REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 11/2001 and No 12/2001

CONTENTS

1. Overall outturn in monthly expenditure

2. Provisional utilisation of appropriations

3. Comments

4. Conclusions

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 by the Member States from 16 October 2000 to 15 October 2001, i.e. this report provides provisional figures for the total expenditure incurred in the budget year 2001.

1.1. Subheading 1a: CAP (not including rural development)

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1.2. Subheading 1b: Rural development

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2. PROVISIONAL UTILISATION OF APPROPRIATIONS

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(1) The indicators for the intermediate totals are given for information purposes.

3. COMMENTS

3.1. The uptake of appropriations for the budget year 2001

The (provisional) uptake of appropriations under heading 1 of the budget for the year 2001 was EUR 42 035,40 million, i.e. 95,5% of appropriations. This amount includes expenditure incurred by the Member States from 16 October 2000 to 15 October 2001 and direct payments made (or to be made by 31.12.2001) by the Commission. This (provisional) expenditure was:

- EUR 1 856,2 million below appropriations for subheading 1a (CAP, not including rural development), and

- EUR 132,1 million below appropriations for subheading 1b (Rural development).

3.2. Transfer of appropriations

3.2.1. Transfer No 25/2001

In September 2001, the Commission presented to the Budget Authority a proposal to transfer credit appropriations amounting to EUR 400 million into chapter B1-33 in order to cover the advance on the Community's financial contribution towards the eradication of foot-and mouth disease in the UK, NL, F and IRL on the basis of the dispositions of Council Decision 90/424/EEC of 26 June 1990. The transferred appropriations were taken out of chapters: B1-10 Arable crops (EUR 50 million), B1-20 Milk and milk products (EUR 250 million), B1-22 Sheepmeat and goatmeat (EUR 100 million). The Budget Authority adopted this transfer in October 2001.

3.2.2. Transfer No 37/2001

In October 2001, the Commission presented to the Budget Authority a proposal to transfer credit appropriations amounting to EUR 60 million into:

- chapter B1-30 (EUR 30 million) in order to cover payments for export refunds of processed agricultural products for export files of the year 2000 which were not paid by the competent services of the Member States in the course of that budget year but they were paid in the course of the year 2001;

- and into chapter B1-39 (EUR 30 million) in order to cover the agri-monetary measures cost arising from the significant revaluations of the UK's and of Sweden's currencies in 2000.

The transferred appropriations were taken out of chapter B1-21 Beef and veal (EUR 60 million). The Budget Authority adopted this transfer in November 2001.

3.2.3. Transfer No 43/2001

In October 2001, the Commission presented to the Budget Authority a proposal to transfer credit appropriations amounting to EUR 0,585 million into chapter B1-41 in order to cover the financial corrections resulting from the accounting clearance of the 2000 accounts on the basis of Commission decision 2001/474/EC. The transferred appropriations of EUR 0,585 million were taken out of chapter B1-40. The Budget Authority adopted this transfer in November 2001.

3.2.4. The end-of-year transfer

In December 2001, the Commission presented to the Budget Authority a proposal to transfer EUR 254 million out of chapter B1-21 Beef and veal in order to cover the deficit shown by the following chapters at the end of the current budget year:

- B1-12: Olive oil (+EUR 52 million),

- B1-16: Wine (+EUR 47 million),

- B1-37: Clearance of accounts (+EUR 131 million),

- B1-39: Other measures (+EUR 24 million).

As of the writing of this report, the Budget Authority has not yet adopted this transfer.

3.3. Monetary factors

3.3.1. The dollar/euro rate

The amount of 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 dollar rate.

In accordance with the Council Regulation on budgetary discipline (Council Regulation (EC) No 2040/2000 of 26 September 2000), the supplementary and amending budget (SAB) No 1/2001 was based on a parity of EUR 1 = $ 0,87. The unweighted average parity from August 2000 to the end of July 2001 was EUR 1 = $ 0,8861.

The Commission presented, on 31.10.2001, a report to the Budgetary Authority on the impact on EAGGF-Guarantee section expenditure in 2001 of movements in the euro/dollar exchange rate [COM(2001) 622 final]. The additional expenditure for EAGGF-Guarantee section, as a result of the depreciation of the dollar in relation to the budget rate of the euro, was estimated at EUR 115 million for the 2001 budget year. This additional expenditure involved the following chapters of the budget:

B1-10: Arable crops (cereals) EUR 89 million

B1-11: Sugar EUR 9 million

B1-13: Cotton EUR 7 million

B1-18: Other plant sectors (rice) EUR 1 million

B1-30: Non-Annex I products (cereals, sugar, rice) EUR 9 million

B1-32: Islands and most remote regions EUR 1 million.

3.3.2. The impact of the double rates

Following the devaluation of the Swedish crown by approximately 5% as well as the slight devaluation of the British pound in 2001, the impact of the double rates to the EAGGF Guarantee Section was estimated at - EUR 45 million.

3.4. Market factors

3.4.1. Subheading 1a

A brief preliminary explanation is given below for the most significant budget implementation divergencies when compared to the corresponding appropriations for certain chapters of the budget:

Chapter B1-10: Arable crops // Under-spending: - EUR 382 million

// (expenditure: EUR 17 466 million)

(appropriations: EUR 17 848 million)

The under-spending was particularly due to the improved market situation which led to lower purchases of cereals into public storage as well as to the fact that the actual area aid payments made by Member States were lower than what was initially forecasted on the basis of their area declarations.

Chapter B1-11: Sugar // Under-spending:- EUR 207 million

// (expenditure: EUR 1 497 million)

(appropriations: EUR 1 704 million)

The under-spending arose essentially from export refunds where the quantity actually exported in 2000/2001 has only been 2.45 million t compared to the budgetary assumption of 2.73 million t.

Chapter B1-12: Olive oil // Over-spending : + EUR 51 million

// (expenditure : EUR. 2 524 million) (appropriations : EUR. 2 473 million)

The over-spending can be attributed to the authorisation granted to E and EL to pay balances of the production aid for olive oil for the marketing year 1998/99 in the course of the budget year 2001.

Chapter B1-15: Fruits and vegetables // Under-spending : - EUR 96 million

// (expenditure : EUR. 1 558 million) (appropriations : EUR. 1 654 million)

The under-spending was due to lower payments for fresh fruits and vegetables and particularly due the reduction of the quantities withdrawn from the market.

Chapter B1-16: Products of the vine-growing sector // Over-spending: + EUR 39 million

// (expenditure: EUR 1 192 million)

(appropriations: EUR 1 153 million)

The overspending can be primarily attributed to the increased quantities of wine authorised for crisis distillation as well as to the resulting increase in the quantities of alcohol brought into intervention.

Chapter B1-20: Milk and milk products // Under-spending: -EUR 457 million

// (expenditure: EUR 1 888 million) (appropriations: EUR 2 345 million)

The under-spending reflected the improvement in the external and internal markets for milk and milk products compared to the budgetary assumptions, which has permitted significant reductions to be made in the rates of export refunds for all the principal milk products as well as in the rates of internal aid for skimmed milk powder for animal feed, for skimmed milk for casein and for butter used for pastry-making and ice-cream. Furthermore, intervention buying of butter has also concerned only 6 000 t instead of 53 000 t foreseen in the budget.

Chapter B1-21: Beef/veal // Under-spending: - EUR 938 million

// (expenditure: EUR 6 040 million)

(appropriations: EUR 6 978 million)

This under-spending was primarily due to the purchase for destruction scheme which eventually concerned approximately half of the 530 000 tonnes retained in the budget as well as to the reduced number of animals for which the slaughter premium was granted. Furthermore, significant under-utilisation of appropriations was made for export refunds due to the drop in the volume of beef-meat exports as a result of the BSE crisis as well for the UK over 30 months scheme due to the interruption of the scheme by the foot and mouth disease outbreak.

Chapter B1-22: Sheep- and goat-meat // Under-spending: - EUR 173 million

// (expenditure: EUR 1 447 million)

(appropriations: EUR 1 620 million)

The under-spending was almost entirely due to the positive development of market prices and the consequent lower level of premium rates for ewes and goats.

Chapter B1-30: Non-Annex I products // Over-spending: + EUR 21 million

// (expenditure: EUR 436 million)

(appropriations: EUR 415 million)

The over-spending was primarily due to payments for exports of processed agricultural products of the year 2000 which were not paid by the competent services of the Member States in the course of that budget year but which were paid in the course of the year 2001. Since these additional payments do not relate to export certificates issued in 2001, the WTO ceiling of EUR 415 million for that year is not breached.

Chapter B1-33: Veterinary measures // Over-spending: + EUR 400 million

// (expected expenditure: EUR 565 million)

(appropriations: EUR 165 million)

The explanation for this over-spending is given in point 3.2.1 above concerning the details with regard to transfer No 25/2001. Payments on these measures are expected to be made by 31.12.2001.

Chapter B1-39: Other measures // Over-spending: + EUR 53 million

// (expenditure: EUR 470 million)

(appropriations: EUR 417 million)

This over-spending was due to the cost of agri-monetary measures arising from the significant revaluations of the UK and of Swedish currencies in 2000.

3.4.2. Subheading 1b

Chapter B1-40: Rural Development // Under-spending: - EUR 132 million

// (expenditure: EUR 4 363 million)

(indicator: EUR 4 495 million)

The implementation rhythm of the rural development programmes confirmed the Commission's earlier remarks on the concentration of Member States payments close to the end of the budget year.

4. CONCLUSIONS

4.1. The uptake of appropriations for the 2001 budget year for subheading 1

The uptake of appropriations for the budget year 2001 (Member States' expenditure from 16 October 2000 to 15 October 2001) is estimated at EUR 42 035,4 million, resulting in an overall under-spending of the budget's appropriations which is estimated at EUR 1 988,3 million. Thus, the under-implementation of the budget's appropriations shown by the indicator since the middle of the budget year was confirmed. This under-implementation is primarily attributable to the beef/veal sector (47%), the milk and milk products sector (23%), the arable crops sector (19%), the sugar sector (10%) and the sheep- and goat-meat sector (9%). On the other hand, over-spending of the budget's appropriations was observed for the olive oil, wine, non-annex I and agri-monetary sectors.