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Financial perspectives system and the multiannual financial framework

Financial perspectives system and the multiannual financial framework

Outline of the Community (European Union) legislation about Financial perspectives system and the multiannual financial framework


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Financial perspectives system and the multiannual financial framework


The political and institutional balance of the Community’s system of finance gradually was marked by ever-increasing strains in the 1980s. The conflict between the two arms of the budgetary authority (the European Parliament and the Council) meant that the annual budgetary procedure became increasingly difficult to administer and resulted in budgetary imbalances and a growing mismatch between Community resources and requirements. This prompted the Community to introduce a system designed to improve the budgetary procedure.

Through an interinstitutional agreement (IIA), the European Parliament, the Council and the Commission agree in advance on the main budgetary priorities for a period covering a number of years. These budgetary priorities establish a framework for Community expenditure (the multiannual financial framework) in the shape of a financial perspective. The system of financial perspectives thus improves the budgetary procedure whilst ensuring budgetary discipline. The multiannual financial framework is not mentioned in the treaties.

Financial perspective and multiannual financial framework: a means of ensuring budgetary discipline

The multiannual financial framework indicates the maximum amount and the composition of foreseeable Community expenditure. The first Interinstitutional Agreement was concluded in 1988 for the application of the 1988-92 financial perspective (Delors I package), which was intended to provide the resources needed for the budgetary implementation of the Single European Act. Since then, the financial perspectives have been updated in 1992 for the period 1993-99 (Delors II package), in 1999 for the period 2000-06 (” Agenda 2000 “) and in 2006 for the period 2007-13.

The purpose of the financial perspective is therefore to strengthen budgetary discipline, to keep the total increase in expenditure under control and to ensure that the procedure runs smoothly. The multiannual financial framework imposes a dual ceiling on expenditure: one for total expenditure and one for each category of expenditure.

Structure of the mutiannual financial framework

For each programming period, the multiannual financial framework determines “ceilings” (the maximum amounts of commitment appropriations and payment appropriations) per “heading” (the categories of expenditure) for each year. The annual budgetary procedure determines the exact level of expenditure and the breakdown between the various budget lines for the year in question.

The expenditure allocated to each heading is based on the Union’s political priorities for the period in question. The structure of the multiannual financial framework for 2007-13 is as follows:

1. Sustainable growth
1 a. Competitiveness for growth and employment
1 b. Cohesion for growth and employment
2. Conservation and management of natural resources (including market expenditure and direct payments)
3. Citizenship, freedom, security and justice
3 a. Freedom, security and justice
3 b. Citizenship
4. EU as a world player
5. Administration
6. Compensation

The ring-fencing of expenditure headings means that a budget line is financed only from a given heading. Each heading should be well enough financed to allow redeployment of expenditure between operations under the same heading where necessary in order to tackle unforeseen issues.

The “margin for unforeseen expenditure” between the own resources ceiling and the ceiling for payment appropriations has a dual role:

  • to allow the multiannual financial framework to be revised if necessary so as to cover any expenditure which is unforeseen when the financial perspective is adopted;
  • to leave a safety margin should economic growth be lower than forecast; should this be the case, actual GNI will be lower than expected and the ceiling for payment appropriations, which is an absolute amount, can be financed from the own resources margin, within the limits of the own resources ceiling expressed as a percentage of GNP.

Link with the own resources system

The overall ceiling for commitment appropriations is obtained by adding together the various ceilings for individual expenditure headings. To check the compatibility of the financial perspective with the ceiling for own resources, which constitutes the absolute limit on the resources that the Member States can make available to the Union, an annual ceiling is also established for payment appropriations. This is an overall ceiling not broken down by expenditure heading. It is also expressed as a percentage of the Community’s estimated gross national product (GNP).

Rules for applying the financial framework

The rules for applying the financial framework are laid down in the Interinstitutional Agreement, which contains the rules and procedures for the annual management of the financial framework (e.g. technical adjustments, adjustments connected with the conditions of implementation or with enlargement of the Union, and revision of the financial perspective). This makes it possible to improve the annual budgetary procedure.

Each year the Commission, under its own responsibility, makes a technical adjustment to the multiannual financial frameworkfor the coming year. This adjustment concerns the following operations:

  • as the multiannual financial framework is drawn up at constant prices, it has to be adjusted each year to take account of inflation so as to ensure that each expenditure heading retains its initial purchasing power. The technical adjustment is generally made at the beginning of year n-2 for a given year n on the basis of the most recent economic data and forecasts available. No subsequent technical adjustment is made for the year in question;
  • the ceiling on own resources is expressed as a percentage of GNI. Translation of this ceiling into an absolute figure means that, for the purposes of the technical adjustment, the calculation has to be based on the most recent data on Community GNI. It is at this point that compatibility between the total payment appropriations and available own resources is verified.

The Commission can also propose changes to the multiannual financial framework to the two arms of the budgetary authority in two cases:

  • re-scheduling of the payment appropriations available for structural operations where delays have been identified in the programming of such operations;
  • re-evaluation of the needs relating to certain headings as a result of the accession of new Member States.

The two arms of the budgetary authority may, following a proposal from the Commission, decide to revise the multiannual financial framework. This will enable the Community, while respecting the own resources ceiling, to take necessary action not foreseen at the time the financial perspective was drawn up.

Interinstitutional Agreement on better law-making

Interinstitutional Agreement on better law-making

Outline of the Community (European Union) legislation about Interinstitutional Agreement on better law-making


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Institutional affairs > The decision-making process and the work of the institutions

Interinstitutional Agreement on better law-making

Document or Iniciative

Interinstitutional Agreement on Better Law-Making.


This Interinstitutional Agreement concerns the European Parliament, the Council of the European Union (EU) and the Commission. This Agreement establishes the general principles and arrangements for cooperation between the institutions, particularly during the legislative process. The Agreement aims to optimise the drafting and implementation of Union law.

Improving interinstitutional cooperation and transparency

The three institutions have agreed first of all on better coordination of the legislative process. This means that they will inform each other in good time of their plans and their work, for example by means of their annual legislative timetables or by synchronising the handling of common dossiers by the preparatory bodies in each institution.

The three institutions undertake to improve transparency and the accessibility of information for the public, for example by more broadcasting of public debates, through the systematic use of new communication technologies, by giving the public greater access to Eur-Lex and lastly by holding joint press conferences once they have reached agreement during the ordinary legislative procedure.

For each proposal the Commission will explain and justify to the European Parliament and to the Council its choice of legislative instrument and the legal basis. It will ensure that the measure proposed is simple and necessary.

Promoting co-regulation and self-regulation

The EU legislates only where it is necessary. It is sometimes useful to resort to alternative methods of regulation, such as co-regulation or self-regulation.

Co-regulation is a mechanism whereby attaining the objectives laid down in a legislative act is entrusted to parties which are recognised in the field (economic operators, social partners, non-governmental organisations, etc.). The basic legislative act therefore defines the framework and extent of the co-regulation. The parties concerned are then able to conclude voluntary agreements between themselves in order to achieve the objectives of the legislative act.

Self-regulation means the possibility for economic operators, the two sides of industry, non-governmental organisations or associations to adopt amongst themselves and for themselves common guidelines at European level. These guidelines may, for example, take the form of a code of conduct or a sectoral agreement. They do not generally imply that the European institutions have adopted any particular stance. However, the latter reserve the right to adopt a legislative act when it concerns an area for which the EU has competence.

Improving the quality of legislation

The three institutions have undertaken to produce legislation that is clear, simple and effective. The Commission is asked to conduct pre-legislative consultations and to make public the results of those consultations. It will continue to carry out impact assessments for major items of draft legislation, in order to evaluate their social, economic and environmental consequences. If the European Parliament or the Council makes a substantial amendment, an assessment of the impact of that amendment is desirable. In order to improve the consistency of texts, legal verification needs to be carried out before an act is finally adopted.

Improving the transposition and application of Union law

In order to encourage Member States to transpose Union law properly within the prescribed period, Directives must contain a binding time limit of not more than two years for the transposition of their provisions into national law. If a Member State fails to do this, the Commission can launch an infringement procedure. It will draw up annual reports on the transposition of Directives in the various Member States.

Simplifying legislation

Legislation can be simplified in various ways: by repealing acts that are no longer applied or through the codification or recasting of acts. Codification (or consolidation) is a procedure that consists of repealing the acts concerned and replacing them with a single act containing the unchanged substance of those acts. Recasting consists of the adoption of a new legal act incorporating in a single text both the substantive amendments it makes to an earlier act and the unchanged provisions of that act. The new legal act replaces and repeals the earlier act.


Act Entry into force Deadline for transposition in the Member States Official Journal

Interinstitutional Agreement


OJ C 321 of 31.12.2003

Related Acts

Interinstitutional Agreement of 22 December 1998 on common guidelines for the quality of drafting of Community legislation [OJ C 73 of 17.3.1999].
This agreement lays down guidelines for the quality of the drafting of Community legislation. For example, all acts are drawn up in accordance with a standard structure (title, preamble, enacting terms, annexes). The content of acts must be drafted in a concise and homogenous manner.

Interinstitutional Agreement of 20 December 1994 on an accelerated working method for official codification of legislative texts [OJ C 102 of 4.4.1996].
This interinstitutional agreement points out that codification does not involve any substantive amendment of the acts concerned. Proposals for codification from the Commission are to be examined by the European Parliament and the Council by means of an accelerated procedure.

Interinstitutional Agreement of 28 November 2001 on a more structured use of the recasting technique for legal acts [OJ C 77 of 28.3.2002].
This interinstitutional agreement lays down the rules for recasting, which must be justified on grounds explicitly set out in the explanatory memorandum. Precise indications must be given as to which provisions of the previous act remain unchanged.

This summary is for information only. It is not designed to interpret or replace the reference document, which remains the only binding legal text.

The principle of cooperation between the institutions

The principle of cooperation between the institutions

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The principle of cooperation between the institutions


The principle of “sincere cooperation” stems from Article 4 of the Treaty on European Union (TEU) in the context of relations between the European Union (EU) and Member States and Article 13 of the TEU in the context of relations between the EU institutions.

In substance, this Article states that the Member States must take all appropriate measures to fulfil their obligations arising out of the Treaty and do nothing detrimental to the proper functioning of the European Union.

Cooperation between the Member States and the EU institutions

Member States have a duty of sincere cooperation with the EU institutions. Accordingly, they are asked to support EU activities and not to hinder their proper functioning. This involves, for example:

  • punishing infringements of EU law as strictly as infringements of national law;
  • cooperating with the Commission in procedures linked to the monitoring of compliance with EU law, e.g. by sending the documents required in accordance with the rules;
  • making good any damage caused by infringements of EU law;
  • not unnecessarily hindering the internal operation of the European institutions (for example, by taxing reimbursements of the transport costs of MEPs travelling to Brussels and Strasbourg);
  • cooperating with the Commission in the event of inaction on the part of the Council, so as to enable the EU to fulfil its responsibilities (for example, to fulfil urgent needs concerning the conservation of certain fish stocks).

Article 4 of the TEU invites the EU and the Member States to respect and assist each other in carrying out tasks which flow from the Treaties.

Cooperation between the institutions

In accordance with Article 13 of the TEU, the EU institutions are required to comply with the principle of mutual “sincere cooperation”. They are:

  • the European Parliament;
  • the European Council;
  • the Council;
  • the European Commission;
  • the Court of Justice of the European Union;
  • the European Central Bank;
  • the Court of Auditors;

This principle is applicable in accordance with the case law of the Court of Justice of the EU.

The principle of interinstitutional cooperation can also be found in Article 249 of the Treaty on the Functioning of the European Union (TFEU), which lays down that the Council and the Commission must consult each other and settle by common accord their methods of cooperation.

Interinstitutional cooperation takes place in various ways, including:

  • exchanges of letters between the Council and the Commission;
  • interinstitutional agreements;
  • joint declarations of the three institutions.

Conventions and agreements

Conventions and agreements

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Conventions and agreements

Conventions and agreements, together with unilateral acts, constitute the secondary legislation of the European Union (EU). They generate rights and obligations. They are the product of a consensus between the European institutions or between the latter and a third party. Unlike unilateral acts, therefore, conventions and agreements are not the result of a legislative procedure or the sole will of an institution.

Moreover, the founding Treaties of the EU provide for two main types of convention and agreement:

  • international agreements;
  • interinstitutional agreements.

International agreements

International agreements are agreements concluded between the EU on the one hand and a third country or third-party organisation on the other. Article 216 of the Treaty on the Functioning of the EU lists the cases in which the EU is authorised to conclude such agreements.

Moreover, international agreements have mandatory application throughout the EU. They have a value greater than unilateral secondary acts, which must therefore comply with them.

Interinstitutional agreements

Interinstitutional agreements are concluded between the European institutions. Their aim is to organise and facilitate cooperation between the institutions, specifically the Commission, the Parliament and the Council.

This type of agreement is the result of institutional practice but has been enshrined in the founding Treaties of the EU with the entry into force of the Treaty of Lisbon. Article 295 of the Treaty on the Functioning of the EU recognises the existence of interinstitutional agreements and specifies that they may also be binding. In this case the binding nature of the agreement depends on the wishes of the authors of the act.

Moreover, interinstitutional agreements may for example take the form of codes of conduct, guidelines or declarations.

Atypical acts

Atypical acts

Outline of the Community (European Union) legislation about Atypical acts


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Institutional affairs > The decision-making process and the work of the institutions

Atypical acts


Atypical acts are acts adopted by the institutions of the European Union (EU). These acts are described as “atypical” because they are not part of the nomenclature of legal acts provided for by the Treaty on the Functioning of the EU (Articles 288 to 292).

There is therefore a wide variety of atypical acts. Some are provided for by other provisions of the founding Treaties of the EU, while others have been developed by institutional practice.

Atypical acts are differentiated by their application, which is generally political. However, some may be binding, but this remains limited to the EU’s institutional framework.

Atypical acts provided for by the Treaties

The EU institutions’ Rules of Procedure are atypical acts. The founding Treaties provide that the EU institutions shall adopt their own Rules of Procedure.

The Rules of Procedure lay down the organisation, operation and internal rules of procedure of the EU institutions. They have binding effect only for the institution concerned.

The founding Treaties also provide for other types of act adopted in the context of political dialogue between the EU institutions. These acts are essentially intended to facilitate work and cooperation between the institutions. For example, in the context of the procedure for the adoption of international agreements, the Council must send negotiating guidelines to the Commission for the negotiation of the agreements.

The institutions may also go further by organising their cooperation by means of interinstitutional agreements. These types of agreement are also atypical acts. They may have binding effect, but only for the institutions which have signed the agreement.

Atypical acts not provided for by the Treaties

Each of the EU institutions has developed a series of instruments in the context of its own activity.

For example, the European Parliament expresses some of its political positions at international level by means of resolutions or declarations. Similarly, the Council regularly adopts conclusions, resolutions or guidelines following its meetings. These acts essentially express the institutions’ opinion on certain European or international issues. They have general application but do not have binding effect.

The Commission also adopts several atypical acts which are specific to it. These are communications, which generally present new policy programmes. The Commission also adopts green papers which are intended to launch public consultations on certain European issues. It uses these to gather the necessary information before drawing up a legislative proposal. Following the results of the green papers, the Commission sometimes adopts white papers setting out detailed proposals for European action.