REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 2/2004

1. OVERALL OUTTURN IN MONTHLY EXPENDITURE

The following tables show the overall outturn in monthly expenditure in relation to the expenditure profile. This situation corresponds to expenditure incurred in the Member States from 16 October to 31 December 2003.

1.1. Subheading 1a: Part of policy areas 05 (Agriculture), 11 (Fisheries) and 17 (Health and Consumer Protection)

1.2.

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1.3. Subheading 1b: Policy area 05 (Agriculture) - Rural Development (article 05 04 01)

1.4.

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2. PROVISIONAL UTILISATION OF APPROPRIATIONS

The following table presents the provisional utilisation of appropriations for the first two months of the 2004 budget year:

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3. COMMENTS

3.1. The uptake of appropriations for February 2004

The uptake of appropriations under heading 1 of the budget for February 2004 (Member States' expenditure from 16 October to 31 December 2003) amounts to EUR 23 933,6 million, i.e. 59,3% of appropriations. Expenditure is

- EUR 240,8 million above the indicator for subheading 1a, and

- EUR 264,0 million under the indicator for subheading 1b.

3.2. Monetary factors

The dollar/euro rate

The expenditure indicated above takes account of the movement in the dollar/euro 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 2004 agriculture budget was drawn up on the basis of the average dollar rate for July, August and September 2003, i.e. EUR 1 = $ 1,12. For the period 1 August to 31 December 2003 the average dollar rate was equal to EUR 1 = $ 1,16 i.e. at a level slightly above the rate used for the establishment of the 2004 budget.

3.3. Market factors

Subheading 1a

For subheading 1a, the rhythm of execution is above the level of the indicator for the animal products sector while it stands below the level of the indicator for the plants products sector. For the plant products sector, this under-execution is primarily related to sugar, textile plants and to other plant products/measures. For the animal products sector, this over-execution is attributed to beefmeat and sheepmeat. Therefore, the following comments are due:

Article 05 02 05: Sugar // Divergence: -EUR 221 million (-12,9%)

// (expenditure: EUR 332 million)

(indicator: EUR 553 million)

This under-execution by comparison to the level of the indicator is due to the reduced quantities of sugar exported with refunds which stood at 69% of the volume of exports expected as of this point in time.

Article 05 02 06: Olive oil // Divergence: + EUR 84 million (+3,5%)

// (expenditure: EUR 1 707 million)

(indicator: EUR 1 623 million)

This over-execution is due to the acceleration of the rhythm of payments of the advances for the production aid for olive oil as compared to the level of the indicator. The situation is expected to be regularised over the coming months on the basis of the maximum predetermined quantities of olive oil expected to be subsidised under this measure.

Article 05 02 07: Textile plants // Divergence: -EUR 49 million (-5,6%)

// (expenditure: EUR 483 million)

(indicator: EUR 532 million)

This under-execution is due to the slowdown of the rhythm of payments of the advances for the aid for cotton as compared to the level of the indicator. The situation is expected to be regularised over the coming months on the basis of the maximum predetermined quantities of cotton expected to be subsidised under this measure.

Article 05 02 11: Other plant products/measures // Divergence: -EUR 44 million (-5,7%)

// (expenditure: EUR 176 million)

(indicator: EUR 220 million)

This under-execution is due to the slowdown of the rhythm of payments of the aid for dried fodder as compared to the level of the indicator. The situation with regard to payments for this scheme is expected to be temporary.

Article 05 03 01: Milk and milk products // Divergence: -EUR 112 million (-4,0%)

// (expenditure: EUR 532 million)

(indicator: EUR 644 million)

This under-execution is primarily due to the payment by Italy of the first yearly instalment of her outstanding additional milk levy on the basis of Council Decision of 16 July 2003 (2003/530/EC). This payment leads to a reduction of the expenditure incurred for the other measures of the milk sector, thus, affecting the execution of the pertinent budget article as a whole.

Article 05 03 02: Beef and veal // Divergence: + EUR 221 million (+2,8%)

// (expenditure: EUR 2 499 million)

(indicator: EUR 2 278 million)

The Commission, following the summer drought in certain Member States, adopted Regulation (EC) No 1621/2003 of 16 September 2003 allowing the advance payment of the 2003 beef premiums in the budget year 2003 instead of 2004. The Member States maintained an accelerated payment rhythm of these premiums with the start of the new budget year as it is evidenced by this over-implementation when compared to the level of the indicator for this article of the 2004 budget. At this point in time, this over-execution is deemed to be temporary.

Article 05 03 03: Sheepmeat and goatmeat // Divergence:+ EUR 463 million (+30,3%)

// (expenditure: EUR 1 159 million)

(indicator: EUR 696 million)

The Commission, following the summer drought in certain Member States, adopted Regulation (EC) No 1621/2003 of 16 September 2003 allowing the advance payment of the 2003 sheep/goat premium in the budget year 2003 instead of 2004. The Member States maintained an accelerated payment rhythm of these premiums with the start of the new budget year as it is evidenced by this over-implementation when compared to the level of the indicator for this article of the 2004 budget. At this point in time, this over-execution is deemed to be temporary.

4. CONCLUSIONS

Implementation of appropriations at 29 February 2004

The uptake of appropriations for February 2004 (Member States' expenditure from 16 October to 31 December 2003) shows an over-execution for subheading 1a. This over-execution relates to certain individual articles of the budget and, at this point in time, it is expected to be temporary. The under-execution for subheading 1b invites no comment at this point in time.