Interinstitutional Agreement on cooperation in budgetary matters

The Interinstitutional Agreement on budgetary discipline and sound financial management, concluded between the European Parliament, the Council and the Commission on 17 May 2006, contains the financial framework for 2007-13 and aims to implement budgetary discipline. Its purpose is also to improve the functioning of the annual budgetary procedure and cooperation between the institutions in budgetary matters.

ACT

Interinstitutional Agreement between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management [See amending acts].

SUMMARY

The Agreement on budgetary discipline and sound financial management (IIA) was concluded between the European Parliament, the Council and the Commission. It concerns the drafting and implemention of the European Union (EU) budget. Through this agreement, the European institutions have decided to organise their cooperation in order to improve the functioning of the budgetary procedure and to ensure the sound financial management of European finances.

The IIA comprises three sections:

• Part I establishes the financial framework for the 2007-2013 period, specifically the amounts of expenditure for each policy area;
• Part II organises the cooperation between the Parliament, the Council and the Commission during the budgetary procedure;
• Part III establishes the rules aimed at ensuring sound financial management of EU funds.

Financial framework 2007-2013

The financial framework is intended to ensure that EU expenditure develops in an orderly manner for a given period. For each of the years from 2007 to 2013, the financial framework sets ceilings for each category of expenditure. The European institutions undertake to use their budgetary powers in such a way as to comply with these ceilings.

The financial framework table for the 2007-2013 period is provided in Annex I to the IIA. The ceilings are set within the limits of the EU’s own resources.

Furthermore, the financial framework may be subject to technical adjustments by the Commission. For example, these adjustments consist of revaluations of the ceilings depending on price development and the conditions of implementation of the budget.

The financial framework may also be subject to revision in response to any initially unforeseen circumstances, with due regard to the own resources ceiling. Any Commission proposal for such revision should be presented and adopted before the start of the budget procedure of the financial year (or the first of the series of financial years) concerned.

Furthermore, the IIA lays down rules for mobilising certain instruments outside of the financial framework:

• Emergency aid reserve: this reserve is designed to respond to the specific aid requirements of third countries following events which could not be foreseen when the budget was established. The annual amount of the reserve is fixed at EUR 221 million for the duration of the financial framework;
• Solidarity Fund: the EU Solidarity Fund is intended to allow swift financial assistance in the event of major disasters occurring on the territory of a Member State or of a candidate country. There will be a ceiling on the annual amount available for the Solidarity Fund of EUR 1 billion;
• Flexibility instrument: the flexibility instrument with an annual ceiling of EUR 200 million is intended to allow financing of expenditure which could not be financed within the limits of the ceilings available for one or more other headings;
• European Globalisation Adjustment Fund: the European Globalisation Adjustment Fund is intended to provide additional support for workers suffering from the consequences of major structural changes in world trade patterns, to assist them with their reintegration into the labour market. The maximum annual amount allocated to the Fund is EUR 500 million.

Interinstitutional cooperation during the budgetary procedure

The Interinstitutional Agreement lays down the procedures and details for interinstitutional cooperation in budgetary matters as regards:

• establishing the budget;
• classifying expenditure;
• the maximum rate of increase for non-compulsory expenditure in the absence of a financial framework;
• incorporating financial provisions into legislative acts;
• expenditure related to fisheries agreements;
• financing the common foreign and security policy (CFSP).

Sound financial management

The institutions shall ensure that this Agreement and the budget are implemented in a context of sound financial management based on the principles of economy, efficiency, protection of financial interests, proportionality of administrative costs, and user-friendly procedures.

Furthermore, the Commission will submit twice a year a financial programme structured by heading, policy area and budget line. This financial programme shall be closely connected to the Commission’s legislative programme.

Furthermore, the Parliament, the Council and the Commission commit to strengthening internal control without adding to the administrative burden. The Institutions plan to include provisions to this end in the legislative acts concerned.

Finally, the Institutions also commit to encouraging the introduction of co-financing mechanisms based on public and private investment. The aim is to take advantage of the leverage effect of the EU budget.

Context

The Lisbon Treaty, which entered into force on 1 December 2009, introduced new provisions relating to the EU budget.

Article 312 of the Treaty on the Functioning of the EU specifies that the multi-annual financial framework shall henceforth be the subject of a Council Regulation, adopted unanimously and following approval by the Parliament.

Furthermore, the procedure for adopting the budget has also been revised. The role of the Parliament in particular has been strengthened and the distinction between compulsory and non-compulsory expenditure has been removed.

The changes introduced by the Lisbon Treaty therefore require the current interinstitutional agreement to be revised. Two legislative proposals are currently being adopted at European level:

• Proposal for a Council Regulation laying down the multiannual financial framework for the years 2007-2013;
• a draft interinstitutional agreement between the European Parliament, the Council and the Commission on cooperation in budgetary matters.

REFERENCES

See also

Further information on the European Commission website

Last updated: 24.04.2012