AMENDING LETTER No 3 TO THE DRAFT GENERAL BUDGET 2012

STATEMENT OF EXPENDITURE BY SECTION Section III – Commission

Having regard to:

– the Treaty on the Functioning of the European Union, and in particular Article 314 thereof, in conjunction with the Treaty establishing the European Atomic Energy Community, and in particular Article 106a thereof,

– the Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities[1], and in particular Article 34 thereof,

– the draft general budget of the European Union for the financial year 2012 presented by the Commission on 26 May 2011[2]

– the amending letter No 1 to the draft general budget of the European Union for the financial year 2012 presented by the Commission on 17 June 2011[3],

– the amending letter No 2 to the draft general budget of the European Union for the financial year 2012 presented by the Commission on 16 September 2011[4],

the European Commission hereby presents to the budgetary authority the amending letter No 3 to the draft general budget of the European Union for the financial year 2012 for the reasons set out in the explanatory memorandum.

TABLE OF CONTENTS

1. Introduction.. 3

2. Preservation and Management of Natural Resources.. 3

2.1. Introduction and Summary Table. 3

2.2. EAGF (market related expenditure and direct payments) 4

2.2.1 Overall Picture. 4

2.2.2 Detailed Comments. 5

2.3. International Fisheries Agreements. 9

2.4. European Chemicals Agency (ECHA) 9

2.5. Changes to the Nomenclature and Budgetary Remarks. 10

3. Summary table by heading of the financial framework.. 11

STATEMENT OF EXPENDITURE BY SECTION

The changes to the statement of revenue and expenditure by section are available on EUR-Lex (http://eur-lex.europa.eu/budget/www/index-en.htm). An English version of the changes to these statements by section is attached for information as a budgetary annex.

1. Introduction

The Amending Letter No 3 (AL 3) to the Draft Budget for 2012 (DB 2012) covers the following:

– the line by line updating of the estimated needs for agricultural expenditure. In addition to changing market factors, the AL also incorporates the impact of legislative decisions adopted in the agricultural sector since the DB 2012 was drawn up, revised estimates of needs for some direct payments, as well as any proposals, which are expected to have a significant effect during the coming budget year.

– an update of the situation for International Fisheries Agreements;

– reinforcement of the EU contribution to the European Chemicals Agency (ECHA) under Heading 2.

The budgetary impact of these adjustments is a reduction in commitment appropriations of EUR 85.7 million and in payments appropriations of EUR 83.4 million compared to the Draft Budget 2012.

2. Preservation and Management of Natural Resources 2.1. Introduction and Summary Table

The AL 3 is sent to the budgetary authority in accordance with Article 314 of the Treaty on the Functioning of the European Union (TFEU) "the Commission may amend the draft budget during the procedure until such time as the Conciliation Committee, referred to in paragraph 5, is convened".

The AL 3 is based, in the same way as the DB itself, on the needs of the EU as a whole. It must be stressed that appropriations for agricultural expenditure financed by the EAGF (European Agricultural Guarantee Fund) are to be understood as a forecast and not as an objective of expenditure. The actual expenditure will depend, in particular, on actual market conditions, on the actual euro-dollar exchange rate, and on the rhythm of the payments by Member States. In accordance with the legal base, whatever the amount a Member State is obliged to pay in accordance with the regulations – within the limits set by the financial framework - will be reimbursed in full, subject to budget availabilities.[5]

For clarification and transparency purposes, some budgetary remarks have been updated.

According to the present AL 3, overall appropriations requested for heading 2 in 2012 are estimated at EUR 60 073 million, leaving a margin of EUR 737 million in commitment appropriations below the corresponding ceiling of the multiannual financial framework.

The commitment appropriations for agricultural expenditure (including veterinary and fisheries expenditure financed under the EAGF) amount to EUR 44 092 million, a decrease of EUR 88 million compared with the DB 2012, mostly explained by higher than expected assigned revenue to be carried over from 2011. EAGF payment appropriations are decreased by the same amount to a total of EUR 44 015 million.

As far as the International Fisheries Agreements are concerned, the AL 3 proposes to decrease commitment appropriations and payment appropriations for budget article 11 03 01 International Fisheries Agreements by EUR 3,5 million and EUR 2,8 million, respectively, as well as to increase on the reserve line commitment appropriations by EUR 4,2 million and payment appropriations by EUR 5,8 million.

The following table summarises the effect of AL 3 on heading 2:

|| DB 2012 || AL3/2012 || Difference

EUR million || (a) || (b) || (c)=(b)-(a)

|| CA || PA || CA || PA || CA || PA

Ceiling Financial Framework || 60 810,0 || || 60 810,0 || || 0 ||

margin || 651,6 || || 737,2 || || +85,7 ||

Total Appropriations Heading 2 || 60 158,4 || 57 948,4 || 60 072,8 || 57 865,0 || -85,7 || -83,4

of which: || || || || || ||

Agricultural expenditure (market related expenditure and direct payments)[6] || 44 179,7 || 44 102,8 || 44 091,6 || 44 014,7 || -88,1 || -88,1

International Fisheries and Law of the Sea || 154,1 || 154,1 || 154,8 || 157,1 || +0,7 || +3,0

European Chemicals Agency – Activities in the field of biocides legislation || 1,0 || 1,0 || 2,8 || 2,8 || +1,7 || +1,7

2.2. EAGF (market related expenditure and direct payments)

2.2.1 Overall Picture

The purpose of the AL 3 is to ensure that the agricultural budget is based on the most up-to-date economic data and legislative framework. By the month of September, the Commission has at its disposal a first indication of the level of production for 2011 and perspectives for the agricultural markets, which is the basis for any reliable estimate of the budgetary needs for 2012.

As in the past, the Commission has carefully reviewed all its estimates of agricultural expenditure line by line. As well as taking into account market factors, this AL 3 also incorporates the impact of any legislative decisions adopted in the agricultural sector since the DB was drawn up, as well as proposals made by the Commission.

EAGF appropriations are decreased by EUR 88 million. This is mostly due to somewhat higher needs in chapter 05 02 Intervention in Agricultural markets (+ EUR 94 million) and slightly higher needs in chapter 05 03 Direct aids (+ EUR 37 million). These higher needs are more than compensated for by a modification in the level of EAGF assigned revenue available in 2012. Firstly, additional assigned revenue received in 2011 amounting to EUR 205 million will be carried over from 2011 to 2012. Secondly, the Commission expects a small increase in the assigned revenue generated in 2012 (+ EUR 14 million), so that the total increase in available assigned revenue is EUR 219 million.

As a result, the total commitment appropriations requested for agricultural expenditure financed by the EAGF are EUR 44 092 million, lower than in the DB 2012 (- EUR 88 million), resulting in a margin under the EAGF sub-ceiling which now stands at EUR 619 million. The new margin for heading 2 in total is EUR 737 million.

2.2.2 Detailed Comments

05 02 Interventions in agricultural markets (appropriations + EUR 75 million)

needs in draft budget: EUR 3 438 million

appropriations requested in draft budget: EUR 3 147 million

estimated assigned revenue available in 2012 in draft budget: EUR 291 million

needs after letter of amendment: EUR 3 532 million

appropriations requested after letter of amendment: EUR 3 222 million

estimated assigned revenue available in 2012 after letter of amendment: EUR 310 million

In general, the hypotheses underlying this AL 3 confirm the assessment at the moment of the DB 2012, with favourable prospects for most agricultural markets. The modifications proposed by this AL 3 are mostly of a technical nature and concern small amounts, with the exception of the fruit and vegetables sector, olive oil, dried fodder, and the milk sector; where there are more substantial modifications. Overall needs for intervention measures on agricultural markets increase by EUR 94 million compared to the DB 2012. However, EUR 19 million of additional assigned revenues are estimated to be available for chapter 05 02, so that EUR 75 million additional appropriations are requested compared to the DB 2012.

The most important modifications are shortly explained below. A table with the full set of modifications (at the level of the budget article) can be found at the end of this section.

For fruit and vegetables, while needs for operational programmes of producer organisations are somewhat higher (+ EUR 15 million) following an updated assessment of the actual uptake of measures and the situation on outstanding payments for plans from previous years, including the exceptional support measures introduced in 2011, the appropriations proposed are slightly lower than in the DB 2012. In fact, it is proposed to reduce the budget appropriations requested for operational funds for producer organisations (budget item 05 02 08 03) by EUR 4 million because of EUR 19 million more revenue assigned to that item, reflecting updated estimates. A more substantial modification is proposed for preliminary recognition of producer organisations (budget item 05 02 08 11) with + EUR 45 million, reflecting the steady increase of expenditure over the last years, Member States' communications and updated figures for implementation during 2011.

For olive oil, following a fall of market prices below the trigger price, and in order to cope with high stocks in some Member Sates that affect the olive oil market throughout Europe, it is proposed to enter EUR 23 million on budget item 05 02 06 03. This will be needed for private storage aid.

It is proposed to increase appropriations for dried fodder (budget item 05 02 11 01) by + EUR 9 million, reflecting the latest figures on production.

For milk and milk products, the AL 3 proposes to decrease appropriations by - EUR 10 million. Part of that decrease (- EUR 6 million) is linked to intervention storage of skimmed-milk powder, reflecting updated figures on the stock situation in 2011 with some quantities carried over to 2012 in order to have availabilities for the most deprived persons scheme. The other part of the saving (- EUR 4 million) is related to private storage of butter reflecting lower than expected quantities under contract.

In additon to these modified requests, the AL 3 proposes for food programmes for the most deprived persons (budget item 05 02 04 01) that EUR 340 million out of the total appropriations (EUR 500 million) in the DB 2012 to be put on the reserve line, pending adoption of the legal base. The Commission still considers that it would be possible to carry out food programmes at this level after adoption of the proposed amended regulation (COM(2011) 634).

05 03 Direct Aids (appropriations - EUR 163 million)

needs in draft budget: EUR 41 174 million

appropriations requested in draft budget: EUR 40 674 million

estimated assigned revenue available in 2012 in draft budget: EUR 500 million

needs after letter of amendment: EUR 41 211 million

appropriations requested after letter of amendment: EUR 40 511 million

estimated assigned revenue available in 2012 after letter of amendment: EUR 700 million

Budget appropriations requested for this chapter are revised downwards by EUR 163 million. The change is the result of an increase in the amount of assigned revenues by EUR 200 million, while the revised estimation of needs shows a small increase by EUR 37 million. The most significant variations affect the Single Payment Scheme (SPS) and the Single Area Payment Scheme (SAPS) where there are changes in the assumptions for execution rates, since 2011 is the first year when actual implementation can be observed after the Health Check. Other small changes occur on budget lines inside the chapter, with a zero-sum effect.

Modifications at the level of the budget article

Code || Heading || DB || AL || difference || Comments

(in million EUR) || (in million EUR) || (in million EUR)

|| Interventions in agricultural markets || || || ||

05 02 01 || Cereals || 41,0 || 43,0 || +2,0 || Increase on line 05 02 01 02 for additional intervention storage of cereals as a small quantity remains in stock compared to DB 2012.

05 02 03 || Refunds on non-Annex 1 products || 14,0 || 12,0 || -2,0 || Decrease due to lower export refunds for egg products.

05 02 06 || Olive oil || 48,5 || 68,5 || +20,0 || Increase for private storage (line 05 02 06 03) of EUR 23 million and a small decrease of EUR 3 million for quality improvement measures (05 02 06 05) following revised implementation figures.

05 02 07 || Textile plants || 28,0 || 27,0 || -1,0 || The aid for fibre flax and hemp (line 05 02 07 01) decreases following slightly revised assumption for quantities.

05 02 08 || Fruits and vegetables || || || || Additional needs of EUR 15 million resulting from increased demands for operational funds for producer organisations (05 02 08 03) due to higher outstanding payments for plans from previous years, reimbursement of national aids and exceptional support measures remaining from 2011. A higher amount of assigned revenue will be used for this budget item (+ EUR 19 million). Aid to producer groups for preliminary recognition (05 02 08 11) increases by EUR 45 million on the basis of execution in 2011 as well as Member States' forecasts and communications. Other measures (05 02 08 99) increase by EUR 4,9 million for exceptional support measures outstanding from 2011.

|| --- Appropriations || 742,1 || 788,0 || +45,9

|| --- Needs || 1 033,1 || 1 098,0 || +64,9

05 02 09 || Products of the wine-growing sector || 1 105,9 || 1 108,9 || +3,0 || Increase of EUR 3 million for the grubbing-up scheme (05 02 09 09) following revised estimates for outstanding payments. Minor adjustments for lines 05 02 09 04 (+ EUR 0,2 million) and 05 02 09 08 ( - EUR 0,2 million).

05 02 10 || Promotion || 52,4 || 55,4 || +3,0 || Increase for promotion measures paid by Member States (05 02 10 01) related to additional campaign for fruit and vegetables.

05 02 11 || Other plant products/measures || 345,5 || 356,5 || +11,0 || Increase of EUR 9 million for dried fodder (05 02 11 01) following revised figures for quantities. POSEI measures (05 02 11 04) increase by EUR 2 million for higher market measures POSEIMA and additional RSA support for Aegean Islands based on execution in 2011.

05 02 12 || Milk and milk products || 92,1 || 82,1 || -10,0 || EUR 6 million and EUR 4 million lower needs for intervention storage of skimmed milk powder (05 02 12 02) and butter (05 02 12 04) following updated estimates of intervention and private stocks.

05 02 13 || Beef and veal || 45,1 || 46,1 || +1,0 || EUR 3 million additional needs for export refunds for meat (05 02 13 01), and EUR 2 million less for export refunds for live animals (05 02 13 04) resulting from updated estimates for quantities.

05 02 15 || Pigmeat, eggs and poultry, bee-keeping and other animal products || 131,0 || 133,0 || +2,0 || EUR 1 million higher needs for export refunds for pigmeat (05 02 15 01) and EUR 1 million more for private storage measures for pigmeat (05 02 15 02) following revised figures for quantities.

|| Directs Aids || || || ||

05 03 01 || Decoupled direct aids || || || || For the Single Payment Scheme (SPS; 05 03 01 01), the needs increase of EUR 47 million because of improved execution rates expected, based on the 2011 implementation. The Single Area Payment Scheme (SAPS: 05 03 01 02) decreases by EUR 11 million because of lower execution rate anticipated for Bulgaria, based on the 2011 implementation. EUR 1 million decrease for the Separate sugar payment (05 03 01 03), which is off-set with the budget line for SAPS. Furthermore, there is an increase in assigned revenue for SPS by EUR 200 million.

|| --- Appropriations || 37 354,0 || 37 189,0 || -165,0

|| --- Needs || 37 854,0 || 37 889,0 || +35,0

05 03 02 || Other direct aids || 3 317,7 || 3 320,7 || +3,0 || Variations due to a change in the hypothesis of under execution: - Decrease of EUR 10 million on budget line 05 03 02 06 (Suckler-cow premium) - Increase of EUR 5 million on line 05 03 02 40 (Area aid for cotton) - Other minor adjustments on lines: 05 03 02 05 Production aid for seeds (+ EUR 1 million); 05 03 02 19 Area aid for rice (- EUR 3 million); 05 03 02 43 Transitional Soft Fruit payment (+ EUR 2 million). - POSEI line (05 03 0250) is increased by EUR 6 million taking into account updated plans of Member States. - Transitional Fruit & Vegetable payment (05 03 02 41) increases by EUR 1 million for Slovakia, off-set with the budget line for SAPS. - The Specific Support Article 68 (05 03 02 44) increases by EUR 1 million for Belgium, compensated by the corresponding decrease in SPS.

05 03 03 || Additional amounts of aid || 2,0 || 1,0 || -1,0 || Decrease in remaining amounts due for previous years.

2.3. International Fisheries Agreements

As foreseen by point B of Annex II to the Interinstitutional Agreement (IIA), the Commission has examined the most recent information available concerning fisheries agreements. To reflect the latest situation, including the level of outstanding commitments (RAL), the Commission proposes to decrease commitment appropriations and payment appropriations for budget article 11 03 01 International Fisheries Agreements by EUR 3,5 million and EUR 2,8 million respectively.

It is also proposed to increase the reserve line 40 02 41 02 accordingly, by EUR 4,2 million for commitment appropriations and EUR 5,8 million for payment appropriations, reflecting updated information on individual Fisheries Agreements and on the amount estimated for additional catches.

2.4. European Chemicals Agency (ECHA)

On 12 June 2009, the Commission presented a proposal for a Regulation of the European Parliament and of the Council concerning the placing on the market and use of biocidal products[7]. This proposal includes new tasks for the European Chemicals Agency (ECHA), part of which is financed under Heading 2 of the multi-annual financial framework.

The Council adopted its position at first reading on 21 June 2011, and introduced changes which give rise to the additional workload and associated resource needs for the Agency are as follows:

– the scope of the EU centralised procedure for product authorisation has been widened significantly, which will mean that the Agency will have to process considerably more applications than initially foreseen;

– ECHA will have a greater involvement in data sharing in order to avoid duplicate testing on vertebrates and will also be called upon to take decisions regarding the "technical equivalence" of similar active substances;

– ECHA is now explicitly identified as providing the secretariat for the co-ordinating group overseeing mutual recognition;

– ECHA will be responsible for the maintenance of the Register for Biocidal Product which will be the key informatics platform for submitting applications as well as exchanging information between the Member States, the Agency, the Commission and the applicants.

A thorough review of the financial needs and staff requirements of ECHA has been carried out by the Commission's services in consultation with ECHA, covering the different new tasks to be assigned to ECHA.

On 11 August 2011, the Commission adopted a Communication on the Council's position[8], including a revised version of the financial statement taking into account the changes introduced by Council annexed to the Commission communication.

As 2012 will be a year of preparation and applications for product authorisations and substances approval will only be submitted from 2013 onwards, ECHA's work on biocides will depend entirely on the EU subvention in 2012.

In order for ECHA to be ready in time to implement the additional tasks assigned to it by the co-legislators, the Commission proposes that the subvention is increased by EUR 1,7 million, both in commitment appropriations and payment appropriations. These amounts are entered in the reserve, pending the adoption of the legal base. The breakdown by budget item is as follows:

Item 07 03 60 01 — European Chemicals Agency — Activities in the field of biocides legislation — Contribution to Titles 1 and 2 from Heading 2

(EUR)

|| Appropriations DB 2012 || Increase AL 3 || New amount

|| Commitments || Payments || Commitments || Payments || Commitments || Payments

07 03 60 01 || p.m. || p.m. || p.m. || p.m. || p.m. || p.m.

40 02 41 || 704 000 || 704 000 || 803 000 || 803 000 || 1 507 000 || 1 507 000

Item 07 03 60 02 - European Chemicals Agency — Activities in the field of biocides legislation — Contribution to Title 3 from Heading 2

(EUR)

|| Appropriations DB 2012 || Increase AL 3 || New amount

|| Commitments || Payments || Commitments || Payments || Commitments || Payments

07 03 60 02 || p.m. || p.m. || p.m. || p.m. || p.m. || p.m.

40 02 41 || 319 000 || 319 000 || 930 000 || 930 000 || 1 249 000 || 1 249 000

The amended establishment plan, incorporating an additional 9 AD posts, is included in the budgetary annex.

2.5. Changes to the Nomenclature and Budgetary Remarks

The budgetary remarks for the following chapters, articles and items have been updated (explanation in brackets):

Chapter 05 02 – Interventions in agricultural markets (figures for assigned revenues)

Item 05 02 07 99 Other measures (textile plants) (new line with a p.m.)

Article 05 02 16 01– Sugar Restructuring Fund (figures for assigned revenue)

Chapter 05 03 – Direct aids (figures for assigned revenues)

Item 05 03 01 99 Other (decoupled direct aids) (change in budgetary remarks)

Item 05 03 02 99 Other (direct aids) (change in budgetary remarks)

Item 07 03 60 02 European Chemicals Agency – Activities in the field of biocides legislation – Contribution to Title 3 from Heading 2 (change in budgetary remarks: amount of the EU contribution)

Article 11 03 01 International fisheries agreements (change in budgetary remarks: table)

Item 6 7 0 1 – Clearance of EAGF accounts – Assigned revenue (figures for assigned revenue)

Item 6 7 0 2 – EAGF irregularities – Assigned revenue (figures for assigned revenue)

Item 6 7 0 3 – Superlevy from milk producers – Assigned revenue (figures for assigned revenue)

Item 6 8 0 1 – Temporary restructuring amounts – Assigned revenue (figures for assigned revenue)

3. Summary table by heading of the financial framework

Financial framework Heading/subheading || 2012 Financial Framework || Draft Budget 2012 (incl AL No 1-2/2012) || Amending Letter No 3/2012 || DB 2012 + AL No 1-3 to 2/2012

CA || PA || CA || PA || CA || PA || CA || PA

1. SUSTAINABLE GROWTH || || || || || || || ||

1a. Competitiveness for growth and employment || 14 853 000 000 || || 15 223 600 752 || 12 566 134 008 || || || 15 223 600 752 || 12 566 134 008

1b. Cohesion for growth and employment || 52 761 000 000 || || 52 738 876 141 || 45 134 800 000 || || || 52 738 876 141 || 45 134 800 000

Total || 67 614 000 000 || || 67 962 476 893 || 57 700 934 008 || || || 67 962 476 893 || 57 700 934 008

Margin1 || || || 151 523 107 || || || || 151 523 107 ||

2. PRESERVATION AND MANAGEMENT OF NATURAL RESOURCES || || || || || || || ||

Of which market related expenditure and direct payments || 48 093 000 000 || || 44 179 737 305 || 44 102 837 025 || -88 100 000 || -88 100 000 || 44 091 637 305 || 44 014 737 025

Total || 60 810 000 000 || || 60 158 443 305 || 57 948 376 981 || -85 667 000 || -83 367 000 || 60 072 776 305 || 57 865 009 981

Margin2 || || || 651 556 695 || || || || 737 223 695 ||

3. CITIZENSHIP, FREEDOM, SECURITY AND JUSTICE || || || || || || || ||

3a. Freedom, Security and Justice || 1 406 000 000 || || 1 340 381 000 || 868 333 500 || || || 1 340 381 000 || 868 333 500

3b. Citizenship3 || 699 000 000 || || 683 471 000 || 645 659 400 || || || 683 471 000 || 645 659 400

Total || 2 105 000 000 || || 2 023 852 000 || 1 513 992 900 || || || 2 023 852 000 || 1 513 992 900

Margin || || || 81 148 000 || || || || 81 148 000 ||

4. EU AS A GLOBAL PLAYER4 || 8 997 000 000 || || 9 409 280 576 || 7 293 724 333 || || || 9 409 280 576 || 7 293 724 333

Margin || || || -153 343 576 || || || || -153 343 576 ||

5. ADMINISTRATION5 || 8 670 000 000 || || 8 294 402 467 || 8 294 797 467 || || || 8 294 402 467 || 8 294 797 467

Margin || || || 459 597 533 || || || || 459 597 533 ||

TOTAL || 148 196 000 000 || 141 360 000 000 || 147 848 455 241 || 132.751.825.689 || -85 667 000 || -83 367 000 || 147 762 788 241 || 132 668 458 689

Margin || || || 1 343 825 335 || 8 802 174 311 || || || 1 429 492 335 || 8 885 541 311

1 The European Globalisation adjustment Fund (EGF) is not included in the calculation of the margin under Heading 1a.

2 After the transfer from modulation to Rural Development and from cotton and wine for restructuring in the respective regions (EUR 3 150,4 million).

3 The European Union Solidarity Fund (EUSF) amount is entered over and above the relevant headings as foreseen by the IIA of 17 May 2006 (OJ C 139 of 14.6.2006).

4 The 2012 margin for Heading 4 does not take into account the appropriations related to the Emergency Aid Reserve (EUR 258,9 million). EUR 153,3 million above the ceiling is financed by the mobilisatio of the Flexibility instrument.

5 For calculating the margin under the ceiling for Heading 5, account is taken of the footnote (1) of the financial framework 2007-2013 for an amount of EUR 84 million for the staff contributions to the pensions scheme.

[1] OJ L 248, 16.9.2002, p. 1.

[2] COM(2011)300

[3] COM(2011) 372.

[4] COM(2011) 576.

[5] Article 19 of Council Regulation (EC) No 1290/2005.

[6] European Agricultural Guarantee Fund (EAGF) expenditure, including EUR 30,5 million under title 11 Fisheries and Maritime Affairs and EUR 335,8 million under title 17 Health and Consumer Protection.

[7] COM(2009) 267.

[8] COM(2011) 498.