# EUR-Lex - 52013PC0521 - EN

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# 52013PC0521

**Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Council Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) /* COM/2013/0521 final - 2013/0247 (COD) */**

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EXPLANATORY MEMORANDUM

1.           CONTEXT OF THE PROPOSAL

Extension of derogation for those Member
States threatened with serious difficulties with respect to their financial
stability to use increased co-financing rates

· Reasons and objectives for the proposal

The sustained financial and economic crisis has
put national financial resources under pressure as Member States pursue
necessary policies of fiscal consolidation. In this context, is of particular
importance to ensure a maximum implementation of rural development programmes.

Programme implementation is often challenging,
not least as a result of the liquidity problems resulting from fiscal
consolidation. This is particularly the case for those Member States which have
been most affected by the financial crisis and have received financial
assistance under an adjustment programme. To date, seven countries have
received financial assistance and have agreed a macro-economic adjustment
programme with the Commission. These countries are Cyprus, Hungary, Romania, Latvia, Portugal, Greece and Ireland, hereafter called "programme
countries". Hungary, Romania and Latvia are no longer under an adjustment
programme.

To ensure that these Member States (and any
other Member State which may benefit from such assistance programmes in the
future) continue to implement rural development programmes on the ground and
continue to disburse funds to projects, the current proposal contains
provisions that would allow these Member States to use increased co-financing
rates, without modifying their overall allocation under rural development
policy for the period 2007-2013. This will provide additional financial
resources to the Member States at a critical juncture and will facilitate the
continued implementation of programmes on the ground.

· 
General context and provisions in force in
the policy sphere of the proposal

Article 70(4c) of Regulation (EC) No 1698/2005 provides
for a derogation to increase the European Agricultural Fund for Rural
Development (EAFRD) contribution ceilings set out in paragraphs 3, 4 and 5 of the
same Article, up to a maximum of 95 % of eligible public expenditure in the
regions eligible under the Convergence Objective and the outermost regions and
the smaller Aegean Islands, and up to 85 % of eligible public expenditure in
other regions. That derogation currently applies only to the expenditure
incurred by the paying agencies until 31 December 2013.

· 
Consistency with other policies and
objectives of the Union

The proposal is consistent with other proposals
and initiatives adopted by the Commission as a response to the financial
crisis.

2.           RESULTS OF CONSULTATIONS
WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS

· 
Consultation of interested parties

There was no consultation of external
stakeholders

· Procurement and use of expertise

Use of external expertise has not been
necessary.

· 
Impact analysis

The Member States under financial assistance
have a possibility to submit a request to the Commission to modify its 2007-2013
rural development programme and make use of the derogation to apply higher than
normal co-financing rates. Currently Greece, Ireland and Portugal make use of that derogation, but not in all cases up to the maximum. Because the
total financial allocation for the period from the EAFRD to the Member State s and the programmes in question will not change, the higher EU co-financing
rates essentially reduce the total amount of public contribution available to
the rural development programmes during the programming period. The possibility
for the Member States under financial assistance to increase the EAFRD
contribution rates under the current 2007-2013 rural development programmes currently
exist only for the expenditure incurred until 31 December 2013 (for the period
the Member State is under financial assistance) and therefore does not extend
until the final eligibility date of the expenditure on 31 December 2015.

For the expenditure incurred under the new programming
period 2014-2020, according to Article 22 of Regulation (EU) No .../... [Common
Provisions Regulation] the EAFRD contribution rate may be increased by 10
percentage points above the co-financing rate applicable to each measure for
the EAFRD. This new system, which will be a uniform top-up for all measures,
may in some cases mean either lower or higher changes to the EAFRD contribution
rates than the current system under Article 70(4c) of Regulation (EC) No
1698/2005.

If the possibility provided for in Article
70(4c) of Regulation (EC) No 1698/2005 to use higher than normal EAFRD
contribution rates under the current rural development programmes is limited
until the end of 2013 and only to the period in which the Member State is under
financial assistance, there is a risk that the maximum and optimal use of the
funding from the EAFRD will be seriously affected for the rural development
programmes concerned before the possibility exist for the top-ups under the new
programmes.

3.           LEGAL ELEMENTS OF THE
PROPOSAL

· 
Summary of the proposed measures

It is proposed to amend Article 70(4c) of
Regulation (EC) No 1698/2005 to allow the Member
States receiving financial assistance to benefit from the increase of 10
percentage points, only for the open budget commitments for the
2007-2013 programming period, until the end of the
eligibility period and to claim it in their requests for final balance even if
the financial assistance is not anymore provided.

· 
Legal basis

Articles 42 and 43 of the TFEU.

· Subsidiarity principle

The proposal complies within the subsidiarity
principle to the extent that it seeks to provide increased support through EAFRD
for certain Member States which are experiencing serious difficulties, notably
with respect to economic growth and financial stability and with deterioration
in their deficit and debt position, also as a result of the international
economic and financial environment. In this context, it is necessary to
establish at the Union level a temporary mechanism which allows derogating from
the normal co-financing rates for the EAFRD.

· 
Proportionality principle

The proposal conforms to the proportionality
principle:

The extension of the application of the
increased co-financing rates is proportional in relation to the sustained
economic crisis and to the other efforts undertaken to help these Member
States.

· 
Choice of instruments

Proposed instrument: amendment of the current
regulation.

The Commission has explored the scope for
manoeuvre provided by the legal framework and considers it necessary, in the
light of experience up to now, to propose a modification to Regulation (EC) No
1698/2005.

4.           BUDGETARY IMPLICATION

There is no impact on commitment appropriations
since no modification is proposed to the maximum amounts of EAFRD financing
provided for in the Operational Programmes for the programming period
2007-2013.

However, the need of payment appropriations in budget
2014 may be increased by EUR 90 million in case Member States continue applying
the increased co-financing rates.

In the light of Member State's requests to
benefit from this action and taking into account the evolution of the
submission of interim payments, the Commission will review the situation and if
necessary consider relevant actions.

2013/0247 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT
AND OF THE COUNCIL

amending Council Regulation (EC) No
1698/2005 on support for rural development by the European Agricultural Fund
for Rural Development (EAFRD)

THE EUROPEAN PARLIAMENT AND THE
COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 42 and 43 thereof,

Having regard to the proposal from the
European Commission,

After transmission of the draft legislative
act to the national Parliaments,

Having regard to the opinion of the
European Economic and Social Committee[1],

Having regard to the opinion of the
Committee of the Regions[2],

Acting in accordance with the ordinary
legislative procedure,

Whereas:

(1)       The unprecedented global
financial crisis and economic downturn have seriously damaged economic growth
and financial stability and provoked a strong deterioration in financial and
economic conditions in several Member States. In particular, certain Member
States are experiencing serious difficulties or are threatened with such
difficulties, notably with problems in their economic growth and financial
stability and with deterioration in their deficit and debt position, also as a
result of the international economic and financial environment.

(2)       Whilst important actions
to counterbalance the negative effects of the crisis have already been taken, including
amendments of the legislative framework, the impact of the financial crisis on
the real economy, is still being widely felt and pressure on national financial
resources is increasing.

(3)       In view of the serious
difficulties that a number of Member States still face with respect to their
financial stability, and in order to limit the resulting negative effects
during the transition from the current to the forthcoming programming period,
by allowing for maximum utilisation of the EAFRD funds available, the duration
of the derogation increasing the maximum EAFRD contribution rates provided for
in Article 70(4c) of Council Regulation (EC) No 1698/2005[3] should be extended until the
final date of eligibility of expenditure for the 2007-2013 programming period, on
31 December 2015.

(4)       The possibility for
interim payments and payments of final balance to be increased  above the normal
co-financing rate should not be limited to the time period during which the
Member State receives financial assistance in accordance with Regulation (EU)
No 407/2010, Regulation (EC) No 332/2002 or the Treaty establishing the
European Stability Mechanism because the Member State continues to face serious
difficulties in ensuring co-financing from the national budget even after the
financial assistance has been completed.

(5)       In line with the European
Council conclusions of 7-8 February 2013 and as foreseen in Article 22 of
[CPR], the co-financing rate increased by 10 percentage points will apply with
regard to the 2014-2020 programming period until 30 June 2016 when the
possibility of the increase will be reviewed. As the 2007-2013 and 2014-2020
programming periods overlap, it is necessary to ensure coherent and uniform
treatment of Member States receiving financial assistance under the two
periods. Therefore, the Member States receiving financial assistance should be
able to benefit from the increase of the co-financing rate until the end of the
eligibility period and to claim it in their requests for final balance even if
the financial assistance is not anymore provided.

(6)       In view of the fact that
the deadline established in Article 70(4c) coincides with the end of the
programming period and the relevant programming and procedural requirements, it
is appropriate that this Regulation enters into force on the day of its
publication in the Official Journal of the European Union.

(7)       Regulation (EC) No
1698/2005 should therefore be amended accordingly,

HAVE ADOPTED THIS REGULATION:

Article 1

Article 70(4c) of Regulation (EC) No 1698/2005
is amended as follows:

(a) 
In the first subparagraph the introductory part is
replaced by the following:

“By way of
derogation from the ceilings set out in paragraphs 3, 4 and 5, the EAFRD
contribution may be increased up to a maximum of 95 % of eligible public
expenditure in the regions eligible under the Convergence Objective and the
outermost regions and the smaller Aegean Islands, and 85 % of eligible public
expenditure in other regions. These rates shall apply to the eligible
expenditure newly declared in each certified declaration of expenditure, where after
[OPOCE please insert date of entry into
force of this Regulation] a Member State complies with one of
the following conditions: “

(b) 
The second subparagraph is replaced by the
following:

"A Member State wishing to make use of the derogation provided for in
the first subparagraph shall submit a request to the Commission to modify its
rural development programme accordingly. The derogation shall apply from the
approval, by the Commission, of the modification of the programme."

Article 2

This Regulation shall enter into force on
the day of its publication in the Official Journal of the European Union.

This Regulation shall be binding
in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament                       For
the Council

The President                                                 The
President

LEGISLATIVE FINANCIAL STATEMENT

FINANCIAL STATEMENT || AGRI/I1/2013/1278200

6.20.2013.6

|| DATE: 17.05.2013

1. || BUDGET HEADING: 05 04 Rural Development ||

2. || TITLE: Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Council Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD)

3. || LEGAL BASIS: Article 43(2) of the Treaty on the Functioning of the European Union

4. || AIMS: This regulation extends until the end of 2015 the derogation which allows Member States under financial assistance to increase the EAFRD contribution rates up to 95% in regions under the Convergence Objective and the outermost regions and smaller Aegean Islands, and up to 85% in other regions.

5. || FINANCIAL IMPLICATIONS || 12 MONTH PERIOD (EUR million) || CURRENT FINANCIAL YEAR 2013 (EUR million) || FOLLOWING FINANCIAL YEAR 2014 (EUR million)

5.0 || EXPENDITURE -               CHARGED TO THE EU BUDGET (REFUNDS/INTERVENTIONS) -               NATIONAL AUTHORITIES -               OTHER || ||   || CA: - PA: + 90

5.1 || REVENUE -               OWN RESOURCES OF THE EU (LEVIES/CUSTOMS DUTIES) -               NATIONAL || || ||

|| || 2015 || 2016 || 2017 || 2018

5.0.1 || ESTIMATED EXPENDITURE || || || PA: - 90 ||

5.1.1 || ESTIMATED REVENUE || || || ||

5.2 || METHOD OF CALCULATION: -

6.0 || CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE RELEVANT CHAPTER OF THE CURRENT BUDGET? || n.a.

6.1 || CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF THE CURRENT BUDGET? || n.a.

6.2 || WILL A SUPPLEMENTARY BUDGET BE NECESSARY? || NO

6.3 || WILL APPROPRIATIONS NEED TO BE ENTERED IN FUTURE BUDGETS? || NO

OBSERVATIONS: For commitment appropriations, the modification of Regulation 1698/2005 will not have any financial impact as the global envelope for rural development remains unchanged as well as its annual breakdown. For payments, the extension of the derogation that permits the application of increased co-financing rates could result in higher reimbursements to the MS concerned. The proposal will not have any impact in year 2013. Based on the latest available payment forecast from Member States, the additional payments needs can be estimated at EUR 90 million in 2014 (compared to a situation where the application of increased rates ends in 2013). This amount will be compensated at the closure of programmes, most likely in 2017. In the light of Member State's requests to benefit from this action and taking into account the evolution of the submission of interim payments, the Commission will review the situation and if necessary consider relevant actions.

[1]               OJ C , , p. .

[2]               OJ C , , p. .

[3]               OJ L 277, 21.10.2005, p.1.