Establishment of a stable budgetary base for enlargement of the European Union:
7. Pre-accession aid 3 120 3 120 3 120 3 120 3 120 3 120 3
Agriculture 520 520 520 520 520 520 520 Pre-accession structural instrument 1 040 1 040 1 040 1 040 1 040 1 040 1 040 Phare (applicant countries) 1 560 1 560 1 560 1 560 1 560 1 560 1 560
Total appropriations
for commitments 92 025 93 475 93 955 93 215 91 735 91 125 90 660 Total appropriations
for payments 89 600 91 110 94 220 94 880 91 910 90 160 89 620 Appropriations for payments
as % of GNP 1.13 % 1.12 % 1.13 % 1.11 % 1.05 % 1.01 % 0.97 % Available for accession (appropriations
for payments) 4 140 6 710 8 890 11 440 14 220 Agriculture 1 600 2 030 2 450 2 930 3 400 Other expenditure 2 540 4 680 6 440 8 510 10 820 Ceiling, appropriations for payments 89 600 91 110 98 360 101 590 100 800 101 600 103 840 Ceiling, payments as % of GNP 1.13 % 1.12 % 1.18 % 1.19 % 1.15 % 1.13 % 1.13 % Margin for unforeseen expenditure 0.14 % 0.15 % 0.09 % 0.08 % 0.12 % 0.14 % 0.14 %
Own resources ceiling 1.27 % 1.27 % 1.27 % 1.27 % 1.27 % 1.27 % 1.27 %
(1) In accordance with Article 2 of Decision No 182/1999/EC of the European Parliament and of the Council and
Article 2 of Council Decision 1999/64/Euratom (OJ L 26, 1.2.1999, p. 1 and p. 34), EUR 11 510 million at current prices is available for research over the period 2000-02.
(2) The expenditure on pensions included under the ceiling for this heading is calculated net of staff contributions
82 EUROPEAN UNION PUBLIC FINANCE
TABLE 5.1 B
Financial framework (EU-21)
(million EUR at 1999 prices)
Appropriations for commitments 2000 2001 2002 2003 2004 2005 2006
1. Agriculture 40 920 42 800 43 900 43 770 42 760 41 930 41 660
CAP (not including rural development) 36 620 38 480 39 570 39 430 38 410 37 570 37 290 Rural development and accompanying measures 4 300 4 320 4 330 4 340 4 350 4 360 4 370
2. Structural operations 32 045 31 455 30 865 30 285 29 595 29 595 29 170 Structural Funds 29 430 28 840 28 250 27 670 27 080 27 080 26 660 Cohesion Fund 2 615 2 615 2 615 2 615 2 515 2 515 2 510 3. Internal policies (1) 5 930 6 040 6 150 6 260 6 370 6 480 6 600 4. External action 4 550 4 560 4 570 4 580 4 590 4 600 4 610 5. Administration (2) 4 560 4 600 4 700 4 800 4 900 5 000 5 100 6. Reserves 900 900 650 400 400 400 400 Monetary reserve 500 500 250
Emergency aid reserve 200 200 200 200 200 200 200 Guarantee reserve 200 200 200 200 200 200 200
7. Pre-accession aid 3 120 3 120 3 120 3 120 3 120 3 120 3 120
Agriculture 520 520 520 520 520 520 520 Pre-accession structural instrument 1 040 1 040 1 040 1 040 1 040 1 040 1 040 Phare (applicant countries) 1 560 1 560 1 560 1 560 1 560 1 560 1 560
8. Enlargement 6 450 9 030 11 610 14 200 16 780
Agriculture 1 600 2 030 2 450 2 930 3 400 Structural operations 3 750 5 830 7 920 10 000 12 080
Internal policies 730 760 790 820 850
Administration 370 410 450 450 450
Total approps for commitments 92 025 93 475 100 405 102 245 103 345 105 325 107 440 Total appropriations for payments 89 600 91 110 98 360 101 590 100 800 101 600 103 840
of which: enlargement 4 140 6 710 8 890 11 440 14 220
Appropriations for payments as % of GNP 1.13 % 1.12 % 1.14 % 1.15 % 1.11 % 1.09 % 1.09 %
Margin for unforeseen expenditure 0.14 % 0.15 % 0.13 % 0.12 % 0.16 % 0.18 % 0.18 %
Own resources ceiling 1.27 % 1.27 % 1.27 % 1.27 % 1.27 % 1.27 % 1.27 %
(1) In accordance with Article 2 of Decision No 182/1999/EC of the European Parliament and of the Council and Article 2 of
Council Decision 1999/64/Euratom (OJ L 26, 1.2.1999, p. 1 and p. 34), EUR 11 510 million at current prices is available for research over the period 2000-02.
(2) The expenditure on pensions included under the ceiling for this heading is calculated net of staff contributions to the pen-
1) Total expenditure
In the fi nancial framework fi nally adopted, the overall ceiling on payments for the 15-member EU dropped appreciably, as a percentage of foreseeable GNP, from 2003 onwards to 0.97 % in 2006 as against 1.10 % in the 1999 budget. Including the amounts left available for an initial round of enlarge- ment which was supposed to take place in 2002, there was still an unused margin beneath the own resources ceiling ranging from 0.09 to 0.14 % of the GNP of the EU-15.
These payment ceilings took account of the need to cover the clearance of commitments entered into over the previous period. This meant that the constraints on the ceilings for new commitments were even tighter. These ceilings were, each year, lower than the amount in the 1999 budget, and of course lower than the ceilings set for that year in the previous fi nancial framework.
2) Agricultural expenditure (heading 1)
The defi nition of this heading was amended. It was agreed that the ceiling would no longer be the agricultural guideline but that it would correspond to the expenditure actually resulting from the reformed CAP. The guideline, a higher fi gure, continued to be calculated but it no longer appeared as such in the fi nancial framework. Its scope was broadened to cover not only heading 1 expenditure but also the agricultural components of pre-accession aid and the amount planned in this fi eld for the forthcoming enlargement. Head- ing 1 also had two subheadings: one applied to expenditure on common market organisations (intervention, direct aid for producers, veterinary and plant-health measures) and the other to rural development measures (meas- ures accompanying the 1992 reform and structural measures previously coming under the Structural Funds).
The line taken during the negotiations was to set a level of expenditure for the reformed CAP of more or less the same amount as was entered in the 1999 budget. The necessary savings were fi rst found by reducing intervention prices by less than proposed, hence the compensation in the form of aid to producers was less: the reduction in prices was 15 % in two stages for arable crops (instead of a single 25 % reduction) and 20 % (instead of 30 %) for beef. The reform of the milk sector was also post- poned to the end of the period.
84 EUROPEAN UNION PUBLIC FINANCE
Other formulas were considered but not adopted:
the possibility of reimbursing Member States only part of the expendi- —
ture they advance as direct aid to producers (formula known as ‘co- fi nancing’ of expenditure);
direct aid granted on a declining scale over time (known as ‘degressiv- —
ity’) and/or above a certain threshold per farm (known as ‘capping’).
3) Structural operations (heading 2)
The amounts set were lower than those proposed by the Commission. However, the proposals concerning the concentration of operations, the distribution criteria and the simplifi cation of management methods were adopted without any major changes.
4) Other categories of expenditure
The ceilings for the internal policies, external action and administrative expenditure headings were appreciably lower than those proposed by the Commission. The reductions were imposed very much across the board, with no real discussion about the future content of these categories of expenditure. The starting point for this approach was not the existing 1999 ceilings but the lower fi gures of appropriations actually entered in the 1999 budget. On the other hand, the amounts proposed by the Commission for pre-accession aid and for the estimated cost of the fi rst round of enlarge- ment were accepted without change.
2.2. Limited adjustment of the own resources system
In the end the Berlin European Council did not adopt any of the three options for rebalancing budget positions that the Commission examined in its report. The solution to this problem was found instead in measures to contain expenditure growth and redirect fl ows. The results obtained were enhanced by relatively slight adjustments to the fi nancing system. The European Council decided:
to lower the maximum call-in rate for the VAT resource to 0.75 % in —
to increase the percentage of traditional own resources that the Mem- —
ber States retain to cover collection costs from 10 to 25 %;
to retain the United Kingdom compensation mechanism, with some —
small adjustments, to offset for instance the benefi t that would arise upon enlargement from the replacement of pre-accession aid by internal EU expenditure;
to reduce the share paid by Germany, the Netherlands, Austria and —
Sweden in the fi nancing of the UK correction to a quarter of their normal share.
2.3. Conclusion of a new Interinstitutional Agreement
1) The rules for applying the fi nancial framework
These rules remained essentially unchanged. But some new provisions were added.
Some restrictions were placed on the ‘privileged’ nature of expendi- —
ture on structural operations, in conjunction with the new basic regulations in this area. The allocations made in the fi nancial frame- work continue to be expenditure targets, which must be entered in the budget each year. But the possibility of transferring to subsequent years the part of the allocations which could not be committed in a given year was confi ned to the fi rst year of the period (2000) and then only if non-implementation was the result of a delay in the adoption of programmes.
In the event of a revision of the fi nancial framework, the ‘pre-acces- —
sion’ heading and the amount left available for future enlargement were to be treated as ‘water-tight compartments’: in other words there could be no transfers between these two amounts nor between either of them and the ceilings for the other headings set for the EU-15. A ‘fl exibility instrument’ was introduced. It is intended to allow fi nanc- —
ing, for a given fi nancial year, of clearly identifi ed expenditure which could not be fi nanced beneath the ceilings available. As a rule the instrument should not be used for the same requirements two years running. This instrument was allocated EUR 200 million a year. The
86 EUROPEAN UNION PUBLIC FINANCE
portion not used in a given year may be carried over for the following two years. Decisions to make use of the instrument are taken, during the budgetary procedure or in the course of the budget year, by joint agreement between the two arms of the budgetary authority, acting by qualifi ed majority on a proposal from the Commission.
2) Budgetary procedure aspects
As proposed by the Commission the new agreement consolidated a number of arrangements agreed by the institutions to improve the opera- tion of the budgetary procedure. Two additions were made.
The conciliation procedure for the establishment of the budget was —
extended to cover all expenditure (compulsory and non-compulsory) and continued throughout the budgetary procedure.
Guidelines were laid down, by broad categories, for the classifi cation —
of expenditure.