COMMISSION REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 5/2002

TABLE OF CONTENTS

1. Overall out-turn in monthly expenditure

2. Provisional utilisation of appropriations

3. Comments

4. Conclusions

1. Overall outturn in monthly expenditure

The following tables show the overall out-turn in monthly expenditure in relation to the expenditure profile. This situation corresponds to expenditure incurred in the Member States from 16 October 2001 to 31 March 2002.

1.1. Subheading 1a: CAP

>TABLE POSITION>

1.2. Subheading 1b: Rural Development

>TABLE POSITION>

2. Provisional utilisation of appropriations

>TABLE POSITION>

3. COMMENTS

3.1. The uptake of appropriations for May 2002

The uptake of appropriations under heading 1 of the budget for May 2002 (Member States' expenditure from 16 October 2001 to 31 March 2002) is EUR 29 645,5 million, i.e. 67,0% of appropriations. Expenditure is

- EUR 1 592,4 million below the indicator for subheading 1a (traditional EAGGF Guarantee Section expenditure and veterinary expenditure), and

- EUR 26,9 million below the indicator for subheading 1b (rural development).

3.2. Monetary factors

The dollar/euro rate

The expenditure indicated in point 2.1 above takes account of the movement in the euro/dollar rate. In the case of a large part of export refunds for agricultural products, particularly for cereals and sugar, and of some internal aids such as aid for cotton, expenditure depends on the trend in the dollar rate.

In accordance with the Council Regulation on budgetary discipline (Council Regulation (EC) No 2040/2000 of 26 September 2000), the letter of amendment to the 2002 agriculture budget was drawn up on the basis of the average dollar rate for July, August and September 2001, i.e. EUR 1 = $ 0,89. For the period 1 August 2001 to 31 March 2002 the estimated average dollar rate has remained at approximately the same level.

3.3. Market factors

Subheading 1a

For subheading 1a, the overall budget execution was under the level foreseen by the indicator and it concerned all three major categories of expenditure. Specifically:

- for plant products, the under-execution resulted, mainly, from under-spending for cotton, fruits and vegetables and wine,

- for animal products, the under-execution resulted, mainly, from under-spending for beef and veal as well as for sheep- and goatmeat, and

- for ancillary expenditure, the under-execution resulted, mainly, from under-spending for veterinary and plant health measures.

The observed overall divergence amounts to EUR -1 592,4 million equal to -4,0% of the budget's appropriations. However, the divergence for certain individual chapters is more important, thus, inviting the following explanations:

Chapter B1-14: Fibre plants and silkworms // Divergence: -EUR 135 million (-14,2%)

// (expenditure: EUR 671 million)

(indicator: EUR 806 million)

The indicator was undershot because the effective level of advances of the aid paid for cotton placed under control in the ginning mills was lower in comparison to the amount of advance retained for the establishment of the budget. At this point in time, there are uncertainties as to the level of effective production of cotton and, therefore, it is difficult to predict whether this under-execution will persist to the end of the financial year.

Chapter B1-15: Fruits and vegetables // Divergence: -EUR 105 million (-6,4%)

// (expenditure: EUR 672 million)

(indicator: EUR 777 million)

The under-spending is attributable to both the fresh and the processed fruits and vegetables sectors. For the fresh fruits and vegetables, this is primarily due to smaller compensation payments because of lower quantities of fruits and vegetables withdrawn from the market. With regard to the processed fruits and vegetables, the under-spending is mostly due to delays in the payments of the aid for dried raisins in EL, for the production aid for processing of fruits and for the financial compensation for the processing of citrus fruits.

Chapter B1-16: Wine // Divergence: -EUR 233 million (-16,8%)

// (expenditure: EUR 475 million)

(indicator: EUR 708 million)

The under-spending is primarily related to delays in carrying out the various types of approved distillations in the Member States concerned. Therefore, at this point in time, it is difficult to predict whether this under-execution will persist to the end of the financial year.

Chapter B1-17: Tobacco // Divergence: -EUR 75 million (-7,7%)

// (expenditure: EUR 668 million)

(indicator: EUR 743 million)

The under-spending is primarily related to delays in the payment of the premium in E. However, it is expected that, on the basis of available information, the budget will be implemented as foreseen.

Chapter B1-21: Beef and veal // Divergence: -EUR 294 million (-3,6%)

// (expenditure: EUR 3 981 million)

(indicator: EUR 4 275 million)

The under-spending is primarily attributable to the delays in the payment of the special purchases scheme as well as to the smaller technical, financial and other costs for beef intervention where stocks have remained at approximately 0.25 million t since mid-December. Consequently, the Commission estimates that savings can be expected by the end of the year for this chapter of the budget.

Chapter B1-22: Sheepmeat and goatmeat // Divergence: -EUR 161 million (-23,9%)

// (expenditure: EUR 367 million)

(indicator: EUR 528 million)

The under-spending is primarily due to the fact that higher than foreseen market price levels for sheep- and goat-meat led to the fixing of the ewe/goat premium at a level lower than the one foreseen when the budget was established. In addition, part of the under-spending is attributable to the delays in the payment of the premium by I. Consequently, the Commission estimates that savings of approximately EUR 100 million can be expected by the end of the year for this chapter of the budget.

Chapter B1-30: Non-Annex I products // Divergence: -EUR 35 million (-8,5%)

// (expenditure: EUR 171 million)

(indicator: EUR 206 million)

The under-spending is due to large exports of processed agricultural products using milk and dairy products for which the refund rates for the period concerned were lower than those used in the budget, notably for skimmed milk powder. However, it should be noted that, at the time of writing this report, these export refund rates have started rising again.

Chapter B1-32: Outermost regions and Aegean islands // Divergence: - EUR 39 million (-16,4%)

// (expenditure : EUR 85 million)

(indicator : EUR 124 million)

The observed under-execution is due to implementation delays, primarily, of the POSEIDOM and POSEICAN programmes as compared to the results provided by the indicator.

Chapter B1-33: Veterinary and plant health measures // Divergence: -EUR 295 million (-51,8%)

// (expenditure : EUR - million)

(indicator : EUR 295 million)

The observed under-execution is due to the new accounting rules, in force as of 1.1.2002, which require that commitments of appropriations are made individually by disease for each Member State. These provisions necessitate the communication of a bank account number to the competent Commission services; certain Member States have not yet done so. Therefore, under the new accounting system rules, the relevant commitments can not be made, thus, resulting in the observed temporary under-execution.

Subheading 1b

Chapter B1-40: Rural development // Divergence: -EUR 27 million (-0,6%)

// (expenditure: EUR 1 030 million)

(indicator: EUR 1 057 million)

The discrepancy by comparison to the indicator is minimal at -0,6%. Therefore, the execution of the budget for rural development is proceeding as foreseen.

4. CONCLUSIONS

Implementation of appropriations in May 2002

The uptake of appropriations in May 2002 (Member States' expenditure from 16 October 2001 to 31 March 2002) is EUR 29 645,5 million, i.e. 67,0% of appropriations. Expenditure is EUR 1 592,4 million below the indicator for subheading 1a and EUR 26,9 million for subheading 1b.

The overall discrepancy between actual expenditure and the indicator for subheading 1b is insignificant. However, this discrepancy for subheading 1a is significant. For certain chapters of the budget (animal products) this discrepancy is not expected to be temporary, thus, leading to an overall under-spend of the 2002 budget by the end of the year.