Communication from the Commission to the European Parliament and the Council - Technical adjustment of the financial perspective for 2006 in line with movements in GNI and prices (Point 15 of the Interinstitutional Agreement of 6 May 1999 on budgetary discipline and improvement of the budgetary procedure)
Date: 2004-12-28
Institutions: European Commission
Subjects: adaptation of financial perspectives, budgetary discipline (EU), budgetary procedure, enlargement of the Union, interinstitutional agreement, national income, price fluctuation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 28.12.2004 
COM(2004)837 final 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Technical adjustment of the financial perspective for 2006 
in line with movements in GNI and prices 

(Point 15 of the Interinstitutional Agreement of 6 May 1999 on budgetary discipline and 
improvement of the budgetary procedure) 

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COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Technical adjustment of the financial perspective for 2006 
in line with movements in GNI and prices 

(Point 15 of the Interinstitutional Agreement of 6 May 1999 on budgetary discipline and 
improvement of the budgetary procedure) 

1. 

INTRODUCTION 

The  Interinstitutional  Agreement  (IIA)  of  6  May  1999  on  budgetary  discipline  and 
improvement of the budgetary procedure1, as adjusted for enlargement and revised in 
20032, contains the financial perspective table for EU-25 (Table 1a). 

Point  15  of  the  Interinstitutional  Agreement  states  that  each  year  the  Commission 
will, ahead of the budgetary procedure for year n+1, make a technical adjustment to 
the financial perspective in line with movements in the EU's gross national income 
(GNI) and prices. 

The purpose of this communication is to present to the budgetary authority the result 
of this technical adjustment (EU-25) for 2006. 

2. 

TERMS OF THE ADJUSTMENT OF THE FINANCIAL PERSPECTIVE TABLE (TABLES 1-
3) 

Table  1  shows  the  financial  perspective  for  EU-25  adjusted  for  2006  at  current 
prices. 

Table  2  shows  the  financial  perspective  for  EU-25  adjusted  for  2006  at  current 
prices, including the budgetary implications of a political settlement in Cyprus. 

Table 3 presents the economic parameters used for this adjustment exercise. They are 
based  on  data  drawn  up  by  Eurostat  and  on  the  most  recent  forecasts  made  by  the 
Commission  in  conjunction  with  national  experts  (economic  forecasts,  autumn 
2004).  The  figures  and  forecasts  are  based  on  the  European  System  of  Accounts 
revised in 1995 (ESA 95). 

2.1. 

Adjustment of expenditure ceilings by heading 

The adjustment is calculated by applying the following deflators to the commitment 
appropriations in the financial perspective (at 1999 prices): 

1 
2 

OJ C 172, 18.6.1999, p. 1. 
OJ L 147, 14.6.2003, p. 31. 

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– 

– 

a  cumulative  deflator  of  14,87%  for  the  period  2000-2006  to  the  ceiling  for 
heading 1 and to the figure for the Structural Funds in heading 2, in accordance 
with point 15 of the Interinstitutional Agreement (fixed annual rate of 2% ). 

the GNI deflator in euros for 2000-2006 (14,29%) to the ceilings of the other 
expenditure headings (actual deflator). 

In accordance with point 23 (a) of the Interinstitutional Agreement of 6 May 1999, 
the monetary reserve has been eliminated as from 2003. 

To ensure consistency with the Cohesion Fund, allocations for the ten new Member 
States enshrined in the Accession treaties, the overall figure for the Cohesion Fund in 
2006 prices has been rounded up to the superior unit. 

As  regards  payments,  the  adjustment  is  based  on  the  appropriations  for  payments 
estimated for each expenditure heading when the financial perspective was drawn up 
(1999 prices). The method of calculation is set out in the following table: 

Heading 1
Heading 2-'Structural Funds'
Heading 5

Heading 6

Monetary reserve
Other reserves

Heading 2-'Cohesion Fund', Heading 3, 
Heading 4, Heading 7 and Heading 8)

TOTAL APPROPRIATIONS FOR 
PAYMENTS

EU-25
Appropriations for 
payments 2006 
at 1999 prices (€ million)

                       45.755    
                           29.240    
                             5.712    

Cumulative deflator
2000-2006 (%)

EU-25
Appropriations for 
payments 2006 
at 2006 prices (€ million)

14.87                            52.558    
14.87                            33.588    
14.29                              6.528    

                                400    

14.29                                 458    

                           22.733    

14.29                            25.980    

                         103.840    

                         119.112    

Appropriations for payments concerning the ten new Member States that joined the 
European  Union  on  May  1st,  2004 have  been  added  to  appropriations  for  payments 
concerning  the  fifteen  Members,  in  1999  prices  and  for  each  sub-category  of  the 
table  above.  Sub-totals  for  2006  in  1999  prices  are  then  adjusted  in  2006  prices 
according  to  the  relevant  deflator:  heading  1  and  the  Structural  Funds  share  of 
heading  2  have  been  adjusted  by  means  of  a  14,87 %  cumulative  deflator;  other 
headings  or  expenditure  have  been  adjusted  by  means  of  a  14,29 %  cumulative 
deflator. 

2.2.  Main  results  of  the  technical  adjustment  of  the  Financial  Perspective  for  2006 

(EU-25) 

The overall ceiling on appropriations for commitments for 2006 comes to € 123.515 
million, equivalent to 1,12% of GNI. 

The  corresponding  overall  ceiling  on  the  appropriations  for  payments  comes  to 
€ 119.112  million,  i.e.  1,08%  of  GNI.  On  the  basis  of  current  economic  forecasts, 
this leaves a margin beneath the own resources ceiling of € 18.059 million (0,16% of 
GNI for EU-25). 

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For 2001, 2002, 2003, 2004 and 2005, the size of the margin has been updated from 
the  previous  technical  adjustment  using  the  most  recent  GNI  estimates  so  that 
comparisons  can  be  made  over  a  number  of  years.  However,  the  ceilings  in 
commitments and payments resulting from the adjustments do not change. 

2.3. 

The  financial  perspective  adjusted 
implications of a political settlement in Cyprus 

in  2006  prices 

including  budgetary 

Table 2 presents the financial framework EU-25 for 2006 at current prices including 
the budgetary implications of a political settlement in Cyprus. 

This table has been adjusted in the same way as Table 1 and will apply in the event 
that Cyprus is unified before December 31, 2006. 

3. 

OTHER ELEMENTS LINKED TO THE EXERCISE OF TECHNICAL ADJUSTMENT 

3.1. 

The agricultural guideline 

The  agricultural  guideline  has  been  calculated  in  accordance  with  Article  3  of  the 
Council Regulation on budgetary discipline3 (see Table 4). 

The figures for sugar and isoglucose levies, food aid refunds and ACP sugar refunds 
are based at this stage on the forecasts for the 2006 budget. In accordance with the 
regulation  on  budgetary  discipline,  the  final  level  of  these  specific  items  in  the 
guideline will be fixed when the preliminary draft budget for 2006 is presented. 

In 2006 the agricultural guideline is provisionally estimated at € 58.634 million4. 

3.2. 

Heading 5 (Administration) 

In the case of heading 5, a footnote to the financial perspective states that the figures 
for  pensions  included  under  the  ceiling  for  this  heading  are  to  be  calculated  net  of 
staff contributions to the pension scheme, up to a maximum of € 1.100 million (1999 
prices) for the period 2000-2006. As stated in the Commission communication on the 
technical  adjustment  for  20005,  "this  provision  should  be  interpreted  as  imposing  a 
dual limit on the amounts deducted from expenditure on pensions when applying the 
ceiling of the heading": 

– 

– 

This  amount  may  not  exceed  the  contributions  actually  entered  as  budget 
revenue in any one year; 

The accumulated total of deductions for the period 2000-2006 may not exceed 
€ 1.100 million at 1999 prices, equivalent to an average of € 157 million (€ 180 
million at 2006 prices). 

3 
4 

5 

OJ L 244, 29.9.2000, p.27. Council Regulation No 2040/2000 of 26 September 2000. 
This leaves a margin of € 6.016 million in relation to all the expenditure which, in accordance with the 
regulation  on  budgetary  discipline,  is  included  under  the  guideline  (heading  1  and  the  'agriculture' 
expenditure of the pre-accession aid under heading 7). 
SEC (1999) 847 final, paragraph 6. 

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For the previous years of the financial perspective 2000-2006, the recurrent nature of 
administrative  expenditure  imposed  that  the  lowest  limit  was  adopted  annually  to 
avoid  using  a  margin  at  the  start  of  the  period  which  would  no  longer  be  fully 
available afterwards. For 2006 –the last year of the period– the remaining available 
amount which can be deducted is also the lowest amount, i. e. a maximum of € 180 
million at current prices for 2006. 

3.3. 

Operations outside the budget 

The  fifth  subparagraph  of  point  10  of  the  Interinstitutional  Agreement  states  that 
information  relating  to  operations  not  included  in  the  general  budget  and  the 
foreseeable development of the various categories of own resources is to be set out in 
tables, as an indication, and updated annually when the technical adjustment is made 
to the financial perspective. 

This  information,  updated  in  line  with  the  latest  estimates  available,  is  set  out  in 
Tables 5.1 to 5.2. It covers the European Development Fund (EDF) and the structure 
of own resources. 

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ANNEX 

TABLE 1: FINANCIAL PERSPECTIVE (EU-25) ADJUSTED FOR 2006 

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 (1)
6. RESERVES 
Monetary reserve
Emergency aid reserve
Guarantee reserve
7. PRE-ACCESSION AID
Agriculture
Pre-accession structural instrument
PHARE (applicant countries)
8. COMPENSATION
TOTAL APPROPRIATIONS FOR COMMITMENTS
TOTAL APPROPRIATIONS FOR PAYMENTS
Ceiling, approps 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
1,07%
0,17%
1,24%

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
1,09%
0,15%
1,24%

Current prices
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
1,11%
0,13%
1,24%

2004
49.305
42.769
6.536
41.035
35.353
5.682
8.722
5.082
5.983
442
0
221
221
3.455
0
0
0
1.410
115.434
111.380
1,09%
0,15%
1,24%

2005
51.439
44.598
6.841
42.441
37.247
5.194
9.012
5.119
6.185
446
0
223
223
3.472
0
0
0
1.305
119.419
114.060
1,08%
0,16%
1,24%

2006
52.618
45.502
7.116
44.617
38.523
6.094
9.385
5.269
6.528
458
0
229
229
3.566
0
0
0
1.074
123.515
119.112
1,08%
0,16%
1,24%

(1) 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 2: FINANCIAL PERSPECTIVE (EU-25) ADJUSTED FOR 2006 
(including budgetary implications of a political settlement in Cyprus)

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

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 (1)
6. RESERVES 
Monetary reserve
Emergency aid reserve
Guarantee reserve
7. PRE-ACCESSION AID
Agriculture
Pre-accession structural instrument
PHARE (applicant countries)
8. COMPENSATION
TOTAL APPROPRIATIONS FOR COMMITMENTS
TOTAL APPROPRIATIONS FOR PAYMENTS
Ceiling, approps for payments as % of GNI (ESA 95)
Margin for unforeseen expenditure
Own resources ceiling
(1) 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.

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
0
0
0
1.410
115.500
111.380
1,09%
0,15%
1,24%

2005
51.437
44.608
6.829
42.528
37.319
5.209
9.027
5.119
6.185
446
0
223
223
3.472
0
0
0
1.305
119.519
114.060
1,08%
0,16%
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

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

Current prices
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

100.672
100.078
1,09%
0,15%
1,24%

102.145
102.767
1,11%
0,13%
1,24%

2006
52.615
45.513
7.102
44.746
38.632
6.114
9.401
5.269
6.528
458
0
229
229
3.566
0
0
0
1.074
123.657
119.112
1,08%
0,16%
1,24%

97.189
94.730
1,07%
0,17%
1,24%

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

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TABLE 3: GNP-GNI - FIGURES AND FORECASTS

2000

2001

2002

2003

2004

2005

2006

Real growth rate EU-15 (%)
   -Adjustment for 2000
   -Adjustment for 2001
   -Adjustment for 2002
   -Adjustment for 2003
   -Adjustment for 2004
   -Adjustment for 2005
   -Adjustment for 2006 EU-15
   -Adjustment for 2006 EU-25
GNP deflator in euros EU-15 (%)
   -Adjustment for 2000
   -Adjustment for 2001
   -Adjustment for 2002
   -Adjustment for 2003
   -Adjustment for 2004
   -Adjustment for 2005
   -Adjustment for 2006 EU-15
   -Adjustment for 2006 EU-25

2,7
3,1
3,3
3,4
3,5
3,6
3,6

1,7
2,0
2,7
2,9
3
2,9
2,9

3
3,1
1,7
1,2
1,7
1,7

1,8
1,8
1,7
1,6
1,7
1,7

3,1
1,2
0,9
1
1,1

2
2
2,2
2,3
2,4

2,9
1,9
0,7
0,7

1,7
1,8
0,5
0,5

2,6
1,9
2,4
2,5

1,7
1,7
2,4
2,4

2,5

2,2

1,7

1,8

2,4

1,8

Comparison between deflator in national 
currency and deflator in euros EU-15 & EU-25

2000

2001

2002

2003

2004

2005

2006

Deflators in national currency (weighted average)
Deflators in euros

1,4%
2,9%

2,4%
1,7%

2,6%
2,4%

2,2%
0,5%

2,0%
2,4%

2,0%
1,8%

1,9%
1,8%

GNP-15 at current prices (EUR billion) ESA 79
   -Adjustment for 2000
   -Adjustment for 2001
   -Adjustment for 2002
   -Adjustment for 2003

GNI-15 at current prices (EUR billion) ESA 95
   -Adjustment for 2003
   -Adjustment for 2004
   -Adjustment for 2005
   -Adjustment for 2006

2000
8.058,5
8.138,6
8.275,0
8.333,2

8.501,2
8.527,0
8.544,0
8.539,0

GNI-10 at current prices (EUR billion) ESA 95
   -Adjustment for 2004
   -Adjustment for 2005
   -Adjustment for 2006

GNI-25 at current prices (EUR billion) ESA 95
   -Adjustment for 2004
   -Adjustment for 2005
   -Adjustment for 2006

2001

2002

2003

2004

2005

2006

8.533,3
8.682,5
8.621,1

8.794,3
8.775,0
8.841,0
8.834,0

9.127,3
8.908,7

9.087,4
9.056,0
9.144,0
9.148,0

9.320,2

9.506,6
9.400,0
9.256,0
9.270,0

9.815,0
9.603,0
9.726,0

10.014,0
10.099,0

10.520,0

2004

2005

2006

512,4
443,0
461,0

2004
10.327,4
10.046,0
10.187,0

474,3
508,0

542,0

2005

2006

10.488,3
10.607,0

11.062,0

Source : Autumn Economic Forecasts, October 2004, European Commission, (DG ECFIN)

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 TABLE 4 : CALCULATION OF THE AGRICULTURAL GUIDELINE FOR 2006

EUR million

2006

BASE EXPENDITURE (1995 budget)

36.394

ANNUAL GNP GROWTH RATE

1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

1,8%
2,6%
2,9%
2,8%
3,6%
1,7%
1,1%
0,7%
2,4%
2,2%
2,4%

Cumulative growth rate
74 % of cumulative growth rate
CORRECTED EXPENDITURE (1995 prices)

27,00%
19,98%

43.666

GNP DEFLATOR

1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006

3,4%
2,7%
1,7%
2,3%
2,9%
1,7%
2,4%
0,5%
2,4%
1,8%
1,8%

Cumulative growth rate
CORRECTED EXPENDITURE (2005 prices)

26,27%

55.136

IMPACT OF ENLARGEMENT

GNI  increase in 2004
74 % of GNI increase
CORRECTED EXPENDITURE

Plus
Estimated needs (*) for

   - sugar and isoglucose levy
   - food aid refunds
   - ACP sugar refunds
   - subtotal

   AGRICULTURAL GUIDELINE

(*) Previsions for the 2004 budget

4,74%
3,50%

57.068

793,6
7
765,6
1566,2

58.634

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TABLE 5 : INDICATIVE PROGRAMME OF EXPENDITURE NOT ENTERED IN THE GENERAL BUDGET AND 
PROSPECTIVE TREND IN THE VARIOUS OWN RESOURCES

TABLE 5.1.  EUROPEAN DEVELOPMENT FUND

Commitments (C) and Payments (P)
EUR million - current prices

2000

2001

2002

2003

2004

2005

2006

C
4007

P
1640

C
1921

P
2124

C
2115

P
1902

C
4127

P
2431

C
3185

P
2565

C
4055

P
2995

C
3500

P
3400

TOTAL
The series relate to the measures managed by the Commission and the European Investment Bank. They do not take account of an amount of 
750m€ not yet released by the Council as part of the so-called “conditional" billion EUR.

TABLE 5.2. OWN RESOURCES BY CATEGORY

% of total
Traditional own resources
VAT
GNI

2000
17
40
43

2001
16
40
44

2002
14
28
58

2003
13
25
62

2004
12
15
73

2005
11
14
75

2006
11
14
76

2000-2003 : budget implementation, included the retroactive adjustment of 15% TOR in 2002
2004 : amending budget 8/2004
2005 : PDB 2005, EU-25
2006 : previsions

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