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FINANCIAL PERSPECTIVES 2007-2013

The Commission proposals and the course of negotiations

Financial planning structures and specialises the various operational aspects of the Commission’s main target policies and reserves the required funds to achieve these targets.

The Commission proposals for the period commencing on 1 January 2007 and ending on 31 December 2013 were presented on 10 February 2004. The proposals divide expenditure into five headings:

1.   Sustainable development (€477.6 bn)

1a. Competitiveness for growth and employment (€132.8 bn)

1b. Cohesion for growth and employment (€344.9 bn). This heading is further divided into “Convergence”, for regions whose GDP per capita is less than 75% of the Community average, “Regional Competitiveness” and “European territorial co-operation”.

2.   Sustainable management and protection of natural resources (€404.6 bn)

      οf which €301.1 bn is allocated to agriculture – expenditure on purchases and direct payments

3.   Citizenship, freedom, security and justice (€18.5 bn)

4.   The EU as a global partner (€95.6 bn)

5.   Administration (€28.6 bn)

Based on the proposal, the ceiling for own resources is 1.24% of gross national income (GNI). Legal commitments amount to 1.26% of the Community GNI, while payments reach 1.14%. These limits have been questioned by some Member States, particularly by six net contributors, who have requested a drastic budgetary reduction (to 1% of the Community GNI in commitment appropriations).

Where Greece is concerned, negotiations are particularly focused on sub-heading 1b – Cohesion – (proposed increase: 33.6%) and, in part, on the CAP section regarding rural development. It is worth mentioning that the increase of heading 1a, which reflects the political will to support the Lisbon policy, is substantially higher than in other budget items (194%). Furthermore, an agreement on the new CAP (excepting Agricultural Development) was already reached in October 2002 and thus this field is likely to remain unchanged. Consequently, a reduction in total budget might have a serious impact on the resources that will be allocated for Cohesion.

For the first time, Greek regions will not come all under the Cohesion objective, but will also belong in two transitional categories: at least two regions, Central Greece and the Southern Aegean, will be in the natural phasing-out (phasing in) category, under the Regional Competitiveness and Employment objective (former objective 2). Moreover, depending on which three-year period will be taken into consideration in order to determine eligibility, at least 3 regions (of which Attica will be one) are included in the Cohesion objective phasing-out category (regions subject to statistical convergence, since they experience a statistical increase in the relative GDP per capita due to enlargement).

The position of Greece in the negotiations

Greece believes that the Commission’s proposal regarding Financial Perspectives for the period 2007-13 forms a satisfactory basis for negotiations. The proposal is justly seen by the Commission as the least that can be done to maintain the reliability of the European policies, data and needs stemming from enlargement.

Key points for Greece in the negotiations are as follows:

1)   The budget level of 1.26% of the EU GNI should be maintained. This is vital in order for the EU to be able to implement its policies and meet the new requirements arising from enlargement and from the need to face the challenges of the international competitive environment.

2)   0.41% of the Community GNI must be allocated to cohesion in order for the implementation of EU 25 structural policies to continue smoothly. The cost of enlargement should be fairly divided among all Member States.

3)   The funding limit of 4% of national GDP should be maintained. Past experience has shown that in practice this limit has not been exceeded. A larger percentage entails risks for financial stability.

4)   In the new programming period, resources must be distributed in such a way so as to ensure adequate transitional support for the following regional categories:

a.   Regions subject to statistical effect. These regions have not undergone any actual change but are statistically affected due to enlargement. Consequently, it is imperative that the phasing out status be strongly supported (close to full convergence levels).

b.   Phase-in regions. In these regions there is a natural progression out of the favourable status of the cohesion objective. They should still receive adequate funding during the next period in order to prevent the negative impact that an abrupt cut in aid could have given the overall EU budget squeeze.

5)  We support the Commission’s proposal on territorial co-operation and on the Cohesion Fund.

6)   The resources for the enhancement of European competitiveness (heading 1a) should be distributed in such a way so as to enable all EU Member States to participate satisfactorily in practice.

7)   The calculations regarding the distribution of resources should be carried out on the basis of the EU 25 (in other words without Bulgaria and Romania).

8)   There is not much room for negotiation in headings 2, 3, 4 and 5 with respect to the resources that Greece could gain, given that discussion on the CAP (heading 2) has ended and that the management of resources pertaining to headings 3, 4 and 5 will mainly be undertaken by the Commission.

 The course of negotiations

Luxemburg Presidency (1/1/-30/6/05) is looking to reach a political agreement on financial planning for 2007-2013 in June 2005. Drawing on the experience of the Agenda 2000 negotiations, the Presidency has chosen the “negotiating Box’ as its negotiating tool, considering that the ‘box’ is central to achieving the objective agreed by the European Council in December 2004 of reaching political agreement by June 2005.

Up to now the presidency has produced three versions of the Negotiating Box: all versions set out a series of potential adjustments to the Commission Proposal: These concern both the overall budget parameters and individual elements of policy.

Key features of last version submitted on May 20 are as follows: overall commitments estimates range between 1.07 and 1.12 percent of EU GNI, some way above the one percent limit proposed by the six net payers but below the 1.25 percent proposed by the Commission. The most significant reduction of all headings lies with Heading 1A (competitiveness and employment). Suggested commitments allocations for Heading 1b (Cohesion) lie between 0.37-0.38 percent of EU GNI. Reductions under heading 2 are limited to Rural Development, following the agreement reached at the European Council in October 2002. Small cutbacks are foreseen for all other headings.

Proposed changes under this heading are likely to affect the Greek Cohesion envelope, namely modifications introduced to Berlin formula, reduction to cohesion fund allocations or provisions transitional arrangements, less beneficial than in the previous versions.

The pursuit of a compromise proposal during Luxembourg’s presidency should not place the basic principles for the implementation of European policies, and particularly the social and economic cohesion policy, at risk.