COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(91) 551 final 
Brussels, 5 February 1992 
Proposal for a 
COUNCIL DECISION 
on transitional national compensation for farmers In Germany 
(presented by the Commission) 
(Only the German text is authentic) 
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EXPLANATORY MEMORANDUM 
Wnen in 1984 the Council decided to dismantle existing positive MCAs it 
also decided that the consequential loss of income for the farmers 
concerned would be offset by special aid measuresCD. 
As ^ards farmers In Germany the aid now applied in the wake of the 
1934 Council decision involves two components^2): 
- om based on VAT, limited to 3% of the ex-VAT price paid by the 
purchaser for the agricultural product. This aid is valid until 
31 December 1991. (20th VAT directive<3>) 
- the other based on a per hectare system, the overall volume of which 
is limited to an annual amount not exceeding that granted through a 2 
percentage point reduction in VAT. This aid is valid until 
31 December 1992. (Council Decision No 88/402/EEC<4>). 
The volume of aid granted annually under these measures amounts to some 
DM 2 300 million via the VAT system (for the whole of Germany) whereas 
some DM 1 000 mi 11 ion are granted under the hectare system (applied 
only in the old Bundeslander). 
Although the 1984 Council decision concerning dismantlement of positive 
MCAs provides for income compensation which is not of limited duration, 
the Council» when adopting the 20th VAT directive, noted that the 
income consequences of dismantlement of monetary compensatory amounts 
are temporary and degressive. It is therefore logical that any 
assistance granted in the context of such dismantlement reflects these 
economic real it les. 
Cessation of the VAT-based aid from the end of 1991, as currently 
provided for under Community rules, would nonetheless have a 
significant negative effect upon farm incomes in Germany at a time when 
these have fallen sharply. The aid granted through the VAT system is 
equivalent to some 7% of the net value added of German agriculture. 
(1) 0J No L 90, 1.4.1984, p. 1. 
(2) For background information: The VAT aid was set at 5% from 
1 July 1984 to 31 December 1988. From 1 January 1989, it has been 
set at 3%. The 2% per hectare aid was introduced from 
1 January 1989 following a change in the DM green rate applied from 
the beginning of the 1988/89 marketing year. 
(3) 0J No L 192, 24.7.1985, p. 18. 
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Taking particular account of this income situation, the Commission 
considers that an Income support measure should be envisaged for 1992 
on a national and transitional basis. 
The Commission feels however that the VAT system for granting aid must 
not be continued as this mechanism links the aid too closely to the 
level of production of each individual farmer. Already in 1987 the 
Council, when adjusting agricultural conversion rates in Germany which 
entailed a drop in prices in DM*5*, decided that compensatory aid must 
not be linked to production. In the Commission's view, the technically 
most appropriate way of granting the aid envisaged in 1992 would be 
through soclo-structural measures as set out in its proposal of 
1989(°). However, no Council decision has yet been taken on that 
proposal. Against this background, and In view of the need for any 
decision to be taken rapidly In order to fulfil its objective, the 
Commission considers that the aid now proposed should be channelled 
through a mechanism similar to, and operate In parallel with, the 
existing per hectare system with due account being taken of the 
particular farm structures in the Lander of the former German 
Democratic Republic. This Is the purpose of the attached proposal. 
The Commission will review the effects of this proposal before the end 
of 1992 having regard to the decisions on the reform of the Common 
Agricultural Policy and the need for coherence with these decisions. 
(5) Regulation 1890/87 of 2 July 1987 (0J No L 182, 3.7.1987, p.1.) 
- 4 -
Proposal for a 
COUNCIL DECISION 
on transitional national compensation for farmers in Germany 
THE COUNCIL OF THE EUROPEAN COMMUNITIES, 
Having regard to the Treaty establishing the European Economic 
Community, and in particular Articles 42 and 43 thereof, 
Having regard to the proposal from the Commission^1), 
Having regard to the opinion of the European Par I lament<2), 
Having regard to the opinion of the Economic and Social Committee*3*, 
Whereas to offset the income losses resulting from reductions in prices 
expressed in national currency brought about in Germany by the 
adaptation of agricultural conversion rates, the Council, in Regulation 
(EEC) No 855/84 of 31 March 1984 on the calculation and dismantlement 
of the monetary compensatory amounts applying to certain agricultural 
products*4* deemed that, subject to certain specified conditions, a 
special aid granted through the VAT system was to be compatible with 
the common market; whereas the aid provisions laid down in that 
Regulation are without time limit; whereas in Directive 85/361/EEC of 
16 July 1985 on the harmonization of the laws of the Member States 
relating to turnover taxes - Common system of value added tax: 
derogations in connection with the special aids granted to certain 
farmers to compensate for the dismantlement of monetary compensatory 
amounts applying to certain agricultural products*5*, the Council laid 
down the conditions under which the VAT system could be used for the 
grant of this special aid; 
(1) 
(2) 
(3) 
(4) OJ No L 90, 1.4.1984, p. 1. 
(5) OJ No L 192, 24.7.1985, p. 18. 
- 5 -
Whereas the Council, when adopting Directive 85/361/EEC, noted that the 
consequences of the dismantlement of monetary compensatory amounts are 
temporary and degressive; whereas farm incomes in Germany have recently 
developed in an unsatisfactory manner; whereas the provisions of 
Directive 85/361/EEC expired on 31 December 1991; whereas it is 
therefore appropriate to lay down provisions concerning an income 
support benefit for the farm sector in Germany in 1992; 
Whereas the mechanism for the grant of aid provided for in Directive 
85/361/EEC is product ion-1 inked; whereas the income support objectives 
now sought would more appropriately be fulfilled in 1992 through a 
scheme linked to area; whereas due account should be taken of the farm 
structure in the Lander in the former German Democratic Republic; 
whereas the aid provided for in Council Decision 88/402/EEC of 30 June 
1988 on aid to farmers in the Federal Republic of Germany*6* should be 
granted notwithstanding this Decision, 
HAS ADOPTED THIS DECISION: 
Article 1 
Without prejudice to the provisions of Decision 88/402/EEC, Germany is 
hereby authorized to grant, from 1 January 1992 until 31 December 
1992, special national aid which is not linked to prices or to 
production, under the following conditions: 
1. Individual farmers shall qualify for aid per hectare of utilized 
agricultural area of their holdings; however, the aid per holding 
shall not be less than DM 1 500 and shall not exceed DM 16 000 per 
year. This aid shall be paid on a one-off basis. 
2. In principle, only farmers who are members of the German farm 
retirement pension scheme (GAL) may qualify for this scheme. 
(6) 0J No L 195, 23.7.1988, p. 70. 
- 6 -
3. Derogations from the provisions of point 1 except as regards the 
one-off limitation and from the provisions of point 2 shall be 
applied to the extent necessary to take account of the farm 
structure in the Lander in the former German Democratic Republic. 
4. Germany shall fix the unit amount referred to at point 1, the 
conditions of point 3, and all other implementing details in such a 
way as to ensure that the overall volume of the special aid does 
not exceed DM 2 200 mi 11 ion. 
Article 2 
1. Germany shall notify to the Commission drafts of detailed 
provisions and of any further amendments relating to the 
implementation of the aid scheme referred to in Article 1. 
At the request of the Commission, it shall provide further guidance 
information. 
2. Germany may not implement the relevant provisions before such time 
as the Commission has ascertained their compatibility with the 
stipulations set out in Article 1. 
The Commission shall decide on whether to approve the draft 
provisions within two months from the date of receiving them. 
Article 3 
This Decision is addressed to the Federal Republic of Germany. 
Done at Brussels, For the Counci 
The President 
ISSNQ254rl475 
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