Commission working document - Contribution to the interinstitutional negotiations on the Proposal for renewal of the Interinstitutional Agreement on budgetary discipline and improvement of the budgetary procedure
Date: 2006-02-15
Institutions: European Commission
Subjects: budgetary discipline (EU), budgetary procedure, interinstitutional agreement

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 15.2.2006 
COM(2006) 75 final 

COMMISSION WORKING DOCUMENT 

Contribution to the interinstitutional negotiations on the  
Proposal for renewal of the 
INTERINSTITUTIONAL AGREEMENT  
on budgetary discipline and improvement of the budgetary procedure 

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EXPLANATORY MEMORANDUM 

In  its  conclusions  the  December  European  Council  ”calls  on  the  Council,  on  the  basis  of  a 
common position and subject to acceptable terms being attainable, to reach agreement with 
the European Parliament and the Commission on a new IIA reflecting the outcome of these 
conclusions.”' 

The  European  Parliament,  in  its  resolution  of  18  January  2006,  declared  itself  ”willing  to 
enter  into  constructive  negotiations  with  the  Council  on  the  basis  of  respective  positions 
provided the Austrian Presidency [was] entrusted with a real negotiating mandate”.  

The  European  Parliament,  the  Council  and  the  Commission  agreed  on  a  series  of  meetings 
(trilogues) in order to provide a structured framework to the negotiations. 

On  1  February  2006,  the  Commission  approved  a  working  document  on  a  modified 
Interinstitutional Agreement (IIA) proposal. This proposal was accompanied by a letter from 
President  Barroso  which  notably  comments  on  'some  issues  which  are  not  included  in  the 
proposal for an IIA but are of importance for the forthcoming negotiations.'  

The objective of the present Commission Working Document is to translate in a more formal 
way some of the issues referred to in the letter from President Barroso and to submit them to 
the Trilogue of 21 February as concrete elements for the negotiation. 

In  addition  to  these  specific  points,  a  number  of  other  items  identified  during  the  inter-
institutional  discussions  so  far  have  already  received  a  formal  answer  in  the  draft 
Interinstitutional agreement presented on 1 February by the Commission. 

These  include,  notably,  flexibility,  for  which  the  Commission  proposed  different  tools 
increasing the volume and scope of flexibility in order to react properly to changing needs and 
challenges.  As  it  is  the  case  in  the  current  Financial  Perspectives,  the  proposed  IIA  also 
includes  a  specific  heading  for  the  administrative  expenditure  of  all  the  institutions.  As 
regards  budgetary  discipline,  the  Commission  maintained  in  the  draft  of  1  February  all 
existing provisions, including on CFSP. On the review clause, the Commission has proposed 
to  present  a  comprehensive  White  Paper  covering  all  aspects  of  the  financial  framework, 
revenues and expenditure. This exercise will include wide consultations to be reflected in the 
ensuing proposals for the possible modification of the different aspects of the budget. One of 
the issues to be addressed in this context will be the need to give the European Union more 
transparent and independent own resources to replace the existing system. In this respect, the 
Commission  notes  the  intention  of  the  European  Parliament  to  organise  a  conference, 
involving also the national parliaments. 

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1. 

NEW FINANCIAL INSTRUMENTS 

For the future financial framework period, the Commission intends to increase the leverage of 
EU funds by improving synergies between the action of the EU budget and the activities of 
the European Investment  Bank  (EIB).  It has notably already proposed the creation of a risk 
sharing  finance  facility  to  boost  the  financing  of  research  and  is  working  on  a  special 
instrument  to  mobilise  funds  for  the  implementation  of  TEN  -  Transport  projects.  It  is  also 
preparing  in  close  contact  with  the  EIB  and  the  EIF  special  actions  in  favour  of  SMEs,  to 
support for instance venture capital for high growth technology driven companies. 

Proposed text on new financial instruments 

The European Parliament, the Council and the Commission agree that the introduction of co-
financing  mechanisms  is  necessary  to  reinforce  the  leverage  effect  of  the  EU  budget  by 
increasing  the  funding  incentive.  They  agree  to  encourage  all  types  of  financial  instruments 
acting as catalysts for public and private investors. The objective is to increase up to EUR 10 
billion  the  EIB's  capacity  for  research  and  development  loans  in  the  period  2007-2013. 
Moreover,  the  instruments  in  favour  of  Trans-European  Networks,  and  Small  and  Medium-
sized Enterprises are to be reinforced. The Commission will make proposals, accordingly and 
will report back to the budgetary authority about the activities financed by the EIB, the EIF 
and the EBRD (relevant in the case of new Member States) to support investment in all those 
areas. 

2. 

FINANCIAL REGULATION 

The  Commission  recognises  the  need  for  a  better  implementation  of  the  Budget  without 
putting  in  question  the  progress  achieved  in  the  last  2002  recasting1.  To  this  end  the 
Commission  has  already  proposed  a  major  review  of  the  Financial  Regulation  and  of  its 
implementing  rules  in  force.  The  Commission  considers  that  the  revision  of  the  Financial 
Regulation  has  to  stem  from  a  real  conciliation  procedure,  following  the  1975  Joint 
Declaration2. 

Proposed text on the Financial Regulation 

The  institutions  have  a  shared  responsibility  for  the  review  of  the  Financial  Regulation  to 
improve  implementation  of  the  budget  and  increase  the  visibility  and  the  benefit  of  EU 
funding towards the citizens without putting into question the progress achieved in the 2002 
recasting. As in 2002, the European Parliament, the Council and the Commission agree that 
the review  of the Financial Regulation is completed successfully through a real conciliation 
procedure,  on  the  basis  of  its  modified  proposal,  which  forges  effective  consensus  between 
the European Parliament and Council. They also seek close and constructive inter-institutional 
cooperation  for  the  swift  conclusion  of  the  Implementing  Rules  in  order  to  simplify 
procedures for funding whilst ensuring a high protection of the Union's financial interests. 

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Council Regulation (EC, Euratom) n°1605/2002 of 25 June 2002. 
Joint  Declaration  of  the  European  Parliament,  the  Council  and  the  Commission  concerning  the 
institution of a conciliation procedure between the European Parliament and the Council, 4.3.1975, OJ 
C 89 of 22.4.1975, p. 1. 

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The European Parliament and the Council are firmly committed to conclude the negotiations 
on the Financial Regulation in due time to allow for its entry into force on 1 January 2007. 

3. 

CERTIFICATION BY MEMBER STATES 

The  Commission  has  undertaken  very  important  reforms  to  improve  the  financial 
management  of  all  Budget  sectors.  In  its  communication  COM(2005) 9  of  17  January  2006 
the Commission defined an action plan towards an integrated control framework in line with 
the  views  expressed  by  the  Court  of  Auditors  and  the  European  Parliament.  An  appropriate 
follow-up  of  this  action  plan  has  to  be  ensured  in  particular  in  the  field  of  national 
declarations and the definition of the level of risk to be tolerated. 

Proposed text on ensuring effective and integrated internal control of Community funds 

The  European  Parliament,  the  Council  and  the  Commission  agree  on  the  importance  of 
strengthening  internal  control  without  adding  to  the  administrative  burden  for  which  the 
simplification  of  the  underlying  legislation  is  a  prerequisite.  In  this  context,  priority  will  be 
given  to  managerial  accountability  under  shared  management  in  the  form  of  national 
declarations.  Member  States  will  designate  the  bodies  to  be  responsible  for  declarations 
before September 2006.  

4. 

DEMOCRATIC SCRUTINY AND COHERENCE OF EXTERNAL ACTIONS 

The Commission is determined to promote policy coherence in Europe’s external action and 
avoid  the  unnecessary  multiplication  and  rigidity  of  external  action  instruments.  The 
Commission  agrees  that  the  proposed  rationalisation  of  instruments  should  not  reduce  the 
powers of either the legislative authority or the budgetary authority. The Commission stands 
ready to work constructively on the text of the external regulations proposed. 

Proposed text on democratic scrutiny and coherence of external actions 

The  European  Parliament,  the  Council  and  the  Commission  acknowledge  the  need  for  a 
rationalisation  of  the  various  instruments  for  external  actions.  They  agree  that  such  a 
rationalisation  of  instruments,  while  enhancing  the  coherence  and  the  responsiveness  of  the 
EU  action,  should  not  reduce  the  powers  of  either  the  legislative  authority  or  the  budgetary 
authority.  The  text  of  the  relevant  regulations  should  reflect  these  principles  and,  where 
appropriate, include the necessary policy content and an indicative breakdown of resources. 

5. 

AGENCIES 

Concerns have been expressed about the increase in the number of agencies, and the need to 
ensure  that  this  does  not  result  in  the  transfer  of  Community  competencies  to  inter-
governmental  structures.  The  Commission  also  recognizes  that  possible  difficulties  could 
stem  from  the  creation  of  new  agencies  during  the  financial  framework  2007-2013,  in 
particular when their financing would be under already tight ceilings. In order to respond to 
these  concerns,  the  Commission  proposes  that,  whenever  it  is  envisaged  to  create  a  new 
agency, its financial impact be discussed by the Budgetary Authority during a trilogue, on the 
basis of a Commission analysis. 

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Proposed text on Agencies 

Before taking any decision on the creation of a new agency, the Commission will assess the 
budgetary  implications  for  the  expenditure  heading  concerned.  On  the  basis  of  this 
information, the two arms of the Budgetary Authority commit themselves in the framework of 
budgetary  cooperation  to  come  to  an  agreement  on  the  financing  of  the  concerned  agency 
before the underlying legal base comes into force. 

6. 

OWN RESOURCES 

The  draft  Interinstitutional  agreement  presented  on  1  February  by  the  Commission  already 
includes  a  review  clause.  According  to  this  provision,  the  Commission  shall  present  a 
comprehensive White Paper covering all aspects of the EU budget, revenues and expenditure. 
This exercise, to be launched after final agreement has been reached among the Institutions on 
all  elements  of  the  next  Financial  Perspectives,  will  be  the  fruit  of  detailed  preparation  and 
wide  consultation.  Concerning  the  revision  of  the  own  resources  system,  and  in  order  to 
deliver orientations in view of Commission proposals, the European Parliament would like to 
call for a conference involving the European Parliament and the national parliaments. 

Proposed text on Own Resources 

In the context of the future revision of the own resources system, the institutions take note of 
the European Parliament intention to organise a conference of representatives of the European 
Parliament and the national parliaments.  

7. 

FINANCIAL PROGRAMMING 

Financial Programming continues to have a crucial role for the annual budgetary procedure. 
The Commission intends to respect the commitments it has undertaken in the past concerning 
the information of the two arms of the budgetary authority on Financial Programming.  

Proposed text on Financial Programming 

The  European  Parliament,  the  Council  and  the  Commission  acknowledge  the  importance  of 
Financial  programming  and  maintain  the  agreement  reached  on  this  subject  during  the 
conciliation meeting of 16 July 2004. In particular Financial Programming has to be updated 
by  the  Commission  twice  a  year  and  considered,  if  necessary,  at  each  trilogue  meeting 
provided for in the Interinstitutional Agreement of … 

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