Margin for unforeseen expenditure
Own resources ceiling

2000
40.920
36.620
4.300
32.045
29.430
2.615
5.930
4.550
4.560
900
500
200
200
3.120
520
1.040
1.560

92.025
89.600
1,07%
0,17%
1,24%

2001
42.800
38.480
4.320
31.455
28.840
2.615
6.040
4.560
4.600
900
500
200
200
3.120
520
1.040
1.560

93.475
91.110
1,07%
0,17%
1,24%

2002
43.900
39.570
4.330
30.865
28.250
2.615
6.150
4.570
4.700
650
250
200
200
3.120
520
1.040
1.560

93.955
94.220
1,10%
0,14%
1,24%

2003
43.770
39.430
4.340
30.285
27.670
2.615
6.260
4.580
4.800
400

200
200
3.120
520
1.040
1.560

93.215
94.880
1,11%
0,13%
1,24%

2004
44.657
38.737
5.920
35.665
30.533
5.132
7.877
4.590
5.403
400

200
200
3.120

1.273
102.985
100.800
1,11%
0,13%
1,24%

2005
45.677
39.602
6.075
36.500
31.888
4.612
8.098
4.600
5.558
400

200
200
3.120

1.173
105.126
101.600
1,08%
0,16%
1,24%

(1)

2006
45.807
39.612
6.195
37.938
32.660
5.278
8.212
4.610
5.712
400

200
200
3.120

940
106.739
103.840
1,07%
0,17%
1,24%

(1) The respect of the ceilings of the financial perspective does not prevent, in 2006, the transfer of appropriations under subheading 1a to subheading 1b, on account of 
modulation, under the conditions and within the limits laid down in Article 10 of Council Regulation No 1782/03.
(2) The expenditure on pensions included under the ceiling for this heading is calculated net of staff contributions to the pension scheme, up to a maximum of 1 100 million euros at 
1999 prices for the period 2000-2006.

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TABLE 1b: REVISED FINANCIAL PERSPECTIVE (EU-25) AT 1999 PRICES 
(including budgetary implications of a political settlement in Cyprus) 

(EUR million) 

COMMITMENT APPROPRIATIONS
1. AGRICULTURE
1a Common Agricultural Policy
1b Rural development
2. STRUCTURAL ACTIONS
Structural funds
Cohesion fund
3. INTERNAL POLICIES
4. EXTERNAL ACTIONS
5. ADMINISTRATION (2)
6. RESERVES 
Monetary reserve
Emergency aid reserve
Guarantee reserve
7. PRE-ACCESSION STRATEGY
Agriculture
Pre-accession structural instrument
PHARE (applicant countries)
8. COMPENSATION
TOTAL APPROPRIATIONS FOR COMMITMENTS
TOTAL APPROPRIATIONS FOR PAYMENTS
Ceiling, appropriations for payments as % of GNI (ESA 95)
Margin for unforeseen expenditure
Own resources ceiling

2000
40.920
36.620
4.300
32.045
29.430
2.615
5.930
4.550
4.560
900
500
200
200
3.120
520
1.040
1.560

92.025
89.600
1,07%
0,17%
1,24%

2001
42.800
38.480
4.320
31.455
28.840
2.615
6.040
4.560
4.600
900
500
200
200
3.120
520
1.040
1.560

93.475
91.110
1,07%
0,17%
1,24%

2002
43.900
39.570
4.330
30.865
28.250
2.615
6.150
4.570
4.700
650
250
200
200
3.120
520
1.040
1.560

93.955
94.220
1,10%
0,14%
1,24%

2003
43.770
39.430
4.340
30.285
27.670
2.615
6.260
4.580
4.800
400

200
200
3.120
520
1.040
1.560

93.215
94.880
1,11%
0,13%
1,24%

2004
44.650
38.740
5.910
35.718
30.571
5.147
7.891
4.590
5.403
400

200
200
3.120

1.273
103.045
100.800
1,11%
0,13%
1,24%

2005
45.675
39.611
6.064
36.577
31.952
4.625
8.112
4.600
5.558
400

200
200
3.120

1.173
105.216
101.600
1,08%
0,16%
1,24%

(1)

2006
45.805
39.622
6.183
38.050
32.755
5.295
8.226
4.610
5.712
400

200
200
3.120

940
106.863
103.840
1,07%
0,17%
1,24%

(1) The respect of the ceilings of the financial perspective does not prevent, in 2006, the transfer of appropriations under subheading 1a to subheading 1b, on account of 
modulation, under the conditions and within the limits laid down in Article 10 of Council Regulation No 1782/03.
(2) The expenditure on pensions included under the ceiling for this heading is calculated net of staff contributions to the pension scheme, up to a maximum of 1 100 million euros 
at 1999 prices for the period 2000-2006.

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TABLE 2a: REVISED FINANCIAL PERSPECTIVE (EU-25) AT CURRENT PRICES 

(EUR million)

COMMITMENT APPROPRIATIONS
1. AGRICULTURE
1a Common Agricultural Policy
1b Rural development
2. STRUCTURAL ACTIONS
Structural funds
Cohesion fund
3. INTERNAL POLICIES
4. EXTERNAL ACTIONS
5. ADMINISTRATION (2)
6. RESERVES 
Monetary reserve
Emergency aid reserve
Guarantee reserve
7. PRE-ACCESSION STRATEGY
Agriculture
Pre-accession structural instrument
PHARE (applicant countries)
8. COMPENSATION
TOTAL APPROPRIATIONS FOR COMMITMENTS
TOTAL APPROPRIATIONS FOR PAYMENTS
Ceiling, appropriations for payments as % of GNI (ESA 95)
Margin for unforeseen expenditure
Own resources ceiling

2000
41.738
37.352
4.386
32.678
30.019
2.659
6.031
4.627
4.638
906
500
203
203
3.174
529
1.058
1.587

93.792
91.322
1,07%
0,17%
1,24%

2001
44.530
40.035
4.495
32.720
30.005
2.715
6.272
4.735
4.776
916
500
208
208
3.240
540
1.080
1.620

97.189
94.730
1,08%
0,16%
1,24%

Current prices

2005 prices

2002
46.587
41.992
4.595
33.638
30.849
2.789
6.558
4.873
5.012
676
250
213
213
3.328
555
1.109
1.664

100.672
100.078
1,11%
0,13%
1,24%

2003
47.378
42.680
4.698
33.968
31.129
2.839
6.796
4.972
5.211
434

217
217
3.386
564
1.129
1.693

102.145
102.767
1,09%
0,15%
1,24%

2004
49.305
42.769
6.536
41.035
35.353
5.682
8.722
5.082
5.983
442

221
221
3.455

1.410
115.434
111.380
1,11%
0,13%
1,24%

2005
51.439
44.598
6.841
42.440
37.307
5.133
9.012
5.119
6.185
446

223
223
3.472

1.305
119.418
114.060
1,09%
0,15%
1,24%

(1)

2006
51.587
44.610
6.977
43.700
37.827
5.873
9.138
5.130
6.356
446

223
223
3.472

1.046
120.875
116.555
1,08%
0,16%
1,24%

(1) The respect of the ceilings of the financial perspective does not prevent, in 2006, the transfer of appropriations under subheading 1a to subheading 1b, on account of 
modulation, under the conditions and within the limits laid down in Article 10 of Council Regulation No 1782/03.
(2) The expenditure on pensions included under the ceiling for this heading is calculated net of staff contributions to the pension scheme, up to a maximum of 1 100 million euros at 
1999 prices for the period 2000-2006.

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TABLE 2b: REVISED FINANCIAL PERSPECTIVE (EU-25) AT CURRENT PRICES 
(including budgetary implications of a political settlement in Cyprus).  

(EUR million)

COMMITMENT APPROPRIATIONS
1. AGRICULTURE
1a Common Agricultural Policy
1b Rural development
2. STRUCTURAL ACTIONS
Structural funds
Cohesion fund
3. INTERNAL POLICIES
4. EXTERNAL ACTIONS
5. ADMINISTRATION (2)
6. RESERVES 
Monetary reserve
Emergency aid reserve
Guarantee reserve
7. PRE-ACCESSION STRATEGY
Agriculture
Pre-accession structural instrument
PHARE (applicant countries)
8. COMPENSATION
TOTAL APPROPRIATIONS FOR COMMITMENTS
TOTAL APPROPRIATIONS FOR PAYMENTS
Ceiling, appropriations for payments as % of GNI (ESA 95)
Margin for unforeseen expenditure
Own resources ceiling

2000
41.738
37.352
4.386
32.678
30.019
2.659
6.031
4.627
4.638
906
500
203
203
3.174
529
1.058
1.587

93.792
91.322
1,07%
0,17%
1,24%

2001
44.530
40.035
4.495
32.720
30.005
2.715
6.272
4.735
4.776
916
500
208
208
3.240
540
1.080
1.620

97.189
94.730
1,08%
0,16%
1,24%

Current prices

2002
46.587
41.992
4.595
33.638
30.849
2.789
6.558
4.873
5.012
676
250
213
213
3.328
555
1.109
1.664

100.672
100.078
1,11%
0,13%
1,24%

2003
47.378
42.680
4.698
33.968
31.129
2.839
6.796
4.972
5.211
434
0
217
217
3.386
564
1.129
1.693

102.145
102.767
1,09%
0,15%
1,24%

2004
49.297
42.772
6.525
41.094
35.395
5.699
8.737
5.082
5.983
442
0
221
221
3.455

1.410
115.500
111.380
1,11%
0,13%
1,24%

2005
51.437
44.608
6.829
42.527
37.379
5.148
9.027
5.119
6.185
446
0
223
223
3.472

1.305
119.518
114.060
1,09%
0,15%
1,24%

(1)

2005 prices
2006
51.584
44.621
6.963
43.826
37.934
5.892
9.154
5.130
6.356
446
0
223
223
3.472

1.046
121.014
116.555
1,08%
0,16%
1,24%

(1) The respect of the ceilings of the financial perspective does not prevent, in 2006, the transfer of appropriations under subheading 1a to subheading 1b, on account of 
modulation, under the conditions and within the limits laid down in Article 10 of Council Regulation No 1782/03.
(2) The expenditure on pensions included under the ceiling for this heading is calculated net of staff contributions to the pension scheme, up to a maximum of 1 100 million 
euros at 1999 prices for the period 2000-2006.

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