Documents considered by the Committee on 9 February 2011 - European Scrutiny Committee Contents


9   General Budget 2011

(a)

(32443)

5330/11

COM(11) 9

(b)

(32444)

5331/11

COM(11) 10


Draft amending budget No. 1 to the general budget 2011: Statement of expenditure by section: Section iii: Commission


Draft Decision on the mobilisation of the EU Solidarity Fund

Legal baseArticle 314 TFEU; co-decision; QMV
Documents originated14 January 2011
Deposited in Parliament18 January 2011
DepartmentHM Treasury
Basis of considerationEM of 1 February 2011
Previous Committee ReportNone
Discussion in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested

Background

9.1  During the course of a financial year the Commission presents to the Council and European Parliament Draft Amending Budgets (DABs) proposing increases or reductions for revenue and expenditure in the current EU Budget — there are about ten DABs each year.

9.2  In 2002 a European Union Solidarity Fund (EUSF) was established to assist financially Member States or candidate countries affected by a "major natural disaster with serious repercussions on living conditions, the natural environment or the economy". The criteria for financial assistance are contained in Council Regulation (EC) No 2012/2002 and the 2006 Inter-Institutional Agreement on budgetary matters provides that the EUSF may be "mobilised" within an annual ceiling of €1 billion (£0.861 billion), over and above the relevant headings of the Financial Framework. The Commission's view is that solidarity aid should be progressive — the allocation of funding should be 2.5% of the total direct damage below the threshold for mobilising the EUSF (0.6% of GNI or €3 billion (£2.6 billion) in 2002 prices, whichever is the lower amount) and 6% of the total direct damage above it.

The documents

9.3  Draft Amending Budget (DAB) No. 1/2011, document (a), would amend the 2011 General Budget to implement the EUSF Decision proposed in document (b). The draft Decision, document (b), would mobilise the EUSF to give budgetary assistance to alleviate the impact of severe flooding in May, June and July 2010:

  • of €105.6 million (£90.9 million), 2.5 % of estimated damages under the fund threshold (of €2,124.9 million (£1,829.1 million)) and 6% of estimated damages above the threshold, to Poland;
  • of €20.4 million (£17.6 million), 2.5 % of estimated damages under the fund threshold (of €378.2 million (£325.6 million)), to Slovakia;
  • of €22.5 million (£19.4 million), 2.5 % of estimated damages under the fund threshold (of €590.7 million (£508.5 million)), to Hungary;
  • of €5.1 million (£4.4 million), 2.5 % of estimated damages under the fund threshold (of €824.0 million (£709.3 million)), to the Czech Republic;
  • of €3.8 million (£3.3 million), 2.5 % of estimated damages under the fund threshold (of €275.8 million (£237.4 million)), to Croatia; and
  • of €25.0 million (£21.5 million), 2.5 % of estimated damages under the fund threshold (of €787.9 million (£678.2 million)), to Romania.

9.4  For the Polish case the Commission notes that:

  • the application relates to two consecutive flood waves that affected a large part of Poland's territory, causing significant damage to the farming sector, to infrastructure, transport networks and to cultural heritage sites;
  • the Polish authorities estimate the total direct damage at €3 billion (£2.6 billion), representing around 0.8468% of Poland's GNI and exceeding the normal threshold for mobilising the EUSF of €2.124 billion (£1.83 billion), that is. 0.6% of GNI based on 2008 data;
  • the methods used by the Polish authorities for estimating the different categories of damage are very plausible;
  • the application outlines that only two of sixteen provinces have escaped flooding — of these, three provinces in southern Poland were severely hit;
  • it was reported that twenty people lost their lives and 66,000 families were affected by the floods, with 14,563 families evacuated;
  • over 55.6 km of railway lines were found to need immediate repairs and 1,300 km of flood prevention works await reconstruction; and
  • there were serious and lasting repercussions on living conditions, the natural environment and the economy.

9.5  For the Slovak case the Commission notes that:

  • the application relates to record heavy rainfall causing severe damage to infrastructure, transport networks, agriculture and business;
  • the Slovak authorities estimate the total direct damage at €561 million (£482.9 million), representing around 0.8902% of Slovakia's GNI and exceeding the normal threshold for mobilising the EUSF of €378.2 million (£322.6 million), that is 0.6% of GNI based on 2008 data;
  • the methods used by the Slovak authorities for estimating the different categories of damage are very plausible;
  • the application outlines that the floods and landslides occurred mainly in central and eastern Slovak regions which are considered to be less economically developed;
  • in these regions 306 houses were affected by landslides, 45,894 households were affected by floods and 150 residential premises were damaged or destroyed; and
  • several public buildings were damaged, people lost their lives and there was substantial damage to the transport infrastructure and agricultural terrain.

9.6  For the Hungarian case the Commission notes that:

  • the application relates to heavy rainfall causing severe damage to infrastructure, transport networks, agriculture and residential property;
  • the Hungarian authorities estimate the total direct damage at €719.3 million (619.2 million), representing around 0.7307% of Hungary's GNI and exceeding the normal threshold for mobilising the EUSF of €590.7 million (£508.5 million), that is 0.6% of GNI based on 2008 data;
  • the application outlines the extraordinary weather that occurred in May and June 2010 and the effect it had in 11 out of 19 counties;
  • the two major rivers in Hungary, the Danube and the Tisza, overflowed and the highest level of alertness had to be ordered along a total reach of 3,088 km;
  • 5,259 people were forced to leave their homes and about half a million people were in direct danger;
  • there was damage to homes, residential buildings, settlements, railway infrastructure and educational institutions; and
  • most damage occurred in the field of agriculture.

9.7  For the Czech case the Commission notes that:

  • the application relates to the territory of the Czech Republic being hit by severe rainfall during May and June 2010 resulting in two interconnected waves of floods causing damage to residential properties and businesses, to the road network and other infrastructure;
  • the Czech authorities estimate the total direct damage at €204.5 million (£170 million);
  • as this amount is below the normal threshold for mobilising the EUSF, that is €824 million (£709.3 million) or 0.6% of GNI based on 2008 data, the disaster does not qualify as a "major natural disaster" under the terms of the Council Regulation;
  • the Czech Republic was, however, affected by the same flooding that led to the major disaster in Poland and Slovakia;
  • therefore, the condition in the Regulation, whereby a country affected by the same major disaster as a neighbouring country may exceptionally benefit from the EUSF, was found to be met;
  • the area worst hit was the North-East part of the Czech Republic and includes four regions that are bordering Poland, Slovakia and Austria; and
  • as a consequence of the flood, five people lost their lives, hundreds of homes were flooded and destroyed, public transport networks were damaged and economic production was stalled, affecting these economically weak localities.

9.8  For the Croatian case the Commission notes that:

  • the application from Croatia outlines heavy rainfall during the month of June 2010 which resulted in severe floods that struck eastern and central parts of the country, causing significant damage to the agricultural sector, public and private property and transport infrastructure;
  • the Croatian authorities estimate the total direct damage at €153 million (£131.7 million);
  • as this amount is below the normal threshold for mobilising the EUSF, that is €275.8 million (£237.4 million) or. 0.6% of GNI based on 2008 data, the disaster does not qualify as a "major natural disaster" under the terms of the Council Regulation;
  • Croatia was, however, affected by the same flooding disaster which led to the major disaster in Hungary;
  • therefore, the condition in the Regulation, whereby a country affected by the same major disaster as a neighbouring country may exceptionally benefit from the EUSF, was found to be met;
  • 427 houses were flooded, 682 houses were damaged and over one hundred families had to be evacuated; and
  • significant damage was caused to road infrastructure, affecting road traffic and increasing the difficulty of urgent action; and
  • most damage, however, was caused to the farming sector.

9.9  For the Romanian case the Commission notes that:

  • the application from Romania covers the effects of heavy flooding and landslides on infrastructure, on the agricultural sector and on private and public property;
  • the Romanian authorities estimate the total direct damage at €875.8 million (£753.9 million), representing around 0.67% of Romania's GNI and exceeding the normal threshold for mobilising the Solidarity Fund of €787.9 million (£678.2 million), that is 0.6% of GNI based on 2008 data;
  • the severe flooding caused significant damage in thirty-seven out of forty-one counties with over 6.7 million inhabitants affected;
  • 15,000 people needed evacuation, 3,073 homes were damaged and 863 completely destroyed;
  • 35 dams and 5,257 km of infrastructure as well as bridges, footbridges and culverts were damaged; and
  • the most important damages were registered in the field of agriculture.

9.10  In relation to the applications the Commission says that:

  • all were received within the deadline of ten weeks after the first damage was recorded;
  • all the disasters were of natural origin and therefore fall within the field of the application; and
  • all applications should be accepted, mobilising the EUSF in each case.

9.11  Under DAB01/11, document (a), additional EUSF commitment and payment appropriations, required to mobilise the fund, would be added to the 2011 budget. As EUSF mobilisations sit over and above the relevant Financial Framework ceilings DAB01/11 has no impact on the margins under the 2011 Financial Framework ceilings for commitment appropriations.

The Government's view

9.12  The Economic Secretary to the Treasury (Justine Greening) says that:

  • the Government supports the broad objectives of the EUSF in providing financial assistance to Member States and countries engaged in accession negotiations in the event of major natural disasters, where the country concerned cannot alone handle the repercussions;
  • assistance from the fund therefore carries real EU added value;
  • given the impact on the agricultural sector, infrastructure, residential and commercial buildings of the Polish, Slovak, Hungarian and Romanian regions affected by heavy rainfall, the Government is content that these applications meet the "extraordinary regional disaster" criterion;
  • the Government is satisfied that the Czech and Croatian applications meet the condition whereby a country affected by the same major disaster as a neighbouring country may exceptionally benefit from the EUSF;
  • the Government therefore supports the proposed mobilisation of the EUSF;
  • it does not, however, support the proposed method of financing this mobilisation through an overall increase to the 2011 EU budget;
  • at a time of deep fiscal consolidation across the EU, the Government worked hard last year to limit the 2011 EU budget to an increase of just 2.91% from 2010;
  • this is the level that the majority of Member States supported at the Council's first reading position in the summer of 2010 and that was adopted in December 2010;
  • the proposal now to increase the budget from that level is completely unacceptable;
  • furthermore, the Government does not consider it necessary — appropriations required to mobilise the EUSF for the six applications could and should be allocated by reprioritising existing resources from areas of the budget that routinely underspend; and
  • the Government has already begun making this case to other Member States and the Commission.

The Minister adds that, if adopted, DAB 01/11 would increase EU budget commitments and payments in 2011 by €182.4 million (£157 million). Since additional EU spending is met by Member States according to their GNI-contribution share, of which the UK's is currently around 14%, this proposal would increase the UK's contribution to the EU budget in 2011 by €25.5 million (£22 million).

Conclusion

9.13  Whilst we have no problem about the principle of the EU providing EUSF assistance in these six cases, we are concerned, like the Government, about the possibility of such assistance breaching the agreed 2.91% increase over 2010 for the 2011 EU Budget. So, before considering these proposals further, we should like to hear about progress in persuading other Member States and the Commission of need to avoid this. Meanwhile the documents remain under scrutiny.



 
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