there is widespread support for maintaining the present categories of expenditure within the financial perspective.In line with the conclusions of the Luxembourg European Council, a clear distinction must be made in the presentation and implementation in the financial framework between expenditure relating to the Union as currently constituted and that reserved for the future acceding countries, including after enlargement.

53.The Inter-Institutional Agreement has worked well as a framework for the annual budget procedures.The approach to negotiating a new agreement should be governed by the principles that an appropriate balance of powers between the institutions should be maintained that the new agreement should ensure strict budgetary discipline and that it should clearly implement dual programming and entry of pre-accession and accession-related expenditure The Council should now begin a technical examination of the Commission's proposals with the European Parliament.

54.The European Council notes the Commission's working assumption that the existing Own Resources ceiling will be maintained, but that some Member States have not accepted this The European Council notes the Commission's undertaking to bring forward to the autumn of 1998 its report on Own Resources, including the question of relative budgetary positions in the light of policy reforms and including all other issues discussed in the European Council in Cardiff.In this context, the European Council notes that some Member States have expressed their view that burden sharing should be more equitable and have called for the creation of a mechanism for correcting budgetary imbalances, but that some other Member States have opposed this.In the same context, it also notes that some Member States have made proposals for changing the own resources, e.g.by creating a progressive own resource, but that others have opposed this.

55.The European Council attaches importance to the implementation of Trans- European Networks, including the fourteen priority projects.It notes the initial discussions on the changes to the regulation on the financing of Trans-European Networks and invites the Council to reach a common position by December.

56.The European Council stresses the importance of sound financial management and fraud prevention.In particular, it calls on the institutions to ensure that the opportunities provided by policy reform are used to introduce policies and procedures which are as fraud proof as possible and which encourage a high standard of financial management.It also underlines the importance of preparing the enlargement candidates to participate in the Community's finances In the enlarged Union, at least the present level of protection of the Community's financial interests must be maintained.

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