REPORT on the draft general budget of the European Union for the financial year 1998 as modified by the Council (all sections) (C4-0600/97) and on Letter of Amendment No 1/98 to the preliminary draft budget for 1998, Section III - Commission (C4-0645/97)

10 December 1997

Committee on Budgets
Rapporteurs: Mr Stanislaw Tillich / Mr John Tomlinson

By letter of 31 October 1997 the Commission presented Letter of Amendment No 1 to the preliminary draft budget for 1998, Section III - Commission.

At the conciliation meeting of 27 November 1997 the Council presented to a delegation from Parliament its position on the main priorities and problems concerning the 1998 budget.

By letter of 5 December 1997 the Council reported on the outcome of its deliberations of 27 November 1997 on the draft general budget of the European Union for the financial year 1998 as amended and modified by the European Parliament at its first reading of 23 October 1997.

At its meeting of 8 and 9 December 1997 the Committee on Budgets considered the modified draft budget.

At that meeting the Committee adopted the motion for a resolution by 28 votes to 2.

The following took part in the vote: Samland, chairman; Tillich, vice-chairman and co-rapporteur; Willockx and Giansily, vice-chairmen; Tomlinson, co-rapporteur; Bardong, Böge, Bösch, Bourlanges, Brinkhorst, Colom i Naval, Dankert, Dell'Alba, Dührkop Dührkop, Elles, Fabra Vallés, Garriga Polledo, Haug, Imaz San Miguel, Jöns (for Krehl), Kellett-Bowman (for Pimenta), Kuckelkorn (for Laignel), McCartin, Müller, Tappin, Theato, Virrankoski, Waidelich, Wemheuer (for Ghilardotti) and Wynn.

The report was tabled on 10 December 1997.

The explanatory statement and the opinion of the Committee on Agriculture and Rural Development (Part B) and the decisions taken by the Committee on Budgets on the draft amendments and proposed modifications (Part C) will be published separately.

The deadline for tabling amendments is 12 noon on Tuesday, 16 December 1997.

A MOTION FOR A RESOLUTION

Resolution on the draft budget of the European Union for the financial year 1998 as modified by the Council (all sections) and on Letter of Amendment No 1/98 to the preliminary draft budget for 1998, Section III - Commission

The European Parliament,

- having regard to the Treaty on European Union,

- having regard to Letter of Amendment No 1 to the preliminary draft budget for 1998, Section III - Commission, established by the Commission on 29 October 1997 (C4-0645/97)[1],

- having regard to the Council decisions of 27 November 1997 on the draft budget for 1998 as amended and modified by Parliament at first reading (C4-0600/97), which include Letter of Amendment No 1,

- having regard to the Interinstitutional Agreement of 29 October 1993 on budgetary discipline and improvement of the budgetary procedure[2] and the financial perspective attached thereto, as last revised and adjusted on 24 April 1997[3],

- having regard to its resolution of 13 March 1997 on the guidelines for the 1998 budget[4],

- having regard to its resolution of 17 July 1997 on the ad hoc procedure for the 1998 budget provided for in Annex II on interinstitutional collaboration in the budgetary sector to the Interinstitutional Agreement of 29 October 1993 on budgetary discipline and improvement of the budgetary procedure[5],

- having regard to the Financial Regulation, and in particular Articles 15 and 26 thereof, and the deliberations of the competent committees on transfers permitted by those articles,

- having regard to the report of the Court of Auditors on the financial year 1996[6],

- having regard to its deliberations and amendments adopted at first reading and its resolutions adopted on 23 October 1997 on the draft general budget of the European Union for the financial year 1998 (Sections I, II, III, IV, V and VI)[7],

- having regard to the report of the Committee on Budgets and the opinion of the Committee on Agriculture and Rural Development (A4-0390/97),

A. whereas Parliament has decided to adopt the 1998 budget at ECU 91 012.938 million in commitment appropriations and ECU 83 529.767 million in payment appropriations, which represents an increase of 2.1% in commitment appropriations and 1.4% in payment appropriations over 1997,

B. whereas the Council's draft budget of 27 November 1997 has reduced commitments by ECU 246.098 million and increased payments by ECU 579.847 million over Council's first reading; whereas reductions of ECU 550 m in agricultural appropriations and ECU 550 m in reductions in payments in categories 3 and 4 were agreed on the basis of Parliament's first reading; whereas early budgetization of ECU 100 m in balances from 1997 was also agreed; whereas the Council's draft budget remains at 1.14% of GNP in terms of expenditure but 1.129% in terms of revenue needed, while the actual own resources ceiling is 1.26% of GNP,

C. whereas the draft budget was established with regard for the new employment initiative of the European Union and the employment measures of the Member States, as well as the budgetary rigour called for by the Member States, in order to enable them to better adapt to the convergence criteria leading to Economic and Monetary Union as of 1999,

General approach

1. Approves the budget decisions to provide adequate funding for the major priorities designated by Parliament and by Council at their first readings while respecting budgetary rigour:

- initiating the three-year employment initiative, called for by Parliament, and agreed at the Special European Summit at Luxembourg on 21 November 1997;

- ensuring tight budget targets in view of the need to respect the criteria for Economic and Monetary Union and the single currency, by agreeing reductions of payment appropriations below Parliament's first reading;

- continuing funding of the programme for peace and reconciliation in Northern Ireland;

- strengthening the Socrates programme for educational cooperation;

- identifying and consolidating pre-accession actions;

- bringing together and reinforcing measures to promote human rights and democracy;

- introducing a new approach for EU subsidies with more transparent criteria ;

2. Notes that the European Council in Luxembourg, after having heard the President of Parliament, welcomed the European Parliament's initiative providing for the strengthening of budgetary resources earmarked for employment, a move given a positive reception by the Council; formalizes the agreement with Council by adopting the necessary budgetary decision; expects the Commission to make proposals, as soon as possible, for necessary legal bases for the initiative providing for new financial instruments to support innovatory and job-creating small and medium-sized enterprises, so that the Council can adopt them speedily[8];

3. Notes that the Commission will introduce in due time a preliminary draft supplementary and amending budget if payments, and in the case of category 1 commitment appropriations as well, appear to be insufficient and that the budgetary authority will examine favourably the Commission's PDSAB; notes that this may arise because of the Council reductions in commitment and payment appropriations of ECU 550 m in category 1 and payment appropriations of ECU 550 m in categories 3 and 4, which is endorsed by Parliament on this clear condition; urges the Commission to ensure that the 1998 budget is fully implemented in accordance with Article 205 of the EC Treaty and to take appropriate account of these budget decisions in its 1998 legislative programme;

4. In order to monitor the payments, requests the Commission to present the evolution of payments for each budget line on a monthly basis, together with a forecast of budget implementation to be presented to the budgetary authority before the conciliation meeting in July 1998;

5. Is of the opinion that its decisions on the 1998 budget have followed the guidelines expressed in its above-mentioned resolution of 13 March 1997, and, as far as possible, have taken account of the Council and Commission guidelines;

6. Expects the informal conciliation with Council early in the year to encourage the setting of realistic joint budget targets, help prepare an open and cooperative posture by both arms of the budgetary authority, and address the longer-term financing issues that will arise from the processes of Economic and Monetary Union and of enlargement;

7. Welcomes Letter of Amendment No 1/98, which responds to Parliament's requests in the agricultural sector, following the agreement at the trialogue of 8 April 1997; calls for agreement between Parliament, Council and Commission on continuing the procedure on agricultural expenditure successfully followed this year, after a trialogue to be held no later than March 1998;

8. Urges the Member States to re-examine and improve the collection of revenue contributing to the Union's budget, in accordance with the recent recommendations of the Court of Auditors, and with the conclusions of the Transit Inquiry Committee, so as to avoid the high wastage that currently occurs, and to enable the budgetary authority to meet needs better without excessive calls on the fourth resource;

9. Is aware that, in this final programming period, ensuring the full implementation, monitoring and assessment of Community support frameworks and single programming documents for the programmes and projects under the Structural Funds, Community support frameworks, the Community initiatives and the Cohesion Fund will be a priority for Parliament and asks the Commission to present detailed information on job creation initiatives in Objective 2 areas and the real expectations for the next two years;

10. Welcomes the agreement reached by the two arms of the budgetary authority to allocate supplementary funding of ECU 70 m for the Socrates programme in 1998 and 1999, currently being examined under the codecision procedure; expects this to speed up successful conclusion of the legislative conciliation procedure before the end of December; remarks that the budgetary authority has thus reduced the risk of further delays in the legislative domain harming the full implementation of this popular programme;

11. Notes that after the meeting between the representatives of the Institutions at the highest level a sustainable strategy for a common information policy aimed at better informing the European citizen should be set out before 31 March 1998;

12. Approves the decision to place against the heading the funding for the controlled nuclear fusion programme,

- except ECU 3.6 million in the reserve pending a possible settlement of the staff dispute at the JET; agrees to the transfer of 25 JET Euratom posts to the fusion programme and to the maintenance of the reserve list of candidates, due to lapse at the end of 1997, until the end of 1999; requests the Commission to forward as soon as possible its proposals to modify the JET Statutes in the terms required by the Court of First Instance's judgement of 12 December 1996, and to take additional measures in the area of staff policy and recruitment, in order to fulfil its obligations resulting from joined Cases T-177/94 and T-377/94;

13. Is concerned about the reported implementation difficulties concerning EU funding for actions which correspond to the stated priorities in Bosnia-Herzegovina, in particular the return of refugees; confirms its first-reading decision to leave 30 % of the appropriations in the reserve for reconstruction activities; invites its competent authorities to examine rapidly and favourably the sending in early 1998 of a four Member ad hoc delegation from the competent organs, including the Committee on Budgets and the Committee on Budgetary Control, to evaluate on the ground the financial and administrative problems concerning this aid with the authorities in the area;

14. Welcomes the outline agreement on the funding allocation to the EBRD for the Union's contribution to the Chernobyl Shelter plan, approving Council's decision to enter ECU 25 m for Article B7-536 in the reserve and confirming that the appropriations will be released once the legal basis is adopted, after the verification of specific conditions linked to the technical implementation of the plan, as well as to payments to the fund by other donors; adds to the remarks of Article B7-520 a comment permitting appropriations up to a maximum amount of ECU 25m to be used to cover the expenditure referred to in Article B7536 through transfer; underlines that the total amount to be allocated to this action shall not exceed ECU 100 m over the eight-year period of the programme and that the nuclear safety sector in 1998 under the TACIS programme shall not exceed 13% of the total appropriations;

15. Expects budget management to be improved by the prompt application, by the Commission and by the Member State administrations, of the recommendations adopted under the SEM 2000 programme and, as far as the staff of the institution is concerned, those of the MAP 2000 programme;

Reserves

16. Decides to place appropriations in the reserve in respect of 23 lines, so as to supervise closely the implementation of these lines during the 1998 financial year (see Annex I); recalls the conditions for their release as indicated in the amendments it has adopted; agrees to release the appropriations once the conditions set by Parliament are fulfilled;

17. Repeats its call to the Commission to submit all transfers of appropriations entered in Chapter B0-40, for specific lines, as far as possible before 15 September 1998; calls on the Commission to notify the budgetary authority in full no later than 10 days prior to the latter's deliberations thereon; points out that such proposals for transfers must be submitted separately from the Notenboom-Bourlanges global transfer, the procedure for which must be revised and which might, for example, be replaced by a supplementary and amending budget proposed in the last four months of the year;

18. Commits itself to evaluating interinstitutional cooperation, and to encouraging it in identified priority areas so as to achieve the synergy and savings that have been forecast;

19. Commits itself to watching closely the implementation of the new system for subsidies from the Union budget (Part A of the budget) and insists that internal procedures be improved so as to avoid duplication of subsidy from the two parts of the budget;

Other institutions' budgets

20. Notes that, apart from the amendments made by Parliament to its own budget and to that of the Ombudsman, for the first time the Council has endorsed Parliament's first reading of the draft budget (other institutions) without amendment;

21. Welcomes that outcome, which it regards as consent to a common reading of the Institutions' administrative expenditure;

22. Is of the opinion that a single reading ought to give the institutions concerned greater leeway, in terms of time, and therefore invites them to take this opportunity to improve their budget implementation plan;

23. Points out in this connection that it has placed appropriations in the reserve and that, during this budgetary procedure, it has asked for reports to be drawn up on questions listed, together with the deadlines and conditions for submission, in Annex II;

24. Deplores the fact, however, that the Council has rejected the amendments seeking to enter appropriate remarks for each revenue heading in accordance with the provisions of Article 20(2) of the Financial Regulation;

25. Has therefore decided to retable the revenue-related amendments;

26. Invites the administration to bring forward the appropriate transfer for the twelfth partsession in Strasbourg; stresses that that request should take due account of the provisions adopted by the Conference of Presidents on 23 October 1997 on the holding of parliamentary committee meetings in Strasbourg; notes that possible savings due to reductions in committee meetings in Strasbourg following these decisions could amount to about ECU 4 m over the year;

27. Underscores its attachment to a transparent and efficient nomenclature permitting, in particular in the case of administrative expenditure, comparability between institutions;

28. Invites the Commission, accordingly, to coordinate work on harmonization of the nomenclature for Title 2 - Buildings, equipment and miscellaneous operating expenditure - and to submit an interinstitutional report before 30 April 1998;

Margins

29. Notes the margins left available for a possible supplementary and amending budget of ECU 2 826 million in heading 1, ECU 247 million in heading 3, ECU 470 million in heading 4 and ECU 187 million in heading 5;

Final provisions

30. Instructs its President to designate the budgetary act as the budget of the European Union;

31. Instructs its President to forward these budgetary decisions to the Council, the Commission and the institutions and advisory bodies concerned.

.ANNEX I

1998 BUDGET

Appropriations entered in reserve B0-40(situation at the end of Parliament's second reading)

in ECU m

Line	Heading	Appropriations	Appropriations	Conditions for release
		ca	pa
B3-1006	Promotion and safeguard or regional and minority languages and cultures	0.4	0.4	The Board of the European Bureau for Lesser Used Languages must demonstrate the broad representation of its Council.
B3-300	General information and communication work concerning the European union	13.0	15.0	Concrete proposals on the setting up of an European Information System and other conditions.
B3-306	Information programme for European citizens (Prince)	15.0	10.0	1) A working party has to decide on the breakdown of the line; 2) "Euronews" is to be used as one of the instruments.
B3-4005	European Centre for Industrial Relations	0.585	0.4	Release when: 1)a written commitment from the parties concerned is given on co-financing;2) when the management of the Centre has been changed, and 3) its efficiency demonstrably improved.
B3-4311	European Agency for Safety and Health at Work	0.7	0.5	Agreement of the budgetary authority on the work programme.
B3-441	European Monitoring Centre for Drugs and Drugs addiction	2.0	2.0	Release when the transfer of funding for the implementation of the policy referred to has been carried out.
B5-800	Cooperation in the fields of justice and home affairs	4.0	3.0	Release will depend on whether Parliament will have an opportunity to give its views prior to adoption of the multiannual programmes (Sherlock, Grotius, Oisin, Stop).
B6-8121	Controlled thermon Nuclear fusion	3.6	3.6	Settlement of the JET UKAEA Team Staff dispute; provision for the consequences of a possible future Court judgment.
B7-4034	Financial cooperation with Turkey	53.0	30.0	1) Absence of legal basis; 2) substantial progress towards a political solution on Cyprus, and the Kurdish problem, 3) as well as compliance with numerous Parliament resolutions, in particular that of 19 September 1996.
B7-410	MEDA (measures to accompany reforms to the economic and social structures in the Mediterranean non-member countries)	94.0	30.0	Presentation of the Commission's evaluation report on the implementation of the programme and its recommendations on how to improve the effectiveness of the programme.
B7-520	Assistance to economic reform and recovery in the New Independent States and Mongolia	45.0	38.0	Presentation of the Commission's communication confirming that it will keep to the political guidelines set by Parliament.
B7-535	Cooperation with the countries of central and eastern Europe and the NIS under EURATOM	10.115	6.550	Completion of full consultation procedure.
B7-536	Community contribution to the European Bank for Reconstruction and Development for the Chernobyl Shelter fund	25.0	25.0	1) Legal basis and 2) undertakings by other contributing partners.
B7-541	Measures for the reconstruction of the Republics formerly part of Yugoslavia	30.0	24.0	1) Progress report (number of refugees, etc., planning table), 2) proposal for improvement of staff managment in DG 1A, 3) improvement of the Regulation on reconstruction aid.
B7-651	Coordination of development policy, evaluation of the results of Community aid and follow-up and inspection measures	2.0	2.0	Presentation of a Commission report on the actions taken under this item and their results.
B7-6600	External cooperation measures	15.0	15.0	Parliament's consultation on the EU's accession to KEDO and delivery of a positive opinion.
B7-6602	New Transatlantic Agenda	6.0	5.0	Information for the budgetary authority following receipt of the annual work programme listing the activities financed under this budget line.
A-1100	Basic salaries	4.7	4.7	1) strengthening DG XXIV (BSE crisis);2) Task Force enlargment; 3) setting up UCLAF unit;4) strengthening Financial Control department; 5) reinforcement stafff third pillar; 6) proposals on sustainable agriculture
A-2410	Telecommunications subsciptions and charges	3.0	3.0	1) Reduction of costs; 2) information from the Commission on all intiatives it will take to take full advantage of liberalization.
A-340	Official Journal	4.0	4.0	Action by the Commission and the Office for Official Publications on the presentation of consolidated text of Community law. Release after proposals to avoid overlapping activities.
A-3410	General Publications	1.0	1.0	Action by the Commission and the Office for Official Publications on the presentation of consolidated text of Community law. Release after proposals to avoid overlapping activities.
A-4015	Translation Centre for the bodies of the European Union	0.450	0.450	Communication of its annual work programme to the budgetary authority, identifying inter alia the work done for the bodies of the Union.
A-421	Operation of radio and television studios and audiovisual equipment	1.5	1.5	Report on value for money of the "Europe by Satellite" programme.

.ANNEX II

List of the reports requested by Parliament during the budgetary procedure

and appropriations entered in the reserve

Institution or consultative body / area concerned	Section I	Section I	Section IV: Court of Justice	Section V: Court of Auditors	Section VI:ESC, CoR, JOS
	Parliament	Annex:Ombudsman
Buildings and related expenditure[9]	32 669 258		2 195 800		4 399 500
Telecomms[10]		5 000	132 000	42 000	75 000
Computing[11]	13 499 000				83 333
Restaurants and canteens[12]	X		40 000		5 000
Vehicles[13]			95 000	X
Participation in conferences, etc.[14]					171 000
Interpreters, etc.[15]	5 871 000
Relations with the national parliaments [16]	X
Members[17]	X
Meetings in general, etc.[18]					X
Total	52 039 258	5 000	2 462 800	42 000	4 733 833

• [1]  SEC(97)1954
• [2]  OJ C 331, 7.12.1993, p. 1.
• [3]  OJ C 150, 19.5.1997, p. 23.
• [4]  OJ C 115, 14.4.1997, p. 178 and p. 183.
• [5]  Minutes of that Sitting, Part II, Item 1(a).
• [6]  OJ C 348, 18.11.1997.
• [7]  Minutes of that Sitting, Part II, Item 1.
• [8]  Paragraphs 47 and 48 of the Presidency's conclusions, which conclude: "These new instruments must reinforce the European Technology Facility, financed by the European Investment Bank and administered by the European Investment Fund, byopening a "risk capital window", support the creation of transnational joint ventures and establish within the European Investment Fund a special guarantee fund to facilitate risk-taking by institutions providing finance for small and medium-sized enterprises. The European Council invites the Commission to submit examples of good practice concerning the functioning of these measures, based on Member States' experience.".
• [9]  Court of Justice: Am. 645 and para. 39 of resolution A4-0280/97, plus deliberations on Transfer of Appropriations 51/97. ESC and CoR: Am. 676 and paras. 60 to 63 of resolution A4-0280/97; deadline: 30March 1998 at the latest. EP: para. 28 of resolution A4-0280/97.
• [10]  Ams. 639, 648, 659 and 679 plus paras. 32, 42, 50 and 65 of resolution A4-0280/97; interinstitutional report in the light of the results of the invitation to tender in progress at present; deadline: before first reading of the 1999 draft budget.
• [11]  EP: para. 30 of resolution A4-0178/97. ESC: see footnote 1 and 9 in part.
• [12]  Ams. 611, 643 and 675, plus paras. 24, 25, 41 and 65 of resolution A4-0280/97; interinstitutional report including a three-year plan for dismantling subsidies.
• [13]  Am. 647 and paras. 44 , 45 and 51 of resolution A4-0280/97; joint Court of Justice / Court of Auditors report; deadline: 30 March 1998 at the latest.
• [14]  Am. 685, report accompanied by a detailed financial statement on the conditions for ESC participation in EXPO 98; deadline: 30 January 1998 at the latest.
• [15]  Am. 687 and para. 22 of resolution A4-0280/97; deadline: 1 July 1998.
• [16]  Am. 622, report on the conditions for utilization of the appropriations against Item 2993.
• [17]  Paras. 13, 14 and 15 of resolution A4-0280/97.
• [18]  Ams. 661, 667 and 676 in part, plus Transfer of Appropriations 48/97 and suggestions made in the report by the Court of Auditors, OJ C 348; deadline: 30 March 1998.

B EXPLANATORY STATEMENT

1998 budgetary procedure - EP first reading in figures

General remarks: The figures below bring out the "change of culture" which applies to the 1998 procedure. Parliament has assumed its responsibilities by responding to citizens' demands and priorities and, at the same time, maintaining the level of rigour requested by the governments of the Member States needing to fulfil the convergence criteria for joining EMU. It has adopted a budget which for many items remains below the level of the preliminary draft budget adopted by the Commission. Moreover, thanks to its special efforts to concentrate appropriations and to maintain its priorities, it has been able to contribute to the global efforts of the Union for job creation, by finding finance for the employment initiative amounting to ECU 150 million, which was supported by the Luxembourg European Council Special Summit of 20-21 November.

!!! The following tables cannot be reproduced in HTML - Please refer to the WP or the PDF version !!!

The letter of amendment to the PDB

Introduction.

The presentation of this Rectifying and Amending Letter (R.A.L) follows the agreement between the Council, the Commission and Parliament at the Trilogue on 8 April 1997, the main reason being to have a better forecast of the Agriculture expenditure.

The Rectifying and Amending Letter to the Preliminary Draft Budget for 1998 presented by the Commission on 29 October goes beyond this agreement and includes two other elements, which were partly included in the Budgetary procedure.

This Rectifying and Amending Letter is presented outside the deadlines set by art. 14 of the Financial Regulation and, therefore, the Commission has to prove the exceptional circumstances for the different elements of this Letter and the budgetary authority must agree. This agreement should be achieved before the Council votes its second reading.

Your rapporteur welcomes the initiative of the Commission concerning agriculture, which is in line with Parliament's request and thus the need to verify the most updated forecast fully justifies the exceptional circumstances.

For other aspects included in the Rectifying Letter - the financing of the Chernobyl shelter and the supplementary expenditure for BSE - your rapporteur does not consider the need as imperative and those problems are already covered in part in the draft budget as voted by the European Parliament on 23 October.

Agriculture

The main reason for the R.A.L. is the fact that the figures of the Commission's Preliminary Draft Budget, presented on 30 April 1997, are based on estimates made in March 1997. This means that the figures are not very up-to-date when Parliament and Council adopt the Budget at the end of the year. The presented Rectifying and Amending Letter takes the following developments into account in the field of agriculture :

As a result of market developments:

- the favourable development (at least for agriculture expenditure) of the US$/Ecu exchange rate (probably at least -ECU 200m); which permits a transfer of ECU 200m to the reserve;

- the less dramatic financial consequences resulting from the BSE crisis (-ECU 557m);

- the favourable developments for a number of agricultural products (e.g. cereals, sheepmeat, milk and sugar, -ECU 831m);

- unfavourable developments such as in the pork sector due to swine fever (+ECU 147m);

As a result of Council's decisions:

- the decisions of the Council on agricultural prices (in total ECU 55m);

- the rejection by the Council (supported by Parliament) of the Commission's proposal to reduce the direct aid in the cereal sector (an extra cost of about ECU 1,353m);

On request of the Parliament:

- certain demands from Parliament, such as those on apiculture, promotion of the consumption of beef meat and measures for control and the prevention of abuse of agricultural funds (ECU 23m);

- other demands of the Parliament concerning the creation of a reserve for market uncertainties (ECU 200m);

For other reasons:

- certain other developments such as the clearance of previous years' accounts which brings +ECU 110m cash, but on the other hand extra expenditure for accompanying measures (+ECU 148m) and agri-monetary aid (+ECU 143m).

- the confirmation of the nomenclature presented in the PDB and approved by Parliament;

Your rapporteur considers that, with all these changes, the Commission presents updated figures and a balanced proposal which satisfies most of Parliament's demands. The proposed total amount of agricultural expenditure for B1 (EAGGF) nevertheless remains the same as proposed in the PDB: ECU 40,987m.

Specific remarks

Cereals

The Commission bases its Rectifying and Amending Letter on the non-reduction of aid in the cereal sector. Council and Parliament were opposed to these proposals as they were found unjustified and superfluous. The market developments are, at the moment, so favourable (a lower amount of applications for direct aid and better prices) that they make substantial savings possible in 1998.

Linear Reduction

The Commission's linear cut of ECU 381m is the result of the elements mentioned in paras. 7-10 and of the fact that the Commission wanted to maintain the amount it had proposed in its PDB: ECU 40,987m.

Taking into account that:

a) the linear cut of ECU 1,000m on the 1997 budget did not present any problems;

b) the clearance of previous years' accounts could be much higher than the ECU 110m definitely decided to recuperate in 1998;

c) the estimated extra needs, e.g. for B1-5011 Environment, are not as probable as this budget line has been heavily underused since it was set up;

one might wonder whether the linear cut could not have been bigger.

Reserve

For the last two years, Parliament has wanted a reserve within cat. 1 for market uncertainties. The Council agreed with the idea of a reserve and had put an amount of ECU 329m (the amount of an early estimate of savings by the Commission) in the reserve B0-40. The Commission now proposes to put an amount of ECU 200m in the reserve (B0-40), and justifies it with the favourable development of the US$/ECU exchange rate.

Changes to specific lines

The Commission has taken on board most of Parliament's requests for increases on certain lines. That is the case for bees (apiculture, plus ECU 3m, totalling ECU 15m), for the promotion of beef meat (plus ECU 15m, totalling ECU 30m), hemp (plus ECU 6m, totalling ECU 29m) and measures to launch a series of pilot projects to combat and prevent fraud and abuse of agricultural funds (ECU 5m). The demands for reductions on two lines in the cereal sector and for the sugar sector have also been satisfied.

Updating of the figures

Most of the updating operation led to a decrease in the proposed amounts for each budget line:

* for beef meat the Commission estimates a need of ECU 557m less then expected,

* for cereals the amount is ECU 337m,

* for sheep meat ECU 251m,

* and for milk and sugar ECU 158m and ECU 85m respectively.

The decision taken on the clearance of accounts of previous years will lead to a paying back by the Member States of an additional ECU 110m.

The more recent forecasts indicate that the swine fever will lead to an extra amount of ECU 147m in 1998. Due to recent monetary fluctuations, the Commission expects an increase in expenditure for agri-monetary aid of ECU 143m.

The accompanying measures (e.g. environmental measures) enjoy more interest from the farmers, and the Member States now achieve a better implementation. In order to satisfy the increasing demand, the Commission increases the appropriations by ECU 127m to ECU 2,297m.

Further reductions

Experience last year proved that even a linear cut in the needs forecast did not create any difficulty in the market management. If Council's logic in first reading is to be followed, a reduction should apply beyond the genuine savings based on market forecasts, although the magnitude of the reduction should probably be less than last year's.

Your rapporteur considers that following the 1998 guidelines voted by Parliament in March for a disciplined budget, the possibility of a reduction in expenditure as last year's should not be excluded, on condition that, and in case of need, the Commission will present a Supplementary and Amending budget. The Budgetary Authority should promise to do its best for a rapid decision (one reading).

Others elements:

Chernobyl and AIFM

Your rapporteur considers that even if the European Union confirms its highest interest in the nuclear security for this region, it has to be excluded that the European Union could support the full financial burden of this initiative alone and within the current ceiling of Financial perspectives.

In its proposal, the Commission followed the vote of Parliament's first reading. The Commission budgetary proposal contradicts in part the approach followed in the legislative proposal. The rapporteur proposes that a maximum amount of ECU 20m could be entered in the reserve, without prejudice of a Parliament decision in the legislative field.

The conditions of release of funds should be linked to the following points:

a) the agreement to be reached in the forthcoming Pledging Conference on the other countries' participation in the initiative;

b) the confirmation of the payments of the other partners of the pledged funds.

The rapporteur considers that Parliament, as one arm of the budgetary authority, has to confirm that the Tacis appropriations devoted to nuclear safety will not exceed 13% of the annual amount. The fact that some problems still exist in the Tacis implementation should not be the main reason to invest in this kind of project, Tacis should remain a programme for economic support;

Beyond the aspects of substance mentioned above, as previously indicated, your rapporteur does not consider that the condition of urgency, as requested in art. 14 of the Financial Regulation, is fulfilled in that case and the financing of this initiative can be ensured in the normal procedure unless an agreement on the above principles is reached with the Council.

Administrative expenditure

The Commission proposes to reduce the A-1100 - Salaries - to provide more appropriations, ECU 2.25m, to decentralized activities of DG XXIV. This point has already been raised during "contacts" on Administrative expenditure, but the Commission did not insist on an amendment. Your rapporteur considers that the Commission should have indicated this as an administrative priority, but it did not and is now using the shortcut of the Rectifying Letter.

Your rapporteur recognizes that a specific need exists, but does not consider the procedure chosen by the Commission as correct. If the Commission cannot finance within the appropriations voted in title A7, it should justify a request for a transfer during the year.

In any case, even for this proposal the conditions for urgency are not fulfilled.

Conclusion

Pending the opinion of the Committee on Agriculture, your rapporteur considers:

a) that this Rectifying and Amending Letter can be accepted by Parliament;

b) that for the other two elements included in the Rectifying and Amending Letter, the "exceptional circumstances" requested by art. 14 of the Financial Regulation are not fulfilled and that those points can be treated in the normal procedure.

Nevertheless, it is open to discussion with Council on both issues in the forthcoming trilogue.

Table 1: Development of the positions of the Commission, the Council and Parliament

Subject	APB30-4-´97	CouncilPricePackage25-6-´97	EPAd HocVote July17-7-´94	CouncilFirst Reading24-7-´97	EPFirst Reading23-10-´97	Rectifying and AmendingLetter29-10-´97
Cereals	Savings should be adopted (1.408 Mecu)	No savings in the sector:(+ 1.408 Mecu)	No savingsin the sector:(+ 1.408 Mecu)	No savingsin the sector:(+ 1.408 Mecu)	Nosavingsin the sector:(+ 1.408 Mecu)	Nosavingsin the sector:(+ 857 Mecu)
Reduction	-	-	weighted cut of 1.408Mecu	linear cutof 1.408Mecu	linear cutof 1.408Mecu	linear cutof 381Mecu
Reserve	-	-	310 Mecuin B1-550N	329 Mecuin B0-40	310 Mecuin B0-40	200 Mecu in B0-40
Changes of Specific lines	-	various lines	various, but differentlines	various lines	various,but different lines	certainlines
Total amount B1	40.987Mecu	40.987Mecu	40.987Mecu	40.987Mecu	40.987Mecu	40.987Mecu

!!! The following table cannot be reproduced in HTML - Please refer to the WP or the PDF version !!!

Conciliation meeting of 27 November 1997

Following the debate in the Committee on Budgets on 25 November, and in view of the conciliation meeting of 27 November, the rapporteur presents below elements explaining the Committee's position.

Parliament's first reading: preamble

The 1998 draft budget adopted by Parliament in its first reading was nearly 3% more than the 1997 budget in commitment appropriations and over 2,7% more than the 1997 budget in payment appropriations. It represents about 1,15% of the Union's GNP as compared with 1,12% for the 1997 budget, in terms of payment appropriations.

Classification of expenditure and the ad hoc procedure on agricultural expenditure

The rapporteur considers it essential to clarify the whole situation so as to avoid any misunderstanding, on an interinstitutional level, by and within the Parliament.

During the 1998 budgetary procedure, no change has been made in Parliament's and Council's position on the classification of expenditure. Parliament and Council have, with the cooperation of the Commission, reached an agreement on a procedure to allow a more realistic budget to be adopted for agriculture, that takes account of the more accurate and up-to date forecasts available towards the end of the budget procedure.

This new procedure marks genuine progress for both Parliament and Council. The budgetary authority has an interest in confirming this procedure for the years to come.

The Council's proposal for a reduction of approximately ECU 550m in agricultural expenditure is not a structural reduction; nor does it imply a modification of the agricultural regulations. It is a proposal for the better use of taxpayers' money, without affecting the rights of European farmers. It reflects the lower use of such funding in past and current years.

Difference between commitment and payment appropriations

In preparing its second reading, Council proposes a reduction of about ECU 550m in appropriations for category 1, of ECU 300m in structural funding, and an amount of ECU 550m in payment appropriations for categories 3 and 4. The general rapporteur considers that these reductions do not affect the general balance of the budget for three reasons:

a) the reduction in payment appropriations in categories 3 and 4 does not affect commitment appropriations. All the commitments will be respected, and once committed, payments will need to be made. The Commission will implement these as entered in the 1998 budget. If a problem arises, the Commission will take the necessary measures. During the 1997 Notenboom procedure, across the whole budget, ECU 910m in payment appropriations were moved between lines.

b) a readiness by the Commission to evaluate the situation in the categories affected by the reductions, and, if necessary, to present a preliminary draft supplementary and amending budget (PDSAB), and a related commitment by the Council to view this PDSAB from the Commission favourably.

c) the appropriations for agriculture are only forecasts of expenditure and reductions in them do not affect the regulations in force. It does not affect the rights of European farmers to require that the Commission implement the current regulations in force. The reduction of ECU 1 000 million in the 1997 agricultural budget did not affect the agricultural community in the Union, since the funding was not needed. The Early Warning System Report nΊs 11/97 and 12/97 indicates that end-year implementation levels will be nearly ECU 260m below the adopted budget, which was itself ECU 1 000 million below the guideline.

Thus, the rapporteur recommends accepting the reductions of ECU 1 100m in total made by the Council in the three categories 1, 3 and 4.

Amendment 1000 on internal policies

38. The general rapporteur rejects the Council´s approach on the interpretation of article 203, para. a of the treaty: "The Council may, acting by a qualified majority, modify any of the amendments adopted by the European Parliament." (These modifications may concern nomenclature or figures.) Parliament has adopted one single amendment regrouping all the lines of category 3. According to article 203, para. 6 of the treaty, Parliament will treat amendment 1000 as a modified amendment.

Creation of reserves

39. The Council considers that Parliament has made abusive use of the instrument of the reserve. The rapporteurs would like to point out that the appropriations entered into the reserve form only 0.6% of the total appropriations. To consider this as an abuse is unjustified. On the contrary, it has been demonstrated that the use of the reserve compels the Commission to improve its management. It is surprising that the Council shows such little interest in improving the use of European funds; Parliament is committed to a better use of these funds in the interests of the taxpayers.

Cooperation between the institutions

40. On its side, the rapporteur has underlined that the success of the 1998 procedure has been ensured by the cooperation of the Parliament and the Council, for the benefits of the Union as a whole and its tax payers. He noticed that such a positive cooperation was due to the meaningful dialogue engaged by the Council presidencies through trialogues and other numerous high level meetings. Finally, he recognised the helpful role played by the Commission, in particular through the presentation of the Letter of Amendment, regarding the agriculture expenditure.

Conclusions

Following the vote in the Committee on Budgets of 25 November, the rapporteur proposes:

. agreement on the parallel reduction of ECU 550m in category 1 appropriations (agriculture) and of ECU 550m in payments in categories 3 and 4;

. agreement that the agricultural funding reduction will not be in the form of a simple linear cut but a specific one; agreement on the modification of nomenclature as proposed by the Commission in its letter of amendment;

. that a trilogue be organized in March 1998 to institutionalise the new procedure for agricultural expenditure followed this year;

. that an agreement is reached by both arms of the budgetary authority to consider favourably a supplementary and amending budget, that could be presented by the Commission in the course of 1998, in the event that payment appropriations are found to be insufficient;

E. an agreement on a reinforcement of the Socrates program for 1998 and 1999.

The rapporteur stresses that no reductions of payment appropriations in category 2 can be accepted.

The Council's second reading

After the meeting with Parliament's delegation on the basis of the conclusions set out above, the Budget Council adopted its second reading of the 1998 draft budget at its meeting of 27 November 1997.

The Council welcomed the efforts to achieve rigour already made by the European Parliament at its first reading, which, because of the reductions against headings 3 and 4, had enabled significant funding to be made available to finance the employment initiative approved by the Extraordinary European Council of 20 and 21 November 1997.

It furthermore acknowledged the spirit of positive cooperation with which the 1998 budgetary procedure had been conducted, which augured well for collaboration along the same lines on the important budgetary decisions to come.

The Council's main decisions are as follows:

- adoption of the agricultural section of Letter of Amendment No 1 plus an additional reduction, not applied in an across-the-board fashion, of ECU 550 m against heading 1;

- an equivalent reduction in payments (ECU 550 m) against headings 3 and 4;

- early incorporation, into the 1998 budget, of ECU 100 m of the balance from the financial year 1997;

- entering an amount of ECU 35 m to cover the supplementary funding for the Socrates programme for 1998, and willingness on the part of the Budget Council to enter a total amount of ECU 70 m for the entire period 1998-1999;

- an amount of ECU 25 m to finance a shelter at Chernobyl, a transfer of ECU 25 m from the Tacis programme being possible if the other donors honour their commitments.

Accordingly, the budget adopted by the Council at second reading amounts to ECU 90 638 762 m in commitment appropriations and ECU 83 517 166 m in payment appropriations, and will be submitted for consideration by Parliament at second reading.

Letter from the chairman of the Committee on Agriculture and Rural Development to Mr Detlev Samland, chairman of the Committee on Budgets

Brussels, 25 November 1997

Dear Mr Samland,

The Committee on Agriculture and Rural Development considered the above subject at its meeting of 25/26 November 1997 and adopted the following conclusions unanimously.[1]

By joint declaration of 8 April 1997, the Council and the European Parliament invited the Commission to present a rectifying and amending letter in order to be able to adopt an agricultural budget based on the most recent forecasts. The Commission sent this rectifying and amending letter No. 1 to the Budget Authority at the end of October, and this is now being discussed in the context of the ad hoc procedure, which has been kept open for this purpose.

The Amending Letter No 1

The Committee on Agriculture and Rural Development praises the Commission's efforts to supply the Budget Authority with the most recent forecasts. The Committee welcomes the Commission's proposal to offset increased demands by expected windfalls in several sectors, thereby de facto replacing to a considerable extent the Council's linear cut in its first reading by justified decreases. The Committee also welcomes the proposal to honour certain demands from the Parliament such as those on apiculture, promotion of beef consumption and measures for the control and prevention of abuse of agricultural funds. The Committee notes that the actual needs after the new forecasts add up to 41.468 MECU, this being an increase of 1.38% compared to 1997, and of 0.92% compared to the preliminary draft budget. However, in view of the Committee's commitment to a modest growth of Category 1 expenditure it reluctantly accepts the linear cut of 381 MECU to achieve the originally envisaged growth of 0.45%. Concluding, the Committee therefore accepts the various elements of the rectifying and amending letter No. 1 concerning agricultural expenditure.

Further reductions

The Council indicated during the trilogue of 17 November that it is aiming for a reduction of more than 1 billion ECU in the total Union budget in order to help those Member States seeking to respect the Maastricht criteria. The Agriculture Committee strongly protests against the Council's intention to cut the obligatory agricultural expenditure in Category 1 for the following reasons:

(a) It is not supported by factual evidence that the revised forecasts are wrong;

(b) It is in contradiction with the agreement between the Council and the European Parliament expressed in the Joint Declaration of 8 April to base agricultural expenditure on the most recent forecasts;

(c) Agricultural expenditure has not gone out of control but has remained within its target of 0.45% growth, a position supported by the Agriculture Committee and the Parliament throughout the year;

(d) Parliament has objected to linear cuts as a method of operation.

However, it is important that a compromise be reached between the two arms of the Budgetary Authority, in order to ensure that expenditure cuts are not borne by agriculture alone, and because a negotiated compromise is likely to have a more favourable outcome than a unilateral decision by the Council. It would therefore be sensible, in the context of the ad hoc procedure, which has been kept open this year for the first time, to seek a compromise with the Council which should have the following conditions:

• A reduction in category 1 expenditure should be non-linear and should not exceed 500 MECU;• A guarantee that an equal reduction in non-obligatory expenditure will be implemented;• A guarantee that the Council and Parliament will fulfill their commitments regarding obligatory

expenditure in the time schedule foreseen; that the Council and Parliament to that effect will organise an extra trilogue in March/April to assess the necessity of a supplementary budget; that if a supplementary budget appears necessary, the Council and Parliament will deal with it constructively;

• That there will be no cut in income support;

• That the Council honours the Parliament's priorities in agricultural expenditure as reflected in the rectifying letter.

The Committee will review the conditions under which it will participate in the ad hoc procedure next year. Special attention will be given to the commitment by the Council and Parliament to the latest forecasts of the Commission, as presented in a rectifying letter.

The Committee on Agriculture and Rural Development therefore calls upon the Committee on Budgets to support its opinion and act accordingly.

Yours sincerely,

(sgd) Juan Luis Colino Salamanca

• [1]  The following took part in the vote: Colino Salamanca, chairman; Cunha and Graefe zu Baringdorf, vice-chairmen; Anttila, Böge (for Ebner), Campos, Fantuzzi, Funk, Garot, Gillis, Iversen, Keppelhoff-Wiechert, Kindermann, Klaß (for Mayer), Lambraki, Lulling (for Dimitrakopoulos), Mulder, Olsson (for Kofoed), Otila (for Filippi), des Places, Redondo Jiménez, Rehder, Rosado Fernandes, Santini, Schierhuber, Sonneveld and Sturdy.