REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 4/2002

TABLE OF CONTENTS

1. Overall out-turn in monthly expenditure

2. Provisional utilisation of appropriations

3. Comments

4. Conclusions

1. Overall outturn in monthly expenditure

The following tables show the overall out-turn in monthly expenditure in relation to the expenditure profile. This situation corresponds to expenditure incurred in the Member States from 16 October 2001 to 28 February 2002.

1.1. Subheading 1a: CAP

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1.2. Subheading 1b: Rural Development

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2. Provisional utilisation of appropriations

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3. COMMENTS

3.1. The uptake of appropriations for April 2002

The uptake of appropriations under heading 1 of the budget for April 2002 (Member States' expenditure from 16 October 2001 to 28 February 2002) is EUR 27 946,8 million, i.e. 63,1% of appropriations. Expenditure is

- EUR 482,5 million below the indicator for subheading 1a (traditional EAGGF Guarantee Section expenditure and veterinary expenditure), and

- EUR 18,9 million below the indicator for subheading 1b (rural development).

3.2. Monetary factors

The dollar/euro rate

The expenditure indicated under the above point takes account of the movement in the Euro/dollar 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 trend in the dollar rate.

In accordance with the Council Regulation on budgetary discipline (Council Regulation (EC) No 2040/2000 of 26 September 2000), the letter of amendment to the 2001 agriculture budget was drawn up on the basis of the average dollar rate for July, August and September 2001, i.e. EUR 1 = $ 0,89. For the period 1 August 2001 to 28 February 2002 the estimated average dollar rate has remained at approximately the same level.

3.3. Market factors

Subheading 1a

For subheading 1a, the overall budget execution was under the level foreseen by the indicator. However, this execution was not homogeneous amongst the three categories of expenditure concerned. Specifically:

- for plant products, the observed under-execution was minimal when compared to the level of the indicator,

- for animal products, the execution was under the level of the indicator and it resulted, mainly, from under-spending for beef and veal as well as for sheep- and goatmeat,

- for ancillary expenditure, the situation was similar to the one for animal products with the main under-spending attributable to veterinary and plant health measures.

The observed overall divergence amounts to EUR -482,5 million equal to -1,2% of the budget's appropriations. However, the divergence for certain individual chapters is more important, thus, inviting the following explanations:

Chapter B1-10: Arable crops // Divergence: +EUR 360 million (+2,0%)

// (expenditure: EUR 17 250 million)

(indicator: EUR 16 890 million)

At the start of the financial year, the majority of payments under this chapter relate to payments for direct aids which have to be made in the period from 16 November 2001 to 31 January 2002. The observed over-execution is mainly attributable to the acceleration in the rhythm of payment of direct aids when compared to the level resulting from the indicator. For the budget year 2002, the indicator was based on the rhythm of payments for the 2001 budget year, i.e.: the first year in which the payment deadline for these direct aids changed to 31 January. Member States did not, immediately, adjust their rhythm of payments to respect this new deadline in 2001. Therefore, the observed acceleration of the rhythm of payments in the course of the 2002 budget year is primarily attributable to the adjustment of the Member States' payments rhythm in their effort to respect the new mandatory payments' deadline.

Chapter B1-14: Fibre plants and silkworms // Divergence: -EUR 93 million (-9,7%)

// (expenditure: EUR 669 million)

(indicator: EUR 762 million)

The indicator was undershot because of delays in the payment of advances for the aid for cotton in EL.

Chapter B1-16: Wine // Divergence: -EUR 195 million (-14,1%)

// (expenditure: EUR 310 million)

(indicator: EUR 505 million)

The under-spending is related to delays in payments for distillation for the potable alcohol market in E, F, I and P as well as for restructuring aids in EL, I and A.

Chapter B1-21: Beef and veal // Divergence: -EUR 86 million (-1,1%)

// (expenditure: EUR 3 360 million)

(indicator: EUR 3 446 million)

The under-spending is primarily attributable to the delays in the payment of the special purchases scheme as well as to the smaller technical, financial and other costs for beef intervention where stocks have remained at approximately 0.25 million t since mid-December.

Chapter B1-22: Sheepmeat and goatmeat // Divergence: - EUR 110 million (- 16,4%)

// (expenditure: EUR 292 million)

(indicator: EUR 402 million)

The under-spending is primarily due to the fact that higher than foreseen market price levels for sheep- and goat-meat led to the fixing of the ewe/goat premium at a level lower than the one foreseen when the budget was established. Consequently, the Commission estimates that savings of approximately EUR 86 million can be expected by the end of the year for this chapter of the budget.

Chapter B1-30: Non-Annex I products // Divergence: -EUR 26 million (-6,2%)

// (expenditure: EUR 141 million)

(indicator: EUR 167 million)

The under-spending is due to large exports of processed agricultural products using milk and dairy products for which the refund rates for the period concerned were lower than those used in the budget, notably for skimmed milk powder. However, it should be noted that, at the time of writing this report, these export refund rates have started rising again.

Chapter B1-32: Outermost regions and Aegean islands // Divergence: - EUR 31 million (-12,8%)

// (expenditure: EUR 70 million)

(indicator: EUR 101 million)

The observed under-execution is due to temporary implementation delays, primarily of the POSEIDOM and POSEICAN programmes as compared to the results provided by the indicator.

Chapter B1-33: Veterinary and plant health measures // Divergence: - EUR 166 million (-29,1%)

// (expenditure: EUR - million)

(indicator: EUR 166 million)

The observed under-execution is due to the new accounting rules, in force as of 1.1.2002, which require that commitments of appropriations are made individually by disease for each Member State. These dispositions necessitate the communication of a bank account number to the competent Commission services; certain Member States have not yet done so. Therefore, under the new accounting system rules, the relevant commitments can not be made, thus, resulting to the observed temporary under-execution.

Subheading 1b

Chapter B1-40:Rural development // Divergence: -EUR 19 million (-0,4%)

// (expenditure: EUR 825 million)

(indicator: EUR 844 million)

The discrepancy by comparison to the indicator is minimal (= 0,4%). It is mostly attributable to implementation delays of programmes relating to less-favoured areas and to the new agri-environmental, pre-retirement and forest protection schemes.

4. CONCLUSIONS

Implementation of appropriations in April 2002

The uptake of appropriations in April 2002 (Member States' expenditure from 16 October 2001 to 28 February 2002) is EUR 27 946,8 million, i.e. 63,1% of appropriations. Expenditure is EUR 482,5 million below the indicator for subheading 1a and EUR 18,9 million for subheading 1b.

The overall discrepancy between actual expenditure and the indicator for both subheadings is insignificant. However, the discrepancies for certain individual chapters are more important. While some of these discrepancies are expected to be temporary, in some chapters for instance in the sheep- and goatmeat and in the beef sectors this under-execution should be confirmed by the end of the year, thus leading to an overall under-spend of the 2002 budget.