Preliminary draft amending budget No 2 TO the budget for 2007 - General statement of revenue - Statement of revenue and expenditure by section : section III – Commission
Date: 2007-03-28
Institutions: Directorate-General for Budget, European Commission
Subjects: EU expenditure, Greece, Hungary, aid to disaster victims, amending budget, commitment of expenditure, flood, preliminary draft EC budget, research expenditure (EU)

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 28.3.2007 
COM(2007) 148 final 

PRELIMINARY DRAFT AMENDING BUDGET No 2 
TO THE BUDGET FOR 2007 

GENERAL STATEMENT OF REVENUE 

STATEMENT OF REVENUE AND EXPENDITURE BY SECTION 
Section III – Commission 

(presented by the Commission) 

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PRELIMINARY DRAFT AMENDING BUDGET No 2 
TO THE BUDGET FOR 2007 

GENERAL STATEMENT OF REVENUE 

STATEMENT OF REVENUE AND EXPENDITURE BY SECTION 
Section III – Commission 

Having regard to: 

– 

– 

– 

the  Treaty  establishing  the  European  Community,  and  in  particular  Article 272 
thereof, 

the  Treaty  establishing  the  European  Atomic  Energy  Community,  and  in  particular 
Article 177 thereof, 

the  Council  Regulation  (EC,  Euratom)  No  1605/2002  of  25  June  2002  on  the 
Financial Regulation applicable to the general budget of the European Communities1, 
and in particular Article 37 thereof, 

The  European  Commission  hereby  presents  to  the  budgetary  authority  the  preliminary  draft 
amending  budget  No 2  to  the  2007  budget  for  the  reasons  set  out  in  the  explanatory 
memorandum. 

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OJ  L  248,  16.9.2002,  p.  1.  as  last  amended  by  Regulation  1995/2006  of  13  December  2006  
OJ L 390 p.1 of 30.12. 2006 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

2.3. 

3. 

3.1. 

3.2. 

Introduction .................................................................................................................. 4 

Mobilisation of the EU Solidarity Fund....................................................................... 4 

Hungary: Floods of April 2006 .................................................................................... 4 

Greece: Floods of March 2006..................................................................................... 5 

Financing...................................................................................................................... 6 

Modification of the structure of the Budget 2007 for the Research, following the 
adoption of FP7 ............................................................................................................ 7 

Split into two separate budget lines of the research priority "Security  
and space" .................................................................................................................... 7 

Introduction of a new sub-programme, under the specific programme  
"Capacities: Coherent development of research policies" ........................................... 8 

3.3. 

Reduction in payment appropriations .......................................................................... 8 

SUMMARY TABLE BY HEADING OF THE FINANCIAL FRAMEWORK ....................... 9 

GENERAL  STATEMENT  OF  REVENUE  AND  STATEMENT  OF  REVENUE  AND 
EXPENDITURE BY SECTION 

The general statement of revenue and the statement of revenue and expenditure for section III 
-  Commission  -  are  forwarded  separately  via  the  SEI-BUD  system.  An  English  language 
version is attached as a budgetary annex by way of example. 

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1. 

INTRODUCTION 

This Preliminary Draft Amending Budget concerns two elements: 

–  The mobilisation of the EU Solidarity Fund for the floods that hit Hungary and Greece in 

March and April 2006; 

–  The modification of the structure of the Budget 2007 for Research, following the adoption 

of the 7th Framework Programme (FP7). 

the  overall 

While 
impact  on  commitment  appropriations  will  be  an 
EUR 24.4 million, the overall level of payment appropriations will not change. 

increase  of 

2. 

MOBILISATION OF THE EU SOLIDARITY FUND 

In March and April 2006 severe floods hit large parts of central, south-eastern and southern 
Europe  causing  severe  damage  in  a  number  of  countries.  Hungary  and  Greece  applied  for 
financial  assistance  from  the  EU  Solidarity  Fund  relating  to  the  floods  within  the  ten  week 
deadline set by Article 4 of Council Regulation (EC) No 2012/20022. 

The Commission carried out a thorough examination of the applications in  accordance with 
Regulation (EC) 2012/2002 and in particular with Articles 2, 3 and 4 thereof. 

The most important elements of the assessments can be summarised as follows: 

2.1. 

Hungary: Floods of April 2006 

(1) 

(2) 

(3) 

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The application was presented to the Commission on 9 June 2006 within the deadline 
of 10 weeks after the first damage was recorded on 3 April 2006. Upon request from 
the  Commission  services  the  Hungarian  authorities  provided  additional  information, 
which was received on 21 September 2006. 

The disaster  is  of natural origin. The Hungarian authorities estimated  the total direct 
damage  at  EUR 519 million.  As  this  amount  exceeds  the  threshold  of  0.6 %  of 
Hungary's GNI (EUR 459 million) the disaster qualifies as a “major natural disaster” 
and falls thus within the main field of application of Regulation (EC) No 2012/2002. 
Total  direct  damage  is  the  basis  for  the  calculation  of  the  amount  of  financial 
assistance.  The  financial  assistance  may  only  be  used  for  essential  emergency 
operations as defined in Article 3 of the Regulation3. 

According  to  the  Hungarian  authorities  the  disaster  affected  over  1.5  million 
inhabitants in 8 of the country's 20 counties along the catchments' areas of the Danube 
to 
and  Tisza 

rivers.  The  Hungarian  authorities 

reported  serious  damages 

Council  Regulation  (EC)  N°  2012/2002  of  11  November  2002  establishing  the  European  Union  Solidarity 
Fund (OJ L 311, 14.11.2002). 
It should be noted that the figure for estimated total damage includes private damage only partially. The share 
of public damage (EUR 409 million) represents thus almost 80 % of total damage. The Hungarian authorities 
have however declared that complete estimates of private damage are not available. In reality, total damage is 
therefore likely to be higher than the amount given. 

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infrastructures,  in  particular  in  the  water/waste  water  sector  (EUR 136 million),  for 
flood protection (EUR 85 million), in the transport sector (EUR 93 million) as well as 
in  agriculture  (over  EUR 61 million),  to  the  cultural  heritage,  and  to  several  natural 
parks. 

The  cost  of  essential  emergency  operations eligible  under  Article  3(2)  of  Regulation 
(EC)  No  2012/2002  has  been  estimated  by 
the  Hungarian  authorities  at 
EUR 335 million  and  has  been  broken  down  by  type  of  operation.  Compared  with 
earlier  disasters  for  which  the  Solidarity  Fund  intervened  this  amount  appears 
unusually  high  in  relation  to  total  damage  (of  which  it  represents  64.4%)  and  even 
more significantly in relation to public damage (of which it represents 82%). In spite 
of this and a number of inconsistencies in the application regarding the nature and cost 
of eligible operations it is evident that the real cost of eligible operations would in any 
event exceed the amount of a possible grant from the Solidarity Fund by far. The types 
of operation effectively to be financed from the Fund would be clearly defined in the 
Implementation Agreement. 

Hungary  does  not  intend  to  use  financing  from  other  Community  Instruments  for 
purposes related to the flooding. 

The  Hungarian  authorities  confirmed  that  the  eligible  operations  referred  to  under 
point 4 above are not covered by insurance. 

(4) 

(5) 

(6) 

In conclusion, for the reasons set out above, it is proposed to accept the application made by 
Hungary  relating  to  the  floods  in  April/May  2006  as  a  “major  disaster”  and  to  propose  the 
mobilisation of the Solidarity Fund. 

2.2. 

Greece: Floods of March 2006 

(1) 

The application was presented to the Commission on 22 May 2006 within the deadline 
the  first  damage  was  recorded  on  13  March  2006. 
of  10  weeks  after 

The  disaster  is  of  natural  origin.  The  Greek  authorities  estimate  the  damages  at 
EUR 402 million.  This  amount  includes  however  indirect  economic  damages  due  to 
the  interruption  of  economic  activities  of  EUR  30  million  which  may  not  be 
considered when assessing the direct damages of a disaster under the Solidarity Fund. 
The total direct damage that can be taken into account amounts to EUR 372 million. It 
should  be  noted  that  the  figure  for  estimated  total  damage  includes  only  part  of  the 
private  damage  suffered.  The  share  of  public  damage  (EUR 325 million)  represents 
thus  around  87%  of  total  damage.  In  reality,  total  damage  is  therefore  likely  to  be 
higher than the amount given. 

(2) 

(3) 

The  amount  of  total  direct  damage  of  EUR 372 million  is  lower  than  the  applicable 
threshold  for  mobilising  the  Solidarity  Fund  for  major  disasters  (0.6 %  of  Greece’s 
GNI, i.e. EUR 1 004 million). The Solidarity Fund could therefore only exceptionally 
be  mobilised  if  the  conditions  laid  down  in  Article  2(2),  last  subparagraph  of 
Regulation 2012/2002 are met. 

The  Greek  authorities  indicated  that  the  territory  of  11  municipalities  with  a  total 
population  of  137 171  residents  and,  to  a  lesser  extent,  the  city  of  Alexandroupoli 
(43 000 residents) are directly affected by the disaster. It has been demonstrated that 

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(4) 

(5) 

the  majority  of  the  population  (around  71 %)  in  that  area  has  suffered  serious 
consequences.  This  concerns  in  particular  the  population  living  near  or  next  to  the 
river Evros. 

The  cost  of  essential  emergency  operations eligible  under  Article  3(2)  of  Regulation 
2012/2002  is  estimated  at  EUR 325 million.  These  operations  relate  mainly  to 
emergency  measures  to  restore  to  working  order  basic  infrastructures  and  utilities, 
preventive infrastructures (embankments), temporary housing, rescue services and the 
immediate cleaning-up of the affected areas. 

The  major  damage  caused  to  networks  and  infrastructure  in  the  area  paralysed 
economic activity in the region. Around 100 million m² of farmland was flooded along 
the river banks and an estimated 2 000 head of livestock were lost. The floods caused 
total  destruction  of  agricultural  produce  while  the  slow  drainage  of  the  flood  areas 
removed any possibility of planting new crop. Due to the lack of agricultural produce 
much  of  the  local  industry  was  prevented  from  engaging  in  any  agricultural, 
processing or commercial activity in a region in which the main occupation of 90 % of 
the population is agriculture. In the municipalities near or next to the River Evros and 
its  tributaries  the  population  has  been  directly  affected  by  the  river  flooding  and  the 
damages  to  transport  and  water  supply  networks.  The  extensive  damage  to  the 
irrigation and water supply network resulted in the need to distribute bottled water in a 
number  of  municipalities,  which  continued  at  the  time  of  application.  Repair  of  the 
water  supply  networks,  identification  of  alternative  bore  holes  unaffected  by 
contamination  of  the  hydrological  basin  and  the  search  for  new  springs  will  create  a 
critical situation in the wider area for more than one year until the situation returns to 
normal. It has also been noted that the negative effect on economic activity caused by 
the floods, considered the worst over the last 50 years, took place in an area that has 
already been severely affected by floods in 2005. This cumulative effect has severely 
hit the resilience of the local economy. 

(6) 

Greece  indicated  that  the  damages  will  not  be  financed  by  any  other  Community 
sources. 

(7) 

Greece has declared that there is no coverage of eligible damage by insurance. 

In  conclusion,  for  the  reasons  set  out  above,  the  flooding  is  considered  to  be  extraordinary 
within the meaning of the Regulation and meeting the conditions set out by Article 2(2), last 
subparagraph, of Regulation 2012/2002 for exceptionally mobilising the Solidarity Fund. 

2.3. 

Financing 

The  total  annual  budget  available  for  the  Solidarity  Fund  is  EUR 1 billion.  In  2007,  no 
resources have yet been earmarked for earlier applications leaving EUR 1 billion available. 

As solidarity was the central justification for the creation of the Fund, the Commission takes 
the view that aid from the Fund should be progressive. That means that, according to previous 
practice,  the  portion  of  the  damage  exceeding  the  threshold  (0.6 %  of  the  GNI  or 
EUR 3 billion in 2002 prices, whichever is the lower amount) should give rise to higher aid 
intensity  than  damage  up  to  the  threshold.  The  rate  applied  in  the  past  for  defining  the 
allocations  for  major  disasters  is  2.5 %  of  total  direct  damage  under  the  threshold  and  6 % 
above. It is proposed to apply the same percentages in this case. 

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The  Commission’s  proposed  allocation  under  the  Fund  is  based  on  the  information  made 
available by the applicants. 

The Commission proposes to grant the following amounts: 

Direct 
damage 

Amount based on 
2.5 % 

Amount based on 
6 % 

(EUR)
Total amount of 
aid proposed 

519 096 784  

11 487 300 

3 576 287 

15 063 587 

372 261 099  

9 306 527 

0 

9 306 527 

24 370 114 

Hungary: Floods 
April 2006 
Greece: Floods March 
2006 
Total 

This amount of compensation will leave at least 25 % of the European Union Solidarity Fund 
available  for  allocation  during  the  last  quarter  of  the  year,  as  required  by  Article  4(2)  of 
Regulation 2012/2002. 

However,  taking  into  account  the  identification  of  excess  payment  appropriations  in  line 
02 04 01 "Security and space research" there will be no need of fresh money for financing the 
EU Solidarity Fund payments for Hungary and Greece. An amount of EUR 24 million would 
thus  be  allocated  from  budget  line  02 04 01  to  budget  line  13 06 01  to  cover  the 
corresponding  needs  related  to  the  mobilisation  of  the  EU  Solidarity  Fund  (see  point  3.3 
below). 

3. 

MODIFICATION  OF  THE  STRUCTURE  OF  THE  BUDGET  2007  FOR  THE  RESEARCH, 
FOLLOWING THE ADOPTION OF FP7 

The  legal  base  of  the  7th  Framework  Programme  (FP7)  was  adopted  at  the  end  of  20064. 
Some  differences  exist  between  the  budget  structure  in  the  adopted  legal  base,  and  the 
structure in Budget 2007, which was based on the amended Commission proposal of 24 May 
2006  on  the  7th  Framework  Programme  of  the  European  Community  for  research, 
technological development and demonstration activities (2007 to 2013)5. The main changes, 
which should now be incorporated into the structure of Budget 2007, are as follows (see also 
annex I). 

3.1. 

Split  into  two  separate  budget  lines  of  the  research  priority  "Security  and 
space" 

The  creation  of  two  items  under  article  02 04 01 "Security  and  space  research"  is  proposed: 
item  02 04 01 01  "Security  research"  and 
item  02 04 01 02  "Space  research".  The 
commitments appropriations proposed for these two new items correspond to the split of the 
amount allocated for "Security and space research" in the budget. The amount for each new 
item will be calculated on the basis of the percentage foreseen in the FP7 legal base for these 
two sub-programmes. 

4 
5 

Decision No 1982/2006/EC of the European Parliament and of the Council, OJ L 412 of 30.12.2006. 
COM (2005) 119 final. 

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3.2. 

Introduction  of  a  new  sub-programme,  under  the  specific  programme 
"Capacities: Coherent development of research policies" 

A new budget line 08 23 01 "Coherent development of research policies" is created, and it is 
proposed  to  allocate EUR 7.6 million in commitment appropriations and EUR 2.7 million in 
payment  appropriations  to  this  line.  However,  no  new  financing  is  requested,  rather  the 
appropriations  will  be  deducted  from  budget  line  08 16 01  corresponding  to  the  sub-
programme  "Science  in  Society".  This  reflects  the  approach  taken  by  the  Legislative 
Authority, which reduced this activity by EUR 29 million over the duration of FP7 compared 
to the amended Commission Proposal presented in May 2006. 

3.3. 

Reduction in payment appropriations 

A reduction is proposed in the budgeted  payment appropriations for line 02 04 01 "Security 
and  space  research",  amounting  to  EUR 24.4 million.  These  payment  appropriations  will  be 
allocated  to  budget  line  13 06 01,  to  cover  the  needs  related  to  the  mobilisation  of  the  EU 
Solidarity  Fund.  The  needs  for  payment  appropriations  for  "Security  and  space  research" 
activities  are  lower  than  originally  foreseen,  due  to  the  late  adoption  of  the  FP7  legal  base. 
Given the time needed from the moment of the publication of the call for research proposals 
to the signature of the contracts, lower than anticipated amounts will be paid in 2007, and part 
of the pre-financing will be postponed to 2008.  

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SUMMARY TABLE BY HEADING OF THE FINANCIAL FRAMEWORK 

2007 Financial framework 

Budget 2007 + AB 1/2007 

PDAB 2/2007 

Budget 2007 + AB 1 +PDAB 2  

CA 

PA 

CA 

PA 

CA 

PA 

CA 

PA 

Financial framework 
Heading/subheading 

1. SUSTAINABLE GROWTH 
1a. Competitiveness for growth and 
employment 
1b. Cohesion for growth and 
employment 

Total 
Margin6 

2. PRESERVATION AND 
MANAGEMENT OF NATURAL 
RESOURCES 
Of which market related expenditure and 
direct payments 

Total 
Margin 

3. CITIZENSHIP, FREEDOM, 
SECURITY AND JUSTICE 
3a. Freedom, Security and Justice 
3b. Citizenship 

Total 
Margin7   

8 918 000 000

45 487 000 000

54 405 000 000

45 759 000 000

58 351 000 000

637 000 000
 636 000 000
1 273 000 000

4. EU AS A GLOBAL PARTNER8 

6 578 000 000

5. ADMINISTRATION9 

6. COMPENSATION 

Margin 

Margin 

Margin 
TOTAL 

Margin   

7 039 000 000

445 000 000

128 091 000 000

123 790 000 000

9 367 547 511

7 071 164 511

-24 370 114

9 367 547 511

7 046 794 397 

45 486 784 504

37 790 265 808

45 486 784 504

37 790 265 808 

54 854 332 015

50 667 985  

44 861 430 319

54 854 332 015

44 837 060 205 

50 667 985  

42 713 661 000

42 437 641 756

42 713 661 000

42 437 641 756 

56 250 230 036
2 100 769 964  

54 718 545 736

623 833 000
623 233 000
1 247 066 000

25 934 000  

6 812 460 000
67 000
6 942 364 030
172 635 970
444 646 152
353 848
126 551 098 233
2 350 428 767

24 370 114

24 370 114

473 683 000
703 902 652
1 177 585 652

7 352 746 732

6 942 264 030

444 646 152

115 497 218 621

8 368 781 379  

24 370 114

0

56 250 230 036
2 100 769 964  

54 718 545 736 

623 833 000
647 603 114
1 271 436 114

25 934 000  

6 812 460 000
67 000
6 942 364 030
172 635 970
444 646 152
353 848
126 575 468 347
2 350 428 767

473 683 000 
728 272 766 
1 201 955 766 

7 352 746 732 

6 942 264 030 

444 646 152 

115 497 218 621 
8 368 781 379 

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The European Globalisation adjustment Fund (EGF) is not included in the calculation of the margin under Heading 1a. 
The European Union Solidarity Fund (EUSF) amount is entered over and above the relevant headings as foreseen by the IIA of 17 May 2006 (OJ C 139 of 14.6.2006) 
The 2007 margin for heading 4 does not take into account the appropriations related to the Emergency Aid Reserve (EUR 234,5 million). 
For calculating the margin under the ceiling for heading 5, account is taken of the footnote (1) of the financial framework 2007-2013 for an amount of EUR 76 million for the staff 
contributions to the pensions scheme. 

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