Commission working document - Revised Proposal for renewal of the Interinstitutional Agreement on budgetary discipline and improvement of the budgetary procedure
Date: 2006-02-01
Institutions: European Commission
Subjects: budgetary discipline (EU), budgetary procedure, interinstitutional agreement

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 1.2.2006 
COM(2006) 36 final 

COMMISSION WORKING DOCUMENT  

Revised 
Proposal for renewal of the 
INTERINSTITUTIONAL AGREEMENT  
on budgetary discipline and improvement of the budgetary procedure 

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EXPLANATORY MEMORANDUM 

On  14  July  2004  the  Commission  presented  a  proposal1  for  the  renewal  of  the 
Interinstitutional Agreement (IIA) on budgetary discipline and improvement of the budgetary 
procedure for the period 2007-2013.  

On  8  June  2005  the  European  Parliament  adopted  a  resolution  on  Policy  Challenges  and 
Budgetary  Means  of  the  Enlarged  Union  2007-20132,  followed  by  a  resolution  on  the 
Interinstitutional  Agreement  on  budgetary  discipline  and  improvement  of  the  budgetary 
procedure3 adopted on 1 December 2005.  

On  15-16  December  2005,  the  European  Council  reached  a  political  agreement  on  the 
Financial Perspective 2007-20134. 

On 18 January 2006 the European parliament adopted a resolution on the European Council's 
position  on  the  Financial  Perspective  and  the  renewal  of  the  Interinstitutional  agreement 
2007-20135; 

The  enclosed  draft  Interinstitutional  Agreement  is  intended  as  a  working  paper  for  the  last 
phase of the negotiations between the European Parliament, the Council and the Commission 
taking into account in particular the conclusions of the European Council of 15-16 December 
2005. 

The purpose of this Interinstitutional Agreement is to provide a set of agreed rules concerning 
the  multiannual  financial  framework  and  the  sequence  of  operations  as  regards  the  annual 
budgetary procedure. 

1. 

GUIDELINES FOR A NEW AGREEMENT ON BUDGETARY DISCIPLINE 

1.1.  Maintaining the fundamentals 

Agenda  2000  successfully  fulfilled  its  main  purposes  as  regards  financial  discipline,  the 
orderly  evolution  of  expenditure  and  interinstitutional  collaboration  during  the  budgetary 
procedure. The Budget of the European Union has been adopted on time each year, and the 
two arms of the budgetary authority have jointly adjusted the financial framework 2000-2006 
to cater for the enlargement of the European Union to ten new member States. 

a) 

The  present  Interinstitutional  agreement  therefore  proposes  to  maintain  unchanged 
the main features of the financial framework:  

– 

expenditure  is  broken  down  by  broad  categories  of  expenditure  called 
headings; for each year of the 2007-2013 period; 

1 
2 
3 
4 
5 

COM(2004) 498. 
P6_TA(2005)0224.  
P6_TA PROV(2005)0453 
Document 15915/05 CADREFIN 268 of 19/12/2005. 
PE 368.274, B6-0049/2006. 

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– 

– 

– 

maximum  amounts  called  ceilings  are  established  in  the  financial  framework 
table for the period 2007-2013 in terms of appropriations for commitments and 
for each heading; expenditure levels are based on the assumption that Bulgaria 
and  Romania  join  the  EU  on  1  January  2007;  in  case  of  their  accession  at  a 
later date, the expenditure ceilings may have to be revised accordingly; 

overall annual amounts are expressed both for commitment appropriations and 
payment appropriations; 

the annual ceiling for payment appropriations must respect the own resources 
ceiling currently established at 1,24 % of the EU gross national income (GNI). 

In the perspective of future institutional developments, the present Interinstitutional 
Agreement  proposes  to  replace  the  term  'financial  perspective'  with  'multiannual 
financial framework', also referred to as the 'financial framework'. 

It  proposes  to  insert  a  new  provision  whereby  in  2008/2009  the  Commission  will 
present to the European Parliament and Council a wide-ranging review covering all 
aspects of EU spending and resources. 

b) 

c) 

1.2. 

Simplification, consolidation 

The  present  Interinstitutional  Agreement  provides  for  the  renewal  of  the  Interinstitutional 
Agreement of 6 May 1999 in the light of experience acquired with its implementation but also 
for the consolidation of all the joint declarations and interinstitutional agreements concluded 
on  budgetary  matters  since  1982.  It  also  proposes  the  simplification  of  the  framework 
wherever justified and possible. 

a) 

b) 

c) 

The  present  agreement  aims  at  incorporating  the  Interinstitutional  Agreement  of  7 
November  2002  on  the  creation  of  the  European  Union  Solidarity  Fund  (EUSF), 
agreed  upon  during  the  current  period  of  the  financial  perspective  as  a  separate 
supplementary  interinstitutional  agreement.  It  is  proposed  that  the  EUSF  maintains 
the  current  rules  for  its  mobilisation  whereby,  when  the  Fund  is  mobilised, 
corresponding  expenditure  be  'entered  in  the  budget  over  and  above  the  relevant 
headings' in the financial framework. 

Simplification  of  the  method  for  the  technical  adjustment,  by  extending  the  pre-
determined 2% annual inflation rate used for structural funds and agriculture, to the 
rest of expenditure.  

The provisioning of the guarantee fund for loans to third countries is rationalised so 
that  there  is  no  longer  any  need  for  a  ‘reserve’  to  this  end.  The  related  (reduced) 
expenditure to be budgeted becomes part of the instruments available for the Union’s 
external policy.  

1.3. 

Flexibility: taking stock of the experience of Agenda 2000 

Flexibility  within  the  agreed  multiannual  financial  framework  is  the  essential  corollary  to 
financial  discipline.  If  properly  designed,  it  contributes  to  enhancing  effective  resources 
allocation  while  allowing  responding  to  unforeseen  needs  or  new  priorities.  Several 
parameters  influence  the  degree  of  flexibility  of  the  financial  framework:  the  length  of  the 
period covered by the financial perspective; the number of expenditure headings; the margins 

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available  within  each  expenditure  ceiling;  the  margin  below  the  own  resources  ceiling;  the 
share of EU spending pre-determined by 'amounts of reference' in co-decided legislation; pre-
allocated multiannual programmes; the general attitude towards using the revision procedure. 

The  degree  of  flexibility  has  evolved  over  time  with  the  changing  mix  of  those  parameters. 
Agenda  2000  has  so  far  succeeded  in  answering  unforeseen  challenges  to  the  EU  budget, 
though that has been done at the price of greater complexity and lower transparency, without 
necessarily  improving  effective  resource  allocation.  For  instance,  the  existing  instrument  of 
flexibility  and  the  European  Union  Solidarity  Fund  (EUSF)  had  to  be  created  outside  the 
financial perspective to respond to acknowledged needs.  

On 15-16 December 2005, the European Council reached a political agreement which entails 
expenditure  ceilings  significantly  lower  than  those  proposed  by  the  Commission.  Tighter 
expenditure ceilings entail more rigidity in the financial framework and risks undermining the 
Union’s  ability  to  address  future  challenges  and  hinder  rather  than  encouraging  effective 
resource allocation. That is why the Commission proposes the following measures to address 
future  challenges  and  find  the  proper  balance  between  budgetary  discipline  and  efficient 
resources allocation.  

(1) 

(2) 

The revision of the multiannual financial framework remains the main instrument to 
respond  to  significant  changes  of  permanent  character  in  the  EU  policies  in  a  fast 
developing context.  

Some flexibility instruments to be mobilised within the limits of the agreed financial 
framework,  in  view  of  facilitating  the  deployment  or  redeployment  of  financial 
resources within the expenditure ceilings. These include the following:  

(a)  The  Emergency  Aid  reserve  within  Heading  4  to  respond  to  emergency 
situations  in  third  countries.  Its  amount  and  mobilisation  procedure  remain 
unchanged. 

(b)  A new European Globalisation Adjustment Fund intended to provide additional 
support for workers who suffer the consequences of major structural changes in 
world  trade  patterns,  to  assist  them  with  their  reintegration  into  the  labour 
market. 

(c)  Finally,  the  possibility  for  the  budgetary  authority  based  on  a  Commission 
proposal, in the framework of the annual budgetary procedure, to depart by up 
to  10%  from  the  so-called  ‘reference  amounts’  concerning  multiannual 
programmes  adopted  under  the  co-decision  procedure  (except  for  cohesion 
programmes). 

(3) 

Some other instruments to be mobilised above the agreed expenditure ceilings within 
certain limits. These instruments, to be used in the framework of the annual budget 
procedure  according  to  the  relevant  provisions  defined  in  the  enclosed  draft  IIA, 
include:  

(a) 

the European Union Solidarity Fund, with unchanged amount and mobilisation 
procedure;  

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(b) 

the  Flexibility  Instrument,  whose  maximum  annual  amount  is  increased  to 
€ 700 million, with the possibility to cover requirements of multiannual nature. 
The mobilisation procedure remains unchanged. 

2. 

CONSEQUENCE FOR THE REGULATION ON BUDGETARY DISCIPLINE 

The  experience  with  the  2000-2006  financial  perspective  has  shown  that  there  is  no  longer 
any need for maintaining the agricultural guideline foreseen in Council Regulation (EC) No 
2040/2000  on  budgetary  discipline,  since  agriculture  expenditure  is  already  constrained  by 
ceilings  agreed  till  2013.  The  other  provisions  concerning  budget  discipline  for  agriculture 
will be overtaken and reinforced by the new Regulation (Articles 18-20) on the financing of 
the  common  agricultural  policy.  With  the  shift  from  market  intervention  towards  direct 
payments to farmers and rural development measures agriculture expenditure has also become 
more predictable.  

The  monetary  reserve  does  no  longer  exist,  and  the  Commission  has  proposed  a  new 
mechanism for the provisioning of the fund to guarantee loans to non-Member countries. The 
provisions concerning the Emergency Aid reserve are set up in the draft IIA enclosed.  

Under  these  conditions,  the  Commission  considers  that  Council  Regulation  (EC)  No 
2040/2000  should  be  repealed.  The  Commission  will  accordingly  propose  separately  the 
appropriate legal act in due time.  

3. 

GUIDELINES  ON  INTERINSTITUTIONAL  COLLABORATION  FOR  THE  BUDGETARY 
PROCEDURE 

Provisions included in Part II aim at improving the annual budgetary procedure. Most of these 
provisions result from budgetary practice or previous agreements and declarations. They have 
been  updated  in  relation  with  the  new  financial  regulation6.  The  annexes  I  to  IV  form  an 
integral part of the present proposed agreement. 

3.1. 

Structure and classification of expenditure 

Annex  III  provides  an  update  of  the  classification  of  expenditure  between  compulsory  and 
non-compulsory expenditure for the new structure by heading. A provision is maintained so 
that the two arms of the budgetary authority determine the classification of new budget items 
within the annual conciliation procedure. 

3.2. 

Financial provisions in legislative instruments 

The principle set out in the Joint Declaration of 6 March 1995, and incorporated in point 33 of 
the Interinstitutional Agreement of 6 May 1999, whereby the institutions undertake to comply 
during  the  budgetary  procedure  with  the  reference  amounts  adopted  in  the  legislative 
codecision  procedure,  is  maintained.  However,  the  codecision  procedure  has  been  regularly 
extended since 1995 and the strict provisions as regards reference amounts impose increasing 
constraints  for  budgetary  policy.  As  mentioned  above,  the  Commission  proposes  that  the 

6 

OJ L 248, 16.9.2002, p. 1.  

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budgetary authority and the Commission, in the course of the annual budgetary procedure, can 
depart from these amounts by a limited margin (10%). 

4. 

CONCLUSION 

The Interinstitutional Agreement on budgetary discipline and improvement of the budgetary 
procedure has proved an efficient tool to frame the annual budgetary practice within an agreed 
multiannual financial framework. Its renewal should be taken as an opportunity to update and 
simplify the various existing agreements and joint declarations concerning budgetary matters. 
Finally, this agreement should aim at finding the proper balance between budgetary discipline 
and efficient resources allocation. 

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INTERINSTITUTIONAL AGREEMENT  
on budgetary discipline and improvement of the budgetary procedure 

TABLE OF CONTENTS 

PART I – FINANCIAL FRAMEWORK 2007-2013: DEFINITION AND IMPLEMENTING 
PROVISIONS 

A. Contents and scope of the financial framework 

B. Annual adjustments of the financial framework 

C. Review of the financial framework 

D. Revision of the financial framework 

E.  Consequences  of  the  absence  of  a  joint  decision  on  the  adjustment  or  revision  of  the 
financial framework 

F. Emergency Aid Reserve 

G. European Union Solidarity Fund 

H. Instrument of Flexibility 

I. European Globalisation Adjustment Fund 

J. Adjustment of the financial framework to cater for enlargement 

K.  Duration  of  the  financial  framework  and  consequences  of  the  absence  of  a  financial 
framework 

PART II – IMPROVEMENT OF INTERINSTITUTIONAL COLLABORATION DURING THE 
BUDGETARY PROCEDURE 

A. The interinstitutional collaboration procedure 

B. Establishment of the budget 

C. Classification of expenditure 

D.  Maximum  rate  of  increase  of  non-compulsory  expenditure  in  the  absence  of  a  financial 
framework 

E. Incorporation of financial provisions in legislative acts 

F. Expenditure relating to fisheries agreements 

G. Financing of the common foreign and security policy (CFSP) 

ANNEX I : FINANCIAL FRAMEWORK 2007-2013 

ANNEX II: INTERINSTITUTIONAL COLLABORATION IN THE BUDGETARY SECTOR 

ANNEX III: CLASSIFICATION OF EXPENDITURE 

ANNEX IV: FINANCING OF EXPENDITURE DERIVING FROM FISHERIES AGREEMENTS 

DECLARATION on the adjustment of Structural Funds, Rural Development and the 
European Fund for Fisheries in the light of the circumstances of their implementation 

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Draft 

EUROPEAN PARLIAMENT 
COUNCIL 
COMMISSION 
INTERINSTITUTIONAL AGREEMENT 

of […] 

between the European Parliament, the Council and the Commission on budgetary discipline and improvement of the 
budgetary procedure 

NB: The definition 'multiannual financial framework' replaces 'financial perspective' in the following draft. 

Comments are referred to changes vis-à-vis the previous Commission proposal or the text of the Interinstitutional Agreement of 6 
May  1999.  Unless  specified  otherwise,  the  mentioning  of  the  European  Council's  position  in  the  comments  refers  to  the  final 
conclusions  of  the  European  Council  of  15-16  December  2005.  Likewise,  the  European  Parliament's  position  refers  to  the  EP 
Resolution of 8 June  2005 on 'Policy challenges and  budgetary means of the enlarged Union  2007-2013', the EP Resolution of 1 
December 2005 on ‘The Inter-institutional Agreement on budgetary discipline and improvement of the budgetary procedure and the 
EP  Resolution  of  18  January  2006  on  'the  European  Council's  position  on  the  Financial  Perspective  and  the  renewal  of  the 
Interinstitutional Agreement 2007-2013'. 

Text of the IIA 
1.  The  purpose  of  this  Agreement  concluded  between  the  European  Parliament,  the 
Council and the Commission, hereafter referred to as the institutions', is to implement 
budgetary discipline and to improve the functioning of the annual budgetary procedure 
and cooperation between the institutions on budgetary matters. 
2. Budgetary discipline under this Agreement covers all expenditure. It is binding on all 
the institutions involved in its implementation for as long as the Agreement is in force. 
3.  This  Agreement  does  not  alter  the  respective  budgetary  powers  of  the  various 
institutions, as laid down in the Treaties. Where reference is made to this point in the 
present text, the Council will act by a qualified majority and the European Parliament 

Comments 

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Text of the IIA 
by a majority of its members and three fifths of the votes cast, in compliance with the 
voting  rules  laid  down  in  the  fifth  subparagraph  of  Article  272(9)  of  the  Treaty 
establishing the European Community (here after referred to as the 'EC Treaty'). 
4. Any amendment of this Agreement requires the consent of all the institutions which 
are  party  to  it.  Changes  to  the  multiannual  financial  framework  must  be  made  in 
accordance with the procedures laid down for this purpose in this Agreement. 
5. This Agreement is in two parts: 
– Part I contains a definition and implementing provisions for the multiannual financial 
framework7 2007 to 2013 and applies for the duration of that financial framework, 
– Part II relates to improvement of interinstitutional collaboration during the budgetary 
procedure. 
6.  Whenever  it  considers  it  necessary  and  at  all  events  at  the  same  time  as  any 
proposal  for  a  new  financial  framework  presented  pursuant  to  point  31,  the 
Commission  will  present  a  report  on  the  application  of  this  Agreement,  accompanied 
where necessary by proposed amendments. 
7. This Agreement enters into force on 1 January 2007. It replaces with effect from the 
same date: 
–  the  Interinstitutional  Agreement  of  6  May  1999  between  the  European  Parliament, 
the  Council  and  the  Commission  on  budgetary  discipline  and  improvement  of  the 
budgetary procedure8, 
–  the  Interinstitutional  Agreement  of  7  November  2002  between  the  European 
Parliament, the Council  and the  Commission  on the financing of  the European Union 
Solidarity  Fund  supplementing  the  Interinstitutional  Agreement  of  6  May  1999  on 
budgetary discipline and improvement of the budgetary procedure9. 

Comments 

the  Commission 

Modifications: 
Updating  and  simplification.  Already 
proposed  by 
in 
COM(2004)  498, 
the  regrouping  of 
'various  existing  agreements  and  joint 
declarations 
budgetary 
concerning 
matters'  is  also  a  guideline  of  the 
European  Council  conclusions  (§  6  of 
conclusions). 

7 
8 

The multiannual financial framework is also referred to as 'the financial framework' in the present agreement. 
OJ C 172, 18.6.1999, p. 1. This Interinstitutional Agreement already replaced and declared obsolete the following instruments: 
- the Joint Declaration by the European Parliament, the Council and the Commission of 30 June 1982 on various measures to improve the budgetary procedure (OJ C 
194, 28.7.1982, p. 1); 
- the Interinstitutional Agreement of 29 October 1993 between the European Parliament, the Council and the Commission on budgetary discipline and improvement of 

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Text of the IIA 

PART I – FINANCIAL FRAMEWORK 2007 to 2013: 

DEFINITION AND IMPLEMENTING PROVISIONS 

Comments 

A. Contents and scope of the financial framework 

8. The 2007 to 2013 financial framework, set out in Annex I, forms an integral part of 
this  Agreement.  It  constitutes  the  reference  framework  for  interinstitutional  budgetary 
discipline. 
9.  The  financial  framework  is  intended to  ensure  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. 
10.  The  2007  to  2013  financial  framework  establishes,  for  each  of  the  years  and  for 
each  heading  or  subheading,  amounts  of  expenditure  in  terms  of  appropriations  for 
commitments.  Overall  annual  totals  of  expenditure  are  also  shown  in  terms  of  both 
appropriations for commitments and appropriations for payments.  
All these amounts are expressed in 2004 prices. 
The financial framework does not take account of budget items financed by earmarked 

Modifications: 
- General updating 
- § 4 of the current IIA deleted (void): no 
for  pre-accession 
specific  heading 
expenditure is proposed. 
-  §3  (§5 
in 
paragraph  concerns 

IIA):  This 
the  European 

the  current 

the budgetary procedure (OJ C 331, 7.12.1993, p. 1);   
- the Declaration by the European Parliament, the Council and the Commission of 6 March 1995 on the incorporation of financial provisions into legislative acts (OJ C 
102, 4.4.1996, p. 4); 
- the Joint Declaration of 12 December 1996 concerning the improvement of information to the budgetary authority on fisheries agreements (OJ C 20, 20.1.1997, p. 
109); 
- the Interinstitutional Agreement between the European Parliament, the Council and the European Commission of 16 July 1997 on provisions regarding financing of 
the common foreign and security policy (OJ C 286, 22.9.1997, p. 80); 
- the Interinstitutional Agreement of 13 October 1998 between the European Parliament, the Council and the Commission on legal bases and implementation of the 
budget (OJ C 344, 12.11.1998, p. 1). 
OJ C 283, 20.11.2002, p. 1. 

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remains 

Comments 
Development  Fund,  which 
outside the financial framework. 
-  §6  of  the  current  IIA:  Deletion  of  the 
reference  to  agricultural  guideline  (see 
explanatory memorandum above). 
-  For  adjustments  concerning  specific 
headings, see Point 15 below. 

§2  of  the  current  IIA  deleted  (void):  no 
specific  heading 
for  pre-accession 
expenditure is proposed for the financial 
framework 2007-2013. 

Modifications: 
- Point 12 § 2: the specific nature of sub-
heading  1B  (Heading  2 
in  Agenda 
2000),  which  only  covers  pre-allocated 
expenditure,  is  preserved  for  the  period 
2007-2013. 
- Point 12 § 3 of the current IIA deleted: 
the  corresponding  provision  has  been 
inserted in Part II, Article 41. 

Text of the IIA 
revenue within the meaning of Article 18 of the Financial Regulation of 25 June 2002 
applicable to the general budget of the European Communities10, here after referred to 
as the 'Financial Regulation'. 
Information relating to operations not included in the  general  budget of the  European 
the  various  categories  of 
Communities  and 
Community  own  resources  are  set  out,  by  way  of  indication,  in  separate  tables.  This 
information is updated annually when the technical adjustment is made to the financial 
framework. 

foreseeable  development  of 

the 

11. The institutions acknowledge that each of the absolute amounts shown in the 2007 
to  2013  financial  framework  represents  an  annual  ceiling  on  expenditure  under  the 
general  budget  of  the  European  Communities.  Without  prejudice  to  any  changes  in 
these  ceilings  in  accordance  with  the  provisions  contained  in  this  Agreement,  they 
undertake to use their respective powers in such a way as to comply with the various 
annual expenditure ceilings during each budgetary procedure and when implementing 
the budget for the year concerned. 
12.  The  two  arms  of  the  budgetary  authority  agree  to  accept,  for  the  duration  of  the 
2007 to 2013 financial framework, the maximum rates of increase for non-compulsory 
expenditure  deriving  from  the  budgets  established  within  the  ceilings  set  by  the 
financial framework. 
Except  in  sub-heading  1B  'Cohesion  for  growth  and  employment'  of  the  financial 
framework,  for  the  purposes  of  sound  financial  management,  the  institutions  will 
ensure  as  far  as  possible  during  the  budgetary  procedure  and  at  the  time  of  the 
budget's adoption that sufficient margins are left available beneath the ceilings for the 
various headings. 
13. No act adopted under the co-decision procedure by the European Parliament and 
the  Council  nor  any  act  adopted  by  the  Council  which  involves  exceeding  the 
appropriations  available  in  the  budget  or  the  allocations  available  in  the  financial 

10 

OJ L 248, 16.9.2002, p. 1. 

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Text of the IIA 
framework in accordance with point 11 may be implemented in financial terms until the 
budget  has  been  amended  and,  if  necessary,  the  financial  framework  has  been 
appropriately  revised  in  accordance  with  the  relevant  procedure  for  each  of  these 
cases. 
14. For each of the years covered by the financial framework, the total appropriations 
for  payments  required,  after  annual  adjustment  and  taking  account  of  any  other 
adjustments  or  revisions,  must  not  be  such  as  to  produce  a  call-in  rate  for  own 
resources that exceeds the ceiling in force for these resources. 
If  need  be,  the  two  arms  of  the  budgetary  authority  will  decide,  in  accordance  with 
Point 3 of the present Agreement, to lower the ceilings set in the financial framework in 
order to ensure compliance with the ceiling on own resources. 

B. Annual adjustments of the financial framework 

Technical adjustments 

15. Each year the Commission, acting ahead of the budgetary procedure for year n+1, 
will make the following technical adjustments to the financial framework: 
(a)  revaluation,  at  year  n+1  prices,  of  the  ceilings  and  of  the  overall  figures  for 
appropriations for commitments and appropriations for payments; 
(b) calculation of the margin available under the own resources ceiling. 
The Commission will make these technical adjustments on the basis of a fixed deflator 
of 2% a year.  
The  results  of  such  adjustments  and  the  underlying  economic  forecasts  will  be 
communicated to the two arms of the budgetary authority. 
No further technical adjustments will be made in respect of the year concerned, either 
during the year or as ex-post corrections during subsequent years. 
16.  In  its  technical  adjustment  for  the  year  2011,  if  it  is  established  that  any  Member 
State's  cumulated  GDP  for  the  years  2007-2009  has  diverged  by  more  than  +/-  5 % 
from  the  cumulated  GDP  estimated  when  drawing  up  the  present  agreement,  the 
Commission  will  adjust  the  amounts  allocated  from  funds  supporting  cohesion  to  this 

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Comments 

Comments and modifications: 
-  §  2:  updating  of  the  procedure  of  the 
technical  adjustment  in  compliance  with 
the  new  names  of  agricultural  and 
structural programmes. 
- § 2: the application of the fixed deflator 
of  2%  is  extended  to  all  expenditure 
headings.  The  2%  deflator  is  already 
used  for  almost  80%  of  expenditure 
(agriculture,  cohesion  and  the  future 
European  Fishery  Fund)  in  the  budget. 
Moreover, 
the 
negotiations  on  the  2007-2013  financial 
framework,  a  simplified  2%  annual 
deflator  was  used  systematically  by  the 
Commission to  transform in 2004 prices 
all  financial  envelopes  of  new  legal 
bases established in current prices. The 
application  of  a  single  2%  deflator  will 
simplify  the  annual  technical  adjustment 
of 
and 

the  course  of 

predictability 

increase 

in 

 
 
 
 
Text of the IIA 
Member  State  for  that  period.  The  total  net  effect,  whether  positive  or  negative,  of 
these  adjustments  may  not  exceed  € 3  billion.  If  the  net  effect  is  positive,  total 
additional resources shall be limited to the level of under-spending against the ceilings 
for sub-heading 1B for the years 2007-2010. The required adjustments will be spread 
in equal proportions over the  years 2011-2013 and the corresponding ceilings will be 
modified accordingly. 

Comments 
expenditure ceilings in current prices. 
- § 2. The possibility to review the index 
base is dropped. 
-  New  point  16:  integrates  possible 
impact of the specific provision agreed in 
the  European  Council  conclusions 
(§ 42). 

Adjustments connected with implementation 

17.  When  notifying  the  two  arms  of  the  budgetary  authority  of  the  technical 
adjustments to the financial framework, the Commission will present any proposals for 
adjustments  to  the  total  appropriations  for  payments  which  it  considers  necessary,  in 
the  light  of  implementation,  to  ensure  an  orderly  progression  in  relation  to  the 
appropriations for commitments. 

Updating of forecasts for payment appropriations after 2013 

18. In 2010, the Commission will update the forecasts for payment appropriations after 
2013.  This  update  will  take  into  account  the  real  implementation  of  budget 
appropriations  for  commitments  and  budget  appropriations  for  payments,  as  well  as 
the  implementation  forecasts.  It  will  also  consider  the  rules  defined  to  ensure  that 
payment  appropriations  develop  in  an  orderly  manner  compared  to  commitment 
appropriations and the growth forecasts of the European Union Gross National Income 
(GNI). 

Adjustments connected with excessive government deficit 

19.  In  the  event  that  a  procedure  for  excessive  government  deficit  leads  to  the 
suspension of budgetary commitments concerning the Cohesion Fund, the Council can 
decide,  at  the  same  time  this  suspension  is  lifted,  on  a  transfer  of  suspended 
commitments  to  the  following  years.  Suspended  commitments  of  year  n  cannot  be 
rebudgeted beyond year n+1. The Council decides on a proposal from the Commission 

EN 

13 
EN 

Modifications: 
-  Point  17  of  the  current  IIA  deleted.  A 
declaration 
instead 
(enclosed at the end of this document). 

proposed 

is 

New Point 19 linked to the proposal for a 
new  regulation  on  the  Cohesion  Fund 
and  to  the  excessive  deficit  procedure, 
notably  the  sanctions  as  regards  the 
Cohesion 
budgetary 
Fund 
appropriations for commitments. 

 
 
 
 
Text of the IIA 
and in compliance with the relevant provisions of the basic regulation. 

Comments 

20.  The  European  Parliament  and  the  Council  will  take  decisions on  these  proposals 
before 1 May of year n, in accordance with Point 3 of the present Agreement. 

C. Review of the financial framework 

21. In 2008/2009, the Commission will present to the European Parliament and Council 
a  wide-ranging  review,  in  the  form  of  a  White  Paper,  covering  all  aspects  of  EU 
spending  and  resources,  with  a  view  to  ensuring  that  the  budget  is  equipped  to 
respond to the challenges of the future. 

A general review of EU expenditure and 
in  2008/9,  as 
foreseen 
revenue 
agreed 
the  European  Council 
conclusions (§ 80). 

is 
in 

New provision: 

D. Revision of the financial framework 

22.  In  addition  to  the  regular  technical  adjustments  and  adjustments  in  line  with  the 
conditions  of  implementation,  the  financial  framework  may  be  revised  in  compliance 
with  the  own  resources  ceiling,  on  a  proposal  from  the  Commission,  in  the  event  of 
unforeseen circumstances. 
23. As a general rule, any such proposal for revision must be presented and adopted 
before  the  start  of  the  budgetary  procedure  for  the  year  or  the  first  of  the  years 
concerned. 
Any decision to revise the financial framework by up to 0,03% of the Community GNI 
within the margin for unforeseen expenditure will be taken jointly by the two arms of the 
budgetary authority acting in accordance with Point 3.  
Any revision of the financial framework above 0,03% of the Community GNI within the 
margin  for  unforeseen  expenditure  will  be  taken  jointly  by  the  two  arms  of  the 
budgetary authority, with the Council acting unanimously. 
24.  Without  prejudice  of  Point  41,  the  institutions  will  examine  the  scope  for 
reallocating expenditure between the programmes covered by the heading concerned 
by  the  revision,  with  particular  reference  to  any  expected  under-utilisation  of 

EN 

14 
EN 

Updating:  gross  national  product  (GNP) 
has  been  replaced  by  gross  national 
income  (GNI)  since  the  entry  into  force 
of  the  new  decision  on  the  system  of 
own resources (OJ L 253, 7.10.2000, p. 
42). 

Updating: 
§  3  of  the  current  IIA  deleted  (void):  no 
separate  heading 
for  pre-accession 
expenditure is proposed for the financial 

 
 
 
 
 
 
 
Text of the IIA 
appropriations.  The  objective  should  be  that  a  significant  amount,  in  absolute  terms 
and  as  a  percentage  of  the  new  expenditure  planned,  should  be  within  the  existing 
ceiling for the heading. 
The institutions will examine the scope for offsetting raising the ceiling for one heading 
by lowering the ceiling for another. 
Any revision of the compulsory expenditure in the financial framework may not lead to 
a reduction in the amount available for non-compulsory expenditure. 
Any  revision  must  maintain  an  appropriate  relationship  between  commitments  and 
payments. 

E. Consequences of the absence of a joint decision on the adjustment or 
revision of the financial framework 

25. In the absence of a joint decision by the European Parliament and the Council on 
any adjustment or revision of the financial framework proposed by the Commission, the 
amounts set previously will, after the annual technical adjustment, continue to apply as 
the expenditure ceilings for the year in question. 

F. Emergency Aid Reserve 

26. The emergency aid reserve is included in Heading 4 'the EU as a global partner' of 
the financial framework. This reserve is entered in the general budget of the European 
Communities as a provision. The purpose of the emergency aid reserve is to provide a 
rapid  response  to  the  specific  aid  requirements  of  non-member  countries  following 
events  which  could  not  be  foreseen  when  the  budget  was  established,  first  and 
foremost  for  humanitarian  operations,  but  also  for  civil  crisis  management  and 
protection where circumstances so require. Its annual amount is fixed at € 221 million 
for the duration of the financial framework, in constant prices. 
When the Commission considers that this reserve needs to be called on, it will present 

11 

OJ L 248, 16.9.2002, p. 1. 

EN 

15 
EN 

Comments 
framework 2007-2013. 

Modifications and simplification: 
-  §  1(a)  of  the  current  IIA:  void.  The 
monetary  reserve  was  foreseen  only 
until 2002. 
- § 1(b) of the current IIA: deletion of the 
reference 
for 
the 
to  non-member 
guaranteeing 
countries.  The  Commission  will  propose 
a  new  arrangement  whereby 
the 
appropriations  necessary 
to  properly 
provisioning  the  guarantee  fund  will  be 
entered  in  the  budget,  with  no  ad-hoc 

reserve 

loans 

to 

 
 
 
 
                                                 
Text of the IIA 
the two arms of the budgetary  authority  a proposal for a transfer from this reserve to 
the corresponding budgetary lines. 
Any Commission proposal for a transfer to draw on the reserve for emergency aid must 
be, however, preceded by an examination of the scope for reallocating appropriations. 
At the same time as it presents its proposal for a transfer, the Commission will initiate a 
trialogue procedure, if necessary in a simplified form, to secure the agreement of the 
two arms of the budgetary authority on the need to use the reserve and on the amount 
required.  The  transfers  are  made  in  accordance  with  Article  26  of  the  Financial 
Regulation11. 

for 

(all 

the 

figures  of 

related  call  of 

Comments 
provision 
resources. 
-  §  1: 
the  emergency  aid  reserve 
remains the only reserve referred to and 
is entered under Heading 4. Its scope is 
enlarged  to  the  management  of  civil 
crisis and its amount is adjusted in 2004 
prices 
the  proposed 
financial  framework  are  expressed  in 
constant prices (2004 prices).  
-  §  2-5  of  the  current  IIA:  the  procedure 
for  the  mobilisation  of  the  reserve  is 
updated  to  take  into  account  the  new 
Financial Regulation. 
If  necessary,  supplementary  needs  for 
this  reserve  could  be  covered  either  by 
operational 
transfers 
budgetary  lines,  or  by  an  amending 
budget to use the available margin. 

other 

from 

G. European Union Solidarity Fund 

27. The European Union Solidarity Fund is intended to allow rapid financial assistance 
in  the  event  of  major  disasters  occurring  on  the  territory  of  a  Member  State  or  of  a 
candidate  country, as defined in the relevant basic act. There will be a ceiling on the 
annual amount available for the Solidarity Fund of € 1 billion. On 1 October each year, 
at least one-quarter of the annual amount will remain available in order to cover needs 
arising until the end of the year. The portion of the annual amount not entered in the 
budget may not be rolled over in the following years. 
In exceptional cases and if the remaining financial resources available in the Fund in 
the  year  of  occurrence  of  the  disaster,  as  defined  in  the  relevant  basic  act,  are  not 
sufficient  to  cover  the  amount  of  assistance  deemed  necessary  by  the  budgetary 
authority,  the  Commission  may  propose  that  the  difference  be  financed  through  the 

New point: 
Point 27 incorporates the current IIA of 7 
November 2002 on the European Union 
Solidarity  Fund  (EUSF).  The  EUSF 
remains  outside  the  financial  framework 
and keeps the same features in terms of 
maximum  annual  amount  (€1  billion), 
trialogue  procedure,  joint  adoption  by 
the  budgetary  authority  on  a  proposal 
from  the  Commission,  no  carry-overs 
possible  for  non-budgetised  portions  of 
the Fund. 

EN 

16 
EN 

 
 
 
Text of the IIA 
following  year's  Fund.  The  annual  amount  of  the  Fund  to  be  budgeted  in  each  year 
may not exceed € 1 billion under any circumstance. 
When the conditions for mobilising the Solidarity Fund as set out in the relevant basic 
act are met, the Commission will make a proposal to deploy it. Where there is scope 
for reallocating appropriations under the heading requiring additional expenditure, the 
Commission  shall  take  this  into  account  when  making  the  necessary  proposal,  in 
accordance  with  the  Financial  Regulation  in  force,  by  the  appropriate  budgetary 
instrument. The decision to deploy the Solidarity Instrument will be taken jointly by the 
two arms of the budgetary authority in accordance with Point 3. 
The corresponding commitment appropriations shall be entered in the budget over and 
above the relevant headings in the financial framework as laid down in Annex I. 
At  the  same  time  as  it  presents  its  proposal  for  a  decision  to  deploy  the  Solidarity 
Fund,  the  Commission  will  initiate  a  trialogue  procedure,  if  necessary  in  a  simplified 
form, to secure the agreement of the two arms of the budgetary authority on the need 
to use the Solidarity Fund and on the amount required. 

H. Instrument of Flexibility 

28.  The  Instrument  of  Flexibility  with  an  annual  ceiling  of  € 700  million  is  intended  to 
allow the financing, for a given financial year and up to the amount indicated, of clearly 
identified  expenditure  of  one-off  and/or  multiannual  character,  which  could  not  be 
financed within the limits of the ceilings available for one or more other headings.  

The  Commission  will  make  a  proposal  for  the  flexibility  instrument  to  be  used  after  it 
has  examined  all  possibilities  for  re-allocating  appropriations  under  the  heading 
requiring additional expenditure. 
The  proposal  may  be  presented,  for  any  given  financial  year,  during  the  budgetary 
procedure. The Commission proposal will be included in the preliminary draft budget or 
accompanied,  in  accordance  with  the  Financial  Regulation,  by  the  appropriate 
budgetary instrument. 
The decision to deploy the instrument of flexibility will be taken jointly by the two arms 

EN 

17 
EN 

Comments 

Modification and simplification: 
The  existing  flexibility  instrument  is  re-
instated  and  the  reallocation  flexibility 
removed. 
The  annual  amount  of  the  flexibility 
instrument  is  increased  to  € 700  million 
per  year  and  its  scope  broadened  to 
cover  also  the  possibility  to  cater  for 
justified  needs  extending  beyond  one 
year.  These  changes  would  ensure 
sufficient  flexibility  within  lower  ceilings 
for  commitments  than  in  the  original 
Commission  proposal  while  simplifying 
its use. 

 
 
 
 
Text of the IIA 
of  the  budgetary  authority  in  accordance  with  Point  3.  Agreement  will  be  reached  by 
means of the conciliation procedure provided for in Part II, Section A and Annex II to 
this Agreement 

Comments 

I. European Globalisation Adjustment Fund 

New provision.  

29.  The  European  Globalisation  Adjustment  Fund  is  intended  to  provide  additional 
support for workers who suffer from the consequences of major structural changes in 
world trade patterns, to assist them with their reintegration into the labour market. 
The  Fund  may  not  exceed  a  maximum  annual  amount  of  € 500  million  which  can  be 
drawn  from  any  margin  existing  under  the  global  expenditure  ceiling  of  the  previous 
year,  and/or  from  commitment  appropriations  de-committed  during  the  previous  two 
years. 
When the conditions exist for mobilising the European Globalisation Adjustment Fund, 
as set out in the relevant basic act, the Commission will make a proposal to deploy it. 
The  decision  to  deploy  the  European  Globalisation  Adjustment  Fund  will  be  taken 
jointly by the two arms of the budgetary authority in accordance with Point 3. 
At the same time as it presents its proposal for a transfer or for a decision to deploy the 
Fund,  the  Commission  will  initiate  a  trialogue  procedure,  if  necessary  in  a  simplified 
form, to secure the agreement of the two arms of the budgetary authority on the need 
to use the Fund and on the amount required.  
The  corresponding  commitment  appropriations  shall  be  entered  in  the  budget  under 
the relevant heading, if necessary over and above the relevant amount as laid down in 
Annex I. 

J. Adjustment of the financial framework to cater for enlargement 

30.  Where  the  Union  is  enlarged  to  include  new  Member  States  during  the  period 
covered by this financial framework, the European Parliament and the Council, acting 
on a proposal from the Commission and in accordance with Point 3, will jointly adjust 
the financial framework to take account of the expenditure requirements resulting from 

§  2  of  the  current  IIA  deleted  (void):  no 
specific  table  including  supplementary 
an 
for 
requirements 
financial 
enlargement  during 
the  2007-2013 
financial framework is foreseen. 

EN 

18 
EN 

 
 
 
 
 
Text of the IIA 
the outcome of the accession negotiations. 

Comments 

K. Duration of the financial framework and consequences of the absence of a 
financial framework 

Modification: 
This  provision  aims  at  lifting  current 
ambiguities  concerning  the  coherence 
between  the  financial  framework  and 
the 
accession 
experience  of  the  latest  enlargement.  In 
the  event  that  no  financial  framework  is 
agreed,  it  should  be  possible  to  adjust 
an 
the 
enlargement. 

treaties,  based  on 

extended 

ceilings 

for 

31. Before 1 July 2011, the Commission will present proposals for a new medium-term 
financial framework, taking into account the review mentioned in Point 21. 
Should  the  two  arms  of  the  budgetary  authority  fail  to  agree  on  a  new  financial 
framework, and unless the existing financial framework is expressly terminated by one 
of the parties to this Agreement, the ceilings for the last year covered by the existing 
financial  framework  will  be  adjusted  in  accordance  with  point  15  so  that  the  2013 
ceilings  are  maintained  in  constant  prices.  In  the  event  that  an  enlargement  of  the 
European Union occurs after 2013, and if deemed necessary, the extended framework 
will be adjusted in order to take into account the results of accession negotiations. 

EN 

19 
EN 

 
 
 
 
 
 
Text of the IIA 

Comments 

PART II – IMPROVEMENT OF INTERINSTITUTIONAL COLLABORATION DURING 
THE BUDGETARY PROCEDURE 

A. The interinstitutional collaboration procedure 

32.  The  institutions  agree  to  set  up  a  procedure  for  interinstitutional  collaboration  in 
budgetary matters. The details of this collaboration are set out in Annex II, which forms 
an integral part of this Agreement. 

B. Establishment of the budget 

33.  The  Commission  will  present  each  year  a  preliminary  draft  budget  showing  the 
Community's actual financing requirements. 
It will take into account: 
– accurate forecasts in relation to the Structural Funds provided by the Member States,
– the capacity for utilising appropriations, endeavouring to maintain a strict relationship 
between appropriations for commitments and appropriations for payments, 
–  the  possibilities  for  starting  up  new  policies  through  pilot  projects  and/or  new 
preparatory  operations  or  continuing  multiannual  operations  which  are  coming  to  an 
end,  after  assessing  whether  it  will  be  possible  to  secure  a  basic  act,  within  the 
meaning of Article 49 of the Financial Regulation (definition of a basic act, necessity of 
a basic act for implementation and exceptions), 
– the need to ensure that any change in expenditure in relation to the previous year is 
in accordance with the constraints of budgetary discipline. 
The preliminary draft budget will be accompanied by Activity Statements including such 
information  as  required  under  Articles  27(3)  and  33(2)(d)  of  the  Financial  Regulation 
(objectives, indicators and evaluation information). 
34. The institutions will, as far as possible, avoid entering items in the budget carrying 
insignificant amounts of expenditure on operations. 
The  two  arms  of  the  budgetary  authority  also  undertake  to  bear  in  mind  the 

EN 

20 
EN 

of 

evolution 

Additions: 
-  §  1:  new  indent  which  recalls  the 
importance of having accurate forecasts 
payment 
on 
the 
appropriations 
funds. 
These  forecasts  are  provided  by  the 
Member States. 
-  New  §  2  to  take  into  account  the 
Activity  Statements  which 
gather 
information  foreseen  in  the  Financial 
Regulation. 

for  structural 

Additions: 
- New § 2 aims at formalising a practice 
already in use. 
- New § 3 is linked to the previous one 

 
 
 
 
Comments 
and  underlines  the  link  between  sound 
financial  management  and  ensuring  a 
certain 
budget 
nomenclature. 

stability 

the 

in 

Text of the IIA 
assessment of the possibilities for implementing the budget made by the Commission 
in its preliminary drafts and in connection with implementation of the current budget. 
Before the Council 2nd reading, the Commission sends a letter to the Chairman of the 
European  Parliament  Budgets  Committee,  with  a  copy  to  the  other  arm  of  the 
budgetary  authority,  containing its comments  on  the  executability  of  the  amendments 
to  the  draft  budget  adopted  by  the  European  Parliament  in  its  first  reading.  The  two 
arms of the budgetary authority will take these comments into account in the context of 
the conciliation procedure provided for in Annex II. 
In the interest of sound financial management and due to the effect of major changes 
in  the  budget  nomenclature  in  the  titles  and  chapters  on  the  management  reporting 
responsibilities  of  Commission  departments,  the  two  arms  of  the  budgetary  authority 
undertake  to  discuss  any  such  major  changes  with  the  Commission  during  the 
conciliation procedure. 

C. Classification of expenditure 

35.  The  institutions  consider  compulsory  expenditure  to  be  such  expenditure  as  the 
budgetary  authority  is  obliged  to  enter  in  the  budget  by  virtue  of  a  legal  undertaking 
entered into under the Treaties or acts adopted by virtue of the said Treaties. 
36. The preliminary draft budget is to contain a proposal for the classification of each 
new budget item and each item with an amended legal base. 
If  they  do  not  accept  the  classification  proposed  in  the  preliminary  draft  budget,  the 
European  Parliament  and  the  Council  will  examine  classification  of  the  budget  item 
concerned  on  the  basis  of  Annex  III,  which  forms  an  integral  part  of  this  Agreement. 
Agreement will be sought during the conciliation procedure provided for in Annex II. 

D. Maximum rate of increase of non-compulsory expenditure in the absence of a 
financial framework 

37.  Without  prejudice  to  the  first  paragraph  of  point  12,  the  institutions  agree  on  the 
following provisions: 
(a) the European Parliament's autonomous margin for manoeuvre for the purposes of 

EN 

21 
EN 

 
 
 
 
 
 
Comments 

Addition: 
-  The  addition  in  §  3  is  essential  to 
introduce  some  flexibility  in  the  annual 
budget  compared 
the  codecided 
reference amounts. This flexibility is set 
at  10%  to  allow  sufficient  adjustments, 
as 
the  European 
by 
Parliament.  

proposed 

to 

Text of the IIA 
the  fourth  subparagraph  of  Article  272(9)  of  the  EC  Treaty  –  which  is  to  be  half  the 
maximum  rate  –  applies  as  from  the  draft  budget  established  by  the  Council  at  first 
reading, including any letters of amendment. 
The  maximum  rate  is  to  be  observed  in  respect  of  the  annual  budget,  including  any 
supplementary  and/or  amending  budgets.  Without  prejudice  to  the  setting  of  a  new 
rate, any portion of the maximum rate which has not been utilised will remain available 
for  use  and  may  be  used  when  draft  supplementary  and/or  amending  budgets  are 
considered; 
(b)  without  prejudice  to  paragraph  (a),  if  it  appears  in  the  course  of  the  budgetary 
procedure that completion of the procedure might require agreement on setting a new 
rate  of  increase  for  non-compulsory  expenditure  to  apply  to  payment  appropriations 
and/or  a  new  rate  to apply  to  commitment appropriations  (the  latter  rate  may  be  at  a 
different level from the former), the institutions will endeavour to secure an agreement 
between the two arms of the budgetary authority by the conciliation procedure provided 
for in Annex II. 

E. Incorporation of financial provisions in legislative acts 

38.  Legislative  acts  concerning  multiannual  programmes  adopted  under  the  co-
decision procedure contain a provision in which the legislative authority lays down the 
financial envelopes for the programme. 
That amount will constitute the prime reference for the budgetary authority during the 
annual budgetary procedure. 
The  budgetary  authority  and  the  Commission,  when  drawing  up  its  preliminary  draft 
budget,  undertake  not  to  depart  by  more  than  10%  from  this  amount  unless  new, 
objective,  long-term  circumstances  arise  for  which  explicit  and  precise  reasons  are 
given,  with  account  being  taken  of  the  results  obtained  from  implementing  the 
programme, in particular on the basis of assessments. 
This point does not apply to appropriations for cohesion adopted under the co-decision 
procedure and pre-allocated by Member States, which contain a financial envelope for 
the entire duration of the programme. 

EN 

22 
EN 

 
 
 
Comments 

Modification: 

Transferred from Point 12 of the current 
IIA. 

Text of the IIA 
39. Legislative instruments concerning multiannual programmes not subject to the co-
decision procedure will not contain an 'amount deemed necessary'. 
Should the Council wish to include a financial reference, this will be taken as illustrating 
the  will  of  the  legislative  authority  and  will  not  affect  the  powers  of  the  budgetary 
authority as defined by the Treaty. This provision will be mentioned in all instruments 
which include such a financial reference. 
If  the  amount  concerned  has  been  the  subject  of  an  agreement  pursuant  to  the 
conciliation procedure provided for in the Joint Declaration of the European Parliament, 
Council  and  the  Commission  of  4  March  197512,  it  will  be  considered  a  reference 
amount within the meaning of point 38 of this Agreement. 
40.  The  financial  statement  provided  for  in  Article  28  of  the  Financial  Regulation  will 
reflect  in  financial  terms  the  objectives  of  the  proposed  programme  and  include  a 
schedule covering the duration of the programme. The appropriations will be revised, 
where necessary, when the preliminary draft budget is drawn up, taking account of the 
extent of implementation of the programme. 
41. Within the maximum rates of increase for non compulsory expenditure specified in 
the first subparagraph of point 12, the two arms of the budgetary authority undertake to 
respect  the  allocations  of  commitment  appropriations  provided  for  in  the  relevant 
regulations  for  structural  operations,  rural  development  and  the  European  Fund  for 
fisheries. 

F. Expenditure relating to fisheries agreements 

42.  The  institutions  agree  to  finance  expenditure  on  fisheries  agreements  in 
accordance with the arrangements set out in Annex IV, which forms an integral part of 
this Agreement. 

12 

OJ C 89, 22.4.1975. 

EN 

23 
EN 

 
 
 
 
 
 
                                                 
Comments 

Updating. 

Text of the IIA 

G. Financing of the common foreign and security policy (CFSP) 

43.  For  the  CFSP  expenditure  charged  to  the  general  budget  of  the  European 
Communities  in  accordance  with  Article  28  of  the  Treaty  on  European  Union,  the 
institutions will endeavour, in the conciliation procedure provided for in Annex II and on 
the  basis  of  the  preliminary  draft  budget  established  by  the  Commission,  to  secure 
each year agreement on the amount of the operating expenditure to be charged to the 
Community  budget  and  on  the  distribution  of  this  amount  between  the  articles  of  the 
CFSP  budget  chapter  suggested  in  the  fourth  subparagraph  of  this  point.  In  the 
absence of agreement, it is understood that the European Parliament and the Council 
will  enter  in  the  budget  the  amount  contained  in  the  previous  budget  or  the  amount 
proposed in the preliminary draft budget, whichever is the lower. 
The total amount of operating CFSP expenditure will be entered entirely in one budget 
chapter (CFSP) and distributed between the articles of this chapter as suggested in the 
fourth  subparagraph  of  this  point.  This  amount  is  to  cover  the  real  predictable  needs 
and a reasonable margin for unforeseen actions. No funds will be entered in a reserve. 
Each  article  covers  Joint  Actions  and  Council  Decisions  implementing  joint  actions 
already adopted, measures which are foreseen but not yet adopted and all future – i.e. 
unforeseen – action to be adopted by the Council during the financial year concerned. 
Since,  under  the  Financial  Regulation,  the  Commission  has  the  authority,  within  the 
framework of a CFSP action, to transfer appropriations autonomously between articles 
within  one  budget  chapter,  i.e.  the  CFSP  allocation,  the  flexibility  deemed  necessary 
for speedy implementation of CFSP actions will accordingly be assured. In the event of 
the amount of the CFSP budget during the financial year being insufficient to cover the 
necessary expenses, the European Parliament and the Council will seek a solution as 
a matter of urgency, on a proposal from the Commission, taking into account Point 26. 
Within  the  CFSP  budget  chapter,  the  articles  into  which  the  CFSP  actions  are  to  be 
entered could read along the following lines: 
–  monitoring and verification of conflicts and peace processes, 
–  non-proliferation and disarmament, 

EN 

24 
EN 

 
 
 
Comments 

The modification in § 1 is in line with the 
agreement  reached  at  the  conciliation 
meeting on 24 November 2003. 

the 

financial 

Text of the IIA 
–  police missions, 
–  emergency measures, 
–  preparatory and follow-up measures, 
–  European Union Special Representatives, 
–  conflict resolution and other stabilisation measures. 
The European Parliament, the Council and the Commission agree that the amount for 
actions entered under the article mentioned in the fourth indent may not exceed 20% of 
the overall amount of the CFSP budget chapter. 
44.  Once  a  year,  the  Council  Presidency  will  consult  the  European  Parliament  on  a 
Council  document  setting  out  the  main  aspects  and  basic  choices  of  the  CFSP, 
including 
the  European 
Communities.  Furthermore,  according  to  the  agreement  reached  at  the  conciliation 
meeting  on  24 November  2003,  the  Council  Presidency  and  the  two  incoming 
Presidencies  will  keep  Parliament  informed  by  holding  joint  consultation  meetings  at 
least five times a year to be agreed at the latest at the conciliation meeting to be held 
before the Council 2nd reading. The Commission will be associated and participate at 
these meetings. 
Whenever it adopts a decision in the field of CFSP entailing expenditure, the Council 
will  immediately  and  in  each  case  send  the  European  Parliament  an  estimate  of  the 
costs  envisaged  ('financial  statement'),  in  particular  those  regarding  time-frame,  staff 
employed,  use  of  premises  and  other  infrastructure,  transport  facilities,  training 
requirements and security arrangements. 
Once  a  quarter  the  Commission  will  inform  the  budgetary  authority  about  the 
implementation of CFSP actions and the financial forecasts for the remaining period of 
the year. 

the  general  budget  of 

implications 

for 

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ANNEX I 

FINANCIAL FRAMEWORK 2007-2013 

EN 

26 

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ANNEX II 

INTERINSTITUTIONAL COLLABORATION IN THE BUDGETARY SECTOR 

Comments 

Modifications and updating: 
-  §  A:  reference  is  made  to 
the Annual Political Strategy 
(APS)  communication  as 
part of the strategic planning 
and programming. 
- § B: reordering of points. 
-  § C.4  (B.5  of  the  current 
IIA):  modification.  In  light  of 
the experience, the trialogue 
held  before  the  EP's  first 
sometimes 
is 
reading 
unnecessary. 
-  § D  (new)  replaces  points 
37  and  38  of  the  current 
Interinstitutional Agreement. 
New 
pilot 
schemes  and  preparatory 
actions 
been 
have 
calculated  on  the  basis  of 
current  IIA  figures,  which 
have been adjusted to 2004 
prices  and 
to  a  10  % 
increase  to  cater  for  the 
effect  of  enlargement.  The 
figure 
total  of 
the 
preparatory  actions  has 
been  calculated  on 
the 
basis of 2.5 times the figure 
for new preparatory actions 

figures 

for 

for 

A. After the technical adjustment of the financial framework 
for  the  forthcoming  financial  year,  taking  into  account  the 
Annual  Policy  Strategy  presented  by  the  Commission  and 
prior  to  its  decision  on  the  preliminary  draft  budget,  a 
meeting  of  the  trialogue  will  be  convened  to  discuss  the 
possible  priorities  for  the  budget  of  that  year.  Due  account 
will  be  taken  of  the  institutions'  powers  as  well  as  the 
foreseeable development of the needs for the financial year 
to come and for the following years covered by the financial 
framework. Account will also be taken of the new elements 
since the establishment of the initial financial framework and 
likely to have a significant and lasting financial impact on the 
budget of the European Union.  
B. As regards compulsory expenditure, the Commission, in 
presenting its preliminary draft budget, will identify: 
(a)  appropriations  connected  with  new  or  planned 
legislation; 
(b)  appropriations  arising  from  the  application  of  legislation 
existing when the previous budget was adopted. 
The  Commission  will  make  a  careful  estimate  of  the 
financial  implications  of  the  Community's  obligations  based 
on  the  rules.  If  necessary  it  will  update  its  estimates  in  the 
course  of  the  budgetary  procedure.  It  will  supply  the 
budgetary authority with all the duly justified reasons it may 
require. 
If it considers it necessary, the Commission may present to 
the two arms of the budgetary authority an ad hoc letter of 
amendment to update the figures underlying the estimate of 
agricultural  expenditure  in  the  preliminary  draft  budget 
the  most  recent 
and/or 
information  available  concerning  fisheries  agreements  in 
force  on  1  January  of  the  financial  year  concerned,  the 
amounts  and  their  breakdown  between  the  appropriations 
entered  in  the  operational  items  for  international  fisheries 
agreements and those entered in reserve. 
This  letter  of  amendment  must  be  sent  to  the  budgetary 
authority before the end of October. 
If it is presented to the Council less than a month before the 
European  Parliament's  first  reading,  the  Council  will,  as  a 
rule,  consider  the  ad  hoc  letter  of  amendment  when  giving 

to  correct,  on 

the  basis  of 

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for 

the 

the  conditions  necessary 

the draft budget its second reading. 
As  a  consequence,  before  the  Council's  second  reading  of 
the  budget,  the  two  arms  of  the budgetary  authority  will  try 
to  meet 
letter  of 
amendment  to  be  adopted  on  a  single  reading  by  each  of 
the institutions concerned. 
C. 1. A conciliation procedure is set up for all expenditure. 
2. The purpose of the conciliation procedure is to: 
(a) continue discussions on the general trend of expenditure 
and, in this framework, on the broad lines of the budget for 
the coming year in the light of the Commission's preliminary 
draft budget; 
(b)  secure  agreement  between  the  two  arms  of  the 
budgetary authority on: 
–  the  appropriations  referred  to  in  point  2(a)  and  (b), 
including those proposed in the ad hoc letter of amendment 
referred to at point 2, 
–  the  amounts  to  be  entered  in  the  budget  for  non-
compulsory expenditure, in accordance with point 41 of this 
Agreement, 
–  and,  particularly,  matters  for  which  reference  to  this 
procedure is made in this Agreement. 
3.  The  procedure  will  begin  with  a  trialogue  meeting 
convened  in  time  to  allow  the  institutions  to  seek  an 
agreement  by  no  later  than  the  date  set  by  the  Council  for 
establishing its draft budget. 
There  will  be  conciliation  on  the  results  of  this  trialogue 
between the Council and a European Parliament delegation, 
with the Commission also taking part. 
Unless  decided  otherwise  during 
the 
conciliation  meeting  will  be  held  at  the  traditional  meeting 
between  the  same  participants  on  the  date  set  by  the 
Council for establishing the draft budget. 
4.  If  necessary,  a  new  trialogue  meeting  could  be  held 
before  the  European  Parliament's  first  reading  on  written 
proposal by the Commission or written request by either the 
chairman of the European Parliament's Budgets Committee 
or  the  President  of  the  Council  (Budgets).  The  decision 
whether  to  hold  this  trialogue  will  be  agreed  between  the 
institutions  after  the  adoption  of  the  Council  draft  budget 
and prior to the vote of the amendments on the first reading 
by the European Parliament Budgets Committee. 
5. The institutions will continue the conciliation after the first 
reading  of  the  budget  by  each  of  the  two  arms  of  the 
budgetary  authority  in  order  to  secure  agreement  on 
in 
compulsory  and  noncompulsory  expenditure  and, 

trialogue, 

the 

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the  Member  of 

particular,  to  discuss  the  ad  hoc  letter  of  amendment 
referred to in point 2. 
A  trialogue  meeting  will  be  held  for  this  purpose  after  the 
European Parliament's first reading. 
The  results  of  the  trialogue  will  be  discussed  at  a  second 
conciliation meeting to be held the day the Council's second 
reading. 
If  necessary,  the  institutions  will  continue  their  discussions 
on  non-compulsory  expenditure  after  the  Council's  second 
reading. 
6.  At  these  trialogue  meetings,  the  institutions'  delegations 
will  be  led  by  the  President  of  the  Council  (Budgets),  the 
Chairman  of  the  European  Parliament's  Committee  on 
Budgets  and 
the  Commission  with 
responsibility for the budget. 
7.  Each  arm  of  the  budgetary  authority  will  take  whatever 
steps are required to ensure that the results which may be 
secured 
respected 
throughout the current budgetary procedure. 
D. In order for the Commission to be able to assess in due 
time the implementability of the amendments envisaged by 
the  budgetary  authority,  creating  new  Preparatory 
Actions/Pilot Projects or prolonging existing ones, both arms 
of  the  budgetary  authority  inform  the  Commission  by  mid 
June of their intentions in this field, so that a first discussion 
may  already  take  place  at  the  conciliation  meeting  of  the 
Council's  first  reading.  The  next  steps  of  the  conciliation 
procedure foreseen in this annex will also apply, as well as 
the provisions on the implementability mentioned in point 37 
of this agreement. 
Furthermore,  the  three  institutions  agree  to  limit  the  total 
amount of appropriations for pilot schemes to € 38 million in 
any budget year. They also agree to limit to € 36 million the 
total amount of appropriations for new preparatory actions in 
any  budget  year,  and  to  € 90  million  the  total  amount  of 
appropriations actually committed for preparatory actions. 

the  conciliation  process  are 

in 

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ANNEX III 

CLASSIFICATION OF EXPENDITURE 

HEADING 1 

Sustainable growth 

1A  Competitiveness for growth and employment 

1B  Cohesion for growth and employment 

HEADING 2 

Preservation and management of natural resources 

Except: 

Non-
compulsory 
expenditure 
(NCE) 
NCE 

NCE 

Expenditure of the common agricultural policy concerning market 
measures and direct aids, including market measures for fisheries 
and fisheries agreements 

Compulsory 
expenditure 
(CE) 

HEADING 3  Citizenship, freedom, security and justice 

3A  Freedom, Security and Justice 

3B  Citizenship 

HEADING 4 

The EU as a global partner 

   Except: 

Expenditure resulting from international agreements which the 
European Union concluded with third parties 

Contributions to international organisations or institutions 

Contributions provisioning the loan guarantee fund 

HEADING 5  Administration 

Except:  

Pensions and severance grants 

Allowances and miscellaneous contributions on termination of 
service 

Legal expenses 

Damages 

HEADING 6  Compensations 

NCE 

NCE 

NCE 

NCE 

CE 

CE 

CE 

NCE 

CE 

CE 

CE 

CE 

CE 

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ANNEX IV 

FINANCING OF EXPENDITURE DERIVING FROM FISHERIES AGREEMENTS 

A. Expenditure relating to fisheries agreements is financed by two 
items  belonging  to  the  'fisheries'  policy  area  (by  reference  to  the 
activity based budget nomenclature): 

Updating 

(a) international fisheries agreements (11 03 01); 
(b) contributions to international organisations (11 03 02). 

All the amounts relating to agreements and protocols which will be 
in force on 1 January of the year in question will be entered under 
heading  11  03  01.  Amounts  relating  to  all  new  or  renewable 
agreements which will come into force after 1 January of the year 
to  heading  31  02  41  02  – 
in  question  will  be  assigned 
Reserves/Differentiated appropriations (compulsory expenditure). 

B.  In  the  conciliation  procedure  provided  for  in  Annex  III,  the 
European  Parliament  and  the  Council  will  seek  to  agree  on  the 
amount to be entered in the budget headings and in the reserve on 
the basis of the proposal made by the Commission. 

C.  The  Commission  undertakes  to  keep  the  European  Parliament 
regularly  informed  about  the  preparation  and  conduct  of  the 
negotiations, including the budgetary implications. 

In  the  course  of  the  legislative  process  relating  to  fisheries 
agreements,  the  institutions  undertake  to  make  every  effort  to 
ensure that all procedures are carried out as quickly as possible. 

If  appropriations  relating  to  fisheries  agreements  (including  the 
reserve)  prove  insufficient,  the  Commission  will  provide  the 
budgetary authority with the necessary information for an exchange 
of  views  in  the  form  of  a  trialogue,  possibly  simplified,  on  the 
causes  of  the  situation,  and  on  the  measures  which  might  be 
adopted  under  established  procedures.  Where  necessary,  the 
Commission will propose appropriate measures. 

Each  quarter  the  Commission  will  present  to  the  budgetary 
authority  detailed 
implementation  of 
agreements in force and financial forecasts for the remainder of the 
year. 

information  about 

the 

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DECLARATIONS 

Declaration on the adjustment of Structural Funds, Rural Development and the 
European Fund for Fisheries in the light of the circumstances of their 
implementation 

The institutions may decide, on a proposal  of the Commission; that in the event of the 
adoption  after  1  January  2007  of  the  new  rules  and  programmes  governing  the 
Structural  Funds,  Rural  Development  and 
for  Fisheries, 
appropriations not used in the first year of the financial framework could be transferred 
to the following years. 

the  European  Fund 

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