The rapporteur considered that the 1998 budget would allow a leap in quality, particularly given the measures intended to combat unemployment, the reconsideration of certain programmes and the adoption of measures in support of young people. He particularly stressed that the budget, according to his report, should be between the 1.15% specified in the Commission’s preliminary draft budget and the 1.12% of the Council’s draft budget. The rapporteur also highlighted the margin of ECU 700 million which had been left. As for the funding for employment initiatives, Mr Tillich welcomed the excellent interinstitutional cooperation and stressed that a legislative basis should be quickly adopted. On agriculture, the rapporteur referred to a letter of amendment from the Commission (which needed to make corrections based on data corresponding more to actual expenditure requirements) as, prior to this letter, Parliament had been unable to give a final opinion. On the other hand, Parliament was calling for the ECU 1 billion removed from the commitment appropriations for the structural funds to be restored, whereas it was satisfied with the funding for the Peace Programme for Northern Ireland. In the area of internal policies, the rapporteur recalled Parliament’s support for the draft on a voluntary civilian service. He asked for more effort in the area of research and development and for cooperation and development policy to respect the principle of balance between all the EU partners. He also called on the Commission to prepare broad guidelines for reinforcing the information policy. In terms of administration, Mr Tillich supported the Commission’s zero growth option but asked the latter to create the conditions to ensure the successful conclusion of the enlargement negotiations. Finally, he stressed that the resources for the committees of inquiry and UCLAF should be increased. For the Council, President FISCHBACH considered that the initiative to create a new chapter on the employment market and technological innovation was a great credit to Parliament, all the more so as a sufficiently high margin was maintained under heading 3. As for agricultural policy, he was keen to reassure Parliament that the Presidency was prepared to do everything in its power to conclude this chapter in only one session. As for heading 2, the Council would support Parliament’s proposal to finance the Peace Programme from unused funds in this heading. Commissioner LIIKANEN wanted to reassure Parliament that, on agriculture, even in the absence of specific proposals, there was already broad agreement between the Commission and Parliament. He also welcomed Parliament’s employment initiative, which he regarded as making a significant contribution to the success of the Luxembourg Summit.

After the meeting with the European Parliament, the Council gave a first reading to the 1998 budget on the basis of the preparatory work by the Budget Committee and Coreper. At the end of its deliberations, it drew up, by a qualified majority, the draft budget for 1998. This draft budget comprised ECU 90 885 million in commitment appropriations and ECU 82 940 million in payment appropriations. In relation to the 1997 budget, these figures represented an increase of 1.97% in commitment appropriations and a growth rate of 0.70% in payment appropriations (the variations for operating appropriations were +2.04% in commitment appropriations and +0.71% in payment appropriations). The total payment appropriations represented 1.13% of Community GNP. In opting for the same approach as in 1997, that of ‘zero growth’ for the budget as a whole, the Council confirmed the importance it attached to the principles of budgetary rigour and discipline. In establishing its draft budget the Council was guided by the following principles: .identification of clear priorities, .budget entries which were realistic and corresponded to what could be implemented while fulfilling commitments, .existence of legal bases, and .maintenance of substantial margins under the headings of the financial perspectives (all criteria laid down in the Interinstitutional Agreement of 29 October 1993). The main differences between the Commission’s preliminary draft budget and the Council’s draft budget on first reading were as follows: - heading 1 (common agricultural policy) : an increase of ECU 1 408 million to meet the outcome of the Agriculture Council on arable crops and the prices package for 1997/1998 compensated by an identical reduction applied across the board to all headings. Moreover, the Council decided to place the additional savings of ECU 329 million already identified by the Commission in a reserve (B0-40) pending the Commission’s submission of a letter of amendment; - heading 2 (Structural operations) : abatement of ECU 1 000 million in payment appropriations by applying a selective reduction preserving the allocations for Objective 1 and Objective 6 regions and the Cohesion Fund without amending the commitment appropriations; - headings 3 and 4 (Internal policies and External actions) : a reduction of ECU 757 million in payment appropriations and of ECU 387.5 million in commitment appropriations for the two headings taken together. The Council agreed to a reduction of ECU 5 million in commitment appropriations entered against international fisheries agreements solely on the grounds of overestimated requirements in the Commission’s PDB. For the financing of the CFSP, the Council agreed to the amounts entered in the PDB and transferred those amounts from the reserve to specific budget headings (in accordance with the provisions of the Interinstitutional Agreement signed on 16 July 1997, see procedure file ACI0010); - heading 5 (Administrative expenditure) : reduced by ECU 72 million. Taking into account the growing burden of pensions on the Commission budget, to which expenditure for pensions for all the institutions was charged, the Council agreed that this would be shared more fairly when the 1999 budget procedure was adopted so that each institution would be charged separately for expenditure in connection with the pensions of its former officials.

Within the 1998 budgetary procedure, the European Parliament and the Council held an exchange of views on various points of the Communities’ draft budget for the 1998 financial year. The Council/Parliament meeting confirmed that the two arms of the Budgetary Authority were fully aware of the strict budget discipline incumbent upon both the Community and the Member States , particularly with a view to attaining Economic and Monetary Union. The European Parliament delegation, led by Detlev SAMLAND ( PSE , DE ), indicated that Parliament’s priorities during the current budgetary procedure would particularly include employment. In addition to the exchange of views on the main features of the Commission’s preliminary draft budget (PDB) and the outcome of preparatory discussions by Council bodies, the meeting between the European Parliament and the Council dealt with conciliation on compulsory expenditure on the common agricultural policy (CAP) and international fisheries agreements. For heading 1 (CAP), the European Parliament looked favourably on the reduction of ECU 1 408 million. It preferred a selective reduction to an across-the-board abatement of all the headings. The European Parliament also stressed that a more targeted decision could not be taken until the autumn when the Commission would update expenditure forecasts in a letter of amendment. For heading 2 (Structural operations), the European Parliament was particularly insistent on not following the approach favoured within the Council of reducing payment appropriations by ECU 1 000 million. For headings 3 and 4 (Internal policies and External actions), the European Parliament deplored the sizeable reductions envisaged by the Council. Finally, on administrative expenditure (heading 5), the European Parliament agreed with a strict budgetary approach aimed towards zero growth. In this context it welcomed the progress already achieved in the implementation of the SEM 2000 Programme.