Having regard to the Interinstitutional Agreement of 6 May 1999 between the European Parliament, the Council and the Commission on budgetary discipline and improvement of the budgetary procedure1, and in particular to points 19, 20 and 21 thereof,

Having regard to Decision 2003/430/EC of the European Parliament and of the Council of 19 May 2003 on the revision of the financial perspective2,

Acting in accordance with the procedure laid down in the fifth subparagraph of Article 272(9) of the Treaty3,

The reform of the common agricultural policy adopted by the Council in September 20034 provides for a reduction in direct payments (modulation) to finance rural development policy to achieve a better balance between policy tools designed to promote sustainable agriculture and those designed to promote rural development and to finance additional rural development measures. The financial perspective set out in Annex I to the Interinstitutional Agreement on budgetary discipline and improvement of the budgetary procedure as revised by Decision 2003/430/EC hereinafter referred to as the ‘financial perspective’, should therefore be modified to take into account the effect of ‘modulation’ for the year 2006. As a consequence, commitment appropriations from subheading 1a ‘Common agricultural policy’ can be used to finance additional measures under subheading 1b ‘Rural development’, with no change in the ceiling of heading 1 ‘Agriculture’,