First reading of draft 2006 EU budget Council of Finance Ministers

July 15, 2005

Brussels, 14 July 2005

The EU’s Council of Finance ministers are meeting in Brussels on 15th July at 10.00 a.m. for the first reading of the 2006 draft budget. At 11.00 a.m. representatives from the European Parliament will join them for the conciliation meeting. The Council will also discuss two amendments to the 2005 budget – aid to tsunami reconstruction (3/2005) and the Solidarity Fund for Slovakia (5/2005) - and transferring funding from direct payments to farmers to finance rural development. The Commission will be represented by Dalia Grybauskaité, Commissioner for Financial Programming and Budget.

First reading of draft 2006 EU budget

The first reading is based on the Commission’s proposal presented on April 2005 ( IP/05/489 ). The Commission has proposed €112.6 billion in payments for 2006, which is equal to 1.02% of the Gross National Income (GNI) of EU-25 and a 5.9% increase on the 2005 budget. In commitments the Commission has proposed €121.3 billion, 1.09% of EU GNI, and an increase of 4% on 2005.

The ceilings proposed by the Commission are the minimum required to meet the EU’s political and financial commitments for 2006. This will be the last budget under the current Financial Framework, and therefore part of it is dedicated to completion of ongoing projects. Despite this, over one third of the resources would be aimed at future challenges, such as stimulating economic growth and creating more and better jobs

The Council normally proposes large cuts in the first reading, and in recent years it has attempted to limit payments to 1% of Union GNI. This year is no exception. The Presidency has proposed a cut of €1 146 million t from the 2006 Commission proposal, fixing the payments at 1.01% of GNI.

Instead of cutting back hard on payments in agriculture and structural actions as in the past, the Council this year is proposing to make deep cuts, in particular in internal policies. Here the Council suggests cutting €516 million on activities that will stimulate economic growth and create jobs, which Member States, and especially the UK Presidency, underline as the key priorities. The reduction represents over half of the rise in payments proposed by the Commission.

A severe cut of €429 million is foreseen for research, one of the most forward-looking policies. The UK Presidency stresses that Europe must invest to face “the biggest shift in the balance of global production and services the world has ever seen” – yet the Council suggests slashing finance needed to promote the information society and make the Union more competitive.

On external policy the Council proposes to cut €83 million in payments. The proposal contradicts the conclusions of the General Affairs Council in January where the Council agreed that the reconstruction of tsunami-hit regions in Asia should not undermine the Millennium Development Goals.

On pre-accession programmes the Council proposes a cut of €1 million and €120 million less on administrative costs. The cut in administrative costs is three times larger than last year, which would end recruitment for 2006 altogether, including the engagement of Commission staff from the new Member States.

Summary of 2006 draft budget proposal for discussion in ECOFIN

Payments in million € Commission proposal for a Preliminary Draft Budget 2006 Possible Council 1st reading changes Result 1a Agriculture 43 641 -150 43 491 1b Rural Development 7 711
7 711 2 Structural Actions 35 640 -150 35 490 3 Internal Policies 8 836 -516 8 320 4 External Actions 5 357 -83 5 5 5 Administration 6 698 -120 6 578 6 Reserves 458
458 7 Pre-Accession Strategy 3 152 -1 3 025 8 Compensation 1 074
1 074

Total

112 567

-1 146

111 421



In% of EU 25 GNI 1.02%
1.01% Commintments in million € Commission proposal for a Preliminary Draft Budget 2006 Possible Council 1st reading changes Result 1a Agriculture 43 641 -150 43 491 1b Rural Development 7 771
7 771 2 Structural Actions 44 555
44 555 3 Internal Policies 9 218 -43 9 175 4 External Actions 5 393 -165 5 2 5 Administration 6 698 -120 6 578 6 Reserves 458
458 7 Pre-Accession Strategy 2 481
2 481 8 Compensation 1 074
1 074

Total

121 288

-478

120 810 In% of EU 25 GNI 1.09%
1.09%

For more information about the draft budget 2006 also see:

MEMO/05/141

http://europa.eu.int/comm/budget/infos/publications_en.htm

http://europa.eu.int/comm/budget/pdf/news/budget_2006_slides.pdf

Aid to tsunami reconstruction

In the beginning of this year, the Commission, together with the Council and the European Parliament pledged €473 million for the victims of the Asian Tsunami in 2005 and 2006. €350 million of this should be earmarked for long-term reconstruction under the Commission proposal - €123 million has already been made available as emergency aid.

In order to deliver on this commitment the Commission in April proposed €98 million in fresh funds in an amending budget for 2005. €72 million will be financed by the budget for Asia (€60 million) and by the Rapid Reaction Mechanism (€12 million). An additional €180 million is needed to fulfil the last phase of reconstruction and this amount is proposed in the budget for 2006 ( IP/05/490 )

In 2005, the Council wishes to mobilise no more than €15 million for tsunami reconstruction through the flexibility instrument, compared to €98 million sought by the Commission and the European Parliament.

Commissioner Grybauskaité has proposed the mobilisation of the emergency aid reserve for a further amount, to find a compromise between the Council and Parliament.

It seems likely there will be a compromise agreement during the ECOFIN on Friday.

Solidarity Fund for Slovakia

In June, the Commission proposed an amending budget providing EU Solidarity Fund aid to Slovakia for severe storm damage suffered in November 2004. Following a Slovak request for such funding in January 2005, the Commission proposed €5.67 million to help with the costs of reconstruction. ( IP/05/671 )

It seems likely there will be an agreement during the ECOFIN on Friday.

Financing rural development

CAP reform adopted by the Council in September 2003 foresees a reduction in direct payments ("modulation") to finance rural development policy.

In 2006 direct aid to farmers shall be reduced by 3% (4% in 2007 and 5% from 2008 onwards). The net transfer of €655 million will be made available as additional Community support for rural development.

The transfer is only possible if the financial perspective is revised – this must happen before the Council decides on its Draft Budget in July.

The budgetary authority agreed at the trialogue on July 11 to proceed with a limited revision of the Financial Perspective in order to facilitate modulation, as proposed by the Commission.

Item source: MEMO/05/253 Date: 14/07/2005 Previous Item Back to Titles Print Item

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