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Europaudvalget 2005-06
KOM (2004) 0487 Bilag 7
Offentligt

COUNCIL OF

THE EUROPEAN UNION

Brussels, 16 December 2005

PROVISIONAL VERSION

NOTE

from :

to :

Subject :

Presidency

European Council

Financial Perspective 2007-2013

Delegations will find attached a final comprehensive proposal from the Presidency on the Financial

Perspective 2007-2013.

This proposal is in three parts:

Part I: expenditure

Part II: revenue

Part III: review.

These three parts are complementary and inseparable. This means that the principle of nothing is

agreed until everything is agreed continues to apply.

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PART I

EXPENDITURE

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THE NEW FINANCIAL PERSPECTIVE - GENERAL

The new Financial Framework should provide the financial means necessary to address

effectively and equitably future internal and external challenges, including those resulting

from disparities in the levels of development in an enlarged Union. It should, in parallel,

attest to determined efforts towards budgetary discipline in all policy areas within a general

context of budgetary consolidation in the Member States. Policies agreed in accordance with

the Treaty should be consistent with the principles of subsidiarity, proportionality and

solidarity. They should also provide added value.

The new financial perspective should cover the seven years between 2007 and 2013 and be

drawn up for a European Union comprising 27 Member States on the working assumption

that Bulgaria and Romania will join the Union in 2007. The amounts allocated to Romania

and Bulgaria in their respective Accession Treaties will be respected.

2bis The European Council has treated the Financial Perspective 2007-2013 as an overall

negotiation package including expenditure, revenue and the review clause. The European

Council shall ensure the global nature of this agreement.

Expenditure under the new Financial Perspective should be grouped under 5 headings

designed to reflect the Union's political priorities and providing for the necessary flexibility in

the interest of efficient allocation of resources. Where a heading is divided into sub-headings,

these will have the same status as separate headings.

In the light of the above, the maximum total figure for expenditure for EU 27 for the

period 2007-2013 is € 862,363 million in appropriations for commitments, representing

1,045% of EU GNI. The breakdown of appropriations for commitments is as described

below. The same figures are also set out in the table contained in Annex I which also sets out

the schedule of appropriations for payments. All figures are expressed using constant

2004 prices. There will be automatic annual technical adjustments for inflation.

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The European Council takes note of the resolutions from the European Parliament on the

Financial Perspective which were adopted on 8 June and 1 December 2005.

Renewal of the Interinstitutional Agreement

The current financial framework and Interinstitutional Agreement (IIA) have largely

succeeded in their objective of ensuring financial discipline, the orderly evolution of

expenditure and smooth budgetary procedures. The new agreement to be established between

the European Parliament, Council and Commission will have to pursue the same objectives

and should allow for the degree of flexibility needed to strike a satisfactory balance between

budgetary discipline and efficient resources allocation. For the purposes of sound financial

management, the institutions will ensure as far as possible that, with the exception of

sub-heading 1b, sufficient margins are left available annually beneath the ceilings for the

various headings and sub-headings. Moreover, this renewed agreement should also be used to

update and simplify the various existing agreements and joint declarations concerning

budgetary matters.

Building on the institutional dialogue to date, the European Council calls on the Council, on

the basis of a common position and subject to acceptable terms being attainable, to reach

agreement with the European Parliament and Commission on a new IIA reflecting the

outcome of these conclusions. In this context, the European Council takes note that the

Commission will make concrete proposals in order to increase the flexibility of the financial

framework.

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HEADING 1A) – COMPETITIVENESS FOR GROWTH AND EMPLOYMENT

The level for sub-Heading 1a) should provide adequate financing for initiatives taken at the

European level in support of and in synergy with action by the Member States to contribute to

the goals of the Lisbon Strategy. These are grouped under the following five broad

objectives: research and technological development, connecting Europe through EU networks,

education and training, promoting competitiveness in a fully-integrated single market, and the

social policy agenda. Nuclear de-commissioning will also be financed under this

sub-Heading, and the financial consequences of this commitment shall be drawn in line with

the Treaties of Accession. The level of commitments, which represents 7,5% annual real

growth compared to 2006, should not exceed:

SUB-HEADING 1a)

2007

8230

2008

8840

2009

9490

2010

10180

(Million euros, 2004 prices)

2011

10930

2012

11740

2013

12600

On the basis of these levels of commitments, the European Council invites the Council,

together with the European Parliament as appropriate, to come to a timely agreement through

the legislative procedure on the content and appropriate funding of the instruments pertaining

to this sub-Heading in the light of the various priorities expressed by the Member States.

10.

In allocating funding within this heading particular priority should be given to delivering a

substantial and progressive enhancement of the EU's research effort, which is generally

recognised to be one of the most promising and effective drivers of innovation and growth.

The European Council believes that EU funding for research should therefore be increased

such that by 2013 the resources available are around 75% higher in real terms than in 2006.

This research effort, as reflected principally through the 7

Framework Programme, has to be

based on excellence while ensuring balanced access for all Member States. Due account will

also be taken of some priority projects within the Trans-European Networks.

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11.

The European Council invites the Commission in cooperation with the European Investment

Bank to examine the possibility of strengthening their support for Research and Development

by up to a maximum of € 10 billion through a financing facility with risk-sharing components

to foster additional investment in European research and development, particularly by the

private sector.

11bis In order further to promote nuclear safety in the Union, the European Council calls on the

Budgetary Authority to ensure that the following amounts are allocated for nuclear power

plant decommissioning during the next Financial Perspective:

−

12.

€ 375 million for V-1 Jaslovske Bohunice in Slovakia

€ 865 million for Ignalina in Lithuania

€210 million for Kozloduy in Bulgaria from 2007 to 2009

The European Council agrees that a Globalisation Adjustment Fund will be established,

designed to provide additional support for workers made redundant as a result of major

structural changes in world trade patterns, to assist them with their re-training and job search

efforts. Activation of the Fund will be subject to strict criteria relating to the scale of

economic dislocation and its impact on local, regional or national economies, which the

European Council invites the Council to establish on the basis of a proposal from the

Commission. The maximum amount of expenditure from the Fund shall be up to € 500

million per year. No specific financial provision for the Fund will be made in the Financial

Perspectives. Instead it should be financed through underspends against the budget ceilings

established in these conclusions (defined in commitments terms) and/or from funds which are

de-committed.

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HEADING 1B) – COHESION FOR GROWTH AND EMPLOYMENT

13.

The operation of cohesion policy will have contributed significantly over the current financial

perspective period to fulfilling the Treaty aim of reducing disparities between the levels of

development of the various Member States and regions. The recent enlargement, and the one

to come, have considerably increased the economic and social disparities at both regional and

national level, thus underscoring the need to maintain the goal of achieving economic and

social cohesion firmly at the centre of the Union's policy objectives over the next financial

perspective period.

14.

Accordingly, there should be an appropriate concentration of structural and cohesion fund

assistance on the least developed regions and Member States while providing for satisfactory

transitional arrangements in particular for those contributing most to such a concentration.

Actions supported by cohesion policy should be focused on investment in a limited number of

priorities organised around three Objectives: Convergence; Regional competitiveness and

employment; Territorial cooperation.

Supporting growth and employment

15.

As part of the Union's overall objective of promoting competitiveness and creating jobs, and

of working towards meeting the objectives of the Lisbon agenda, the European Council agrees

that targets will be set for expenditure under both the convergence and regional

competitiveness and employment objectives for policies which contribute directly to this end.

These targets will be 60% for the convergence objective and 75% for the regional

competitiveness and employment objective, applied as an average over the entire period.

These provisions shall not apply to Member States that acceded to the Union in or after 2004,

reflecting their specific development needs.

16.

The European Council invites the Commission to present proposals establishing a list of those

categories of expenditure considered as contributing towards these targets, as well as

arrangements providing for the full involvement of Member States with a view to ensuring

that specific national circumstances will be taken into account.

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Improving delivery

17.

A number of reforms will improve the delivery of structural funds, by encouraging a more

strategic approach to programming, bringing about greater decentralisation of responsibilities

and enhancing management and control systems. In this connection, the work of the

Cohesion Fund will be integrated into the programming of structural assistance to ensure

greater coherence among the various Funds.

VERALL LEVEL OF ALLOCATIONS

18.

The appropriate level of commitment appropriations to be entered in the financial perspective

for the structural funds and the Cohesion Fund shall be:

SUB-HEADING 1b)

2007

42911

2008

43360

2009

43892

2010

43872

(Million euros, 2004 prices)

2011

44067

2012

44705

2013

45312

Pursuing the goal of achieving economic and social cohesion in the enlarged Union will

require a level of financial commitment for 2007-2013 of 0.37% of EU-27 GNI.

19.

81.9% of these funds (252,234 million euros) will be allocated to the Convergence objective,

of which 24.4% (61,518 million euros) for the Cohesion Fund and 4.9 %

(12,487 million euros) for the "phasing out" regions and Member States.

15.7% (48,386 million euros) of these funds will be allocated to the Regional competitiveness

and employment objective, of which 21.4% (10,368 million euros) to the "phasing in"

regions.

The Territorial co-operation objective will be allocated 2.4% (7,500 million euros) of these

funds.

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20.

Total transfers from funds supporting cohesion to any Member State, including those funds

transferred to the new Rural development and Fisheries instruments, should not exceed the

percentages of Member States’ GDP set out in paragraph 40 below, in order to pay regard to

the finite capacity of Member States to utilise effectively the resources available.

EFINITION OF THE DIFFERENT OBJECTIVES AND ELIGIBILITY

Definition of the Convergence Objective

21.

The Convergence Objective shall be aimed at speeding up the convergence of the

least-developed regions and Member States.

22.

The regions eligible for funding from the structural funds under this Objective are the current

NUTS

level II regions whose per capita GDP, measured in purchasing power parities and

calculated on the basis of Community figures for the period 2000-2002, is less than 75% of

the EU 25 average.

23.

The Member States eligible for funding from the Cohesion Fund shall be those whose per

capita GNI, measured in purchasing power parities and calculated on the basis of Community

figures for the period 2001-2003, is less than 90% of the EU 25 average and which have a

programme for meeting the economic convergence conditions referred to in Article 104 of the

Treaty.

Definition of the Regional Competitiveness and Employment Objective

24.

This Objective shall be aimed at strengthening regions' competitiveness and attractiveness as

well as employment. The respective contributions of the European Regional Development

Fund (ERDF) and European Social Fund (ESF) shall be fixed by the Member States in

consultation with the Commission.

Nomenclature of Territorial Units for Statistics

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25.

The entire territory of the Community shall be eligible, with the exception of the regions

eligible for funding from the structural funds under the Convergence Objective and the

regions covered by transitional arrangements, subject to the limits set out in paragraph 40.

Definition of the European Territorial Cooperation Objective

26.

This Objective aims at strengthening territorial cooperation at the cross-border, trans-national

and inter-regional levels and at establishing cooperation networks and furthering the exchange

of experience at the appropriate territorial level.

27.

The regions eligible for cross-border cooperation financing shall be all NUTS level III regions

along the internal land borders, certain NUTS level III regions along the external land borders

and all NUTS level III regions along the maritime borders separated, as a general rule, by a

maximum of 150 kms, taking into account potential adjustments needed to ensure the

coherence and continuity of the cooperation action.

28.

The list of eligible trans-national regions will be drawn up by the Commission following close

consultations with Member States.

29.

The entire territory of the Community shall be eligible for the financing of inter-regional

cooperation and cooperation networks and exchange of experience.

LLOCATION METHOD

Allocation method for convergence regions

30.

The specific level of allocations to each Member State should be based on an objective

method and calculated as follows:

Each Member State's allocation is the sum of the allocations for its individual eligible regions,

the latter calculated on the basis of relative regional and national prosperity and the

unemployment rate according to the following steps:

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(i)

determination of an absolute amount (in euros) obtained by multiplying the population

of the region concerned by the difference between that region's GDP per capita (PPS

)

and EU 25 average GDP per capita (PPS);

(ii)

application of a percentage to the above absolute amount in order to determine that

region's financial envelope; this percentage is graduated to reflect the relative

prosperity, as compared to the EU 25 average, of the Member State in which the eligible

region is situated, i.e.:

•

4,25%

for regions in Member States whose level of GNI per capita is

below 82% of the Community average

•

3,36%

for regions in Member States whose level of GNI per capita is

between 82% and 99% of the Community average

•

2,67%

for regions in Member States whose level of GNI per capita is over

99% of the Community average

(iii) to the amount obtained under step (ii) is added, if applicable, an amount resulting from

the allocation of a premium of € 700 per unemployed person, applied to the number of

persons unemployed in that region exceeding the number that would be unemployed if

the average unemployment rate of all the EU convergence regions applied.

31.

The level of funds determined by the application of these parameters will include that part to

be transferred to Heading 2 (cf. paragraph 63).

Purchasing Parity Standard

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Allocation method for the Cohesion Fund

32.

The total theoretical financial envelope is obtained by multiplying average per capita aid

intensity of € 44,7 by the eligible population. Each eligible Member State's

a priori

allocation

of this theoretical financial envelope corresponds to a percentage based on its population,

surface area and national prosperity, and obtained by applying the following steps:

calculation of the arithmetical average of that Member State's population and surface

area shares of the total population and surface area of all the eligible Member States; if,

however, a Member State's share of total population exceeds its share of total surface

area by a factor of 5 or more, reflecting an extremely high population density, only the

share of total population shall be used for this step;

adjustment of the percentage figures so obtained by a coefficient representing one third

of the percentage by which that Member State's GNI per capita (PPS) exceeds or falls

below the average GNI per capita of all the eligible Member States (average expressed

as 100%).

33.

In order to reflect the significant needs of new Member States in terms of transport and

environment infrastructure, the share of the Cohesion Fund will be set at one third of the total

financial allocation (structural funds plus Cohesion Fund) for the new Member States on

average over the period. For the other Member States, their financial envelope results directly

from the allocation method described in paragraph 32.

34.

Member States' eligibility for the Cohesion Fund will be reviewed in 2010 on the basis of data

relating to the EU-25.

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Allocation method for the Regional Competitiveness and Employment Objective

35.

The share of each Member State concerned is the sum of the shares of its eligible regions,

with the latter determined according to the following criteria, weighted as indicated: total

population (weighting 0,5), number of unemployed people in NUTS Level III regions with an

unemployment rate above the group average (weighting 0,2), number of jobs needed to reach

an employment rate of 70% (weighting 0,15), and number of employed people with a low

educational level (weighting 0,10), low population density (weighting 0,05). The shares are

then adjusted according to relative regional prosperity (for each region, increase or decrease

of its total share by +5%/-5% according to whether its GDP per capita is below or above the

average GDP per capita for the group). The share of each Member State shall not however be

less than three-quarters of its share in 2006 of combined funding under Objectives 2 and 3.

Allocation method for the Territorial Cooperation Objective

36.

The allocation of resources between the beneficiary Member States (including the

contribution of the ERDF to the cross-border strand of the European Neighbourhood and

Partnership Instrument and the Instrument for Pre-accession) is determined as follows:

•

for the cross-border component, on the basis of the population of the NUTS level III

regions in terrestrial and maritime border areas, as a share of the total population of all

the eligible regions. Contributions provided from Heading 4 should be allocated

simultaneously;

•

for the transnational component, on the basis of the total population of the Member

State, as a share of the total population of all the Member States concerned.

The shares of the cross-border, transnational and inter-regional cooperation components are

77%, 19% and 4% respectively.

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RANSITIONAL ARRANGEMENTS

37.

In the interest of equity and to allow the process of convergence to be completed, transitional

arrangements will be put in place.

38.

The following categories of region and Member State are concerned:

(a)

the regions which would have been eligible for Convergence objective status had the

eligibility threshold remained at 75% of average EU-15 GDP, but which lose eligibility

because their nominal per capita GDP level will now exceed 75% of the new (lower)

EU-25 average (the so-called "statistical" effect). These regions will be "phased out" of

the Convergence objective;

(b)

the regions currently eligible for full Objective 1 region status which cease to be eligible

in the next financial perspective period because natural growth has brought their per

capita GDP level to over 75% of the EU-15 average, corresponding to over 82,19% of

the new EU-25 average ("growth" effect). These regions will be "phased into" the

Regional competitiveness and employment objective;

(c)

the Member States currently eligible for funding from the Cohesion Fund and which

would have continued to be so had the eligibility threshold remained at 90% of average

EU-15 GNI, but which lose eligibility because their nominal per capita GNI will now

exceed 90% of the new (lower) EU-25 average. These Member States will be "phased

out" of the Cohesion Fund element of the Convergence objective.

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39.

The allocations under these phasing out/in arrangements will result from the application of the

following parameters:

(a)

for the regions defined in paragraph 38 (a), 80% of their individual 2006 per capita aid

intensity level in 2007 and a linear reduction thereafter to reach the national average per

capita aid intensity level for the regional competitiveness and employment objective in

2013. To the allocation thus obtained is added, if applicable, an amount resulting from

the allocation of a premium of € 600 per unemployed person, applied to the number of

persons unemployed in that region exceeding the number that would be unemployed if

the average unemployment rate of all the EU convergence regions applied.

The level of funds determined by the application of these parameters will include that

part to be transferred to Heading 2 (cf. paragraph 63);

(b)

for the regions defined in paragraph 38 (b), 75% of their individual 2006 per capita aid

intensity level in 2007 and a linear reduction thereafter to reach the national average per

capita aid intensity level for the regional competitiveness and employment objective by

2011. To the allocation thus obtained is added, if applicable, an amount resulting from

the allocation of a premium of € 600 per unemployed person, applied to the number of

persons unemployed in that region exceeding the number that would be unemployed if

the average unemployment rate of all the EU convergence regions applied;

(c)

for the Member States defined in paragraph 38 (c) the allocation shall be degressive

over 7 years, with the amount in 2007 being € 1,2 billion, in 2008 € 850 million, in

2009 € 500 million, in 2010 € 250 million, in 2011 € 200 million, in 2012 € 150 million

and in 2013 € 100 million.

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AXIMUM LEVEL OF TRANSFERS FROM FUNDS SUPPORTING COHESION

40.

In order to contribute to the objectives of adequately concentrating cohesion funding on the

least developed regions and Member States and reducing disparities in average per capita aid

intensities resulting from capping, the maximum level of transfer to each individual Member

State shall be as follows:

•

for Member States whose average 2001-2003 per capita GNI (PPS) is under 40% of the

EU-25 average: 3.7893% of their GDP

•

for Member States whose average 2001-2003 per capita GNI (PPS) is equal to or above

40% and below 50% of the EU-25 average: 3.7135% of their GDP

•

for Member States whose average 2001-2003 per capita GNI (PPS) is equal to or above

50% and below 55% of the EU-25 average: 3.6188% of their GDP

•

for Member States whose average 2001-2003 per capita GNI (PPS) is equal to or above

55% and below 60% of the EU-25 average: 3.5240% of their GDP

•

for Member States whose average 2001-2003 per capita GNI (PPS) is equal to or above

60% and below 65% of the EU-25 average: 3.4293% of their GDP

•

for Member States whose average 2001-2003 per capita GNI (PPS) is equal to or above

65% and below 70% of the EU-25 average: 3.3346% of their GDP

•

for Member States whose average 2001-2003 per capita GNI (PPS) is equal to or above

70% and below 75% of the EU-25 average: 3.2398% of their GDP

•

thereafter, the maximum level of transfer is reduced by 0.09 percentage point of GDP

for each increment of 5 percentage points of average 2001-2003 per capita GNI (PPS)

as compared to the EU-25 average.

In the case of Romania and Bulgaria this shall be without prejudice to paragraph 2 above.

In order to reflect the value of the Polish zloty in the reference period, the result of the

application of the cap above for Poland will be multiplied by a coefficient 1.04 for the period

up to the review referred to in paragraph 42 (2007-2009).

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41.

Calculations of GDP by the Commission will be based on the statistics published in

April 2005. Individual national growth rates of GDP for 2007-2013, as projected by the

Commission in April 2005, will be applied for each Member State separately.

42.

If it is established in 2010 that any Member State's cumulated GDP for the years 2007-2009

has diverged by more than ±5% from the cumulated GDP estimated according to

paragraph 41, including as a consequence of exchange rate changes, the amounts allocated for

that period to that Member State pursuant to paragraph 40 will be adjusted accordingly. The

total net effect, whether positive or negative, of these adjustments may not exceed € 3 billion.

In any event, if the net effect is positive, total additional resources shall be limited to the level

of under-spending against the ceilings for category 1B set out in paragraph 18 for the years

2007-10. Final adjustments will be spread in equal proportions over the years 2011-2013.

DDITIONAL PROVISIONS

43.

The methods, definitions and arrangements set out above form the common bedrock for

allocating cohesion funds to the Member States. However, their necessarily general nature

and the impossibility in practice of building in all relevant factors do not allow an adequate

response to a number of objective situations, which accordingly calls for special treatment for

a variety of reasons: the need to take into account revisions of the most recent statistical data,

the disproportionate impact on certain regions and countries of mechanically applying certain

criteria; and exceptional geographic and demographic circumstances. In order to pay full

regard to these different elements in the interests of fairness and balance, the following

additional provisions will be applied when implementing the allocation of cohesion

expenditure.

44.

When in a given Member State the "phasing-out" regions defined in paragraph 38 (a)

represent at least one third of the total population of the regions fully eligible for Objective 1

assistance in 2006, the rates of assistance shall be 80% of their individual 2006 per capita aid

intensity level in 2007, 75% in 2008, 70% in 2009, 65% in 2010, 60% in 2011, 55% in 2012

and 50% in 2013.

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45.

As far as the transitional arrangements under paragraphs 37-39 are concerned, the starting

point in 2007 for those regions which were not eligible for Objective 1 status in the

2000-2006 period, or whose eligibility started in 2004, will be 90% of their theoretical 2006

per capita aid intensity level calculated on the basis of the 1999 Berlin allocation method with

their regional per capita GDP level being assimilated to 75% of the EU 15 average.

46.

Notwithstanding paragraph 40, the Polish NUTS level II regions of Lubelskie, Podkarpackie,

Warmínsko-Mazurskie, Podlaskie and Świętokrzyskie, whose per capita GDP levels (PPS)

are the five lowest in the EU-25, shall benefit from funding from the ERDF over and above

the funding to which they are otherwise eligible. This additional funding will amount to

€ 95 per inhabitant over the period 2007-2013. Any upward adjustment of the amounts

allocated to Poland pursuant to paragraph 42 shall be net of this additional funding.

46bis Notwithstanding paragraph 40, the NUTS level II region of Közép-Magyarország shall be

allocated an additional envelope of €140 million over the period 2007-2013. For this region

the same regulatory provisions would apply as for the region in paragraph 38(a).

46ter Notwithstanding paragraph 40, the NUTS level II region of Prague shall be allocated an

additional envelope of € 200 million over the period 2007-2013.

47.

Recognising that on the basis of revised figures for the period 1997-1999 Cyprus should have

been eligible for Objective 1 in 2004-2006, Cyprus will benefit in 2007–2013 from the

transitional arrangements applicable to the regions defined in paragraph 38 (b), its starting

point in 2007 being established in accordance with paragraph 45.

48.

The NUTS level II regions of Itä-Suomi and Madeira, while keeping the status of phasing-in

regions, will benefit from the financial transitional arrangements laid down in

paragraph 39 (a).

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49.

The NUTS level II region of the Canaries will benefit from an additional envelope of

€ 100 million over the period 2007-2013.

50.

The outermost regions identified in Article 299 of the Treaty and the NUTS level II regions

fulfilling the criteria laid down in Article 2 of Protocol No 6 to the Treaty of Accession of

Austria, Finland and Sweden shall, in view of their specific constraints, benefit from

additional funding from the ERDF. This funding will amount to € 35 per inhabitant per year

and will be in addition to any funding to which these regions are otherwise eligible.

51.

As far as allocations under the Territorial Cooperation Objective are concerned, aid intensity

for regions along the former external terrestrial borders between the EU-15 and the EU-12

and between the EU-25 and the EU-2 will be 50% higher than for the other regions

concerned.

52.

In recognition of the special effort for the peace process in Northern Ireland, a total of

€ 200 million will be allocated for the PEACE Programme for the period 2007-2013. This

programme will be implemented in full respect of additionality of structural fund

interventions.

53.

The Swedish regions falling under the Regional Competitiveness and Employment Objective

shall be allocated an additional ERDF envelope of € 150 million.

53bis Notwithstanding paragraph 40, Estonia and Latvia, which represent single NUTS II regions,

shall be allocated additional funding of € 35 per capita over the period 2007-2013.

54.

The Austrian regions falling under the Regional Competitiveness and Employment Objective

situated on the former external borders of the EU shall be allocated an additional ERDF

envelope of € 150 million. Bavaria shall be allocated a similar additional envelope of €100

million.

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54bis Spain shall benefit from an additional allocation of € 2.0 billion under the European Regional

Development Fund, to enhance research and development by and for the benefit of enterprises

as set out in articles 4.1 and 5.1 of the ERDF regulation. The indicative split shall be 75% for

convergence objective regions (of which 5% for phasing-out regions) and 25% for

competitiveness objective regions (of which 15% for phasing-in regions). These percentages

may subsequently be amended at the initiative of Spain at any point before the adoption of the

Structural Funds General Regulation.

54ter Ceuta and Melilla shall be allocated an additional ERDF envelope of € 50m over the period

2007-2013.

54quater Italy will be allocated an additional envelope of EUR 1.9 bn under the Structural Funds

as follows: EUR 1.71 bn for the regions eligible under paragraph 22, EUR 57 m for the

region eligible under paragraph 38(a), and EUR 133 m for the regional eligible under

paragraph 38(b).

54quinto In recognition of the particular circumstances of Corsica (30) and Hainaut français (70),

France shall receive an additional allocation of €100m over the period 2007-13 under the

regional competitiveness and employment objective.

54sexto An additional allocation of EUR 300m shall be allocated to the Eastern Länder of Germany

which are eligible for support under the Convergence objective, of which EUR 78m shall

be allocated to regions eligible for support under paragraph 38(a).

FINANCING RATES

55.

The ceilings for the contributions from the Structural and Cohesion Funds shall be those laid

down in Articles 51 and 52 of the Commission's proposal of 16 July 2004 for a Council

Regulation laying down general provisions on the ERDF, ESF and Cohesion Fund, except

that:

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−

for Member States whose average per capita GDP from 2001 to 2003 was below 85% of

the EU25 average, the ceiling for the rate of contribution by the ERDF or ESF for all

operational programmes shall be 85%;

−

in the other Member States eligible for the Cohesion Fund on 1 January 2007, the ceiling

for the standard rate of contribution by the ERDF or ESF under operational programmes

in regions eligible under the Convergence objective, and in regions eligible for funding

under the phasing-in according to paragraph 38 (b), shall be 80%.

The contribution from the Funds for all operational programmes for Member States whose

average per capita GDP from 2001 to 2003 was below 85% of the EU 25 average, together

with operational programmes in the Eastern Länder of Germany eligible for support under the

Convergence objective, shall be calculated in reference to the total eligible cost (public and

private).

DVANCE PAYMENTS

56.

Advance payments for each Member State shall not exceed the following percentages of its

overall cohesion envelope for the 2007-2013 period:

2007

•

For the structural funds

– EU 15 Member States

– EU 10 Member States, Bulgaria and Romania

2008

2009

•

For the Cohesion Fund

– EU 15 Member States

– EU 10 Member States, Bulgaria and Romania

2,5%

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THER REGULATORY PROVISIONS

57.

For Member States whose average per capita GDP between 2001 and 2003 was below 85% of

the EU25 average, non-reimbursable VAT shall count as eligible expenditure for the purpose

of calculating the contribution from the Funds. For all other Member States, the provisions

governing the eligibility of non-reimbursable VAT shall be as follows: VAT shall not, in

general, be eligible for co-financing. However, an exception shall be made for non-

recoverable VAT when it is genuinely and definitively borne by beneficiaries other than non

taxable persons foreseen at Article 4(5), 1

subparagraph of the 6

Council VAT Directive

(States, regional and local government authorities and other bodies governed by public law).

58.

The automatic decommitment rule ("n+2") shall apply as set out in Article 92 of the

Commission's proposal of 16 July 2004, for a Council Regulation laying down general

provisions on the ERDF, ESF, and Cohesion Fund, except that for Member States whose

average per capita GDP from 2001 to 2003 was below 85% of the EU25 average the "n+2"

rule shall be replaced with an "n+3" automatic de-commitment rule for the period 2007 to

2010 only.

59.

The ERDF may also contribute to the financing of housing projects in the EU10, Romania

and Bulgaria. The modalities for such support shall be laid down in a Regulation of the

Council and the European Parliament on the basis of a proposal from the Commission.

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HEADING 2 – PRESERVATION AND MANAGEMENT OF NATURAL RESOURCES

60.

Commitment appropriations for this Heading, which is intended to cover agriculture, rural

development, fisheries and a new financial instrument for the environment, and which include

those funds transferred from sub-Heading 1b), should not exceed the following level:

HEADING 2

2007

of which

Agriculture -

Market-related

expenditure and

direct payments

61.

2008

2009

(Million euros, 2004 prices)

2010

2011

2012

2013

43,120

42,697

42,279

41,864

41,453

41,047

40,645

The amounts for market-related expenditure and direct payments correspond to those agreed

at the October 2002 European Council, expressed in 2004 constant prices. These constitute a

ceiling and also include the sums which, according to modulation arrangements

, will be

transferred to and disbursed under the new Rural Development instrument.

62.

At their discretion, Member States may transfer additional sums from within this ceiling to

rural development programmes up to a maximum of 20% of the amounts that accrue to them

from market related expenditure and direct payments. The European Council invites the

Council, on the basis of a proposal from the Commission, to establish the modalities which

will govern such transfers. Sums transferred to support rural development measures pursuant

to such arrangements shall not be subject to the national co-financing and minimum spending

per axes rules set out in the Rural Development Regulation

Including those equivalent arrangements covering the cotton and tobacco sectors and

additional voluntary modulation at the discretion of individual Member States.

Regulation 1698/2005

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63.

The allocation for the new Rural Development instrument, consisting essentially of amounts

transferred from the funds supporting the regional component of the Convergence objective

and amounts currently disbursed under the guarantee section of the EAGGF, will be

€ 69.25 billion before modulation, of which € 40.73 billion is currently disbursed under the

guarantee section of the EAGGF. The Commission will allocate total Rural Development

expenditure, including transfers from the EAGGF, and will ensure that at least € 33.01 billion

is allocated to the EU10, Bulgaria and Romania. Of the remaining € 36.24 billion,

€ 18.91 billion shall be allocated to the EU15 according to a key to be proposed by the

Commission and agreed by the Council in line with the Rural Development Regulation

(1698/2005) adopted on 20 September 2005, and the other € 3.57 billion will be allocated to

Austria (€ 1.35 billion), Finland (€ 0.46 billion), Ireland (€ 0.50 billion), Luxembourg

(€20 million), France (€0.1 billion) Sweden (€ 0.82 billion), and owing to the specific

difficulties of Portuguese agriculture outlined in the European Council conclusions on the

Commission's report on Portuguese Agriculture (doc. 10859/03 AGRI 213) Portugal

(€ 0.32 billion) not subject to the national cofinancing rules.

64.

The allocation for the new Fisheries instrument, consisting of amounts transferred from the

funds supporting the regional component of the Convergence objective and the Regional

Competitiveness and Employment objective, will be € 3.8 billion.

65.

The amounts transferred to the Rural Development and Fisheries instruments from the funds

supporting the regional component of the Convergence objective have been determined by

each Member State after consultation with the Commission, drawing on the historical

percentages of expenditure in these areas during the period 2000-2006 (2004-2006 for the

new Member States) as a reference point. They will not be subject to reallocation.

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HEADING 3A) – FREEDOM, SECURITY AND JUSTICE

66.

The area of Freedom, Security and Justice covers a range of issues which relate specifically to

the protection and rights of individual citizens. It includes the framing of a common policy on

asylum, immigration and border control, taking a more effective, joint approach to

cross-border problems such as illegal immigration and trafficking in and smuggling of human

beings, as well as to terrorism and organised crime, promoting fundamental rights and

developing judicial cooperation in civil and criminal matters. It is a sector certain to continue

to grow in importance in support of action by the Member States. The level of commitments,

which represents 15% annual real growth compared to 2006, should not exceed:

SUB-HEADING 3a)

2007

600

2008

690

2009

790

2010

910

2011

1,050

(Million euros, 2004 prices)

2012

1,200

2013

1,390

HEADING 3B) – OTHER INTERNAL POLICIES

67.

A number of other actions concern in particular culture, youth, audiovisual matters and health

and consumer protection, areas where the Union has a role as a catalyst for action by Member

States. The level of commitments, which represents stabilisation at levels 1% higher in real

terms throughout the period covered by the Financial Perspective as compared to 2006,

should not exceed:

SUB-HEADING 3b)

2007

520

2008

520

2009

520

2010

520

2011

520

(Million euros, 2004 prices)

2012

520

2013

520

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HEADING 4 – THE EU AS A GLOBAL PARTNER

68.

The Union is a global player, with a wide range of instruments as its disposal. It needs to be

ready to share in the responsibility for helping to reduce global poverty, including by

contributing to the achievement of the Millennium Development Goals, and to improve global

security, and to have adequate funding to enable it to do so. The Union's external actions and

policies are covered by Heading 4 and grouped in the main under the following instruments:

Pre-accession, Stability, Development Cooperation and Economic Cooperation, European

neighbourhood and partnership, Humanitarian aid and Macrofinancial assistance. The level

of commitments, which represents close to 4,5% annual real growth compared to 2006,

should not exceed:

HEADING 4

2007

6280

2008

6550

2009

6830

2010

7120

(Million euros, 2004 prices)

2011

7420

2012

7740

2013

8070

69.

On the basis of these levels of commitments, and noting the indicative figures proposed by the

Commission for each of the objectives under this Heading, the European Council invites the

Council, together with the European Parliament as appropriate, to come to a timely agreement

through the legislative procedure on the content and appropriate funding of each of the four

proposed new instruments falling under this Heading in the light of the various priorities

expressed by the Member States.

70.

Cooperation with the ACP countries will be allocated € 22,682 million in current prices for

the period 2008-2013 under the existing inter-governmental European Development Fund

framework. This amount is separate from the figures contained in the above table. The

contribution key for financing this amount is as set out in Annex I.

71.

The emergency aid reserve and the provisioning of the loan guarantee fund will be financed

through Heading 4. The emergency aid reserve will be fixed at a level of € 221 million and

should be adequately ring-fenced. The provisioning of the loan guarantee fund will be

adequately funded as foreseen in the related legislative mechanism.

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72.

The Union should aim to ensure over the period 2007-2013 that at least 90% of its overall

external assistance be counted as official development assistance according to the present

DAC definition. In addition, the Union should ensure that the relevant conclusions of the

Council (GAERC) of 21-22 November 2005 on EU official development assistance are taken

into account in allocating such assistance between beneficiary countries.

73.

The European Council calls upon the Budgetary Authority to ensure a substantial increase in

the Common Foreign and Security Policy budget from 2007 in order to meet real predictable

needs, assessed on the basis of forecasts drawn up annually by the Council, together with a

reasonable margin for unforeseen activities.

HEADING 5 – ADMINISTRATION

74.

Taking account of the objective factors determining the current level of administrative

expenditure, expenditure related to enlargement, increased operational activity and the effect

of the new Statute, and savings made possible through efficiency gains and economies of

scale, the level of commitments for the Union's administrative expenditure should not exceed:

HEADING 5

2007

6720

2008

6900

2009

7050

2010

7180

(Million euros, 2004 prices)

2011

7320

2012

7450

2013

7680

75.

This Heading will, without prejudice to the Activity-Based Budgeting approach now used in

establishing the annual budget, lay down the ceiling for the administrative expenditure of all

the Institutions. The principle of budgetary discipline shall apply equally to all the

institutions.

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PART II

REVENUE

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RESOURCES

76.

The ceilings for own resources will be maintained at their current levels of 1,31% of EU GNI

for appropriations for commitments and 1,24% of EU GNI for appropriations for payments.

77.

The own resources arrangements should be guided by the overall objective of equity. These

arrangements should therefore ensure, in line with the relevant conclusions of the 1984

Fontainebleau European Council, that no Member State sustains a budgetary burden which is

excessive in relation to its relative prosperity. These arrangements should accordingly

introduce provisions covering specific Member States.

Changes to the Own Resources Decision

78.

The Own Resources Decision and the accompanying Working Methods paper shall be

modified so that the ratification process for the Own Resources Decision can be completed by

all Member States to allow entry into force from no later than the beginning of 2009 and in

order to introduce the changes below. These changes shall take effect from 1 January 2007,

and will be applied retroactively if necessary:

(a)

the rate of call (in effect the "uniform rate") of the VAT resource shall be fixed

at 0,30%;

(b)

for the period 2007-13 only, the rate of call of the VAT resource for Austria shall be

fixed at 0.225%, for Germany at 0,15% and for the Netherlands and Sweden at 0,10%;

(c)

for the period 2007-13 only, the Netherlands will benefit from a gross reduction in its

annual GNI contribution of € 605 million. Sweden will benefit from a gross reduction

in its annual GNI contribution of € 150 million over the same period;

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(d)

The UK budgetary correction mechanism (the UK abatement) shall remain, along with

the reduced contribution to the financing of the abatement benefiting Germany, Austria,

Sweden and the Netherlands, as agreed at the 1999 Berlin European Council. The UK

abatement remains in full on all expenditure except in relation to the new Member

States as set out below.

Starting in 2013 at the latest, the UK shall fully participate in the financing of

enlargement costs for countries which have acceded after 30 April 2004 except for CAP

market expenditure

. To this end the UK budgetary mechanism shall be adjusted by

progressively reducing the total allocated expenditure in line with the modalities in

Annex II.

During the period 2007-2013 the additional contribution from the UK shall not be

higher than 10.5 billion euro, in comparison with the application of the current Own

Resources Decision.

In case of future enlargement the additional contribution referred to above will be

adjusted accordingly (except for Romania and Bulgaria).

Direct payments and market-related expenditure as well as that part of rural development

expenditure originating from the EAGGF guarantee section.

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PART III

REVIEW

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REVIEW

79.

Europeans are living through an era of accelerating change and upheaval. The increasing

pace of globalisation and rapid technological change continues to offer new opportunities and

present new challenges. Against this background, the European Council agrees that the EU

should carry out a comprehensive reassessment of the financial framework, covering both

revenue and expenditure, to sustain modernisation and to enhance it, on an ongoing basis.

80.

The European Council therefore invites the Commission to undertake a full, wide ranging

review covering all aspects of EU spending, including the CAP, and of resources, including

the UK rebate, to report in 2008/9. On the basis of such a review, the European Council can

take decisions on all the subjects covered by the review. The review will also be taken into

account in the preparatory work on the following Financial Perspective.

________________________

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ANNEX I

Cooperation with the ACP countries

contribution key

Belgium

Bulgaria

Czech Republic

Denmark

Germany

Estonia

Greece

Spain

France

Ireland

Italy

Cyprus

Latvia

Lithuania

Luxembourg

Hungary

Malta

Netherlands

Austria

Poland

Portugal

Romania

Slovenia

Slovakia

Finland

Sweden

United Kingdom

3,53

0,14

0,51

2,00

20,50

0,05

1,47

7,85

19,55

0,91

12,86

0,09

0,07

0,12

0,27

0,55

0,03

4,85

2,41

1,30

1,15

0,37

0,18

0,21

1,47

2,74

14,82

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ANNEX II

THE MODALITIES FOR ADJUSTING THE CALCULATION

OF THE UK ABATEMENT

The calculation of the UK abatement shall be adjusted through a progressive percentage reduction,

as set out below, of the total allocated expenditure in Member States which have acceded after 30

April 2004, except for CAP market expenditure as defined in the footnote to paragraph 77(d).

Percentage reduction

2007

2008

2009

2010

2011

2012

2013

100

The provisions of Article 4(f) of the Own Resources Decision shall cease to apply at the end of

2013.