COMMISSION REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure Early warning system No 11/2000 and No 12/2000

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 1999 to 15 October 2000, which means that this report provides provisional figures for total expenditure in 2000.

1.1. Subheading 1a: Traditional EAGGF Guarantee Section expenditure and veterinary expenditure

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1.2. Subheading 1b: Rural development and accompanying measures

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3. Comments

3.1. The uptake of appropriations for 2000

The (provisional) uptake of appropriations under heading 1 of the budget for 2000 is EUR 40 430 million, i.e. 99.4 % of appropriations.

This amount comprises expenditure incurred by the Member States from 16 October 1999 to 15 October 2000, and direct payments made (or to be made) by the Commission. The level of expenditure also takes account of reductions in monthly advances to the Member States still to be decided by the Commission.

Expenditure (provisional) for 2000 is:

-EUR 333 million less than appropriations for subheading 1a (traditional EAGGF Guarantee Section expenditure and veterinary expenditure), taking account of the transfer of appropriations to the monetary reserve,

-EUR 79 million more than appropriations for subheading 1b (rural development and accompanying measures).

3.2. Transfer of appropriations

In October, the Commission proposed to the Budgetary Authority transfer No 43/2000 to reinforce the chapters for which an immediate additional need was felt.

For the end of the year, the Commission will present the following to the Budgetary Authority:

-a transfer to the monetary reserve (see next point),

-a chapter-to-chapter transfer to take account of additional requirements.

3.3. Monetary factors

3.3.1. The dollar/euro rate

The expenditure indicated under the above point 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 how the dollar rate develops.

In accordance with the Council Decision on budgetary discipline, the 2000 agriculture budget was drawn up on the basis of the average dollar rate for January, February and March 1999, i.e. EUR 1 = $ 1.12.

The average dollar rate for the period 1 August 1999 to 31 July 2000 (reference period for determining the impact of the dollar) therefore diverged from this budgetary parity (average rate: EUR 1 = USD 0.99). The amount of expenditure incurred by the Member States is lower as a result. Savings amount to EUR 510 million.

The EAGGF Guarantee Section will only take partial advantage of these savings. Savings exceeding the margin of EUR 200 million fixed under the rules of budgetary discipline (i.e. EUR 310 million) will be transferred to the monetary reserve, and cannot be used to finance other measures.

3.3.2. The impact of the dual rates

The impact of the dual rates will result in substantially lower expenditure than in previous years. Abolition of the green rates has eliminated the effect of dual rates in the countries participating in the euro and thus produced major savings.

However, the cost of the dual rate to the EAGGF Guarantee Section at the time when the letter of amendment was prepared was estimated at EUR 119 million. Recent calculations have estimated it at EUR 225 million, i.e. EUR 106 million more.

3.4. Market factors

3.4.1. Subheading 1a: Traditional EAGGF Guarantee Section expenditure and veterinary expenditure

Chapter B1-10: Arable crops // + EUR 21 million

// (expenditure: EUR 16 662 million)

Expenditure is almost exactly the same as appropriations, but there are major divergences within the chapter.

Appropriations were overrun:

-owing to the across-the-board reduction in appropriations decided by the Budgetary Authority when the budget was adopted; in particular, certain budget items for area aid overrun the appropriations,

-under production refunds for starch (due to increased volume and higher rate of refund),

However, the overrun is offset by under utilisation:

-for public storage (higher volume of sales at a price generating profits, and lower volume of buying in),

-for aid for durum wheat following a reduction in payments in Italy.

Expenditure on export refunds is slightly below the amount available. However, the level of refunds takes account of major savings (EUR 371 million) due to the favourable dollar exchange rate.

Chapter B1-11: Sugar // - EUR 86 million

// (expenditure: EUR 1 910 million)

Underutilisation is the result of lower payments for export refunds, which in turn is due to a slight decrease in quantities exported under quota, and to savings resulting from the favourable movement of the dollar exchange rate (savings of EUR 48 million).

Moreover, there was a substantial reduction in the amount needed to cover aid for sugar refining because one of the major recipients applied for aid later than expected.

Chapter B1-12: Olive oil // + EUR 20 million

// (expenditure: EUR 2 210 million)

The Member States have made up the delays in payments recorded over recent months.

Appropriations were overrun because of the across-the-board reduction in appropriations decided by the Budgetary Authority when the budget was adopted, and because of the payment of the balance on consumption aid.

Chapter B1-14: Fibre plants and silkworms // - EUR 33 million

// (expenditure: EUR 991 million)

The underrun is due to lower expenditure on fibre flax production aid in Spain. The reasons for this are that producers/processors may apply for aid later than in previous years, and that the Spanish authorities have reinforced their controls, which has slowed up payment of the aid.

Chapter B1-15: Fruit and vegetables // - EUR 103 million

// (expenditure: EUR 1 551 million)

The underrun results from small divergences for several measures, and relates both to fresh fruit and vegetables and to processed fruit and vegetables.

Appropriations were underused for the following measures in particular: bananas, modernisation programmes, operational funds of producer organisations, production aid for products processed from fruit and financial compensation to encourage the processing of citrus fruit.

They were overrun for the following measures in particular: compensation for withdrawals, nuts and production aid for processed tomato products.

Chapter B1-16: Wine // + EUR 71 million

// (expenditure: EUR 766 million)

Appropriations were overrun because of higher expenditure on:

-aid for products of the vine-growing sector (distillation and private storage),

-aid for the use of grape must (larger-than-expected volume of rectified concentrated grape must intended for enrichment in receipt of aid).

Chapter B1-17: Tobacco // + EUR 18 million

// (expenditure: EUR 993 million)

The Member States have made up the delays in payments recorded over recent months.

The overrun is due to the across-the-board reduction in appropriations decided by the Budgetary Authority when the budget was adopted.

Chapter B1-18: Other sectors // + EUR 38 million

// (expenditure: EUR 350 million)

The overrun is due to:

-late payment of export refunds on rice for the 1998/99 crop year, which led to charging most of the export refund expenditure for both crop years, i.e. 1998/99 and 1999/2000, to financial year 2000,

-an increased requirement for production aid for seeds because of a greater volume of output.

Chapter B1-20: Milk and milk products // - EUR 189 million

// (expenditure: EUR 2 546 million)

There was a major underutilisation of appropriations for public storage of skimmed milk powder. Earnings on sales are considerably higher, as a result of the large volume sold from public intervention stocks, and there was no buying in.

The underutilisation is partly offset by an overrun on aid for use of skimmed milk (in particular aid for the production of casein from skimmed milk) and a shortfall in the collection of the additional milk levy entered in this chapter [1].

[1] Only the amounts of additional milk levy declared by the Member States are credited to Chapter B1-20; reductions in the monthly advances decided by the Commission to take account of failure to declare the levy are entered in Chapter B1-37. See also the explanations under Chapter B1-37.

Chapter B1-21: Beef and veal // + EUR 75 million

// (expenditure: EUR 4 540 million)

The overrun is due to:

-higher-than-expected expenditure under exceptional support measures (slaughter and destruction of livestock in the United Kingdom as part of the campaign to eradicate BSE),

-higher expenditure on premiums, following the across-the-board reduction in appropriations decided by the Budgetary Authority,

-higher expenditure on public storage owing to lower-than-expected earnings on sales.

The overruns are partially offset by the lower level of export refunds.

Chapter B1-22: Sheepmeat and goatmeat // - EUR 96 million

// (expenditure: EUR 1 736 million)

Underutilisation is due to lower expenditure on ewe premiums for 1999 and 2000 (Community market prices higher than expected).

Chapter B1-23: Pigmeat, eggs and poultrymeat // - EUR 30 million

// (expenditure: EUR 435 million)

Underutilisation is due to the pigmeat sector and results in particular from lower expenditure on private storage.

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

// (expenditure: EUR 572 million)

The overrun is mainly due to higher expenditure on products based on cereals, butter and skimmed milk. This resulted from an increase in the volume of exports, and occurred in spite of the savings owing to the favourable development of the dollar exchange rate (savings of about EUR 35 million).

It will be recalled that, in order to limit expenditure, the Commission suspended in mid-May the issue of export licences giving entitlement to the payment of refunds.

Chapter B1-31: Food programmes // - EUR 47 million

// (expenditure: EUR 288 million)

Appropriations were underutilised because of lower expenditure on:

-distribution of agricultural products to deprived persons in the Community (delayed implementation in Italy),

-export refunds for food aid programmes (export of rice with an average rate of refund lower than expected).

However, expenditure on milk for schoolchildren overran the appropriations entered in the budget (greater volume of milk subsidised).

Chapter B1-36: Monitoring and prevention // + EUR 18 million

// (expenditure: EUR 77 million)

The overrun of appropriations was due to higher expenditure on the olive cultivation register, which covered not only the usual work, but also the establishment of the GIS (geographical information system).

Chapter B1-37: Clearance and reduction in advances // - EUR 378 million

// (expenditure: - EUR 1 078 million)

The excess of revenue over expenditure was due to larger-than-expected reductions in advances. The reductions the Commission has decided upon (or, in certain cases, will decide upon) will probably exceed EUR 500 million; they include:

-EUR 280 million for failure to collect the additional milk levy for the 1999/2000 marketing year (mainly Italy, but also Greece, Spain and Portugal),

-EUR 135 million for failure to collect the additional milk levy for the 1998/99 marketing year (Italy),

-EUR 75 million for shortcomings in the application of the integrated system in Greece,

-EUR 16 million for failure on the part of several Member States to comply with deadlines for payments laid down in the rules, relating to several budget items.

Revenue from clearance of accounts is about EUR 30 million below the expected figure.

Chapter B1-39: Other measures // + EUR 69 million

// (expenditure: EUR 904 million)

The overrun results from higher expenditure on agri-monetary aid, due to higher payments by Italy (relating to revaluations of the lira in 1997) and the United Kingdom (relating to the sterling exchange rate in the course of the year).

3.4.2. Subheading 1b: Rural development and accompanying measures

Chapter B1-40: Rural development // + EUR 100 million

// (expenditure: EUR 4 184 million)

Contrary to the expectations of the Member States (and the Commission), it has been possible to speed up payments on the former accompanying measures and other rural development expenditure. Not only has the substantial underutilisation of recent months now disappeared, therefore, but expenditure actually outstrips the appropriations entered in the budget. Consequently, the Commission will be presenting the Budgetary Authority with a transfer to boost resources in this chapter.

Expenditure to be reimbursed to the Member States is still below the ceiling for subheading 1b (appropriations were set by the Budgetary Authority at EUR 281 million below the ceiling).

4. Conclusions

The (provisional) uptake of appropriations under heading 1 of the budget for 2000 is EUR 40 430 million, i.e. 99.4 % of appropriations.

This amount comprises expenditure incurred by the Member States from 16 October 1999 to 15 October 2000, and direct payments made (or to be made) by the Commission. The level of expenditure also takes account of reductions in monthly advances to the Member States still to be decided by the Commission.

4.1. The uptake of appropriations for subheading 1a

Expenditure for 2000 is (provisionally) EUR 333 million less than available appropriations for subheading 1a (traditional EAGGF Guarantee Section expenditure and veterinary expenditure).

Savings due to the favourable development of the dollar exchange rate total EUR 510 million, out of which the EAGGF Guarantee Section keeps EUR 200 million, which is a factor in underutilisation.

Appropriations were overrun in the following sectors:

-beef and veal (+ EUR 75 million) with higher expenditure on measures involving the slaughter and destruction of livestock in the United Kingdom as part of the campaign to eradicate BSE, on premiums (in particular following the across-the-board cut in appropriations), and on public storage,

-wine (+ EUR 71 million) as a result of higher expenditure on distillation and private storage, and on aid for the use of grape must,

-other measures (+ EUR 69 million), due to higher payments for agri-monetary aid.

Appropriations were underutilised in the following sectors:

-milk and milk products (-EUR 189 million) owing to lower expenditure on public storage of skimmed-milk powder (higher profit on sales and no intervention buying in),

-fruit and vegetables (- EUR 103 million), owing to lower payments on several measures,

-sheepmeat and goatmeat (- EUR 96 million), owing to the ewe premium (Community market price higher than expected),

-sugar (- EUR 86 million), owing in particular to lower export refunds (favourable development of the dollar exchange rate).

Clearance of accounts and reductions in advances generated surplus revenue (-EUR 378 million), following larger reductions in advances (in particular, corrections relating to the additional milk levy).

4.2. The uptake of appropriations for subheading 1b

The substantial underutilisation of recent months has disappeared, and expenditure under subheading 1b (rural development and accompanying measures) provisionally stands at EUR 79 million more than appropriations. Consequently, the Commission will be presenting the Budgetary Authority with a transfer to boost resources in this chapter.

Expenditure to be reimbursed to the Member States is still below the ceiling for subheading 1b (appropriations were set by the Budgetary Authority at EUR 281 million below the ceiling).