Communication from the Commission to the European Parliament and the Council - Technical adjustment of the financial framework for 2007 in line with movements in GNI and prices (Point 16 of the Interinstitutional Agreement of 17 May 2006 on budgetary discipline and sound financial management)
Date: 2006-06-22
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, 22.6.2006 
COM(2006) 327 final 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Technical adjustment of the financial framework for 2007 
in line with movements in GNI and prices 

(Point 16 of the Interinstitutional Agreement of 17 May 2006 on budgetary discipline 
and sound financial management) 

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COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Technical adjustment of the financial framework for 2007 
in line with movements in GNI and prices 

(Point 16 of the Interinstitutional Agreement of 17 May 2006 on budgetary discipline 
and sound financial management) 

1. 

INTRODUCTION 

The Interinstitutional Agreement (IIA) of 17 May 2006 on budgetary discipline and 
sound  financial  management1  contains  the  financial  framework  table  for  EU-27  for 
the period 2007-2013, expressed in 2004 prices (Table 1). 

Point  16  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  framework  in  line  with  movements  in  the  EU's  gross  national  income 
(GNI)  and  prices.  Movements  in  GNI  have  been  updated  with  the  latest  economic 
forecasts  available  (Advisory  Committee  for  Own  Resources  – ACOR -  meeting  of 
19  May  2006).  As  far  as  prices  are  concerned,  the  IIA  (point  16)  now  foresees  a 
fixed 2 % deflator for all expenditure. It is therefore possible at this stage to calculate 
the expenditure ceilings at current prices for the whole period 2007-2013. 

Exceptionally,  the  Interinstitutional  Agreement  on  the  financial  framework  2007-
2013  entered into force  after  the presentation of the  2007  preliminary draft budget. 
The purpose of this communication is to present to the budgetary authority the result 
of this technical adjustment (EU-27) for 2007. 

2. 

TERMS  OF  THE  ADJUSTMENT  OF  THE  FINANCIAL  FRAMEWORK 
TABLE (TABLES 1-2) 

Table 1 shows the financial framework for EU-27 as adopted in the IIA, i.e. in 2004 
prices. 

Table 2 shows the financial framework for EU-27 adjusted for 2007. It also shows 
the  financial  framework  expressed  in  percentage  of  GNI,  with  the  latest  economic 
forecasts available (ACOR meeting of 19 May 2006). 

2.1. 

Adjustment of expenditure ceilings by heading for the year 2007 

As foreseen in Point 16 of the IIA, the adjustment is calculated by applying a fixed 
annual deflator of 2 % to the commitment appropriations in the financial framework 
(at 2004 prices). 

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The resulting cumulative deflator for the period 2004-2007 amounts to 6.1208 %. 

To  ensure  consistency  with  the  allocations  of  expenditure  between  the  beneficiary 
Member  States,  the  overall  figure  for  Sub-heading  1B  'Cohesion  for  growth  and 
employment' in 2007 prices has been rounded up to the superior unit. 

As  regards  payments,  the  global  ceiling  has  been  adjusted  by  applying  the  same 
deflator (6.1208 %) used for commitment appropriations.  

2.2. 

Total figure for GNI 

According  to  the  latest  forecasts  available,  the  GNI  for  2007  is  established  at 
€ 11.566  billion  in  current  prices  for  EU-25  and  € 128  billion  in  current  prices  for 
Bulgaria and Romania. 

For subsequent years (2008-2013) the EU-27 GNI has been calculated on the basis of 
the long-term projections for the annual average growth rate (2.3 % in real terms for 
the EU-272) used in the negotiations on the financial framework 2007-2013, and on 
the same fixed annual inflation rate of 2 % as agreed in Point 16 of the IIA. These 
projections  are  indicative  and  will  be  updated  annually  on  the  basis  of  the  latest 
economic forecasts available. 

2.3.  Main results of the technical adjustment of the Financial Framework for 2007 

(EU-27) 

The overall ceiling on appropriations for commitments for 2007 comes to € 128.091 
million, equal to 1.10 % of GNI. 

The corresponding overall ceiling concerning the appropriations for payments comes 
to  € 123.790  million,  i.e.  1.06 %  of  GNI.  On  the  basis  of  the  latest  economic 
forecasts, this leaves a margin beneath the 1.24 % own resources ceiling of € 21.219 
million (0.18 % of GNI for EU-27). 

3. 

OTHER ELEMENTS LINKED TO THE TECHNICAL ADJUSTMENT 

3.1. 

Heading 5 (Administration) 

In the case of heading 5, a footnote to the financial framework 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 € 500 million (2004 
prices) for the period 2007-2013. 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; 

2 

The  average  annual  growth  rate  for  the  EU-27  is  the  combined  result  of  projections  by  group  of 
Member States: 2.2 % for EU-15; 4.1 % for the ten Member States that joined in 2004; and 5.6 % for 
Bulgaria and Romania. 

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– 

The accumulated total of deductions for the period 2007-2013 may not exceed 
€ 500 million at 2004 prices, equivalent to an average of € 71.4 million (€ 75.8 
million at 2007 prices). 

The  recurrent  nature  of  administrative  expenditure  imposes  that  the  lowest  limit  is 
adopted annually to avoid using a margin at the start of the period which would no 
longer  be  fully  available  afterwards.  For  2007  –  the  first  year  of  the  period  –  the 
amount to be deducted is the lowest amount, i. e. € 75.8 million at current prices for 
2007. 

3.2. 

Expenditure items outside the financial framework 2007-2013 

A  number  of  instruments  are  available  outside  expenditure  ceilings  agreed  in  the 
financial framework 2007-2013. These instruments aim at providing rapid response 
to exceptional or unforeseen events, and provide some flexibility beyond the agreed 
expenditure ceilings within certain limits: 

•  the Emergency Aid reserve, which can be mobilised up to a maximum amount of 
€ 221 million per year in 2004 prices, or € 234.5 million in 2007 at current prices 
(€ 1744 million for the whole period in current prices); 

•  the EU Solidarity Fund, whose maximum annual amount in current prices is € 1 

billion; 

•  the  Flexibility  Instrument,  with  a  maximum  annual  amount  in  current  prices  of 
€ 200  million,  plus  the  portion  of  the  unused  annual  amounts  of  the  years  2005 
and 2006, which may be carried over to year 2007; 

In  addition,  it  will  be  possible  to  mobilise  the  European  Globalisation  Adjustment 
Fund (EGF) up to a maximum of € 500 million per year in current prices by drawing 
from any margin existing under the global ceiling for commitment appropriations of 
the previous year, and/or from cancelled commitments from the previous two years 
(excluding those related to heading 1b). For the year 2007 the conditions are met to 
enter the € 500 million provision in the budget. 

4. 

OPERATIONS OUTSIDE THE BUDGET AND OWN RESOURCES 

The  fourth  subparagraph  of  Point  11  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 framework. 

This  information,  updated  in  line  with  the  latest  estimates  available,  is  set  out  in 
Tables 3.1 to 3.2. It covers the European Development Fund (EDF) and the structure 
of own resources. 

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ANNEXES 

TABLE 1: FINANCIAL FRAMEWORK 2007-2013 

COMMITMENT APPROPRIATIONS

1. Sustainable Growth

1a Competitiveness for Growth and Employment
1b Cohesion for Growth and Employment

2. Preservation and Management of Natural Resources
of which: market related expenditure and direct payments

3. Citizenship, freedom, security and justice

3a Freedom, Security and Justice
3b Citizenship

4. EU as a global player
5. Administration (1)
6. Compensations

2007

51.267

8.404

42.863

54.985

43.120

1.199

600

599

6.199

6.633

419

2008

52.415

9.097

43.318

54.322

42.697

1.258

690

568

6.469

6.818

191

2009

53.616

9.754

43.862

53.666

42.279

1.380

790

590

6.739

6.973

190

2010

54.294

10.434

43.860

53.035

41.864

1.503

910

593

7.009

7.111

2011

55.368

11.295

44.073

52.400

41.453

1.645

1.050

595

7.339

7.255

2012

56.876

12.153

44.723

51.775

41.047

1.797

1.200

597

7.679

7.400

(EUR million - 2004 prices)

2013

58.303

12.961

45.342

51.161

40.645

1.988

1.390

598

8.029

7.610

Total
2007-2013
382.139

74.098

308.041

371.344

293.105

10.770

6.630

4.140

49.463

49.800

800

TOTAL COMMITMENT APPROPRIATIONS

120.702

121.473

122.564

122.952

124.007

125.527

127.091

864.316

as a percentage of GNI

1,10%

1,08%

1,07%

1,04%

1,03%

1,02%

1,01%

1,05%

TOTAL PAYMENT APPROPRIATIONS

116.650

119.620

111.990

118.280

115.860

119.410

118.970

820.780

as a percentage of GNI
Margin available
Own Resources Ceiling as a percentage of GNI

1,06%

0,18%

1,24%

1,06%

0,18%

1,24%

0,97%

0,27%

1,24%

1,00%

0,24%

1,24%

0,96%

0,28%

1,24%

0,97%

0,27%

1,24%

0,94%

0,30%

1,24%

1,00%

0,24%

1,24%

(1) The expenditure on pensions included under the ceiling for this heading is calculated net of the staff contributions to the relevant scheme, within the limit of € 500 million at 2004 prices for 
the period 2007-2013.

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TABLE 2: FINANCIAL FRAMEWORK (EU-27) ADJUSTED FOR 2007 

COMMITMENT APPROPRIATIONS

1. Sustainable Growth

1a Competitiveness for Growth and Employment
1b Cohesion for Growth and Employment

2. Preservation and Management of Natural Resources
of which: market related expenditure and direct payments

3. Citizenship, freedom, security and justice

3a Freedom, Security and Justice
3b Citizenship

4. EU as a global player
5. Administration (1)
6. Compensations

2007

54.405

8.918

45.487

58.351

45.759

1.273

637

636

6.578

7.039

445

2008

56.736

9.847

46.889

58.800

46.217

1.362

747

615

7.002

7.380

207

2009

59.197

10.769

48.428

59.252

46.679

1.523

872

651

7.440

7.699

210

2010

61.144

11.750

49.394

59.726

47.146

1.693

1.025

668

7.893

8.008

2011

63.601

12.974

50.627

60.191

47.617

1.889

1.206

683

8.430

8.334

2012

66.640

14.239

52.401

60.663

48.093

2.105

1.406

699

8.997

8.670

(EUR million - current prices)

2013

69.678

15.490

54.188

61.142

48.574

2.376

1.661

715

9.595

9.095

Total
2007-2013
431.401

83.987

347.414

418.125

330.085

12.221

7.554

4.667

55.935

56.225

862

TOTAL COMMITMENT APPROPRIATIONS

128.091

131.487

135.321

138.464

142.445

147.075

151.886

974.769

as a percentage of GNI

1,10%

1,08%

1,06%

1,04%

1,03%

1,01%

1,00%

1,04%

TOTAL PAYMENT APPROPRIATIONS

123.790

129.481

123.646

133.202

133.087

139.908

142.180

925.294

as a percentage of GNI
Margin available
Own Resources Ceiling as a percentage of GNI

1,06%

0,18%

1,24%

1,06%

0,18%

1,24%

0,97%

0,27%

1,24%

1,00%

0,24%

1,24%

0,96%

0,28%

1,24%

0,97%

0,27%

1,24%

0,94%

0,30%

1,24%

0,99%

0,25%

1,24%

(1) The expenditure on pensions included under the ceiling for this heading is calculated net of the staff contributions to the relevant scheme, within the limit of € 500 million at 2004 prices for 
the period 2007-2013.

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TABLE 3: INDICATIVE PROGRAMME OF EXPENDITURE NOT ENTERED IN THE GENERAL BUDGET AND PROSPECTIVE 
TREND IN THE VARIOUS OWN RESOURCES 

TABLE 3.1.  EUROPEAN DEVELOPMENT FUND

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

2000

2001

2002

2003

2004

2005

2006

2007

2008

C
4007

TOTAL
The series relate to the measures managed by the Commission and the European Investment Bank. The amounts for 2001 to 2004 have been 
amended to take account of the impact of the regularisation of certain payments made on the Stabex instrument. 

C
1927

P
1779

C
2125

P
1922

C
4107

P
2349

C
2972

P
2560

C
4015

P
1640

P
2699

C
3971

P
3024

C
3150

P
3350

C
p.m.

P
3300

TABLE 3.2. OWN RESOURCES BY CATEGORY

% of total
Traditional own resources (TOR)
VAT
GNP/GNI
2000-2005: outturns
(including the retroactive adjustment in 2002 of 15% of the amounts retained in 2001 as TOR collection costs)
2006 : Amending Budget (AB) 2/2006
2007: PDB 2007 (forecasts are based upon the Own Resources Decision of 29 September 2000 (OJ L 253/42))

2002
12%
29%
59%

2003
13%
25%
62%

2004
13%
15%
72%

2005
14%
16%
70%

2001
18%
39%
43%

2000
17%
40%
43%

2006
13%
15%
72%

2007
14%
15%
71%

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