(98/0102) (CNS) Proposal for a COUNCIL REGULATION (EC) No . . .

of . . .

on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) (98/C 170/06)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 42 and 43 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Having regard to the opinion of the Economic and Social Committee,

Having regard to the opinion of the Committee of the Regions,

Whereas a common rural development policy should accompany and complement other instruments of the common agricultural policy and thus contribute to the achievement of the objectives of this policy laid down in Article 39(1) of the Treaty;

Whereas, according to Article 39(2)(a) of the Treaty, in working out the common agricultural policy and the special methods for its application, account shall be taken of the particular nature of agricultural activities which result from the social structure of agriculture and from structural and natural disparities between the various agricultural regions;

Whereas, according to Article 130b of the Treaty, the implementation of the common policies shall take into account the objectives set out in Articles 130a and 130c for the common policy of economic and social cohesion and shall contribute to their achievement; whereas rural development measures should, therefore, contribute to this policy in regions whose development is lagging behind (Objective 1) and regions facing structural difficulties (Objective 2) as defined in Council regulation (EC) No . . . (General Structural Funds Regulation);

Whereas measures designed to support the improvement of agricultural structures have been introduced into the common agricultural policy as early as 1972; whereas during almost two decades, attempts have been made to integrate agricultural structural policy into the wider economic and social context of rural areas; whereas the 1992 policy reform stressed the environmental dimension of agriculture as the largest land user;

Whereas rural policy is currently carried out through a range of complex instruments which lack overall coherence;

Whereas over the coming years, agriculture will have to adapt to new realities and further changes in terms of market evolution, market policy and trade rules, consumer demand and preferences and the Community's next enlargement; that these changes will not only affect agricultural markets but also local economies in rural areas in general; whereas a rural development policy should aim at restoring and enhancing the competitiveness of rural areas and, therefore, contribute to the maintenance and creation of employment in these areas;

Whereas these developments should be encouraged and supported by a reorganisation and simplification of the existing rural development instruments;

Whereas such reorganisation should take into account the experience gained in applying existing instruments and thus to be based on these instruments, which are those implemented under the current priority objectives which promote rural development by speeding up the adjustment of agricultural structures in the framework of the reform of the common agricultural policy and which facilitate the development and structural adjustment of rural areas (Objectives 5a and 5b), as laid down in Council Regulation (EEC) No 2052/88 of 24 June 1988 on the tasks of the General Structural Funds Regulation and their effectiveness and on coordination of their activities between themselves and with the operations of the European Investment Bank and the other existing financial instruments (1) and Council Regulation (EEC) No 4256/88 of 19 December 1988 laying down provisions for implementing Regulation (EEC) No 2052/88 as regards the European Agricultural Guidance and Guarantee Fund (EAGGF) Guidance Section (2), and those introduced as accompanying measures of the 1992 common agricultural policy reform by Council Regulation (EEC) No 2078/92 of 30 June 1992 on agricultural production methods compatible with the requirements of the protection of the environment and the maintenance of the countryside (3), Council Regulation (EEC) No 2079/92 of 30 June 1992 instituting a Community aid scheme for early retirement from farming (4) and Council Regulation (EEC) No 2080/92 of 30 June 1992 instituting a Community aid scheme for forestry measures in agriculture (5);

Whereas the framework of a reformed rural development policy should cover all rural areas in the Community;

Whereas the three existing accompanying measures introduced by the 1992 reform of the common agricultural policy (agri-environment, early retirement and afforestation) should be supplemented by the less-favoured areas scheme (LFA);

Whereas other rural development measures should form part of integrated development programmes for Objective 1 regions and for Objective 2 regions;

Whereas in the rural areas outside Objective 1 and Objective 2, rural development measures should accompany and complement market policies;

Whereas support from EAGGF for rural development should be based on a single legal framework establishing measures eligible for support, their objectives and criteria for eligibility;

Whereas, given the diversity of the Union's rural areas, rural development policy should follow the principle of subsidiarity; whereas it should, therefore, be as decentralised as possible and emphasis must be on participation and a 'bottom up` approach; whereas, therefore, eligibility criteria for rural development support should not go beyond what is necessary to achieve the objectives of rural development policy;

Whereas coherence with other instruments of the common agricultural policy and with other common policies requires, however, basic support criteria to be laid down at the Community level; whereas, in particular, unjustified distortions of competition resulting from rural development measures should be avoided;

Whereas, in order to ensure flexibility and to simplify legislation, the Council shall confer all necessary implementing powers to the Commission in accordance with Article 155 of the Treaty;

Whereas the structure of agriculture in the Community is typified by the existence of a large number of holdings which lack the structural conditions which would ensure a fair income and living conditions for farmers and their families;

Whereas the aim of Community investment aid is to modernise agricultural holdings and to improve their viability;

Whereas Community conditions concerning eligibility for investment aids should be simplified as compared to the existing conditions as laid down in Council Regulation (EC) No 950/97 of 20 May 1997 on improving the efficiency of agricultural structures (6);

Whereas the grant of specific benefits to young farmers may facilitate not only their establishment but also the structural adjustment of their holdings after their initial establishment;

Whereas the evolution and the specialisation of agriculture require an appropriate level of general, technical and economic training for the active farm population, especially as regards new approaches to management, to production or to marketing;

Whereas a particular effort is needed to educate, and inform farmers of, agricultural methods compatible with the environment;

Whereas early retirement from farming should be encouraged in order to improve the viability of agricultural holdings taking into account the experience acquired in the implementation of Regulation (EEC) No 2079/92;

Whereas support to less-favoured areas should contribute to continued agricultural land use, preservation of the countryside, maintenance and promotion of farming systems and to the fulfilment of environmental requirements;

Whereas the support scheme for less-favoured areas should constitute a basic instrument to maintain and promote low-input farming systems;

Whereas less-favoured areas should be classified on the basis of common criteria; whereas existing criteria should be modified to allow classification of new areas and in particular areas affected by specific environmental handicaps;

Whereas there is no need for any further classification of less-favoured areas to be drawn up at Community level;

Whereas conditions concerning eligibility for compensatory allowances should be laid down in order to ensure the efficiency of this support scheme and to ensure that its objectives are achieved;

Whereas, in the coming years, a prominent role should be given to agri-environmental instruments to support the sustainable development of rural areas and to respond to society's increasing demand for environmental services;

Whereas the existing agri-environmental support under Regulation (EEC) No 2078/92 should be continued for targeted environmental measures taking into account experience gained in the implementation of this scheme, as described in detail in the Commission's report presented pursuant to Article 10(2) of Regulation (EEC) No 2078/92;

Whereas the agri-environmental aid scheme should continue to encourage farmers to serve society as a whole by introducing or continuing the use of farming practices compatible with the increasing need to protect the environment and natural resources and to maintain the landscape and the countryside;

Whereas improvements in the processing and marketing of agricultural products should be encouraged by support for investments in that field;

Whereas such support can largely be based on existing conditions as currently laid down in Council Regulation (EC) No 951/97 of 20 May 1997 on improving the processing and marketing conditions for agricultural products (7);

Whereas it should be ensured that such investments are viable and that farmers have a share in the economic benefits of the action taken;

Whereas forestry is an integral part of rural development and forestry measures should, therefore, be included into the rural development support scheme;

Whereas forestry measures should be adopted in the light of undertakings of the Community and the Member States made at an international level and should be based on Member States forest plans; whereas such measures should also take into account the specific problems of climatic change;

Whereas forestry measures should be pursued on the lines of the existing schemes laid down in Regulation (EEC) No 1610/89 of 29 May 1989 laying down provisions for implementing Regulation (EEC) No 4256/88 as regards the scheme to develop and optimally utilise woodlands in rural areas in the Community (8) and in Council Regulation (EEC) No 867/90 of 29 March 1990 on improving the processing and marketing conditions for forestry products (9);

Whereas the afforestation of agricultural land is especially important from the point of view of soil use and the environment and as a contribution to increase supplies in certain forestry products; whereas the existing support for afforestation under Regulation (EEC) No 2080/92 should, therefore, be pursued, taking into account experience gained in the implementation of that scheme as described in detail in the Commission's report presented pursuant to Article 8 paragraph 3 of Regulation (EEC) No 2080/92;

Whereas compensatory allowances should be granted for the maintenance of sustainable sylviculture in areas with major natural handicaps;

Whereas support should be granted for other measures related to farming activities and their conversion; whereas the list of measures should be defined on the basis of experience and having regard to the need for rural development to be based partly on non-agricultural activities and services so as to reverse the trend towards the economic and social decline and depopulation of the countryside; whereas measures to remove inequalities and to promote equal opportunities for men and women should be supported;

Whereas rural development measures eligible for Community support should comply with Community law and be coherent with other Community policies as well as with other instruments of the common agricultural policy;

Whereas support should be excluded for certain measures eligible under other common agricultural policy instruments and in particular those falling within the scope of support schemes under common organisations of the market;

Whereas, in view of existing aids to producer groups and their associations in several common organisations of the market, specific support to producer groups in the framework of rural development does not appear to be necessary any more; whereas, therefore, the aid scheme existing under Council Regulation (EC) No 952/97 of 20 May 1997 on producer groups and associations thereof (10) should not be continued;

Whereas the financing of Community support for the accompanying measures and to other rural development measures in areas outside Objective 1 should be made from the Guarantee Section of EAGGF; whereas the basic financial rules laid down in Council Regulation (EC) No . . . ./. . [General Structural Funds Regulation] have been adapted accordingly;

Whereas the financing of Community support for rural development measures, in areas covered by Objective 1, should continue to be made from the Guidance Section of EAGGF except for the three existing accompanying measures and for les-favoured areas support;

Whereas, with regard to the support for rural development measures covered by Objective 1 and Objective 2 programming, Regulation (EC) No . . . [General Structural Funds Regulation] should apply, in particular as to integrated programming of these measures; whereas, however, rules concerning financing should take into account the Guarantee financing of measures in Objective 2 regions;

Whereas rural development measures not covered by Objective 1 or Objective 2 programming should be subject to rural development programming pursuant to specific rules; whereas rates of assistance for such measures should be differentiated according to the general principles laid down in Article 28(1) of Regulation (EC) No . . . [General Structural Funds Regulation] taking sufficiently into account the requirement of social and economic cohesion, and as a consequence those assistance rates should, in principle, be differentiated between areas covered by Objective 1 and Objective 2 and other areas; whereas rates laid down in this Regulation are maxima of Community assistance;

Whereas, in addition to Rural Development Programmes, the Commission should be able to make provisions for studies on rural development on its own initiative notwithstanding the rural development initiative provided for in Articles 18 and 19 of Regulation (EC) No . . . [General Structural Funds Regulation];

Whereas appropriate rules should be established for monitoring and evaluation of rural development support, using as a reference well defined indicators to be agreed and established prior to programme implementation;

Whereas rural development measures should be eligible for Member State support without any Community cofinancing; whereas in view of the considerable economic impact of such aids and in order to ensure coherence with measures eligible for Community support, and to simplify procedures specific state aid rules should be established;

Whereas it should be possible to adopt transitional rules to facilitate the transition from existing support schemes to the new rural development support scheme,

HAS ADOPTED THIS REGULATION:

TITLE I Scope and objectives

Article 1

1. This Regulation establishes the framework for Community support for sustainable rural development.

2. Rural development measures shall accompany and complement other instruments of the common agricultural policy and thus contribute to the achievement of the objectives laid down in Article 39 of the Treaty.

3. Rural development measures shall

- be integrated into the measures promoting the development and structural adjustment of regions whose development is lagging behind (Objective 1) and

- accompany the measures supporting the economic and social conversion of areas facing structural difficulties (Objective 2),

in the regions concerned, taking into account the specific targets of Community support under these objectives as laid down in Articles 130a and 130c of the Treaty and in Regulation (EC) No . . . [General Structural Funds Regulation] and according to the conditions laid down in this Regulation.

Article 2

Support for rural development, related to farming activities and their conversion, may concern:

- the improvement of structures in agricultural holdings and for the processing and marketing of agricultural products;

- the conversion and reorientation of agricultural production potential, the introduction of new technologies and the improvement of product quality;

- sustainable forest development;

- the diversification of activities with the aim of complementary or alternative activities;

- the maintenance and reinforcement of viable social fabric in rural areas;

- the development of economic activities and the maintenance and creation of employment with the aim of ensuring a better exploitation of existing inherent potential;

- the improvement of working and living conditions;

- the maintenance and promotion of low-input farming systems in less favoured areas;

- the preservation and promotion of a high nature value and a sustainable agriculture respecting environmental requirements;

- the removal of inequalities and the promotion of equal opportunities for men and women, in particular by supporting projects initiated and implemented by women.

Article 3

Support shall be granted for the rural development measures defined, and under the conditions laid down, in Title II.

TITLE II Rural development measures

CHAPTER I INVESTMENTS IN AGRICULTURAL HOLDINGS

Article 4

Support for investments in agricultural holdings shall contribute to the improvement of agricultural incomes and of living, working and production conditions.

They shall pursue one or more of the following objectives:

- reduce production costs;

- improve and redeploy production;

- increase quality;

- preserve and improve the natural environment, hygiene conditions and animal welfare standards;

- promote the diversification of farm activities.

Article 5

Support for investments shall be granted to agricultural holdings:

- whose economic viability can be demonstrated;

- which comply with minimum standards regarding the environment, hygiene and animal welfare, and

- where the farmer possesses adequate occupational skill and competence.

Article 6

Support shall not be granted for investments which have as their objective an increase in production for which no normal market outlets can be found.

Article 7

Member States shall set maximum amounts for support for investments.

CHAPTER II SETTING-UP OF YOUNG FARMERS

Article 8

1. Setting-up aids to young farmers shall be granted under the following conditions:

- the farmer is under 40 years of age;

- the farmer possesses adequate occupational skill and competence;

- the farmer sets up for the first time on an agricultural holding;

- for this holding

(i) economic viability can be demonstrated; and

(ii) minimum standards regarding the environment, hygiene and animal welfare are complied with;

and

- the farmer is established as head of the holding.

Specific conditions may be applied to the situation where a young farmer is not established as sole head of the holding. These conditions must be equivalent to those required for a young farmer setting up as a sole head of a holding.

2. The setting-up aid may comprise:

- a single premium up to the maximum eligible amount specified in the Annex;

- an interest subsidy on loans taken on with a view to covering the costs arising from setting up; the capitalised value of the interest subsidy may not exceed the value of the premium.

CHAPTER III TRAINING

Article 9

Support for vocational training shall contribute to the improvement of the occupational skill and competence of farmers and other persons involved in agricultural activities, and their conversion.

Training shall in particular be intended to prepare farmers for qualitative reorientation of production, the application of production practices compatible with the maintenance of the landscape, the protection of the environment, hygiene standards and animal welfare and acquisition of the skills needed to enable them to manage an economically viable farm.

CHAPTER IV EARLY RETIREMENT

Article 10

1. Support for early retirement from farming shall contribute to the following objectives:

- providing an income for elderly farmers who decide to stop farming;

- encouraging the replacement of such elderly farmers by farmers able to improve the economic viability of the remaining agricultural holdings;

- reassigning agricultural land to non-agricultural uses where it cannot be farmed under satisfactory conditions of viability.

2. Early retirement support may include measures to provide an income for farm workers.

Article 11

1. A transferor shall:

- stop all commercial farming activity definitively; he may, however, continue non-commercial farming and retain the use of the buildings in which he continues to live;

- be not less than 55 years old but not yet of normal retirement age at the time of transfer, and

- have practised farming for the 10 years preceding transfer.

2. A farming transferee shall:

- succeed the transferor as the head of the agricultural holding or take over all or part of the land released. The economic viability of the holding of the transferee must be improved within a period and in compliance with conditions to be defined, in terms of, in particular, the occupational skill and competence of the transferee, surface area and volume of work or income, according to the region and type of production;

- possess adequate occupational skill and competence, and

- undertake to practise farming on the agricultural holding for not less than five years in accordance with minimum standards regarding the environment, hygiene and animal welfare.

3. A worker shall:

- stop all farm work definitively;

- be not less than 55 years old but not yet of normal retirement age;

- have devoted at least half of his/her working time as a family helper or a farm worker to farm work during the preceding five years;

- have worked on the transferor's agricultural holding for at least the equivalent of two years full-time during the four-year period preceding the early retirement of the transferor and

- belong to a social security scheme.

4. A non-farming transferee may be any other person or body who takes over released land to use it for non-agricultural purposes, forestry or the creation of ecological reserves in a manner compatible with protection or improvement of the quality of the environment and of the countryside.

5. The conditions laid down in this Article shall be applied throughout the period during which the transferor receives early retirement support.

Article 12

1. Early retirement support granted to transferors may not exceed the total amount per year fixed in the Annex.

2. The duration of early retirement support shall not exceed 10 years and shall not continue after the normal retirement age of the transferor or the worker's normal retirement age and in no case beyond his 70th birthday. Where a normal retirement pension is paid by the Member State early retirement support shall be granted as a supplement taking into account the amount of the national retirement pension.

CHAPTER V LESS-FAVOURED AREAS

Article 13

Support for less-favoured areas shall contribute to the following objectives:

- ensuring continued agricultural land use and thereby contributing to the maintenance of a viable rural community,

- preserving the countryside,

- maintaining and promoting sustainable farming systems,

- assuring environmental requirements.

Article 14

1. Farmers in less-favoured areas may be supported by compensatory allowances.

2. Compensatory allowances shall be granted on a per hectare basis to farmers who:

- farm a minimum area of land to be defined;

- undertake to pursue their farming activity in a less-favoured area for at least five years from the first payment of a compensatory allowance; and

- use practices compatible with the need to safeguard the environment and preserve the countryside, in particular by sustainable farming, such practices to be defined for the different areas.

3. Where residues of substances prohibited under Council Directive 96/22/EC (11) or residues of substances authorised under the aforementioned act but used illegally, are detected pursuant to the relevant provisions of Council Directive 96/23/EC (12) on monitoring, in an animal belonging to the bovine herd of a producer, or where an authorised substance or product, or a substance or product authorised under the Directive 96/22/EC but held illegally is found on the producer's holding in any form, then the producer shall be excluded, for the calendar year of that discovery, from receiving compensatory allowances.

In the event of a repeated infringement, the length of the exclusion period may, according to the seriousness of the offence, be extended to five years from the year in which the repeated infringement was discovered.

In the event of obstruction on the part of the owner or holder of the animals, when inspections are being carried out and when the samples are being taken which are necessary for the application of national residue-monitoring plans, or when the investigations and checks provided for under the Directive 96/23/EC referred to in the first subparagraph are being carried out, the penalties provided for in the first subparagraph shall apply.

Article 15

1. Compensatory allowances shall be fixed at a level which:

- is sufficient to contribute effectively to a compensation for existing handicaps and

- avoids overcompensation.

The compensation may, if necessary, take into account the costs to and income foregone by farmers resulting from their obligations under environmental legislation.

2. Compensatory allowances shall be duly differentiated taking into account:

- the situation and development objectives particular to a region,

- the severity of any permanent natural handicap affecting farming activities,

- the particular environmental problems to be solved,

- the type of production and economic situation of the holding and the income of the farmer.

3. Compensatory allowances shall be fixed between the minimum and maximum amounts set out in the Annex. Compensatory allowances higher than the maximum amounts may be granted provided that the average amount of all compensatory allowances granted in the programming region concerned respects this maximum.

Article 16

Less-favoured areas shall include:

- mountain areas,

- other less-favoured areas and

- areas affected by specific handicaps.

Article 17

1. Mountain areas shall be those characterised by a considerable limitation of the possibilities for using the land and an appreciable increase in the cost of working it, due:

- to the existence, because of altitude, of very difficult climatic conditions, the effect of which is substantially to shorten the growing season;

- at a lower altitude, to the presence, over the greater part of the area in question, of slopes too steep for the use of machinery or requiring the use of very expensive special equipment or

- to a combination of these two factors, where the handicap resulting from each taken separately is less acute, provided that this combination gives rise to an equivalent handicap.

2. Areas north of the 62nd parallel and certain adjacent areas shall be treated in the same way as mountain areas.

Article 18

Less-favoured areas in danger of abandonment of land uses and where the conservation of the countryside is necessary, shall be made up of farming areas which are homogenous from the point of view of natural production conditions and exhibit all of the following characteristics:

- the presence of land of poor productivity, difficult cultivation and with a limited potential which cannot be increased except at excessive cost, and which is mainly suitable for extensive livestock farming;

- production which results from low productivity of the natural environment which is appreciably lower than the average, with regard to the main indices of economic performance in agriculture;

- a low or dwindling population predominantly dependent on agricultural activity, the accelerated decline of which would jeopardise the viability of the area concerned and its continued habitation.

Article 19

Less-favoured areas may include other areas affected by specific handicaps, in particular by specific environmental constraints, and in which farming should be continued, where necessary and subject to certain conditions, in order to conserve or improve the environment, maintain the countryside and preserve the tourist potential of the area or in order to protect the coastline.

The total extent of such areas may not in any Member State exceed 10 % of the area of the State concerned.

CHAPTER VI AGRI-ENVIRONMENT

Article 20

Support for agricultural production methods designed to protect the environment and to maintain the countryside (agri-environment) shall contribute to achieving the Community's policy objectives regarding agriculture and the environment.

Such support shall promote:

- ways of using agricultural land which are compatible with the protection and improvement of the environment, the landscape and its features, natural resources, the soil and genetic diversity,

- an environmentally favourable extensification of farming and management of low intensity pasture systems,

- the conservation of high nature value farmed environments which are under threat,

- the upkeep of the landscape and historical features on farmland,

- the use of environmental planning in farming practice.

Article 21

1. Support shall be granted to farmers in return for agri-environmental undertakings of at least five years. Where necessary, a longer period shall be determined for particular types of undertakings in view of the environmental effects of such undertakings.

2. Agri-environmental undertakings shall go beyond the application of usual good farming practice.

They shall provide for services which are not provided for by other support measures, such as market support or compensatory allowances.

Article 22

1. Support for agri-environmental undertakings shall be granted annually and be calculated on the basis of:

- income forgone,

- additional costs resulting from the undertaking, and

- the need to provide an incentive.

The cost of any non remunerative capital works necessary for the fulfilment of the undertakings may also be taken into account in calculating the level of annual support.

2. Maximum amounts per year eligible for Community support are laid down in the Annex. These amounts shall be based on the area of the holding to which agri-environmental undertakings apply.

CHAPTER VII IMPROVING PROCESSING AND MARKETING OF AGRICULTURAL PRODUCTS

Article 23

1. Support for investments shall facilitate the improvement and rationalisation of processing and marketing of agricultural products and thereby contribute to increasing the competitiveness and the added value of agricultural products.

2. Such support shall contribute to one or more of the following objectives:

- guiding production in keeping with foreseeable market trends or encouraging the development of new outlets for agricultural products,

- improving or rationalising marketing channels or processing procedures,

- improving the presentation and preparation of products or encouraging a better use or elimination of by-products,

- applying new technologies,

- favouring innovative investments,

- improving and monitoring quality and health conditions,

- protecting the environment.

Article 24

1. Support shall be granted to those persons ultimately responsible for financing the investments in enterprises

- for which economic viability can be demonstrated and

- which comply with minimum standards regarding the environment, hygiene and animal welfare.

2. Investments must contribute to improving the situation of the basic agricultural production sector in question. They must guarantee the producers of such basic products an adequate share in the resulting economic benefits.

3. Sufficient evidence must be given that normal market outlets for the products concerned exist.

Article 25

1. The investments shall concern the processing and marketing of products covered by Annex II to the Treaty except fishery products.

2. Investments shall meet selection criteria setting priorities and indicating which investments are not eligible for support.

Article 26

The following investments shall be excluded from support:

- investments at the retail level,

- investments in the processing or marketing of products from third countries.

CHAPTER VIII FORESTRY

Article 27

1. Support for forestry shall contribute to the development of the economic, ecological and social functions of forestry in rural areas.

2. Such support shall promote in particular one or more of the following objectives:

- sustainable management and development of forestry,

- conservation of forest resources,

- extension of woodland areas.

2. Such support shall contribute to the fulfilment of undertakings made by the Community and the Member States on international level. It shall be based on national forest plans as adopted in the Intergovernmental Panel on Forests. In relation to areas classified as high or medium forest-fire risk, forest fire protection plans according to Regulation (EEC) No 2158/92 (13) of 23 July 1992 on protection of the Community's forests against fire shall be provided for.

Article 28

1. Support for forestry shall concern one or more of the following measures:

- planting and restocking of non-farm land provided that the planting is adapted to local conditions compatible with the environment,

- investments in forest holdings owned by private forest owners, associations thereof or municipalities, aimed at a significant improvement of their economic or ecological value,

- investments to improve and rationalise the processing and marketing of forestry products; investments related to the use of wood as a raw material shall be limited to all working operations prior to industrial use,

- promoting new outlets for the use and marketing of wood and forestry products,

- setting up of associations of forest holders, that are established to help members to improve sustainable and efficient management of their holdings,

- restoring forestry production potential damaged by natural disasters and fire and introducing appropriate prevention instruments.

2. The rules laid down in Chapters I, III and VII shall apply correspondingly to forestry measures.

Article 29

1. Support shall be granted for the afforestation of agricultural land.

Such support may include in addition to planting costs:

- an annual premium per hectare afforested to cover maintenance cost for a period of up to five years,

- an annual premium per hectare to cover losses of income resulting from afforestation for a maximum period of 20 years for farmers or their associations who worked the land before its afforestation or for any other private law person.

2. Support for the afforestation of farmland shall not be granted:

- to farmers benefiting from early retirement support,

- in relation to the planting of Christmas trees.

In the case of fast-growing species cultivated in the short term, aid for afforestation costs shall only be granted provided that the planting is adapted to local conditions compatible with the environment.

3. The maximum amounts per year of the annual premium to cover losses of income eligible for Community support are laid down in the Annex.

Article 30

1. With a view to:

- preserving and improving the ecological stability of forests or restoring damaged forests in areas with serious natural handicaps, where the protective and ecological role of these forests are in the general interest and where this role cannot be solely assured by income from sylviculture; or

- maintaining fire-breaks through agricultural practices,

support shall be granted as a compensatory payment to individual persons or associations thereof in order to safeguard the public interest in maintaining the forests concerned provided that sustainable management of these forests is ensured.

2. Compensatory payments shall be fixed between the minimum and maximum amounts set out in the Annex. Compensatory payments higher than the maximum amounts may be granted provided that the average amount of all compensatory payments granted in the programming region concerned respects this maximum.

CHAPTER IX PROMOTING THE ADAPTATION AND THE DEVELOPMENT OF RURAL AREAS

Article 31

Support shall be granted for measures, relating to farming activities and their conversion and related to rural activities, which do not fall within the scope of any other measure referred to in this Title.

These measures shall concern:

- land improvement, reparcelling,

- setting up of farm relief and farm management services,

- marketing of quality products,

- improvement of living conditions,

- renovation and development of villages and protection and conservation of rural heritage,

- diversification of activities, to provide multiple activities or alternative incomes,

- agricultural water resources management,

- development and improvement of rural infrastructure,

- encouragement for tourist and craft activities,

- preservation of the environment and management of rural areas,

- restoring agricultural production potential damaged by natural disasters and introducing appropriate prevention instruments,

- financial engineering.

CHAPTER X IMPLEMENTING RULES

Article 32

Detailed rules for the implementation of this Title shall be adopted in accordance with the procedure laid down in Article 49 of Regulation (EC) No . . . [General Structural Funds Regulation].

These rules may in particular define:

- conditions for support for investments in agricultural holdings (Articles 4 to 7);

- the period and the conditions for the improvement of economic viability of a farm and conditions of use of land released in the case of early retirement (Article 11(2));

- conditions for granting and calculation of compensatory allowances (Articles 14 and 15);

- conditions governing agri-environmental undertakings (Articles 21 and 22);

- selection criteria for investments improving processing and marketing of agricultural products (Article 25(2));

- conditions governing forestry measures (Articles 27 to 30).

According to the same procedure, the Commission may derogate from Article 26 second indent in ultraperipheral regions subject to the condition that the processed products are destined for the market of the region in question.

TITLE III General principles. Administrative and financial provisions

CHAPTER I GENERAL PRINCIPLES

Subchapter I Support from EAGGF

Article 33

1. Community support for early retirement (Articles 10 to 12), less-favoured areas (Articles 13 to 19), agri-environment (Articles 20 to 22) and afforestation (Article 29) shall be financed by the EAGGF Guarantee Section throughout the Community.

2. Community support for other rural development measures shall be financed by the EAGGF

- Guidance Section in areas covered by Objective 1,

- Guarantee Section in areas outside Objective 1.

3. Support for the measures referred to in the third, sixth and eighth indents of Article 31 shall be financed by EAGGF in areas classified under Objectives 1 and 2 in so far as their financing is not ensured by the ERDF.

Article 34

1. With regard to support for rural development measures referred to in Article 33(2)

- in areas covered by Objective 1, Regulation (EC) No . . . [General Structural Funds Regulation] shall apply as supplemented by specific rules contained in this Regulation;

- in areas covered by Objective 2, Regulation (EC) No . . . [General Structural Funds Regulation] shall apply as supplemented by specific rules contained in this Regulation and save as otherwise provided for under this Regulation.

2. With regard to support for rural development measures financed by the EAGGF Guarantee Section, the specific rules of Regulation (EC) No . . . [Agricultural Financial Regulation] and the provisions adopted in implementation thereof shall apply save as otherwise provided for under this Regulation.

Subchapter II Compatibility and coherence

Article 35

1. Support for rural development shall only be granted for measures which comply with Community law.

2. Such measures shall be coherent with other Community policies and measures implemented thereunder.

In particular, any measure which falls within the scope of this Regulation shall only be eligible for support under other Community support schemes provided that this measure is not incompatible with any specific condition laid down in this Regulation.

3. Coherence shall also be ensured with measures implemented under other instruments of the common agricultural policy. In particular, coherence shall be ensured between rural development support measures on the one hand and measures implemented under the common market organisations and agricultural quality and health measures on the other hand, as well as between the different rural development support measures.

For this purpose, no support under this Regulation may be granted for:

- measures falling within the scope of support schemes under common market organisations,

- measures to support research projects, to promote agricultural products or to eradicate animal diseases.

4. Member States may lay down further or more restrictive conditions for granting Community support for rural development provided that such conditions are coherent with the objectives and requirements laid down in this Regulation.

Article 36

1. Payments may not be made in respect of the same measure under both this Regulation and another Community support scheme.

2. Support for several measures under this Regulation may only be combined provided that they are coherent and compatible between each other. If necessary, the level of support shall be adapted.

Article 37

1. Member States shall take all necessary steps to ensure compatibility and coherence of rural development support measures pursuant to the provisions laid down in this Chapter.

2. In relation to all rural development measures, the plans submitted by Member States shall include an appraisal of the compatibility and the coherence of the rural development support measures envisaged and an indication of the measures taken in order to ensure compatibility and coherence.

3. Where necessary to ensure compatibility and coherence, support measures shall be revised subsequently.

CHAPTER II PROGRAMMING

Article 38

1. Rural development measures financed by the EAGGF Guidance Section shall form part of the programming for Objective 1 regions according to Regulation (EC) No . . . [General Structural Funds Regulation].

2. Rural development measures other than those referred to in Article 33(1) shall form part of the programming for Objective 2 regions in accordance with Regulation (EC) No . . . [General Structural Funds Regulation].

3. Other rural development measures shall be subject to Rural Development Programming in accordance with Articles 39 to 42.

Article 39

1. Rural development plans shall be drawn up at the geographical level deemed to be the most appropriate. They shall be prepared by the competent authorities designated by the Member State and shall be submitted by the Member State to the Commission after consultation of competent authorities and organisations at the appropriate territorial level.

2. Rural development support measures to be applied in one area shall be integrated, whenever possible, into a single plan. Wherever several plans need to be established, the relation between measures foreseen in these plans shall be indicated and their compatibility and coherence shall be ensured.

Article 40

Rural development plans shall cover a period of seven years from 1 January 2000.

Article 41

1. Rural development plans shall include:

- a quantified description of the current situation showing disparities, gaps and potential for development, the financial resources deployed and the main results of operations undertaken in the previous programming period with regard to the evaluation results available,

- a description of the strategy proposed, its quantified objectives, and rural development priorities selected, and the geographic area covered,

- a prior appraisal showing the expected economic, environmental and social impact, including employment effects,

- an indicative overall financial table summarising the national and Community financial resources provided for and corresponding to each rural development priority adopted in the context of the plan,

- a description of the measures contemplated for implementing the plans, and in particular aid schemes, including the points necessary for assessing the rules of competition,

- where appropriate, information on the needs for any studies, demonstration projects, training or technical assistance operations relating to the preparation, implementation or adaptation of the measures concerned,

- the designation of competent authorities and bodies responsible,

- provisions to ensure an effective and correct implementation, including monitoring and evaluation with the definition of quantified indicators for evaluation, arrangements for controls and sanctions and adequate publicity,

- the results of consultations and steps taken to associate competent authorities and bodies as well as the economic and social partners at the appropriate levels.

2. In their plans, Member States shall

- provide for agri-environment measures throughout their territories, and in accordance with their specific needs,

- ensure the necessary equilibrium between the different measures to be supported.

Article 42

1. Rural development plans shall be submitted not later than six months after the entry into force of this Regulation.

2. The Commission shall appraise the proposed plans to determine whether they are consistent with this Regulation. On the basis of the plans, it shall approve Rural Development Programming Documents in accordance with the procedure referred to in Article 49 of Regulation (EC) No . . . [General Structural Funds Regulation] within six months after the submission of the plans.

CHAPTER III ADDITIONAL MEASURES AND COMMUNITY INITIATIVE

Article 43

1. Pursuant to Article 20(2) of Regulation (EC) No . . . (General Structural Funds Regulation) the Commission, following the procedure laid down in Article 51 of that Regulation, may extend the scope of assistance from the EAGGF Guidance Section beyond that provided for in Article 33(2) of this Regulation for the implementation of the rural development Community initiative.

2. The EAGGF Guarantee Section may finance, on the initiative of the Commission, studies related to Rural Development Programming.

CHAPTER IV FINANCIAL PROVISIONS

Article 44

1. Community support for rural development from the EAGGF Guarantee Section shall be subject to financial planning and accounting on an annual basis. The financial planning shall form part of Rural Development Programming (Article 38(3)) and of programming related to Objective 2.

2. The Commission shall make initial allocations to Member States and per year on the basis of objective criteria taking into account particular situations and needs, and efforts to be undertaken especially for the environment, job creation and the maintenance of landscape.

3. Initial allocations shall be adapted in view of real expenditures and on the basis of revised expenditure forecasts submitted by the Member States taking into account the objectives of programmes and subject to funds available and, as a rule, in coherence with the aid intensity for rural areas covered by Objective 2.

Article 45

1. The financial provisions laid down in Articles 30, 31 (except for the 31(1)(5) thereof), 33, 37 and 38 of Regulation (EC) No . . . [General Structural Funds Regulation] shall not apply to support for rural development measures in relation to Objective 2.

The Commission shall take the necessary action to ensure efficient and coherent implementation of these measures which shall at least attain the same standards as those laid down in the provisions referred to in the first subparagraph, including the principle of a single management authority.

2. For measures covered by Rural Development Programming (Article 38(3)), the Community shall contribute to financing pursuant to the principles laid down in Articles 28 and 29 of Regulation (EC) No . . . [General Structural Funds Regulation]. The Community contribution shall not exceed 50 % of the total eligible cost and, as a general rule, shall be equal to at least 25 % of eligible public expenditure in areas not covered by Objective 1 and Objective 2. In those areas, the rates laid down in Article 28(4)(a)(ii) and (iii) and (b)(ii) and (iii) of Regulation (EC) No . . . [General Structural Funds Regulation] shall apply.

In the programming for the implementation of Articles 20, 21 and 22 of this Regulation, provision may be made, in exceptional cases, for a rate of part-financing up to 10 % higher than the maximum rates laid down in the first subparagraph for specific measures of special merit from the environmental viewpoint.

The fifth subparagraph of Article 31(1) of Regulation (EC) No . . . [General Structural Funds Regulation] shall apply to such payments.

3. Payments of financial assistance from the EAGGF Guarantee Section may take the form of advances for programme implementation and of payments in respect of expenditure incurred.

CHAPTER V MONITORING AND EVALUATION

Article 46

1. The Commission and the Member States shall ensure effective monitoring of implementation of Rural Development Programming (Article 38(3)).

2. Such monitoring shall be carried out by way of jointly agreed procedures.

Monitoring shall be carried out by reference to specific physical and financial indicators agreed and established beforehand.

Member States shall submit annual progress reports to the Commission.

3. Where appropriate, monitoring committees shall be established.

Article 47

Evaluation of measures covered by Rural Development Programming (Article 38(3)) shall be carried out on the basis of the principles laid down in Articles 39 to 42 of Regulation (EC) No . . . [General Structural Funds Regulation].

CHAPTER VI IMPLEMENTING RULES

Article 48

Detailed rules for the application of this Title shall be adopted in accordance with the procedure laid down in Article 49 of Regulation (EC) No . . . [General Structural Funds Regulation].

These rules may in particular define the details of

- the presentation of rural development plans (Articles 39 to 42),

- the revision of Rural Development Programming Documents,

- financial planning, in particular to ensure budgetary discipline (Article 44), the participation in financing (Article 45(2)),

- the monitoring and evaluation (Articles 46 and 47).

TITLE IV State aids

Article 49

1. Save as otherwise provided in this Title, Articles 92 to 94 of the Treaty shall apply to aids granted by Member States for measures to support rural development.

However, Articles 92 to 94 of the Treaty shall not apply to financial contribution provided by Member States for measures subject to Community support within the scope of Article 42 of the Treaty in accordance with the provisions of this Regulation.

2. State aids to support farmers in less-favoured areas which fail to satisfy the conditions laid down in Articles 13 to 19 or which exceed the amounts determined in accordance with Article 15 shall be prohibited.

3. State aids to support farmers in return for agri-environmental undertakings which fail to satisfy the conditions laid down in Articles 20 to 22 are prohibited. However, additional aids exceeding maximum amounts fixed according to Article 22(2) may be granted if justified under paragraph 1 of that Article.

Article 50

Within the scope of Article 42 of the Treaty State aids intended to provide additional financing for rural development measures for which Community support is granted shall be notified by Member States and approved by the Commission in accordance with the provisions of this Regulation as part of programming referred to in Article 38. The first sentence of Article 93(3) of the Treaty shall not apply to aids thus notified.

TITLE V Transitional and final rules

Article 51

1. Should specific measures be necessary to facilitate the transition from the system in force to the one established by this Regulation, such measures shall be adopted by the Commission in accordance with the procedures laid down in Article 49 of Regulation (EC) No . . . [General Structural Funds Regulation].

2. Such measures shall in particular be adopted for the integration of existing Community support actions, approved by the Commission for a period ending after 1 January 2000 or without any time limit into the rural development support provided for by this Regulation.

Article 52

1. Article 17 of Council Regulation (EEC) No 1696/71 on the common organisation of the market in hops (14) shall be replaced by the following:

'Article 17

1. The Regulations on the financing of the common agricultural policy shall apply to the market in the products referred to in Article 1(1) from the date of implementation of the arrangements laid down herein.

2. The aid referred to in Article 8 shall be subject to part financing by the Community.

3. The Member States shall pay the aid referred to in Article 12 to the producers between 16 October and 31 December of the marketing year in respect of which the aid is applied for.

4. The Commission shall, following the procedure laid down in Article 20, adopt rules for the application of this Article.`

2. Article 6 of Council Regulation (EEC) No 404/93 on the common organisation of the market in bananas (15) shall be replaced by the following text:

'Article 6

1. For the five years following the date of recognition, the Member States shall grant recognised producer organisations assistance to encourage their establishment and assist their administrative operation.

2. Such aid:

- shall be, for the first, second, third, fourth and fifth years respectively, 5 %, 5 %, 4 %, 3 % and 2 % of the value of production marketed under the auspices of the producer organisation,

- shall not exceed the actual cost of formation and administrative operation of the organisation concerned,

- shall be paid in annual instalments for a maximum of seven years following the date of recognition.

The value of each year's production shall be calculated on the basis of:

- the annual volume actually marketed,

- the average producer prices obtained.

3. Producer organisations deriving from organisations which already comply to a large extent with the conditions of this Regulation shall qualify for aid under this Article only if they are formed as the result of a merger enabling the objectives referred to in Article 5 to be achieved more effectively. However, in such a case, the aid shall be granted only in respect of the cost of formation of the organisation (expenditure incurred in connection with the preparatory work and the drawing up of the memorandum and articles of association).

4. The aid referred to in this Article shall be notified to the Commission in a report from the Member States at the close of each financial year.`

3. Council Regulation (EC) No 2200/96 on the common organisation of the market in fruit and vegetables (16) shall be amended as follows:

- Article 15(6) shall be replaced by the following:

'6. In regions of the Community where the degree of organisation of producers is particularly low, Member States may be authorised, upon duly substantiated request, to pay producer organisations national financial assistance equal to half the financial contributions of producers. This assistance shall be additional to the operational fund.

For Member States less than 15 % of whose fruit and vegetable production is marketed by producer organisations and whose fruit and vegetable production represents at least 15 % of their total agricultural output, the assistance referred to in the first subparagraph may be partly reimbursed by the Community at the request of the Member State concerned`.

- Article 52 shall be replaced by the following:

'Article 52

1. Expenditure relating to the payment of the Community withdrawal compensation and to Community financing of the operational fund, the specific measures referred to in Article 17 and Articles 53, 54 and 55 and checks by experts of the Member States made available to the Commission in application of Article 40(1) shall be deemed to be intervention to stabilise agricultural markets within the meaning of Article 1(2)(b) of Regulation (EC) No . . . [Agricultural Financial Regulation].

2. Expenditure relating to the aid granted by the Member States in accordance with Article 14 and the second subparagraph of Article 15(6) shall be deemed to be intervention to stabilise agricultural markets within the meaning of Article 1(2)(b) of Regulation (EC) No . . . [Agricultural Financial Regulation]. It shall be eligible for part financing by the Community.

3. The Commission shall, following the procedure laid down in Article 46, adopt rules for the application of paragraph 2 of this Article.

4. The provisions of Title VI shall apply without prejudice to the application of Council Regulation (EEC) No 4045/89 (1)

(1) Council Regulation of 21 December 1989 on scrutiny by Member States of transactions forming part of the system of financing by the Guarantee Section of the European Agricultural Guidance and Guarantee Fund and repealing Directive 77/435/EEC, OJ L 388, 30.12.1989, p. 17. Regulation as last amended by Council Regulation (EC) No 3235/94, OJ L 338, 28.12.1994, p. 16.`.

Article 53

1. The following Regulations are hereby repealed:

- Regulation (EEC) No 4256/88,

- Regulations (EC) Nos 950/97, 951/97, 952/97, 867/90,

- Regulations (EC) Nos 2078/92, 2079/92, 2080/92,

- Regulation (EEC) No 1610/89.

2. The following provisions are hereby deleted:

- Article 21 of Regulation (EEC) No 3763/91 (17),

- Article 32 of Regulation (EEC) No 1600/92 (18),

- Article 27 of Regulation (EEC) No 1601/92 (19),

- Article 13 of Regulation (EEC) No 2019/93 (20).

3. The Regulations and provisions repealed under paragraphs 1 and 2 shall remain applicable to actions approved by the Commission under those Regulations before 1 January 2000.

4. Council and Commission Directives adopting lists of less-favoured areas or amending such lists in accordance with Article 21(2) and (3) of Regulation (EC) No 950/97 shall remain in force unless further amended in the framework of programmes.

Article 54

This Regulation shall enter into force on the seventh day following its publication in the Official Journal of the European Communities.

It shall apply in relation to Community support as from 1 January 2000.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at . . .

For the Council

. . .

(1) OJ L 185, 15.7.1988, p. 9. Regulation as last amended by Regulation (EC) No 3193/94, OJ L 337, 24.12.1994, p. 11.

(2) OJ L 374, 31.12.1988. Regulation as amended by Regulation (EEC) No 2085/93, OJ L 193, 31.7.1993, p. 44.

(3) OJ L 215, 30.7.1992, p. 85. Regulation as last amended by Commission Regulation (EC) No 2272/95, OJ L 288, 1.12.1995, p. 35. Regulation rectified by Commission Regulation (EC) No 1962/96, OJ L 259, 12.10.1996, p. 7.

(4) OJ L 215, 30.7.1992, p. 91. Regulation as amended by Commission Regulation (EC) No 2773/95, OJ L 288, 1.12.1995, p. 37.

(5) OJ L 215, 30.7.1992, p. 96. Regulation as last amended by Commission Regulation (EC) No 231/96, OJ L 30, 8.2.1996, p. 33.

(6) OJ L 142, 2.6.1997, p. 1.

(7) OJ L 142, 2.6.1997, p. 22.

(8) OJ L 165, 15.6.1989, p. 3.

(9) OJ L 91, 6.4.1990, p. 7.

(10) OJ L 142, 2.6.1997, p. 30.

(11) Council Directive concerning the prohibition on the use in stockfarming of certain substances having a hormonal or thyrostatic action and of â-agonists, and repealing Directives 81/602/EEC, 88/146/EEC and 88/299/EEC, OJ L 125, 23.5.1996, p. 3.

(12) Council Directive on measures to monitor certain substances and residues thereof in live animals and animal products and repealing Directives 85/358/EEC and 86/469/EEC and Decisions 89/187/EEC and 91/664/EEC, OJ L 125, 23.5.1996, p. 10.

(13) OJ L 217, 31.7.1992, p. 3. Regulation as last amended by Regulation (EC) No 308/97, OJ L 51, 21.2.1997, p. 11.

(14) OJ L 175, 4.8.1971, p. 1. Regulation as last amended by Regulation (EC) No 1554/97, OJ L 208, 2.8.1997, p. 1.

(15) OJ L 47, 25.2.1993, p. 1. Regulation as last amended by Regulation (EC) No 3290/94, OJ L 349, 31.12.1994, p. 105.

(16) OJ L 296, 21.11.1996, p. 46, as amended by Commission Regulation (EC) No 2520/97, OJ L 346, 17.12.1997, p. 41.

(17) Council Regulation of 16 December 1991 introducing specific measures in respect of certain agricultural products for the benefit of the French overseas departments, OJ L 356, 24.12.1991, p. 1. Regulation as last amended by Council Regulation (EC) No 2598/95, OJ L 267, 9.11.1995, p. 1.

(18) Council Regulation of 15 June 1992 concerning specific measures for the Azores and Madeira relating to certain agricultural products, OJ L 173, 27.6.1992, p. 1. Regulation as last amended by Council Regulation (EC) No 2348/96, OJ L 320, 11.12.1996, p. 1.

(19) Council Regulation of 15 June 1992 concerning measures for the Canary Islands with regard to certain agricultural products, OJ L 173, 27.6.1992, p. 13. Regulation as last amended by Council Regulation (EC) No 2348/96, OJ L 320, 11.12.1996, p. 1.

(20) Council Regulation of 19 July 1993 introducing specific measures for the smaller Aegean islands concerning certain agricultural products, OJ L 184, 27.7.1993, p. 1. Regulation as last amended by Commission Regulation (EC) No 2417/95, OJ L 248, 14.10.1995, p. 39.

ANNEX

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