Proposal for a COUNCIL REGULATION laying down the multiannual financial framework for the years 2014-2020
Date: 2011-06-29
Institutions: European Commission
Subjects: budgetary procedure, financial management, general budget (EU), implementation of the budget

EUROPEAN COMMISSION 

Brussels, 29.6.2011 
COM(2011) 398 final 

2011/177 (APP) 

Proposal for a 

COUNCIL REGULATION 

laying down the multiannual financial framework for the years 2014-2020 

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EXPLANATORY MEMORANDUM 

1. 

CONTEXT OF THE PROPOSAL 

1.1. 

Treaty basis 

Article 312 of the Treaty on the Functioning of the European Union (hereinafter referred to as 
the  Treaty)  stipulates  that  a  unanimously  adopted  Council  Regulation  shall  lay  down  a 
multiannual  financial  framework.  It  shall  determine  the  amounts  of  the  annual  ceilings  on 
commitment appropriations by category of expenditure and of the annual ceiling on payment 
appropriations and it shall lay down any other provisions required for the annual budgetary 
procedure to run smoothly. 

The  first  multiannual  financial  framework  together  with  provisions  on  interinstitutional 
cooperation and budgetary discipline was adopted more than twenty years ago1. This and the 
following  financial  frameworks  allowed  for  considerably  improving  and  facilitating  the 
annual  budgetary  procedure  and  cooperation  between  institutions  and,  at  the  same  time, 
increasing budgetary discipline.  

By enshrining the multiannual financial framework into the Union's primary law, the Treaty 
has recognised its importance as a cornerstone of the budgetary architecture of the European 
Union.  

The current multiannual financial framework for the years 2007 to 2013 was agreed between 
institutions  in  May  2006  and  laid  down  in  the  Interinstitutional  Agreement  on  budgetary 
discipline and sound financial management2 (hereinafter referred to as the current IIA). 

In  order  to  implement  the  new  Treaty  provisions,  the  Commission  presented,  on  3  March 
2010,  proposals  for  a  Council  Regulation  laying  down  the  multiannual  financial  framework 
for  2007-2013  and  for  a  new  Interinstitutional  Agreement  on  cooperation  in  budgetary 
matters3  (hereinafter  refered  to  as  the  March  2010  proposals).  These  two  proposals,  once 
adopted,  will  replace  the  current  IIA  and  bring  the  provisions  on  the  2007-2013  financial 
framework and on cooperation of the institutions in the budgetary procedure in line with the 
Treaty.  Meanwhile,  the  provisions  of  the  current  IIA  that  are  not  rendered  obsolete  by  the 
Treaty remain valid. 

The  present  explanatory  memorandum  deals  with  the  new  elements  as  compared  with  the 
March  2010  proposals,  for  both  the  proposal  for  a  Regulation  laying  down  the  multiannual 
financial  framework  for  the  years  2014  to  2020  (hereinafter  referred  to  as  the  MFF 
Regulation)  and  the  draft  Interinstitutional  Agreement  on  cooperation  in  budgetary  matters 
and sound financial management (hereinafter referred to as the draft IIA). The justification for 
changes  resulting  from  the  entry  into  force  of  the  Treaty  was  provided  in  the  explanatory 
memorandum  of  the  proposal  for  the  Regulation  laying  down  the  multiannual  financial 
framework for 2007 to 2013 of 3 March 2010 and does not need to be repeated here. 

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Interinstitutional  Agreement  on  budgetary  discipline  and  improvement  of  the  budgetary  procedure, 
signed by Parliament, the Council and the Commission on 29 June 1988 (OJ L 185, 15.7.1988, p. 33). 
Interinstitutional  Agreement  of  17  May  2006  between  the  European  Parliament,  the  Council  and  the 
Commission on budgetary discipline and sound financial management (OJ C 139, 14.6.2006, p. 1). 
COM(2010) 72 and COM(2010) 73 

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1.2. 

New provisions proposed for the 2014-2020 financial framework 

1.2.1.  Main political guidelines 

The  proposal  for  the  MFF  Regulation  accompanied  by  the  draft  IIA  represents  the  legal 
transposition of the Commission Communication on "A Budget for Europe 2020" adopted on 
2] June 20114. It will be complemented by a proposal amending the Commission's proposal 
for a Regulation on the financial rules applicable to the annual budget of the Union in order to 
introduce a few new provisions which are part of the package of proposals for the 2014-2020 
financial framework.  

The  Communication  outlines  the  main  architecture  and  elements  of  the  present  proposals  – 
e.g.  the  duration,  the  structure  reflecting  the  Europe  2020  Strategy,  the  need  for  increased 
flexibility, and the amounts foreseen for the financial framework itself. 

1.2.2.  Flexibility 

Whilst aimed at ensuring budgetary discipline the financial framework must, at the same time, 
provide for adequate levels of flexibility to allow for effective resources allocation and a swift 
Union response to unforeseen circumstances.  

A number of parameters, such as the length of the period covered by the financial framework, 
the  number  and  design  of  expenditure  headings,  the  share  of  EU  spending  pre-allocated  to 
Member  States  and  regions  or  pre-determined  by  'amounts  of  reference'  in  co-decided 
legislation,  the  margins  available  within  each  expenditure  ceiling,  and  the  margins  left 
between the financial framework ceilings and the own resources ceiling, impact on the degree 
of flexibility or rigidity of a financial framework. When elaborating its proposals for the next 
financial framework, the Commission has taken those elements into account. 

However,  recent  experience  demonstrates  that  challenges  resulting  from  unforeseen  events 
with global repercussions have reached a new quality. From the very beginning of the current 
financial  framework  all  available  flexibility  provisions  had  to  be  mobilised,  including  a 
number  of revisions of the framework itself. The Union  will  increasingly be exposed  to  the 
effects  of  globalisation  of  the  economy  and  society,  to  climate  change,  energy  dependency, 
migratory pressure and other global challenges, most of which in areas for which the Lisbon 
Treaty has increased the Union's responsibility and role.  

Finding  the  right  balance  between,  on  the  one  hand,  strict  budgetary  discipline  and 
predictability of expenditure and, on the other hand, the flexibility needed to enable the Union 
to respond to unforeseen challenges, will always be a difficult political exercise. On the basis 
of its assessment of the functioning of the current IIA5 and of further reflections undertaken in 
the  context  of  the  Budget  Review6,  the  Commission  proposes  limited  but  targeted 
improvements to existing flexibility provisions: 

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Firstly,  the  wide  and  regular  use  made  of  the  Flexibility  Instrument  and  the 
Emergency  Aid  Reserve  (EAR)  during  the  current  financial  framework  has  proven 
their  necessity.  At  the  same  time  experience  with  the  management  of,  notably, 

COM(2011) 500, 29.6.2011.  
COM(2010) 185 final of 27.4.2010, chapter 2 (pages 4 to 13).  
COM(2010) 700 final of 19.10.2010, in particular section 4.5 to 4.7 (pages 23 to 25). 

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External  Action  over  the  past  few  years  has  shown  that  the  EU  had  to  make  a 
cumbersome  use  of  different  instruments  (such  as  the  Emergency  Aid  Reserve,  the 
Instrument  for  Stability,  unallocated  margins,  and  the  Flexibility  Instrument)  to 
address international developments and new challenges.  

Therefore, an increase of the maximum amounts available each year is proposed for 
both  the  Flexibility  Instrument  and  the  EAR.  Furthermore,  the  possibility  to  use 
unused  portions  of  the  yearly  maximum  amounts  in  subsequent  financial  years  is 
extended to the year n + 3 for the Flexibility Instrument and newly introduced, up to 
the year n+1, for the Emergency Aid Reserve (the latter subject to a provision to be 
made  in  the  Financial  Regulation).  The  scope  of  the  Emergency  Aid  Reserve  is 
broadened  to  cover  also  situations  of  particular  pressure  resulting  from  migratory 
flows at the Union's external borders.  

This should allow the two instruments to contribute more to a swift Union response 
to unexpected situations of a limited scale. 

the  European  Union  Solidarity  Fund  and 

Secondly,  whilst 
the  European 
Globalisation Adjustment Fund (EGF) have proven their utility, the maximum annual 
amount  foreseen  for  the  EGF  under  the  current  financial  framework  (EUR  500 
million) has never been used. A modest decrease of the amount available to EUR 429 
million is proposed together with a simplification of the procedures for financing and 
releasing  assistance  and  a  broading  of  the  scope  of  the  Fund  to  help  mitigate  also 
effects of globalisation affecting farmers. 

Thirdly,  the  possibility  to  differ  from  the  indicative  amounts  in  the  co-decided 
programmes  is  proposed  to  be  increased  from  5%  to  10%  to  increase  flexibility 
within headings. 

Fourthly,  the  Commission  will  make  a  proposal  for  introducing  a  new  provision  in 
the  Financial  Regulation  with  a  view  to  increasing  flexibility  for  projects  financed 
under the newly established Infrastructure Facility.  

Due to their nature those infrastructure projects will in many cases require complex 
contracting procedures. Under those circumstances, even limited delays may result in 
a  loss  of  annual  commitment  appropriations  and  undermine  the  viability  of  those 
projects  and  thus  of  the  Union's  political  determination  to  modernise  its  transport, 
energy  and  telecommunications  networks  and  infrastructure.  To  prevent  this,  the 
Financial Regulation should allow for automatic carry-over to the following financial 
year of commitment appropriations not used at the end of a financial year for projects 
financed under the Infrastructure Facility.  

Fifthly,  given  the  vulnerability  of  the  agricultural  sector  to  major  crises,  a  new 
Special  Reserve  for  crises  in  the  agriculture  sector  is  proposed  with  an  annual 
amount of 500 million to be  mobilised over  and above the ceilings of the financial 
framework.  The  procedure  for  mobilisation  of  this  Reserve  corresponds  to  the  one 
for the Emergency Aid Reserve. Detailed rules for eligibility for the assisstance from 
this Reserve will be laid down in its specific legal act. 

2. 

3. 

4. 

5. 

6. 

Finally, a revision of the financial framework will continue to be needed for dealing 
with unforeseen circumstances with a major financial impact. To allow for a similar 

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level of flexibility compared to the current IIA, a 'Contingency Margin' is proposed 
that can be mobilised over and above the ceilings of the financial framework within 
the limits of 0.03% of the EU GNI through the same procedure as established under 
Point 22 of the current IIA. 

The provisions on flexibility  proposed for the MFF Regulation and the draft IIA  follow the 
approach of the March 2010 proposals: Article 2 of the Regulation provides for the possibility 
to mobilise the amounts of the special instruments outside the financial framework over and 
above  the  ceilings  set  by  the  financial  framework.  The  provisions  on  the  instruments 
themselves,  their  amounts  and  mobilisation  procedures  are  included  in  the  IIA.  In  this  way 
coherence of procedures and roles of the two arms of the budgetary authority are ensured (see 
Points 10 to 15 of the draft IIA). 

1.2.3. 

Specific provisions on guarantees 

If  the  repayment  of  a  guaranteed  loan  provided  under  the  Balance  of  Payments  Facility 
("BoP")  or  under  the  European  Financial  Stabilisation  Mechanism  ("EFSM")  has  to  be 
covered  by  the  Union's  budget,  Regulation  No  1150/2000  foresees  a  possibility  to  call 
additional own resources to respect the Union's budget's legal obligation. This cash operation 
would  have  to  be  followed  by  a  budgetary  operation  –  i.e.  introduction  of  an  amending 
budget.  Any  amending  budget  has  to  comply  with  the  MFF  ceilings.  Given  the  amounts 
involved (the EFSM and BoP guaranteed loans), this would almost certainly require a revision 
of the MFF. 

It  is  highly  unlikely  that  this  situation  will  ever  occur  but  in  order  to  avoid  any  potential 
difficulties  it  is  proposed  to  include  in  the  MFF  Regulation  a  provision  excluding  such 
potential  expenditure  from  the  financial  framework  (i.e.  if  need  be  the  amounts  would  be 
mobilised over and above the ceilings of the financial framework). 

The relevant ceiling constraining the Union's capacity to guarantee lending from the Union's 
budget is the own resources ceiling not the MFF ceiling. Requiring a revision of the MFF in 
case of activation of this guarantee would seem to run contra to the intentions of the legislator. 

1.2.4.  Contribution to the financing of large scale projects 

The  characteristics  of  major  technological  development  programmes  based  on  large  scale 
infrastructure  projects,  notably  the  European  satellite  navigation  programmes  EGNOS  and 
Galileo, call for specific provisions aimed at 'ring-fencing' the amounts corresponding to the 
contribution from the Union's budget. In the light of the experience made with the 2007-2013 
financial  framework,  these  new  provisions  are  needed  in  order  to  safeguard  the  orderly 
development of Union expenditure and for the annual budgetary procedure to run smoothly.  

The  legislative  acts  concerning  the  above  mentioned  programmes  shall  comply  with  the 
financial provisions set in the present Regulation.  

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2. 

LEGAL ELEMENTS OF THE PROPOSAL 

2.1.  Multiannual Financial Framework Regulation 

Article 1  

The wording of Article 1 specifies the duration of the financial framework and refers to the 
Annex containing the table of the financial framework.  

Article 2 – Compliance with ceiling of the MFF 

The  first  paragraph  of  Article  2  lays  down  an  obligation  for  the  institutions  to  respect  the 
ceilings during the budgetary procedure in compliance with the provisions of the Treaty. 

The second paragraph introduces the possibility to exceed the ceilings, if necessary, when the 
instruments  not  included  in  the  financial  framework  are  mobilised.  The  Emergency  Aid 
Reserve,  the  Solidarity  Fund,  the  Flexibility  instrument,  the  European  Globalisation 
Adjustment  Fund  and  the  newly  created  Reserve  for  crises  in  the  agriculture  sector  and  the 
Contingency Margin are defined in Points 10 to 15 of the draft IIA. They are not included in 
the  financial  framework  and  ensure  that  financing  in  specific  circumstances  is  provided  in 
excess of the ceilings of the financial framework, if needed. They increase the flexibility of 
the financial framework and are mobilised jointly by the two arms of budgetary authority. In 
order  to  maintain  the  current  level  of  flexibility  and  the  roles  of  the  institutions  in  the 
mobilisation of these instruments, the provisions governing them are included in the draft IIA. 

The  third  paragraph  excludes  the  procedure  of  mobilising  the  guarantees  from  the  Union's 
budget for the loans provided under the Balance of Payments Facility and European Financial 
Stabilisation Mechanism from the obligation to respect the ceilings of the financial framework 
and therefore from a need to revise the MFF. The relevant ceiling that needs to be respected is 
the own resources ceiling. 

Article 3 – Respect of own resources ceiling 

A  change  to  this  Article  is  proposed  compared  to  the  March  2010  proposal  –  an  explicit 
reference to the fact that the use made of instruments which can be mobilised from outside the 
financial framework and of guarantees for a loan covered by the Union's budget according to 
Regulation (EC) No 332/2002 or Regulation (EU) No 407/2010 also need to respect the own 
resources ceiling. 

Article 4 – Technical adjustment of the financial framework 

The  financial  framework  is  presented  in  2011  prices.  The  procedure  for  its  technical 
adjustment  is  maintained  as  well  as  the  2%  deflator.  A  new  element  is  introduced  in 
paragraph  1(c)  –  the  presentation  of  the  absolute  amount  of  the  Contingency  margin  at  the 
level of 0.03% of EU GNI as defined in Point 15 of the draft IIA . 

Article 5 – Adjustment of cohesion policy envelopes 

This Article reproduces the text of point 17 of the current IIA and Article 5 of the March 2010 
proposal.  The  changes  introduced  reflect  the  timing  for  the  2014-2020  financial  framework 
and the change of the financial framework structure. 

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Article 6 – Adjustments related to implementation 

The  wording  of  this  Article,  which  lays  down  rules  for  the  adjustments  related  to 
implementation, corresponds to Point 18 of the current IIA. No changes proposed compared 
to the March 2010 proposal. 

Article  7  –  Adjustment  of  Structural  Funds,  Cohesion  Fund,  Rural  Development  and  the 
European Fund for Fisheries 

This Article reproduces the text of Point 48 of the current IIA. The preparation  of  the legal 
bases and then programming documents is usually quite lengthy and therefore a late adoption 
of the legal texts or programmes needs to be envisaged.  

Article 8 – Adjustments related to the excessive government deficit 

The wording of this Article, which lays down rules for the adjustments related to excessive 
government  deficit,  reproduces  the  text  of  Point  20  of  the  current  IIA  and  has  not  been 
changed compared to the March 2010 proposal.  

Article 9 – Revision of the financial framework 

The wording of this Article corresponds to the Points 21 to 23 of the current IIA and Article 8 
of  the  March  2010  proposal.  A  few  changes  have  been  introduced:  1.  the  general  rule 
concerning  the timing of a proposal for a revision, as included in Article 8(2) of  the March 
2010 proposal, has been dropped as it did not correspond to current practice given the need to 
deal with unforeseen circumstances when they arise; 2. the possibility to adapt the financial 
framework by qualified majority as proposed in Art. 8(3) in March 2010 has been withdrawn 
(given  the  proposed  widening  of  flexibility  instruments,  including  the  introduction  of  the 
Contingency Margin); and 3. a new paragraph 5 was introduced which specifies which of the 
adjustments to the financial framework provided for in other Articles are also to be considered 
as a revision of the financial framework. 

Article 10 – Adjustment of the financial framework in case of a revision of the Treaty 

The wording of this Article, which lays down rules for the adjustments in case of a revision of 
the Treaty, reproduces the text of Point 4 of the current IIA and corresponds to Article 9 of the 
March 2010 proposal. 

Article 11 – Adjustment of the financial framework in the case of enlargement 

The wording of this Article reproduces the text of Point 29 of the current IIA and Article 11 
of the March 2010 proposal. 

A  new  paragraph  is  introduced  with  particular  reference  to  a  possible  comprehensive 
settlement of the Cyprus problem during the period covered by the financial framework.  

Article 12 – Interinstitutional cooperation in budgetary procedure 

The provisions of this Article correspond to the March 2010 proposal. The general rules of the 
cooperation in budgetary procedure are included in the MFF Regulation, whilst the draft IIA 
and its Annex contain more detailed provisions. 

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Article 13 – Financing of the Common Foreign and Security Policy (CFSP) 

The provision of the March 2010 proposal is maintained with an exception of establishing the 
minimum amount for CFSP. 

Article 14 – Contribution to the financing of large scale projects 

Specific  provisions  are  needed  for  major  technological  development  programmes  based  on 
large  scale  infrastructure  projects,  notably  the  European  satellite  navigation  programmes 
EGNOS and Galileo. Such provisions are warranted by the specific features of those projects, 
i.e. a duration largely exceeding the multiannual financial framework, project risks liable to 
produce substantial cost-overruns, limited or no participation of private capital, and no or only 
a modest ability to generate revenues from commercial exploitation in the short to medium-
term.  

Consequently, the proposed provision foresees a 'ring-fencing' of the amount available for the 
European satellite navigation programmes EGNOS and Galileo under the 2014-2020 financial 
framework.  

Article 15 – Mid-term assessment of implementation of the financial framework 

A  new  provision  is  included  that  establishes  the  timing  for  a  mid-term  assessment  of  the 
functioning of the financial framework. A similar provision was included in the current IIA 
(Point 7 and Declaration No 1). 

Article 16 - Transition towards the next financial framework 

This  Article  lays  down  the  obligation  for  the  Commission  to  present  a  new  financial 
framework before 1 January 2018, i.e. three years before the end of the financial framework.  

The second paragraph recalls the rules in case no new financial framework is agreed by the 
end of the financial framework covered by the Regulation.  

Article 17 

The final Article of the MFF regulation sets the date of entry into force of the Regulation. The 
IIA should enter into force on the same day as the two legal texts complement each other. 

2.2. 

Interinstitutional Agreement on cooperation in budgetary matters and on sound 
financial management 

Introduction – Points 1 to 6 of the draft IIA 

The introductory part of the draft IIA introduces the Treaty reference (Art. 295), the binding 
nature of this agreement, its coherence with other legal acts linked to the multiannual financial 
framework  and  the  budgetary  procedure,  describes  the  structure  of  the  Agreement,  and 
stipulates the date of its entry into force (the same date as the MFF Regulation).  

It reproduces the wording of Points 1 to 6 of the March 2010 proposal.  

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Part  I  –  provisions  related  to  the  financial  framework  and  special  instruments  not 
included in the financial framework 

A. Provisions related to the financial framework 

Point 7 provides for the rules on presenting information about operations not included in the 
budget  (i.e.  European  Development  Fund)  and  about  the  development  of  the  categories  of 
own resources. The practice of providing this information is maintained but it is proposed to 
present  it  no  longer  with  the  technical  adjustment  of  the  financial  framework  but  with  the 
documents accompanying the draft budget where this more logically belongs. The timing of 
the presentation remains practically the same (end of April/beginning  of May). This change 
has been included already in the March 2010 proposal. 

Point  8  of  the  new  IIA  concerns  the  margins  beneath  the  ceilings.  The  MFF  Regulation 
establishes  the  ceilings  for  all  headings  that  have  to  be  respected  during  each  annual 
budgetary  procedure  as  required  by  the  Treaty.  However,  the  practice  to  ensure  as  far  as 
possible sufficient margins beneath the ceilings should be preserved. It constitutes an element 
of  the  interinstitutional  cooperation  and  good  will  of  the  institutions  in  the  budgetary 
procedure and as such belongs in the IIA. The provision is kept without any changes to the 
current practice and also compared to the March 2010 proposal. 

Point 9 provides for an update of forecast for payment appropriations after 2020 in the fourth 
year  of  the  financial  framework,  according  to  the  current  practice  and  the  March  2010 
proposal. 

B. Provisions related to the special instruments not included in the financial framework 

The existing instruments that are not included in the financial framework (the Emergency Aid 
Reserve,  the  Solidarity  Fund,  the  Flexibility  instrument  and  the  European  Globalisation 
Adjustment Fund) are maintained in the IIA. The MFF Regulation includes in Article 2 the 
possibility  to  mobilise  them,  if  necessary,  over  and  above  the  ceilings  established  by  the 
financial framework. This split of the provisions between the two acts corresponds to the logic 
presented in March 2010 proposals. 

The changes compared to the March 2010 proposal consist of the increase of the amounts for 
the  Flexibility  instrument  and  the  Emergency Aid  Reserve,  a  decrease  of  the  amount  of  the 
European  Globalisation  Adjustment  Fund,  the  introduction,  subject  to  a  provision  to  be 
introduced  in  the  Financial  Regulation,  of  the  possibility  to  use  unused  portions  of  annual 
amounts available under the EAR until the year n+1 and broadening its scope to cover also 
situations  of  particular  pressure  resulting  from  migratory  flows  at  the  Union's  external 
borders,  the  prolongation  of  that  possibility  for  the  Flexibility  instrument  from  year  n+2  to 
year  n+3,  as  well  as  deleting  the  provisions  which  limit  the  yearly  amounts  available  under 
the  European  Globalisation  Adjustment  Fund  (EGF)  to  the  availability  of  unspent  and 
decommitted amounts from the previous two years and broadening its scope to help mitigate 
effects  of  globalisation  affecting  farmers.  All  amounts  are  expressed  in  2011  prices  to  be 
coherent  with  the  overall  presentation  of  the  financial  framework.  The  mobilisation 
procedures are simplified compared to the current practice.  

A  new  Reserve  for  major  crises  in  the  agriculture  sector  is  proposed.  Detailed  rules  for  the 
eligibility of the assistance from this Reserve will be laid down in a specific legal base. The 
IIA defines the amount and the rules for its mobilisation. 

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A new instrument outside the financial framework – the 'Contingency Margin' - is proposed. 
The  wording  corresponds,  in  substance,  to  the  provisions  adopted  by  the  Council  in  its 
position of 18 January 2011 on the March 2010 proposals. However, the split of provisions on 
the  Contingency  Margin  corresponds  to  the  logic  of  the  March  2010  proposals  –  i.e. 
maintaining  in  the  IIA  all  the  provisions  related  to  the  special  instruments  outside  the 
financial framework. 

Part II – improvement of interinstitutional cooperation in budgetary procedure 

A. The interinstitutional collaboration procedure 

The  provisions  on  interinstitutional  cooperation  in  budgetary  procedure  have  been 
significantly  amended  compared  to  the  current  rules  to  comply  with  the  new  budgetary 
procedure introduced by the Treaty. All the provisions are included in the Annex of the IIA as 
proposed in March 2010. 

The provisions included in the annex correspond to the March 2010 proposal but incorporate 
the changes agreed since in the Declarations by the institutions. 

B. Incorporation of financial provisions in legislative acts 

The  provisions  of  the  current  IIA  and  therefore  also  of  the  March  2010  proposal  are 
maintained.  The  possibility  to  depart  from  the  amounts  included  in  the  legislative  acts  is 
increased from 5% to 10% in order to increase flexibility within the headings. This provision 
does  not  apply  to  amount  pre-allocated  to  Member  States  for  the  whole  duration  of  the 
financial  framework  and  newly  to  the  large  scale  project  defined  in  Article  13  of  the  MFF 
Regulation. 

C. Expenditure relating to fisheries agreements 

It is proposed to align the provisions of the current IIA on the expenditure relating to fisheries 
agreements  with  the  new  budgetary  rules.  The  proposed  change  in  wording  reflects  those 
parts  of  the  existing  text  which  are  still  relevant  and  they  are  purely  related  to  good 
cooperation  and  keeping  the  institutions  informed  of  developments.  The  provisions 
correspond to the March 2010 proposal, no changes were deemed necessary. 

D. Financing of the Common Foreign and Security policy  

The provisions correspond to the March 2010 proposal, no changes were deemed necessary. 

E. Involvement of the institutions in the management of the European Development Fund 

In  order  to  improve  parliamentary  scrutiny  of  the  European  Development  Fund  (EDF)  and 
bring it closer to the rules of the Development Cooperation financed by the Union's budget, a 
new  provision  is  proposed  to  be  introduced  concerning  the  dialogue  with  the  European 
Parliament on the programming documents to be financed by the EDF. 

F. Cooperation of the institutions in the budgetary procedure on administrative expenditure 

A  new  provision  is  introduced  aimed  at  making  sure  that  institutions  agree  each  year  at  an 
early  stage  of  the  budgetary  procedure  (timing  introduced  in  Annex)  on  the  sharing  of 
administrative expenditure; the annual variation in the level of administrative expenditure for 

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each institution should also reflect the possible budgetary impact from changes to provisions 
in the staff regulations and the impact of progressively reducing staff levels by 5% between 
2013 and 2018 in all institutions, bodies and agencies. 

Part III – Sound financial management of EU funds 

This part reproduces the text of the March 2010 proposal on the Financial programming (with 
a  few  adjustments  to  bring  the  text  closer  to  the  current  practice)  and  on  Agencies  and 
European  Schools  (with  an  addition  to  follow  the  same  rules  as  for  setting  up  any  new 
Agency  to  modifying  the  relevant  legal  act  or  modifying  the  tasks  of  any  agency  and  a 
specification  on  the  details  of  the  impact  assessment  to  be  undertaken  by  the  Commission 
before presentation of a proposal to establish a new Agency or a new European School).  

The  section  on  New  or  Innovative  Financial  Instruments  is  no  longer  necessary  as  the 
Financial  Regulation  will  include  a  new  Title  entirely  devoted  to  financial  instruments  and 
with detailed rules for reporting on those instruments. 

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2011/177 (APP) 

Proposal for a 

COUNCIL REGULATION 

laying down the multiannual financial framework for the years 2014-2020 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  functioning  of  the  European  Union,  and  in  particular 
Article 312 thereof, in conjunction with the Treaty establishing the European Atomic Energy 
Community, and in particular Article 106a thereof, 

Having regard to the proposal from the European Commission7, 

Having regard to the consent of the European Parliament8, 

After transmission of the draft legislative act to national Parliaments, 

Acting in accordance with a special legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

The  annual  ceilings  on  commitments  appropriations  by  category  of  expenditure  and 
the  annual  ceilings  on  payment  appropriations  established  by  this  Regulation  must 
respect  the  ceilings  set  for  commitments  and  own  resources  in  [Council  Decision 
XXXX/XX/EU, Euratom].  

Taking into account the need for an adequate level of predictability for preparing and 
implementing  medium-term  investments,  the  duration  of  the  financial  framework 
should  be  set  at  seven  years  starting  1  January  2014,  with  an  assessment  of  the 
implementation of the financial framework at mid-term. The results of this assessment 
should be taken into account during the last three years of the duration of the financial 
framework. 

Special  instruments,  the  Emergency  Aid  Reserve,  the  European  Union  Solidarity 
Fund,  the  Flexibility  Instrument,  the  European  Globalisation  Adjustment  Fund,  the 
Reserve for crises in the agriculture sector and the Contingency Margin, are necessary 
to  allow  the  Union  to  react  to  specified  unforeseen  circumstances,  or  to  allow  the 
financing  of  clearly  identified  expenditure  which  could  not  be  financed  within  the 
limits of the ceilings available for one or more headings as laid down in the financial 
framework. Specific provisions are therefore necessary to provide for a possibility to 

7 
8 

OJ C , , p. . 
OJ C , , p. . 

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enter in the budget commitment appropriations over and above the ceilings set out in 
financial framework where it is necessary to use special instruments. 

If  it  is  necessary  to  mobilise  the  Union's  budget  guarantees  for  the  loans  provided 
under  the  Balance  of  Payment  Facility  and  the  European  Financial  Stabilisation 
Mechanism  set  out  in  Council  Regulation  (EC)  No  332/2002  of  18  February  2002 
establishing a facility providing medium-term financial assistance for Member States' 
balances of payments9 and in Council Regulation (EU) No 407/2010 of 11 May 2010 
establishing  a  European  financial  stabilisation  mechanism10,  the  necessary  amount 
should  be  mobilised  over  and  above  the  ceilings  of  the  commitments  and  payments 
appropriations of the financial framework while respecting the own resources ceiling. 

The financial framework should be laid down in 2011 prices. The rules for technical 
adjustments  of  the  financial  framework  to  recalculate  the  ceilings  and  margins 
available should also be laid down. 

The financial framework should not take account of budget items financed by assigned 
revenue  within  the  meaning  of  Regulation  (EU)  No  [xxx/201x]  of  the  European 
Parliament  and  of  the  Council  of  […]  on  the financial rules applicable  to the annual 
budget of the Union11. 

Rules  should  be  laid  down  for  other  situations  that  may  require  the  financial 
framework to be adjusted. Those adjustments may be related to the implementation of 
the  budget,  excessive  government  deficit,  revision  of  the  Treaties,  enlargements  or 
delayed adoption of new rules governing certain policy areas. 

The  national  envelopes  for  Cohesion  for  growth  and  employment  are  established  on 
the basis of forecast for Gross Domestic Product (hereinafter "GDP") of spring 2011. 
Given  the  forecasting  uncertainties  and  the  impact  for  the  capped  Member  States  an 
assessment should be made in mid-term to compare the forecasted and actual GDP and 
its impact for the envelopes. In case the GDP for 2014-2016 differs more than +/- 5% 
from  the  forecast  used  in  2011  the  envelopes  for  2018-2020  for  the  Member  States 
concerned need to be adjusted. The rules for this adjustment need to be provided for. 

The financial framework may need to be revised in case of unforeseen circumstances 
that cannot be dealt with within the established ceilings of the financial framework. It 
is therefore necessary to provide for revision of the financial framework in such cases. 

It  is  necessary  to  provide  for  general  rules  on  interinstitutional  cooperation  in  the 
budgetary procedure. 

In order to help the budgetary procedure to run smoothly, it is necessary to provide for 
the  basic  rules  for  the  budgeting  of  the  expenditure  for  the  Common  Foreign  and 
Security policy and overall amount for the period covered by the financial framework.  

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

(10) 

(11) 

(12)  Detailed arrangements on interinstitutional cooperation in the budgetary procedure and 
on the budgeting of the expenditure for the Common Foreign and Security policy are 

9 
10 
11 

OJ L 53, 23.2.2002, p. 1 
OJ L 118, 12.5.2010, p. 1. 
OJ L . 

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laid  down  in  the  Interinstitutional  Agreement  of  […]  201x  between  the  European 
Parliament, the Council and the Commission on cooperation in budgetary matters and 
sound financial management12. 

(13)  Specific  rules  are  also  necessary  for  dealing  with  large-scale  infrastructure  projects 
whose  lifetime  extends  well  beyond  the  period  set  for  the  financial  framework.  It  is 
necessary  to  establish  maximum  amounts  for  the  contributions  from  the  Union's 
budget to those projects. Those requests should not have any impact on other projects 
financed from the Union's budget.  

(14)  The Commission should present a proposal for a new multiannual financial framework 
before  1  January  2018  to  enable  the  institutions  to  adopt  it  sufficiently  in  advance 
before  the  start  of  the  following  financial  framework.  The  financial  framework  laid 
down  in  this  Regulation  should  continue  to  apply  if  the  new  financial  framework 
regulation  is  not  adopted  before  the  end  of  the  term  of  the  financial  framework  laid 
down in this Regulation, 

HAS ADOPTED THIS REGULATION: 

Article 1 

Multiannual Financial Framework 

The  multiannual  financial  framework  for  the  period  2014  to  2020  (hereinafter  the  financial 
framework) is set out in the Annex.  

Article 2 

Compliance with the ceilings of the financial framework 

1. 

2. 

The  European  Parliament,  the  Council  and  the  Commission  shall  comply  with  the 
annual  expenditure  ceilings,  set  out  in  the  financial  framework,  during  each 
budgetary procedure and when implementing the budget for the year concerned.  

The  commitment  appropriations  may  be  entered  in  the  budget  over  and  above  the 
ceilings  of  the  relevant  headings  laid  down  in  the  financial  framework  where  it  is 
necessary to use the resources from the Emergency Aid Reserve, the European Union 
Solidarity  Fund,  the  Flexibility  Instrument,  the  European  Globalisation  Adjustment 
Fund, the Reserve for crises in the agriculture sector and the Contingency Margin in 
accordance  with  Council  Regulation  (EC)  No  2012/200213,  Regulation  (EC)  No 
1927/2006  of  the  European  Parliament  and  of  the  Council14,  Regulation  No 
xxxx/201x  of  the  European  Parliament  and  the  Council15  and  the  Interinstitutional 
Agreement  of  […]  201x  on  cooperation  in  budgetary  matters  and  sound  financial 
management (hereinafter the Insterinstitutional Agreement). 

12 
13 
14 
15 

OJ C … 
OJ L 311, 14.11.2002, p. 3. 
OJ L 406, 30.12.2006, p. 1. 
OJ L , , p. 

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3. 

1. 

2. 

Where a guarantee for a loan covered by the Union's budget according to Regulation 
(EC) No 332/2002 or Regulation (EU) No 407/2010 needs to be mobilised, it shall be 
over and above the ceilings laid down in the financial framework. 

Article 3 

Respect of own resources ceiling 

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 and revisions as well as the application of paragraphs 2 and 3 of Article 
2,  may  not  be  such  as  to  produce  a  call-in  rate  for  own  resources  that  exceeds  the 
own resources ceiling set in accordance with [Decision XXXX/XX/EU, Euratom]. 

Where  necessary,  the  ceilings  set  in  the  financial  framework  shall  be  lowered  in 
order  to  ensure  compliance  with  the  own  resources  ceiling  set  in  accordance  with 
[Decision XXXX/XX/EU, Euratom]. 

Article 4 

Technical adjustments 

1. 

Each  year  the  Commission,  acting  ahead  of  the  budgetary  procedure  for  year  n+1, 
shall make the following technical adjustments to the financial framework: 

(a) 

(b) 

(c) 

revaluation,  at  year  n+1  prices,  of  the  ceilings  and  of  the  overall  figures  for 
appropriations for commitments and appropriations for payments; 

calculation  of  the  margin  available  under  the  own  resources  ceiling  set  in 
accordance with [Decision XXXX/XX/EU, Euratom]; 

calculation of the absolute amount of the Contingency Margin provided for in 
Point 15 of the Interinstitutional Agreement. 

The Commission shall make the technical adjustments referred to in paragraph 1 on 
the basis of a fixed deflator of 2% a year.  

The Commission shall communicate the results of the technical adjustments referred 
to in paragraph 1 and the underlying economic forecasts to the European Parliament 
and the Council. 

No  further  technical  adjustments  may  be  made  in  respect  of  the  year  concerned, 
either during the year or as ex-post corrections during subsequent years. 

2. 

3. 

4. 

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Article 5 

Adjustment of cohesion policy envelopes 

1. 

2. 

3. 

In its technical adjustment for the year 2018, if it is established that cumulated Gross 
Domestic  Product  ("GDP")  of  any  Member  State  for  the  years  2014-2016  has 
diverged by more than +/- 5 % from the cumulated GDP estimated in 2011 for the 
establishment of cohesion policy envelopes for Member States for the period 2014-
2020,  the  Commission  shall  adjust  the  amounts  allocated  from  funds  supporting 
cohesion to the Member State concerned for that period. 

The  total  net  effect,  whether  positive  or  negative,  of  the  adjustments  referred  to  in 
paragraph 1 may not exceed EUR 3 billion.  

The required adjustments shall be spread in equal proportions over the years 2018-
2020  and  the  corresponding  ceilings  of  the  financial  framework  shall  be  modified 
accordingly. 

Article 6 

Adjustments related to implementation 

When  notifying  the  European  Parliament  and  the  Council  of  the  results  of  the  technical 
adjustments  to  the  financial  framework,  the  Commission  shall  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. The decisions on those proposals shall be taken before 1 May of year n. 

Article 7 

Adjustment of Structural Funds, Cohesion Fund, Rural Development Fund and the European 
Fund for Fisheries  

1. 

2. 

In the case of adoption after 1 January 2014 of new rules or programmes governing 
the  Structural  Funds,  the  Cohesion  Fund,  the  Rural  Development  Fund  and  the 
European  Fund  for  Fisheries,  the  financial  framework  shall  be  adjusted  in  order  to 
transfer to subsequent years, in excess of the corresponding expenditure ceilings, of 
allocations not used in 2014. 

The adjustment concerning the transfer of unused allocation for the year 2014 shall 
be adopted before 1 May 2015. 

Article 8 

Adjustments related to excessive government deficit 

In the case of the lifting of a suspension of budgetary commitments concerning the Cohesion 
Fund in the context of an excessive government deficit procedure, the Council, in accordance 
with  the  Treaty  and  in  compliance  with  the  relevant  basic  act,  shall  decide  on  a  transfer  of 

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suspended commitments to the following years. Suspended commitments of year n may not 
be re-budgeted beyond year n+2. 

Article 9 

Revision of the financial framework 

1. 

2. 

3. 

4. 

5. 

In  case  of  unforeseen  circumstances  the  financial  framework  may  be  revised  in 
compliance  with  the  own  resources  ceiling  set  in  accordance  with  [Decision 
XXXX/XX/EU, Euratom]. 

Any  revision  of  the  financial  framework  in  accordance  with  paragraph  1  shall  take 
into account 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 appropriations. Where feasible, a significant amount, in absolute 
terms  and  as  a  percentage  of  the  new  expenditure  planned,  shall  be  within  the 
existing ceiling for the heading. 

Any  revision  of  the  financial  framework  in  accordance  with  paragraph  1  shall  take 
into account the scope for offsetting any raising of the ceiling for one heading by the 
lowering of the ceiling for another. 

Any  revision  of  the  financial  framework  in  accordance  with  paragraph  1  shall 
maintain an appropriate relationship between commitments and payments. 

Adjustments  referred  to  in  Article  3(2),  6,  7,  8,  10,  11  and  16  also  constitute  a 
revision of the financial framework. 

Article 10 

Adjustment of the financial framework in case of a revision of the Treaties 

Should  a  revision  of  the  Treaties  with  budgetary  implications  occur  during  the  financial 
framework, the necessary adjustments to the financial framework shall be made accordingly. 

Article 11 

Adjustment of the financial framework in case of enlargement and unification of Cyprus 

If  new  Member  States  accede  to  the  Union  during  the  period  covered  by  the  financial 
framework,  the  financial  framework  shall  be  adjusted  to  take  account  of  the  expenditure 
requirements resulting from the outcome of the accession negotiations. 

In  case  of  unification  of  Cyprus  during  the  period  covered  by  the  financial  framework,  the 
latter shall be adjusted to take account of the comprehensive settlement of the Cyprus problem 
and the additional financial needs resulting from unification. 

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Article 12 

Interinstitutional cooperation in the budgetary procedure 

The European Parliament, the Council and the Commission (hereinafter the institutions) shall 
take any measures to facilitate the annual budgetary procedure.  

The  institutions  shall  cooperate  in  good  faith  throughout  the  procedure  with  a  view  to 
through  appropriate 
reconciling 
interinstitutional  contacts  to  monitor  the  progress  of  the  work  and  analyse  the  degree  of 
convergence at all stages of the procedure. 

institutions  shall  cooperate 

their  positions.  The 

The institutions shall ensure that their respective calendars of work are coordinated as far as 
possible in order to enable proceedings to be conducted in a coherent and convergent fashion, 
leading to the final adoption of the budget.  

Trilogues may be held at all stages of the procedure and at different levels of representation, 
depending  on  the  nature  of  the  expected  discussion.  Each  institution,  in  accordance  with  its 
own rules of procedure, shall designate its participants for each meeting, define its mandate 
for the negotiations and inform the other institutions of arrangements for the meetings in good 
time. 

Article 13 

Financing of the Common foreign and security policy  

The  total  amount  of  operating  Common  foreign  and  security  policy  (hereinafter  "CFSP") 
expenditure shall be entered entirely in one budget chapter, entitled CFSP. That amount shall 
cover the real predictable needs, assessed in the framework of the establishment of the draft 
budget, on the basis of forecasts drawn up annually by the High Representative of the Union 
for Foreign Affairs and Security Policy, and a reasonable margin for unforeseen actions. No 
funds may be entered in a reserve.  

Article 14 

Contribution to the financing of large scale projects 

A maximum amount of EUR 7 000 million in 2011 prices shall be available for the European 
satellite  navigation  programmes  (EGNOS  and  Galileo)  from  the  EU  budget  for  the  period 
2014-2020. 

Article 15 

Mid-term assessment of implementation of the financial framework 

In 2016, the Commission shall present an assessment of the implementation of the financial 
framework accompanied, where necessary, by relevant proposals.  

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Article 16 

Transition towards the next financial framework 

Before  1  January  2018,  the  Commission  shall  present  a  proposal  for  a  new  multiannual 
financial framework. 

If  no  Council  regulation  determining  a  new  multiannual  financial  framework  has  been 
adopted before 31 December 2020, the ceilings and other provisions corresponding to the last 
year  of  the  financial  framework  shall  be  extended  until  a  regulation  determining  a  new 
financial  framework  is  adopted.  If  new  Member  States  accede  to  the  Union  after  2020,  the 
extended financial framework shall, if necessary, be adjusted in order to take into account the 
results of accession negotiations. 

Article 17 

Entry into force 

This Regulation shall enter into force on the third day following that of its publication in the 
Official Journal of the European Union. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at …,  

For the Council 
The President 

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ANNEX  

Multiannual Financial Framework table 

COMMITMENT APPROPRIATIONS

1. Smart and Inclusive Growth

of which: Economic, social and territorial cohesion

2. Sustainable Growth: Natural Resources

of which: Market related expenditure and direct payments

3. Security and citizenship

4. Global Europe

5. Administration 

of which: Administrative expenditure of the institutions

2014

64 696

50 468

57 386

42 244

2 532

9 400

8 542

6 967

2015

66 580

51 543

56 527

41 623

2 571

9 645

8 679

7 039

2016

68 133

52 542

55 702

41 029

2 609

9 845

8 796

7 108

2017

69 956

53 609

54 861

40 420

2 648

9 960

8 943

7 191

2018

71 596

54 798

53 837

39 618

2 687

10 150

9 073

7 288

2019

73 768

55 955

52 829

38 831

2 726

10 380

9 225

7 385

(EUR million - 2011 prices)

2020

76 179

57 105

51 784

38 060

2 763

10 620

9 371

7 485

Total
2014-2020

490 908

376 020

382 927

281 825

18 535

70 000

62 629

50 464

TOTAL COMMITMENT APPROPRIATIONS

142 556

144 002

145 085

146 368

147 344

148 928

150 718

1 025 000

as a percentage of GNI

1.08%

1.07%

1.06%

1.06%

1.05%

1.04%

1.03%

1.05%

TOTAL PAYMENT APPROPRIATIONS

133 851

141 278

135 516

138 396

142 247

142 916

137 994

972 198

as a percentage of GNI

Margin available

Own Resources Ceiling as a percentage of GNI

1.01%

0.22%

1.23%

1.05%

0.18%

1.23%

0.99%

0.24%

1.23%

1.00%

0.23%

1.23%

1.01%

0.22%

1.23%

1.00%

0.23%

1.23%

0.94%

1.00%

0.29%

0.23%

1.23%

1.23%

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