Preliminary draft amending budget N° 11 to the general budget 2008 - Statement of expenditure by section : section III - Commission
Date: 2008-11-07
Institutions: Directorate-General for Budget, European Commission
Subjects: Cyprus, EU aid, European Commission, amending budget, budgetary expenditure, drought, fund (EU), preliminary draft EC budget

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 7.11.2008 
COM(2008) 731 final 

PRELIMINARY DRAFT AMENDING BUDGET N° 11 
TO THE GENERAL BUDGET 2008 

STATEMENT OF EXPENDITURE BY SECTION 
Section III - Commission 

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PRELIMINARY DRAFT AMENDING BUDGET N° 11 
TO THE GENERAL BUDGET 2008 

STATEMENT OF EXPENDITURE BY SECTION 
Section III - Commission 

Having regard to: 

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– 

– 

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, 
as  last  amended  by  Council  Regulation  (EC)  No  1525/20072,  and  in  particular 
Article 37 thereof, 

The European Commission hereby presents to the budgetary authority the Preliminary Draft 
Amending Budget No 11 to the 2008 budget. 

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OJ L 248, 16.9.2002, p. 1. 
OJ L 343, 27.12.2007, p. 9. 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

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

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

Cyprus: Drought........................................................................................................... 4 

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

SUMMARY TABLE BY HEADING OF THE FINANCIAL FRAMEWORK ....................... 7 

CHANGES TO THE STATEMENT OF EXPENDITURE BY SECTION 

The changes to the statement of expenditure by section are forwarded separately via the SEI-
BUD system. An English version of the changes to the statement of expenditure by section is 
attached for information as a budgetary annex. 

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1. 

INTRODUCTION 

Preliminary  Draft  Amending Budget (PDAB) No 11  for  the  year  2008  covers  the  following 
elements: 

–  Mobilisation of the EU Solidarity Fund for an amount of EUR 7,6 million in commitment 

and payment appropriations following a serious drought in Cyprus. 

–  A corresponding reduction in payment appropriations of EUR 7,6 million from the budget 

line 13 04 02 Cohesion Fund. 

2. 

MOBILISATION OF THE EU SOLIDARITY FUND 

2.1. 

Cyprus: Drought 

Cyprus  has  been  suffering  from  a  shortfall  of  rain  that  has  lead  to  serious  effects  on  living 
conditions,  the  economy  and  the  natural  environment.  The  Cypriot  authorities  applied  for 
financial assistance from the EU Solidarity Fund in relation to the resulting crisis. 

The  Commission  carried  out  a  thorough  examination  of  the  application  in  accordance  with 
Council Regulation (EC) No 2012/2002 of 11 November 20023 and in particular Articles 2, 3 
and 4 thereof. The most important points of the assessment can be summarised as follows: 

(1)  While  Regulation  (EC)  No  2012/2002  may  not  be  designed  to  tackle  the 
characteristics  of  a  slowly  unfolding  disaster,  it  nevertheless  can  be  mobilised  in 
response to any major natural disaster with serious repercussions on living conditions, 
the natural environment or the economy in a beneficiary State as established in Article 
2(1),  provided  that  the  disaster  meets  the  criteria  set  out  in  Article  2(2)  and  that  the 
application  for  assistance  is  presented  in  good  time  in  accordance  with  Article  4(1). 
None  of  these  elements  necessarily  exclude  slowly  unfolding  disasters  such  as  a 
drought. 

(2) 

(3) 

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The application for Solidarity Fund assistance was received by the Commission on 1 
July  2008.  The  Cypriot  authorities  provided  additional  information  on  16  October 
2008. Article 4(1) of the Regulation (EC) No 2012/2002 requires the application to be 
made no later than ten weeks after the first damage caused by the disaster. Against the 
background  of  the  three-year  period  of  unusually  low  rains,  at  the  end  of  the  rainy 
season, in April 2008, the absence of the rainfall reached its peak. The Commission, 
therefore,  considers  that  the  22  April  2008,  i.e.  10  weeks  before  the  application  was 
received, can be accepted as starting date of the major disaster. As a consequence, the 
application presented to the Commission on 1 July 2008, respects the time-limits laid 
down in Article 4(1). 

The  disaster  is  natural  in  origin.  The  Cypriot  authorities  estimated  the  total  direct 
damage, incurred after 22 April 2008, at EUR 176,15 million. As this amount exceeds 
the  threshold  of  EUR 84,67 million  (i.e.  0,6 %  of  GNI)  the  disaster  qualifies  as  a 

Council  Regulation  (EC)  No  2012/2002  of  11  November  2002  establishing  the  European  Union 
Solidarity Fund, OJ L 311 of 14.11.2002, p.3. 

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(4) 

(5) 

(6) 

(7) 

(8) 

“major  natural  disaster”  and  thus  falls  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.  This  financial  assistance  may  only  be  used  for 
essential emergency operations as defined in Article 3 of the Regulation. 

The Commission also notes the fact that the crisis affected the whole territory of the 
country and major emergency measures have been taken by the public authorities from 
April/May  2008  to  address  it.  These  include  the  reduction  of  water  supplies  for 
domestic  and  industrial  use,  the  implementation  of  an  emergency  plan  aiming  at 
increasing the supply of desalinated water and the transport of water from Greece.  

The  Cypriot  authorities  indicated  the  serious  repercussions  on  living  conditions,  the 
natural  environment  and  the  economy.  Substantial  damages  to  agriculture  were 
reported particularly in late April and in the following months, growing worse as the 
crop season progressed towards harvest stage. The water scarcity is also expected to 
affect tourism, which is an important sector of the Cypriot economy. The drought also 
had  serious  repercussions  on  the  water  infrastructure,  where  serious  damages  caused 
by  the  discontinuation  of  the  water  flow  started  appearing  in  early  May  2008.  The 
natural  environment  suffered  serious  effects  as  the  fragile  ecology  of  the  island  is 
particularly  susceptible  to  the  dry  conditions  with  a  risk  of  desertification.  The 
application contains a detailed breakdown of damages. 

The  cost  of  essential  emergency  operations eligible  under  Article  3(2)  of  Regulation 
the  Cypriot  authorities  at 
(EC)  No  2012/2002  has  been  estimated  by 
EUR 59,45 million and has been broken down by type of operation. The main bulk of 
the  operations  concern  costs  related  to  the  transport  of  water  from  Greece  and 
immediate  investments  into  the  water  infrastructure  to  secure  the  functioning  of  the 
water distribution network under conditions of discontinued water flow. The types of 
operation to be financed from the Fund will be clearly defined in the Implementation 
Agreement.  

The Cypriot authorities also declared that there is no coverage of eligible damage by 
insurance. 

The  Cypriot  authorities  stated  that  Community  assistance  for  compensating  private 
damages, mainly to farmers, will be sought if an appropriate legal basis is available in 
other  EU  financial  instruments.  The  Commission  notes  however  that  the  Common 
Agricultural Policy and notably the Rural Development policy gives no possibility for 
compensating farmers for damages due to natural disaster. Under its rural development 
programme,  the  member  state  has  the  possibility  to  support  the  restoration  of  the 
agricultural  production  potential  damaged  by  natural  disasters  as  well  as  appropriate 
preventive  action.  The  corresponding  measure  is  not  foreseen  in  the  Cyprus  rural 
development  operational  programme  and  the  Cypriot  Authorities  have  so  far  not 
proposed to modify their programme in that sense. 

For the reasons set out above, therefore, it is proposed that the application made by Cyprus 
relating to a drought can be accepted as a “major disaster” and that the Solidarity Fund should 
be used. 

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2.2. 

Financing 

The  total  annual  budget  available  for  the  Solidarity  Fund  is  EUR 1 billion.  In  2008, 
EUR 273 191 197  has  already  been  mobilised 
leaving 
EUR 726 808 803 available. 

for  earlier  applications, 

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  for 
mobilising the Fund and 6 % above. For extraordinary regional disasters the rate is 2,5 % of 
total direct damage. The methodology for calculating Solidarity Fund aid was set out in the 
2002-2003  Annual  Report  on  the  Solidarity  Fund  and  accepted  by  the  Council  and  the 
European Parliament. 

It  is  proposed  to  apply  the  same  percentages  in  this  case  and  to  grant  the  following  aid 
amounts: 

Direct 
damage 
176 150 000 

Cyprus/Drought 
Total 

Threshold 

Amount based 
on 2.5% 

Amount based 
on 6% 

Total amount of 
aid proposed 

(EUR) 

 84 673 000 

2 116 825 

5 488 620 

7 605 445 
7 605 445

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 (EC) 2012/2002. 

Taking  into  account  the  identification  of  excess  appropriations  in  13 04 02  Cohesion  Fund 
there will be no need for fresh payment appropriations for financing the EU Solidarity Fund 
payments  for  Cyprus.  An  amount  of  EUR 7,6 million  would  thus  be  allocated  from  budget 
line  13 04 02  to  budget  line  13 06 01  to  cover  the  corresponding  needs  related  to  the 
mobilisation  of  the  EU  Solidarity  Fund.  This  redeployment  is  possible  because  payments 
under  the  Cohesion  Fund  for  the  period  2007-2013  are  to  a  large  extent  related  to  major 
projects. However, major projects need to be approved separately in subsequent Commission 
decisions before any interim payments can be made. As many major projects are not expected 
to be submitted and approved this year, no significant interim payments are expected in 2008. 

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Financial framework 
Heading/subheading 

2008 Financial framework 

Budget 2008 (incl. AB 1-7/2008 and PDAB 8-
10/2008) 

PDAB 11/2008 

Budget 2008 + AB 1-7/2008 and PDAB 8-
11/2008 

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PA 

CA 

PA 

CA 

PA 

CA 

PA 

SUMMARY TABLE BY HEADING OF THE FINANCIAL FRAMEWORK 

and 

10 386 000 000

11 086 000 000

9 718 739 600

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

growth 

for 

Total 
Margin4 
AND 
NATURAL 

PRESERVATION 

2. 
MANAGEMENT 
RESOURCES 
Of  which  market  related  expenditure  and 
direct payments 

OF 

Total 
Margin 
FREEDOM, 

CITIZENSHIP, 

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

4. EU AS A GLOBAL PLAYER6 

5. ADMINISTRATION7 

6. COMPENSATION 

Total 
Margin5   

Margin 

Margin 

Margin 
TOTAL 
Margin   

47 267 000 000
57 653 000 000

46 217 000 000

59 193 000 000

747 000 000
615 000 000
1 362 000 000

7 002 000 000

7 380 000 000

207 000 000

132 797 000 000

129 681 000 000

47 255 948 720
58 341 948 720

-188 948 720  

36 024 082 504
45 742 822 104

0
0

-7 605 445
-7 605 445

41 006 490 000

40 889 550 500

56 314 715 538

2 878 284 462  

53 220 588 053

730 274 000
888 034 197
1 618 308 197

16 883 000  

7 311 218 000
-70 000 000
7 279 207 193
177 792 807
206 636 292
363 708
131 072 033 940
2 814 375 257

533 196 000
941 144 203
1 474 340 203

7 847 128 400

7 279 767 193

206 636 292

115 771 282 245
14 499 126 952

7 605 445
7 605 445

7 605 445
7 605 445

7 605 445

0

11 086 000 000

9 718 739 600 

47 255 948 720
58 341 948 720

-188 948 720  

36 016 477 059 
45 735 216 659 

41 006 490 000

40 889 550 500 

56 314 715 538

2 878 284 462  

53 220 588 053 

730 274 000
895 639 642
1 625 913 642

16 883 000  

7 311 218 000
-70 000 000
7 279 207 193
177 792 807
206 636 292
363 708
131 079 639 385
2 814 375 257

533 196 000 
948 749 678 
1 481 945 648 

7 847 128 400 

7 279 767 193 

206 636 292 

115 771 282 245 
14 506 732 397 

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The  European  Globalisation  adjustment  Fund  (EGF)  is  not  included  in  the  calculation  of  the  margin  under  Heading  1a.  The  Flexibility  Instrument  has  been  mobilised  for  an  amount  of 
EUR 200 million. 
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  2008  margin  for  heading  4  does  not  take  into  account  the  appropriations  related  to  the  Emergency  Aid  Reserve.  The  Flexibility  Instrument  has  been  mobilised  for  an  amount  of 
EUR 70 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 77 million  for  the  staff 
contributions to the pensions scheme. 

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