EU BUDGET: COUNCIL AND PARLIAMENT REACH AGREEMENT ON FINANCIAL REGULATION.

The Financial Regulation is the principal legal instrument framing all aspects of the Budget: presentation, execution, control by the Court of Auditors, discharge and the definition of the roles and responsibilities of the various players. The current Financial Regulation, adopted on December 21, 1977, has since been modified ten or so times, but a complete overhaul of the text has now become both a technical necessity, in the context of the internal administrative reform of the Commission, and a political imperative, in the light of the revelations that led to the downfall of the previous European Commission in 1999.Discussions leading to the agreement with Parliament focussed on the following points:- The creation of a specific Amending Budget, by virtue of which, the European Commission, at the beginning of each year, would propose to reimburse sums not used over the previous budgetary exercise to the Member States. Scope for this already exists in practice, the SAB 2/2002 being a perfect illustration, but the formula is henceforth institutionalised, providing that Parliament cannot amend this type of Amending Budget. In compensation, Parliament has secured the full maintenance of its right of amendment regarding other Supplementary and Amending Budgets with the Council agreeing to forego use of its veto.- Authorisation for Parliament, in the context of budgetary procedure and in respect of all spending, to transfer funds to a reserve. Parliament has in the past exercised this right empirically, generally on the first reading of the Draft Budget, with a view to influencing the Council's subsequent vote in second reading. The new Financial Regulation fully recognises this procedural option, which the Council has always challenged.- Implementation of the principle of "flexibility" in budgetary management, giving the Parliament and Council an equal say on the scope for transfers which the Commission can introduce in the course of a budgetary year, affecting budget lines within a single heading - i.e. excluding all modification of the medium-term financial perspective by heading - within a limit of 10% of the credits allocated to the budget line being reduced.- Parliament, the Council foregoing its right of veto, will be able to amend all spending in favour of Community agencies, thanks to a comprehensive say on their organisation and functioning.The principal points debated by the Council's Budgets Committee, before receiving the...

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