Documents considered by the Committee on 5 April 2011 - European Scrutiny Committee Contents


4   General Budget 2011

(a)

(32631)

8243/11

COM(11) 154

(b)

(32632)

8244/11

COM(11) 155


Draft amending budget No. 2 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 originated25 March 2011
Deposited in Parliament30 March 2011
DepartmentHM Treasury
Basis of considerationEM of 2 April 2011
Previous Committee ReportNone
Discussion in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested

Background

4.1  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.

4.2  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 (£0.85 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 in 2002 prices, equivalent to €3.54 billion (£3.13 billion) in 2011 prices, whichever is the lower amount) and 6% of the total direct damage above it.

The documents

4.3  Draft Amending Budget (DAB) No. 2/2011, 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 August and September 2010:

  • of €7.46 million (£6.59 million), 2.5% of estimated damages under the fund threshold (of €217.67 million (£192.35 million)) and 6% of estimated damages above the threshold, to Slovenia;
  • of €1.18 million (£1.04 million), under the "neighbouring country [Slovenia] criterion", as the damage was under the threshold (of €275.80 million (£243.72 million)), to Croatia; and
  • of €10.91 million (£9.64 million), under the "extraordinary regional disasters criteria", as the damage was under the threshold (of €824.03 million (£728.20 million)), to the Czech Republic.

4.4  For the Slovenian case the Commission notes that:

  • the application relates to damage caused by flooding following heavy rainfall from 17-20 September 2010;
  • the Slovenian authorities estimate that total direct damage caused by the disaster at €251.30 million (£222.07 million), which exceeds 0.6% of Slovenian GNI according to 2008 data; and
  • they have indicated that there is no insurance coverage of the eligible costs and that no other sources of EU funding are intended to be used to deal with the consequences of the flood.

4.5  For the Croatian case the Commission notes that:

  • the application relates to damage caused by flooding from 17-22 September 2010;
  • the Croatian authorities estimate total direct damage caused by flooding at €47.00 million (£41.53 million); and
  • this is below both thresholds for accessing the EUSF.

The Commission, however, argues that Croatia's application satisfies the condition that a country affected by the same major disaster as a neighbouring country (in this case, Slovenia) may exceptionally benefit from EUSF aid.

4.6  For the Czech case the Commission notes that:

  • the application relates to damage caused by rivers bursting their banks during heavy rainfall in early August 2010;
  • the Czech authorities estimate the total direct damage caused by this event at €436.48 million (£385.72 million); and
  • this is below both thresholds for accessing the EUSF.

The Commission, however, says that it has examined the application using criteria for "extraordinary regional disasters" and that:

  • the Czech Republic's application provides evidence of large scale impacts on large proportions of population in affected areas, which the Commission deems plausible and acceptable;
  • the Czech authorities report that economic output dropped by 15% in Liberec, the affected region, after the floods; and
  • a full return to normal economic conditions is expected to take several years.

The Government's view

4.7  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 and assistance from the fund therefore carries real EU added value;
  • given the impact on infrastructure, residential and commercial building and agriculture in the regions of Slovenia Croatia and the Czech Republic affected by the floods the Government is content that these applications meet the relevant criteria for assistance 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 ongoing fiscal consolidation domestically and 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 proposal would increase the budget further, which the Government believes is unacceptable;
  • furthermore, the Government does not consider it necessary — appropriations required to mobilise the EUSF should be allocated by reprioritising existing resources from areas of the budget that routinely underspend; and
  • the Government will make this case firmly to other Member States and to the Commission.

4.8  The Minister says that:

  • although the EUSF has an annual ceiling of €1 billion (£0.85 billion), appropriations are only allocated to its budget line following a successful application;
  • DAB No. 2/11 would increase the adopted EU budget for 2011 by €19.55 million (£17.28 million), to which the UK's abatement would not apply;
  • although obliged to examine the scope for reallocation of appropriations, the Commission has not proposed reallocating existing appropriations to fund EUSF aid; and
  • agreeing to release €19.56 million (£17.28 million) of EUSF funds with no reallocation would cost the UK approximately £2.43 million.

Conclusion

4.9  Whilst we have no problem about the principle of the EU providing EUSF assistance in these three 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. And we note that this is the second attempt by the Commission to breach the 2.91% limit for otherwise unexceptionable use of the EUSF.[14]

4.10   So, before considering these proposals further, we should like to hear about progress in again persuading other Member States and the Commission of the need to avoid this — an outcome we think exceedingly important. Meanwhile the documents remain under scrutiny.





14   (32443) 5330/11 (32444) 5331/11: see HC 428-xvi (2010-11), chapter 9 (9 February 2011), HC 428-xviii (2010-11), chapter 4 (2 March 2011), HC 428-xix (2010-11), chapter 4 (9 March 2011) and HC 428-xxii (2010-11), chapter 11 (30 March 2011). Back


 
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