Proposal for a COUNCIL REGULATION amending Regulation (EEC) No 2019/93 introducing specific measures for the smaller Aegean islands concerning certain agricultural products

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Introduction

In accordance with Article 15(2) of Council Regulation (EEC) No 2019/93 of 19 July 1993 introducing specific measures for the smaller Aegean islands concerning certain agricultural products, the Commission has drawn up a general report on the economic situation of the smaller Aegean islands, showing the progress and impact of the measures taken pursuant to that Regulation. That report (COM(2001) 64 final of 7 February 2001) was addressed to the Council and the European Parliament.

2. Regulation (EEC) No 2019/93

Regulation (EEC) No 2019/93 was designed as a response to permanent handicaps in these regions (remoteness and climate, fragmentation, relative geographic isolation compared to the rest of the Community) and to specific constraints (very small farm sizes, lack of economies of scale, dependence, extremely high production and transport costs, etc.). It is financed from the EAGGF Guarantee Section (around EUR 22.5 million per year) and comprises two types of measure, specific supply arrangements (SSA) and specific measures for the main sectors of local agricultural production. It also contains a series of derogations concerning structural aids which have been part-financed from the EAGGF Guidance Section, as part of the financial allocation from the Structural Funds for Greece for the 1994-1999 programming period.

3. Progress report on Regulation (EEC) No 2019/93

The Greek authorities have sent the Commission reports on the implementation of this Regulation, and some requests for amendments.

In the context of SEM 2000, the Commission appointed external consultants to draw up reports evaluating the implementation of Regulation (EC) No 2019/93. These consultants examined the achievement of the Regulation's objectives and any possible improvements.

The Commission presented a first report (COM(96) 387 final) and then, taking into account the above evaluations, the information forwarded by the national authorities and the experience obtained of implementation of the Regulation and of its impact, drew up the general report COM(2001) 64 final referred to above which, in its conclusions, outlines the adjustments and improvements to the measures introduced by Regulation (EEC) No 2019/93.

A delay in the presentation of this report has however allowed:

- better use to be made of the results of the evaluation carried out by the independent external consultants,

- four years of application of the measures to be taken into account rather than the three years required under Article 15 of Regulation (EEC) No 2019/93 (i.e. 1994 to 1997).

The data on the implementation of Regulation (EEC) No 2019/93 in the years 1998 and 1999 seem to confirm the trends observed between 1994 and 1997 and the broad outlines of the report to the Commission on adjustments to the various arrangements.

Overall, it should be underlined that the measures introduced by the Regulation have had a positive impact.

Examination of the results of the specific supply arrangements shows that supplies to the islands have improved and that, over the years, the management of the arrangements has also improved and the supply balances have stabilised somewhat in terms of local requirements for certain products. The prices of products covered by the arrangements have been compared to those observed on the representative markets of mainland Greece, as it is from the ports of mainland Greece that the islands are usually supplied. A significant variation has been observed in the impact of these arrangements depending on the product concerned. For flour and animal feedingstuffs, this impact has been significant at the level of the end user. Aid for flour has produced an across-the-board fall in prices, even for non-subsidised quantities, through competition between distributors in the sector.

In the fruit and vegetables sector, the specific supply arrangements decreased progressively until 1997, the final year of implementation. No impact on prices was discerned over that period. In the sugar sector, the aid has had no effect since the Greek sugar industry applies a price policy which means that differences in consumer prices between markets and regions are practically non-existent. No aid has been applied in the yoghurt sector as the balance for that sector remained unused over the entire period under review.

As regards the use of the annual supply balances, the flour and animal feedingstuffs sectors are to the fore with average utilisation rates of 90% and 85%, while rates in the fruit and vegetables, sugar and yoghurt sectors are 23%, 33% and 0% respectively.

By combining the impact of the specific supply arrangements and the degree of use of the annual supply balances, the sectors concerned can be placed in two clearly distinct categories: one where the measures have been well applied (flour and animal feedingstuffs) and another where they have practically completely failed (yoghurt, sugar, fruit and vegetables).

Examination of the measures to support local production shows that they have alleviated some of the production cost constraints and/or helped maintain agricultural activity in difficult areas which are often fragile in environmental terms (cattle farming, olive cultivation, potato-growing, etc.) and are often the site of multiple activities. Some measures have even been linked to conditions that allow vertical structuring of the sector and improved production quality, and operators have therefore capitalised on the aid granted (maintaining areas under vines for the production of quality wines psr, production of honey with a positive impact on the fragile flora of the islands, etc.) The different forms of aid have been well adapted to real local conditions and are consistent with each other and with the specific supply arrangements, and synergy has been possible with general aid granted under the CAP. The other measures (storage aid for local cheeses and aid for the ageing of locally produced liqueur wines, and programmes of initiatives for fruit and vegetables and flowers) have not been successful.

Finally, as regards the structural derogations, the flexibility introduced by Regulation (EEC) No 2019/93 has helped accelerate the modernisation of holdings and the granting of compensatory allowances for "less-favoured areas". The main catalyst has been the increase in the rate of aid to investments which has helped double investments in holdings, with the material improvement plans (MIPs) implemented in the period 1994-97 in the islands representing 16% of the total number of such plans implemented in Greece as a whole over the same period, while compensatory allowances were granted to around 15 000 recipients each year on average - 45% of MIPs were implemented by young farmers.

4. Guidelines for review

The Commission proposes to consolidate and adapt the instruments for the smaller Aegean islands and to target them better, while staying within the limits of the financial perspective. It is therefore aiming for budget neutrality. Accordingly, the Commission's proposal also provides for simplification of the management of the specific supply arrangements, improved cost-effectiveness and some slimming-down of the instrument.

The logic behind the specific supply arrangements (SSA) is to provide conditions which help alleviate the additional costs of marketing resulting from the particular geographical situation of these islands. That logic still applies.

The proposals provide for a review of the list of products covered by the supply arrangements, retaining only those products that are really essential to human consumption (flour) and those that constitute agricultural inputs (animal feedingstuffs), while removing less important products on which the specific supply arrangements have had only a very limited impact (sugar, yoghurt). Finally, there are no plans to renew the arrangements for fruit and vegetables. As for reclassifying the islands, the Commission plans to review the two existing groups taking into account the traditional trade flows between the islands so as to ensure a fairer impact of the specific supply arrangements on product prices.

Finally, in order to lighten the administrative burden of the arrangements, it is proposed to empower the Commission to review the list of products, and to simplify administration of the supply balances.

Turning to the local agricultural production measures, the adjustments to be made arise from the analysis of local needs.

In the case of cattle farming, the measures applied have helped stabilise the herd by reducing production costs. The Commission therefore proposes retaining this system while adapting it to the new rules for the common organisation of the market in beef and veal.

The aid for maintaining cultivation of areas under vines for the production of quality wines psr, olive groves, potatoes for human consumption and seed potatoes and the production of honey of specific quality has also helped to stabilise these activities and to structure the sectors concerned. It is therefore proposed to maintain the existing arrangements, while updating the number of hives in the beekeeping sector. The aid is compatible with, and supplementary to, the respective market organisations.

Aid which has proved not to be effective (storage of local cheeses and ageing of liqueur wines) and too unwieldy and complicated (fruit, vegetables and flowers) will be abolished.

The structural derogations were abolished under the fourth indent of Article 55(2) of Regulation (EC) No 1257/1999 on support for rural development. However, recital 53 of that Regulation indicates the possibility of establishing new rules providing for the flexibility, adaptations and derogations required to meet the specific needs of the Aegean islands when rural development measures are programmed. Since this possibility has been clearly indicated, and in view of the fact that investment costs for materials and equipment and for labour are on average 50% greater in these islands, it is proposed that the rates of aid referred to in Articles 7 and 28(2) of Regulation (EC) No 1257/1999 be increased by way of derogation from those provisions.

5. Conclusion

The proposed changes aim to take better account of the specific features of these island regions and of the results of the implementation of Regulation (EEC) No 2019/93 observed thus far. These amendments must however remain consistent with the spirit and field of application of that Regulation. They are therefore unlikely to disrupt the single market or the application of the common policies. They have no budgetary impact and budget neutrality is therefore ensured.

Taking into account the revision clause in Article 15(2) of Regulation (EEC) No 2019/93, it is proposed that that Regulation be amended.

2001/0260 (CNS)

Proposal for a COUNCIL REGULATION amending Regulation (EEC) No 2019/93 introducing specific measures for the smaller Aegean islands concerning certain agricultural products

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 36 and 37 thereof,

Having regard to the proposal from the Commission [1],

[1] OJ C,

Having regard to the opinion of the European Parliament [2],

[2] OJ C,

Having regard to the opinion of the Economic and Social Committee [3],

[3] OJ C,

Whereas:

(1) Under Article 15 of Council Regulation (EEC) No 2019/93 of 19 July 1993 introducing specific measures for the smaller Aegean islands concerning certain agricultural products [4] the Commission must submit an annual report to Parliament and the Council on the implementation of the measures and, at the end of the third year of application of the specific supply arrangements, a general report on the economic situation of the Aegean islands, showing the impact of the measures taken. These reports are to be accompanied, where necessary, by appropriate proposals for amendments and changes to the measures provided for in that Regulation.

[4] OJ L 184, 27.7.1993, p. 1. Regulation as last amended by Regulation (EC) No 1257/1999 (OJ L 160, 26.6.1999, p. 80).

(2) Analysis of the implementation of these measures points to the need for appropriate adjustments and changes, taking into account the results and experience gathered and the evolution of the context in which these measures have been applied. Council Regulation (EEC) No 2019/93 should therefore be amended accordingly.

(3) In particular, the specific supply arrangements have proved to be poorly suited to the milk products (yoghurt) and sugar sectors, especially as regards passing on the advantages to the end user, while in the fruit and vegetables sector the arrangements expired at the end of 1997. These products should therefore be removed from the specific supply arrangements. The groups of islands should also be redefined on the basis of their distance from the usual ports of shipment in mainland Greece, taking into account supplies to the islands of final destination from islands of transit and of loading.

(4) The economic advantages of the specific supply arrangements must not provoke deflections of trade in the products concerned. Re-dispatching or re-exporting these products from the islands concerned should therefore be prohibited. In the case of processing, this prohibition should not apply to traditional exports and consignments.

(5) The support measures for local products introduced by Regulation (EEC) No 2019/93 for the private storage of certain local cheeses, programmes of initiatives for fruit, vegetables and flowers, and the ageing of locally produced liqueur wines have been shown to be poorly suited to the situation in these sectors on the Aegean islands due in particular to the short storage periods for the cheeses and liqueur wines and thus the negligible impact of the aid, and to the complexity of procedures and the way the proposed aid for fruit, vegetables and flowers was structured. This aid should not therefore be renewed.

(6) In order to continue to support traditional cattle farming in these islands, on the one hand, the stability of the special premium should be ensured for a specific number of male bovines also in receipt of the supplement to the special premium and the grant of the supplement to the suckler cow premium should be continued and, on the other, reference should be made to the new regulatory framework for the common organisation of the market in this sector since 1999.

(7) As regards the continued grant of aid for the cultivation of vines for the production of quality wines psr in the traditional areas of production, the references to the legislation on the common organisation of the market in this sector since 1999 should be updated.

(8) For the purposes of continuing to grant aid to traditional beekeeping and contributing to the continued improvement of quality in this sector, the activities of recognised associations of beekeepers should be encouraged and the number of hives eligible for such aid should be updated.

(9) Since the measures needed to implement this Regulation are management measures within the meaning of Article 2 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission [5], they should be adopted by the management procedure provided for in Article 4 of that Decision.

[5] OJ L 184, 17.7.1999, p. 23.

(10) Article 13 of Regulation (EEC) No 2019/93, providing for derogations applicable to structural measures, has been repealed by Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain Regulations [6]. The structures of certain holdings and processing and marketing firms in the Aegean islands are seriously defective and face specific difficulties. Provision should therefore be made for derogations for certain types of investments from the provisions limiting the grant of some structural aid provided for in Regulation (EC) No 1257/1999,

[6] OJ L 160, 26.6.1999, p. 80.

HAS ADOPTED THIS REGULATION:

Article 1

Regulation (EEC) No 2019/93 is hereby amended as follows:

(1) Articles 2 and 3 are replaced by the following:

"Article 2

Specific supply arrangements are hereby introduced for the agricultural products listed in the Annex to this Regulation, which are essential for human consumption and as inputs in agricultural production in the smaller Aegean islands.

A forecast supply balance shall be drawn up stating the quantity of the agricultural products referred to in the above paragraph needed to meet supply requirements each year.

Article 3

1. Under the specific supply arrangements, aid shall be granted for the supply to the smaller Aegean islands of the products referred to in Article 2.

The amount of aid shall be fixed for a group of islands taking into consideration the additional costs of marketing products in these islands, calculated from the usual ports of shipment in mainland Greece, and from the ports of islands of transit or of loading for the islands of final destination.

90% of the amount of the aid shall be financed by the Community and 10% by the Member State in question.

2. In implementing the specific supply arrangements, account shall be taken, in particular, of the following:

(a) the specific needs of the smaller Aegean islands and the precise quality requirements,

(b) traditional trade flows with ports in mainland Greece and between the islands,

(c) the economic aspect of the proposed aid,

(d) where applicable, the need not to obstruct the potential development of local products.

3. A condition for benefiting from the specific supply arrangements shall be that the advantages are actually passed on to the end user.

4. Products covered by the specific supply arrangements may not be re-exported to third countries or re-dispatched to the rest of the Community.

5. Where the products referred to in paragraph 1 are processed in the smaller Aegean islands, the prohibition referred to in paragraph 5 shall not apply to traditional exports or to traditional shipments of the processed products to the rest of the Community. In the case of traditional exports, no refund shall be granted."

(2) The following Article 3a is added:

"Article 3a

1. Detailed rules for applying this Title shall be adopted in accordance with the procedure referred to in Article 13a(2). They shall cover in particular:

(a) the grouping of the smaller Aegean islands on the basis of their distance from the usual ports of shipment in mainland Greece, and in relation to the ports of islands of transit or of loading from which the islands of final destination are usually supplied;

(b) the fixing of the amount of aid under the specific supply arrangements;

(c) the provisions to ensure effective monitoring and that the advantages are actually passed on to the end user;

(d) the introduction, if necessary, of a system of delivery licences.

2. The Commission shall draw up supply balances in accordance with the procedure referred to in Article 13a(2). It may revise those balances, and the list of products in the Annex, in accordance with the same procedure, in the light of changes in the requirements of the smaller Aegean islands."

(3) Article 4 is deleted.

(4) Article 6 is replaced by the following:

"Article 6

1. The aid provided for in this Article shall be granted to assist traditional livestock farming activities in the beef and veal sector.

2. Fattening aid for male bovine animals, equal to an additional EUR 48.3/head on top of the special premium provided for in Article 4 of Council Regulation (EC) No 1254/1999 on the common organisation of the market in beef and veal [7], shall be granted to beef and veal producers.

[7] OJ L 160, 26.6.1999, p. 21.

The supplement may be granted for an animal of a minimum weight to be determined in accordance with the procedure referred to in Article 13a(2), up to a limit of 12 000 male bovines per year within the regional ceiling set in Article 4(1) and (4) of Regulation (EC) No 1254/1999. The proportionate reduction referred to in Article 4(4) of that Regulation shall not apply within that limit.

3. A supplement to the premium for maintaining suckler cows provided for in Article 6 of Regulation (EC) No 1254/1999 shall be paid to beef and veal producers each year. The amount of this supplement shall be EUR 48.3 per suckler cow held by the producer on the day on which the application is submitted.

4. Detailed rules for applying paragraphs 1, 2 and 3 shall be adopted in accordance with the procedure referred to in Article 13a(2). They may also provide for an amendment of the limit referred to in paragraph 2."

(5) Article 7 is deleted.

(6) Article 8 is replaced by the following:

"Article 8

1. Aid per hectare shall be granted for the cultivation of potatoes for human consumption falling within CN codes 0701 90 50 and 0701 90 90 and for the cultivation of seed potatoes falling within CN code 0701 10 00, up to a limit of 3 200 hectares cultivated and harvested per year.

The amount of the aid shall be not more than EUR 603 per hectare.

2. Detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 13a(2)."

(7) Article 9 is replaced by the following:

"Article 9

1. Aid per hectare shall be granted for the continued cultivation of vines for the production of quality wines psr in the traditional areas of production.

The following areas shall be eligible for aid:

(a) areas planted to vine varieties included among the varieties classified by the Member States as being suitable for the production of each of the quality wines psr produced in their territory, as referred to in Article 19 of Council Regulation (EC) No 1493/1999 [8], and

[8] OJ L 179, 14.7.1999, p. 1.

(b) areas where the yield per hectare is lower than a maximum to be fixed by the Member State, expressed as quantities of grapes, grape musts or wine, under the terms of Annex VI.I to Regulation (EC) No 1493/1999.

2. The amount of the aid shall be EUR 476 per hectare per year. The aid shall be granted exclusively to producer groups or organisations initiating a measure to improve the quality of the wines produced in accordance with a programme approved by the competent authorities; the programme shall include in particular means for improving vinification, storage and distribution conditions.

3. Chapter II of Title II of Regulation (EC) No 1493/1999 shall not apply to the smaller Aegean islands.

4. Detailed rules for applying this Article shall be adopted as necessary in accordance with the procedure referred to in Article 13a(2)."

(8) Article 10 is deleted.

(9) Article 11 is replaced by the following:

"Article 11

1. Aid per hectare shall be granted for the maintenance of olive groves in traditional olive-growing zones, provided that the groves are kept and maintained in good production conditions.

The amount of the aid shall be EUR 145 per hectare per year.

2. Detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 13a(2). In particular they shall fix the conditions for the application of the aid arrangements referred to in paragraph 1, the conditions for proper maintenance of olive groves and the control provisions."

(10) Article 12 is replaced by the following:

"Article 12

1. Aid shall be granted for the production of honey of specific quality from the smaller Aegean islands, containing a large proportion of thyme honey.

The aid shall be paid, on the basis of the number of registered hives in production, to associations of beekeepers recognised by the competent authorities which undertake to implement annual programmes of initiatives designed to improve the conditions under which quality honey is produced.

The amount of the aid shall be EUR 12 per hive per year.

2. The aid referred to in paragraph 1 shall be granted for up to 75 000 hives per year.

3. Detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 13a(2)."

(11) Article 13 is replaced by the following:

"Article 13

1. Notwithstanding Article 7 of Regulation (EC) No 1257/1999, the total value of the aid, expressed as a percentage of the volume of eligible investments, may be increased by a maximum 15 percentage points for investments intended in particular to encourage diversification, restructuring or a move towards sustainable agriculture on agricultural holdings in the smaller Aegean islands.

2. Notwithstanding Article 28(2) of Regulation (EC) No 1257/1999, the total value of the aid, expressed as a percentage of the volume of eligible investments, shall not exceed 65% for investments in small and medium-sized enterprises engaged in processing and marketing agricultural products consisting mainly of local produce in sectors to be defined in the programme complement referred to in Article 18(3) of Council Regulation (EC) No 1260/1999 [9].

[9] OJ L 161, 26.6.1999, p. 1.

3. The measures planned under this Article shall be described as part of the operational programmes as referred to in Article 18 of Regulation (EC) No 1260/1999 covering the smaller Aegean islands."

(12) The following Article 13a is added:

"Article 13a

1. The Commission shall be assisted by the Management Committee for Cereals established by Article 22 of Council Regulation (EEC) No 1766/92 [10], or by the management committees established by the regulations on the common organisations of the market for the products concerned.

[10] OJ L 181, 1.7.1992, p. 21.

In the case of agricultural products covered by Council Regulation (EEC) No 827/68 [11] and products not covered by a common organisation of the market, the Commission shall be assisted by the Management Committee for Hops established by Article 20 of Council Regulation (EEC) No 1696/71 [12].

[11] OJ L 151, 30.6.1968, p.16.

[12] OJ L 175, 4.8.1971, p. 1.

2. Where reference is made to this paragraph, the management procedure laid down in Article 4 of Decision 1999/468/EC shall apply, in compliance with Article 7 thereof.

3. The period referred to in Article 4(3) of Decision 1999/468/EC shall be one month."

(13) Article 14 is replaced by the following:

"Article 14

The measures provided for in this Regulation, except for Article 13, shall constitute intervention intended to stabilise the agricultural markets within the meaning of Article 2(2) of Council Regulation (EC) No 1258/1999 [13]."

[13] OJ L 160, 26.6.1999, p. 103.

(14) The following Article 14a is added:

"Article 14a

The Member States shall take the measures necessary to ensure compliance with this Regulation, in particular as regards controls and administrative penalties, and shall inform the Commission thereof.

Detailed rules for applying this Article shall be adopted in accordance with the procedure referred to in Article 13a(2)."

(15) Article 15 is replaced by the following:

"Article 15

1. Greece shall present an annual report to the Commission on the implementation of the measures provided for in this Regulation.

2. At the end of every five-year period of implementation of the measures provided for in this Regulation, the Commission shall submit to the European Parliament and the Council a general report on the impact of the measures taken pursuant to this Regulation, accompanied where appropriate by proposals concerning any adjustments which may prove necessary.

The first report shall be presented before the end of 2005."

(16) The Annex is replaced by the Annex to this Regulation.

Article 2

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

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

Done at Brussels,

For the Council

The President

ANNEX

"ANNEX

List of products covered by the specific supply arrangements under Title I for the smaller Aegean islands

Description // CN code

Wheat flour // 1101 and 1102

Feedingstuffs //

- Cereals //

- Wheat // 1001

- Rye // 1002

- Barley // 1003

- Oats // 1004

- Maize // 1005

- Alfalfa and fodder // 1214

- Food industry wastes and residues // 2302 to 2308

- Preparations of a kind used in animal feed // 2309 90"

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