CELEX: 51987PC0600
Language: en
Date: 1987-11-12
Title: Proposal for a Council Decision on the correction of budgetary imbalances (The proposed Decision is designed to accompany COM(87) 100 and COM(87) 101) (submitted by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (87) 600
Vol. 1987/0288
 ---pagebreak--- Disclaimer
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 concernant
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la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, p. 1) modifié en dernier
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 concerning
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In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1. Februar
1983 über die Freigabe der historischen Archive der Europäischen Wirtschaftsgemeinschaft und
der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983, S. 1), zuletzt geändert durch die
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                          COM(87 ) 600 final
                                                          Brussels , 12 November 1987 .
                                      Proposai for a
                                     Council Decision
                       on the correction of budgetary imbalances
                   ( The proposed Decision is designed to accompany
                              COM(87 ) 100 and COM(87 ) 101 )
                             ( submitted by the Commission)?V
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C0M(87 ) 600 final
 ---pagebreak---                                EXPLANATQRY MEMORANDUM
1 . In its Communication " Making a Success of the Single Act - A new Frontier
for Europe " ( C0M(87>100 ) and the " Report to the Council and Parliament on the
financing of the Community budget " ( C0M(87)101 ), the Commission put forward
a number of proposals for the future financing arrangements of the Community ,
for strengthening budgetary discipline and for better budgetary management
practices . As regards financing , these proposals were followed by a draft
own resources decision ( CQM(87)420 final ) which aimed to tie own resources
more closely to the relative prosperity of the Member States and thus to their
abi lity to pay .
2 . In the light of the overall budgetary situation of the Member States , the
financial perspective for 1988-92 and its financing proposals , the Commission
has established that there is still a problem , which is caused by the relatively
small amount of agricultural spending by the Community in the United Kingdom .
The attached proposal for a Decision therefore sets out a specific corrective
mechanism based on EAGGF Guarantee expenditure as outlined in the abovementioned
communi cations .
Background
3 . The Fontainebleau European Council of 25 and 26 June 1984 referred to the idea ^
of a budgetary burden which is excessive in relation to a Member State 's relative
prosperity .
The Commission would point out that the budget reflects only some of the benefits
or costs - engendered for the Member States by European integration , it would
add that no reliable figures can be given for each Member State 's share of much
of the expenditure ( EAGGF Guarantee , administrative expenditure ) and resources
( customs duties , agricultural revenue ).
   4 . Nevertheless , the United Kingdom 's overall budgetary situation is
   still clearly a problem . Analysed in the general framework of a twelve -
  nation Community developing as planned in the Single Act , this problem
   is limited to the EAGGF Guarantee Section , from which the United Kingdom
   receives relatively little by way of payments . Although EAGGF Guarantee
  expenditure now accounts for around two thirds of the budget , this proportion
  will drop , thus reducing the relative size of the imbalance .
  5 . As regards the other sectors of Community activity , in particular those
  highlighted in the Single Act ( action by the structural Funds to achieve
  greater economic and social cohesion , research , new operations ), the situation
 ---pagebreak---                                         - 2 -
 of the United Kingdom is not essentially different from that of the other
 Member States , both on the financing side and on the expenditure side .
 Extent of the problem .    Size of the correction
 6.    The problem of the United Kingdom’s imbalance must therefore be gauged by
 reference to the EAGGF Guarantee Section .
 It is proposed that the United Kingdom 's share of EAGGF Guarantee expenditure
 be measured against a simple , general and readily available reference indicator :
 the United Kingdom 's share of the Community 's gross national product .  The
difference between these two shares applied to total EAGGF Guarantee expenditure
 will show the extent of the imbalance .
 7.   The United Kingdom is entitled to a partial refund of the imbalance thus
established .
8.    The rate of refund proposed is 50% , since :
- in terms of relative prosperity , the position of the United Kingdom has
    changed since 1984 ;
- the size of the United Kingdom’s actual budgetary imbalance will be smaller
    under the new own resources arrangements .
Financing
9.    In order not to place a heavier budgetary burden on those countries which
are meant to benefit from the Community 's efforts to achieve economic and
social cohesion , it is proposed that the correction be financed according to
a scale which takes account of the relative prosperity of the Member States , a
criterion which was explicitly recognized by the Fontainebleau European Council .
In view of their level of prosperity , it is proposed that Greece , Spain , Ireland
and Portugal be exempted completely .
The contributions of the other Member States will be determined by multiplying
their GNP by the index of per capita GNP in purchasing power parities *
10 . However , Germany 's special position was already recognized when the budget
compensation mechanism was devised at the Fontainebleau European Council .     In
view of the size of Germany’s contribution and the limited benefit it derives
from the policies conducted under the structural Funds , it is proposed that its
calculated share be reduced by 75% and the amount conceded be divided between
the other six Member States .
 ---pagebreak---                                         - 3 "
  Entry in the budget
  11 .  Since only seven Member States will be financing the correction in
 accordance with a specific scale , it is proposed that the correction and the
 contributions towards its funds be entered in the statement of expenditure of
 the general budget , with the amounts to be paid being entered as negative
 expenditure .
 12 . To avoid any hiatus as a result of the change in system , it is proposed
 that an estimate of the amount of the correction be entered in the following
 year 's budget - as under the current arrangements .
 13 .   The estimates of the amount of the correction and of the contributions
 towards its funding will be prepared by the Commission and presented in the
 preliminary draft budget :
 Adjustments may be made as further information becomes available .
 The final amount of the correction and the Member States' contributions towards
 its funding will be determined on the basis of the final figures for EAGGF
 Guarantee Section expenditure and the gross national product of the Member
 States .
 In the case of EAGGF Guarantee , this will be the total payments made by the
 Commission between 1 January and 31 December .    For GNP , it will be the amount
 as corrected in the following three years - the same formula as applied for
 the additional resources .
 The interim and final adjustments will be entered in the next budget , which
could be a supplementary / amending budget .
Compulsory expenditure included in the annual ceiling on own resources
14 . As the correction is an internal obligation for the Community towards one
of its Member States - the amount of this obligation being determined by
application of a formula laid down in a regulation - this correction will have
to be considered as compulsory expenditure .
15 . The amount of the correction is treated as expenditure to be covered within
the limit of the annual ceiling on own resources .
Correction in the absence of a budget
16 . In the absence of a budget , provisional payments will be made on the
basis of the amount of the correction entered in the previous year 's budget .
Report on the operation of the mechanism
17 .   The Commission will assess the operation of the corrective mechanism in
its report on the application of the new own resources system to be sent to
the Council and Parliament by the end of 1991 .
 ---pagebreak---                                 COUNCIL DECISION
                   on the correction of budgetary imbalances
 THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
 Having regard to the Treaty establishing the European Economic Community ,
 and in particular Articles 201 and 235 thereof ,
 Having regard to the Treaty establishing the European Atomic Energy Community ,
 and in particular Articles 173 and 203 thereof ,
 Having regard to the proposal from the Commission ,
 Having regard to the opinion of the European Parliament ,
 Whereas the fact that the economy of a Member State which is in a special
 situation has to bear a disproportionate share of the financing of the
 Community budget can give rise to a situation which is incompatible with
 the smooth functioning of the Community ;
Whereas the European Council which met in Fontainebleau on 25 and
26 June 1984 reached certain conclusions ;
Whereas there is still an imbalance in the United Kingdom 's budgetary
position resulting from the relatively small amount of agricultural
spending by the Community in the United Kingdom ; whereas this imbalance
may be gauged in relation to gross national product at market prices ,
hereinafter referred to as GNP ; whereas compensation should be paid
to offset part of this imbalance ; whereas the Treaties do not provide
any specific powers to cover this compensation ;  whereas recourse should
therefore be had to Article 235 of the EEC Treaty and Article 203 of
the Euratom Treaty ;
 ---pagebreak---                                               - 2 -
  Whereas the compensation to be granted to the United Kingdom should be
  financed by other Member States by reference to their ability to pay
  and their contribution to the budget ;
  Whereas a timetable has to be drawn up for carrying out the obligations arising
  from this Regulation ;
  Whereas Article 8 A of the Treaty establishing the European Community/ as
  amended by Article 13 of the Single European Act /** provides for the completion
 of the internal market by 31 December 1992 /
  HAS DECIDED AS FOLLOWS :
                                             Article 1
  Financial compensation shall be granted to the United Kingdom 1n accordance
  with the following provisions .
                                             Article 2
  The amount of compensation to be granted in respect of each financial year shall
  correspond to the difference in that financial year between :
 “ the United Kingdom 's percentage share of total 6NP in the Member States arid
 - the United Kingdom's’ percentage share of total EA6GF Guarantee Section payments/ including
    the monetary compensatory amounts paid on its behalf by other Member States
multiplied by 50% of total EAGGF Guarantee Section payments .
                                             Article 3
1 . The compensation due in respect of a financial year shall be paid during the
following financial year ; an estimate of this compensation shall therefore be
entered in the statement of expenditure of the general budget of the European
Communities .
2.    Corrections to these estimates may be entered in subsequent budgets or
amending budgets .
/
 ---pagebreak---                                                     - з -
   3 . The finel amount of compensation shall be determined by reference to the
   GNP of the Member States used for making the final adjustment to the definitive
   additional base provided for in Article 6 of Regulation ( EEC , Euratom, ECSC )
   No .... of .          . . . 1988 .                The adjustment of the compensation
   resulting from comparison between the estimate and the final amount shall be
   entered in the budget of the following financial year .
                                               Article 4
  The compensation shall be financed by Belgium, Denmark , the Federal Republic
  of Germany , France , Italy , Luxembourg and the Netherlands 1n accordance with
  the following rules ;
  (a)     The GNP of the seven Member States concerned shall be multiplied by the
          index of per capita gross national product in purchasing power parities
         established on the basis df . the twelve-nation Community as available when
         the estimate is prepared and when the final amounts of compensation are
        determined .
 (b)    The results shall be added together and expressed as a percentage of the
        total .
(c)     The percentage obtained for the Federal Republic of Germany shall be reduced
        by 75% .
(d)     The 75% deducted from the share of the Federal Republic of Germany shall
        be divided between the six other Member States in accordance with their
        share in the scale referred to at ( b ).
The amounts to be paid shall be entered as negative expenditure in the statement
of expenditure of the general budget of the European Communities .
                                              Article 5
1 . On the first working day of each month the Member States shall enter in the account
     provided for in Article 9(1 ) of Regulation ( EEC, Euratom, ECSC) No 2891 /77 and the Commission
      shall pay the United Kingdom one twelfth of the relevant amounts in the budget .
 ---pagebreak---                                                - 4 -
 Any change in the amounts shall require the final adoption of a supplementary
 or amending budget and shall give rise to the readjustment of the twelfths
 entered since the beginning of the financial year .
2 . If the budget has not been adopted at the beginning of the financial year, the twelfths
to be entered or paid on the first working day of each month shall be twelfths of the
relevant amounts in the Last budget adopted or of the relevant amounts in the draft budget,
whichever are the tower; if no draft budget has been established, reference shall be made
to the relevant amoirts in the preliminary draft budget . The adjustment of these operations
shall be made on the first due date following final adoption of the budget if it is adopted
before the sixteenth of the month . Otherwise, the adjustment shall be made on the second
due date following final adoption of the budget .
3.   The amounts entered in the budget in ECU in respect of the correction of
budgetary imbalances shall be converted at the ECU rate applying on the first
working day after the fifteenth day of the month which precedes the due date .
 ---pagebreak---                                     - 5 -
                                  Artide 6
Member States shad be notified of this Decision by the Secretary-General
of the Council of the European Communities ; it shall be published in
the Official Journal of the European Communities .
Member States shall notify the Secretary-General of the Council of the
European Communities without delay of the completion of the procedures
for the adoption of this Decision in accordance with their respective
constitutional requi rements .
This Decision shall enter into force on the first day of the month
following receipt of the last of the notif ications referred to in the
second paragraph . It shall take effect on 1 January 1988 ,
Done at Brussels ,                                 For the Counci l
                                                   The President