AMENDING LETTER N°2 TO THE PRELIMINARY DRAFT BUDGET 2002 - SECTION III - COMMISSION

(presented by the Commission)

Having regard to:

- Article 272 of the Treaty establishing the European Community,

- Article 78 of the Treaty establishing the European Coal and Steel Community,

- Article 177 of the Treaty establishing the European Atomic Energy Community,

- Article 14 of the Financial Regulation of 21 December 1977 applicable to the general budget of the European Communities [1] as last amended by Regulation n° 762/2001 [2] of 9 April 2001,

[1] OJ L 356, 31.12.1977, p. 1.

[2] OJ L 111, 20.4.2001, p. 1.

The European Commission hereby presents the letter of amendment n° 2 to the 2002 preliminary draft budget for the reasons set out in the explanatory memorandum.

***

A technical annex regarding the financing of the present letter of amendment is being drawn up separately.

TABLE OF CONTENTS

1. General introduction

1.1. Agricultural expenditures

1.2. Structural Funds: creation of the necessary structure for the restructuring programme

1.3. External Actions : update on the international fisheries agreements concluded

1.4. A provisional estimation of the budget surplus from the 2001 implementation

2. HEADING 1: EAGGF GUARANTEE

2.1. Subheading 1a: cap expenditure except for rural development

2.1.1. The market organisations and related expenditure

2.1.2. Changes in legislation

2.1.3. Euro-dollar exchange rate

2.1.4. Sectoral developments

2.2. Subheading 1b: rural development

2.3. Changes in the nomenclature and in the budget remarks - deletion of items

3. HEADING 2: STRUCTURAL OPERATIONS

3.1. General presentation

3.1.1. Background

3.1.2. Actions envisaged

3.1.3. Cost of the specific action

3.1.4. Modalities of intervention

3.1.5. Arrangements for budget intervention

3.1.6. Change in the nomenclature: insertion of a new line

3.1.7. Commitment and Payment appropriations in 2002 for the new line

3.1.8. Remarks for the new line

4. EXTERNAL ACTIONS: International fisheries agreements

5. SUMMARY TABLE BY FINANCIAL PERSPECTIVES

EXPLANATORY MEMORANDUM

1. General introduction

Under the Interinstitutional Agreement on budgetary discipline and improvement of the budgetary procedure signed by the European Parliament, the Council and the Commission on 6 May 1999, " If it considers it necessary, the Commission may present to the budgetary authority an ad hoc letter of amendment to update the figures underlying the estimate of agricultural expenditure in the preliminary draft budget and/or to correct, on the basis of the most recent information available concerning fisheries agreements in force on 1 January of the financial year concerned, the breakdown between the appropriations entered in the operational items for international fisheries agreements and those entered in reserve." This letter of amendment must be sent to the budgetary authority by the end of October.

The Commission presents herewith this ad-hoc amending letter for the budget 2002. It covers the following elements:

1. Agricultural expenditures

2. Structural Funds: creation of the necessary structure for the restructuring programme

3. External Actions : update on the international fisheries agreements concluded

4. A provisional estimation of the budget surplus from the 2001 implementation

1.1. Agricultural expenditures

The update of the figures proposed in the PDB shows a markedly improved situation Global needs are expected to reduce considerably compared to the PDB.

In fact, the agricultural budget benefits from an improving situation in most markets, which, sustained by a strong dollar vis-à-vis the euro, leads to significant savings (the applicable exchange rate is the average for the period 1 July to 30 September i.e. EUR 1 = 0.89 USD, compared to the PDB of 1EUR = 0.92 USD). These are most apparent in the arable crops sector (EUR -781 million), dairy products (EUR -424 million) and sheep meat (EUR -298 million). These savings are partially offset by increased needs for some other sectors (cotton, EUR + 253 million, wine, EUR +117 million and clearance of accounts, EUR +200 million), but overall reduced needs of several hundred millions are expected.

The needs to cope with the beef crisis and BSE/FMD eradication are more "modest" than expected. The EUR1 billion reserve foreseen in the PDB for beef sector and veterinary expenditure is no longer deemed necessary, and is proposed to be annulled. This is due to two elements. Firstly, for FMD, EUR400 million is charged to the 2001 budget, reducing needs in 2002 by the same amount. Secondly, the situation on the beef market appears to be less dramatic than initially expected, as shown by the significant under-consumption of the 2001 appropriations. As a result, it should be possible to cope with the needs for beef and veterinary expenditure within the overall budgetary envelope now foreseen for the corresponding two chapters.

1.2. Structural Funds: creation of the necessary structure for the restructuring programme

The non-renewal of the international fisheries agreement with Morocco affected the European fisheries fleet. The N ice European Council recognised this fact, and "[asked] the Commission to propose, keeping within the financial perspective, a specific action programme for restructuring the Community fleet which has fished in the framework of the old agreement [of fishing with Morocco] and to extend the current system of aid for the inactivity of the fleet" [3]. The Commission thus proposed on 18 July 2001 a programme to promote the conversion of vessels and of fishermen in the affected region. At this time the Commission repeated its intention already announced in the PDB that this programme should, by its nature fall under the structural funds heading of the Financial Perspectives. The programme should complement available funding from FIFG and be managed as structural programmes, where the implementation criteria of the FIFG and the pro visions in force for the Structural Funds will apply.

[3] Document SN 400/00 (« conclusions of the Presidency »), point 59.

Since there was no margin left under the ceiling, the present letter of amendment is presented simultaneously with a proposal to mobilise the flexibility instrument foreseen in point 24 of the Inter-Institutional Agreement for this amount in order to adapt the ceiling of the Financial Perspectives. It is proposed to create a new title in the 2002 budget, B2-2 'other specific structural operations', with article B2-20N: 'specific measures aiming at promoting the conversion of vessels and of fishermen that were, up to 1999, dependent on the fishing agreement with Morocco. The required funding according to the Commission's proposal currently in discussion would be, for 2002, EUR 197 million in commitment appropriations and EUR 39.4 million in payment appropriations.

1.3. External Actions : update on the international fisheries agreements concluded

As provided in the Interinstitutional Agreement, the Commission is correcting the breakdown for appropriations for the international fisheries agreements. The reserve for the item B7-8000, international fisheries agreement amounted to EUR 148 367 500 in commitments the Preliminary Draft Budget and it is proposed to reduce it by EUR 104 543 500 to EUR 43 824 000. This reduction corresponds to the amounts initially foreseen for agreements with Morocco, Comoros, Madagascar, Cape Verde, Guinea Bissau and Mauritania that have been initialled during 2001 and either have already been proposed or will soon be proposed to the Budget authority. The agreement with Mauritania has been increased by EUR 33 million compared to initial estimates due to, amongst others, the non-renewal with Morocco. The reserve now contains funding for Gabon, Seychelles, Senegal, Republic of Guinea and Angola, which are still under negotiation.

Budget line B7-8000 itself amounted to 120 671 000 in the Preliminary Draft Budget. It is now proposed to increase it to 144 969 000 in commitment appropriations for the new agreements as mentioned above. As a result, since the reserve is decreased by some EUR 104 million and the line is increased only by some EUR 24 million, around EUR 80 million are made available and are no longer considered necessary for international fisheries agreements. For payment appropriations, compared to the Preliminary Draft Budget some EUR 82 962 500 less are considered necessary. The resulting margin amounts to around EUR 128 million, which the Commission proposes to keep at this order of magnitude to cater for future needs already dawning in the area of external aid.

1.4. A provisional estimation of the budget surplus from the 2001 implementation

Besides the familiar components of the traditional ad hoc letter of amendment and as has been done already last year, the Commission wishes to add one further item relating to the balance for 2001. Under Article 32 of the Financial Regulation, the balance from each financial year is entered in the budget for the following financial year as revenue in the case of a surplus or expenditure in the case of a deficit. The second paragraph of this Article of the Financial Regulation specifies that the estimates of this revenue or expenditure will be entered in the budget during the budget procedure, and, where appropriate, in a letter of amendment.

The Commission considers that a prudent estimate of the balance of EUR1 000 million can at this stage be included in the PDB 2002. Contrary to the situation last year, this does not result from a surplus in revenues but from under-implementation in the 2001 budget, expenditure side. This stems from mainly heading 1, agriculture and heading 2, structural funds. However for heading 1, agriculture no correct figure for under-implementation can be ascertained until mid November when the bulk of the EAGGF expenditures consisting of the reimbursements of Member States claims will be known. Similarly for the structural funds Member States have in their most recent forecasts indicated that reimbursements on the new programmes, which are for the moment very far from the EUR 13 billions in the budget, will fully absorb the 2001 appropriations. A substantial part is forecast for the last quarter, despite the fact that 31 October is the regulatory deadline for submitting their payment claims to the Commission.

2. HEADING 1: EAGGF GUARANTEE

The aim is to ensure that the agricultural budget is based on the most up-to-date economic data and legislative framework. In fact, by the month of October, the Commission has at its disposal a first indication of the level of production (harvests) of 2001, which is the basis for any reliable estimate of the budgetary needs for 2002. Moreover, at the time of the presentation of the preliminary draft budget 2002, it was not yet possible to make an adequate estimation of the financial consequences of the crises in the agricultural markets, and on the needs in the veterinary field, due to the bovine spongiform encephalopathy (BSE) and the foot-and-mouth disease (FMD) outbreaks. This is why the Commission proposed in the preliminary draft budget a temporary reserve of EUR1 billion, dedicated to potential market and veterinary expenditure linked to these diseases.

As in the past, the Commission has carefully updated all its estimates of agricultural expenditure, line by line. Besides taking into account market factors, the letter of amendment also incorporates legislative decisions adopted in the agricultural sector since the preliminary draft budget was drawn up, as well as proposals. As concerns the decisions, they are roughly budgetarily neutral. Concerning the proposal to reform the sheep and goat meat sector, the Commission expects the Council to decide the reform in due time so that the reduced appropriations, estimated at EUR400 million in this letter of amendment, should be realised.

As for subheading 1a (CAP expenditure except for rural development), the new assessment leads to significant lower needs, i.e. -EUR 1 971 million, than estimated in the preliminary draft budget. In general, the evolution of the agricultural markets is significantly better than expected in May. This positive trend is already visible in 2001, where agricultural expenditure remains considerably below the 2001 budget. Firstly, notably due to the fact that EUR400 million are charged to the 2001 budget for FMD eradication, and that expenditure for the beef market appears to remain slightly lower than expected at the time of the setting up of the preliminary draft, the Commission is of the opinion that the special provision of EUR1 billion, foreseen in the preliminary draft, is no longer required. Moreover, significant savings are seen in some key sectors (arable crops, dairy products, and sheep meat). These are only partially offset by increased needs in some other sectors (fruit and vegetables and wine). Total requirements for subheading 1a are estimated at around EUR 39 656 million, some EUR 1 971 million (-4.7%) lower than in the preliminary draft, leaving a margin of EUR 2 336 million below the ceiling in the financial perspective for subheading 1a.

It should be noted that the agricultural sector is still subject to considerable risks. These relate not only to market developments but also to the eradication of animal diseases.

In accordance with the Council Regulation on Budgetary Discipline, the letter of amendment is based on the Euro-dollar rate recorded between 1 July and 30 September 2001. The rate comes to 0.89 (EUR1 = $0.89) and induces some savings as compared to the preliminary draft budget (EUR1 = $0.92). These are estimated at around EUR 83 million.

As for rural development (subheading 1b), the Commission proposes to maintain the appropriations in the 2002 budget at the ceiling in the financial perspective. In fact, Member States' declarations of 30 September 2001 lead to overall estimated expenditure of slightly more than the ceiling, and the Commission will scale these down, till the level of the ceiling, in accordance with Regulation 1750/2000.

The following table sums up the budgetary forecasts for the various chapters of the EAGGF Guarantee Section and shows the margins under the Financial Perspectives.

Letter of Amendment N° 2/2002 Heading 1

million EUR

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2.1. Subheading 1a: cap expenditure except for rural development

2.1.1. The market organisations and related expenditure

For subheading 1a (CAP expenditure except for rural development), the new assessment leads to significant lower needs than estimated in the preliminary draft budget (-1 971 million).

This is primarily due to the fact that expenditure, expected for the beef market organisation and for eradication of BSE and FMD, is significantly lower than estimated in May. The Commission is of the view that it should be possible to cope with the needs for beef and veterinary expenditure within the total budgetary envelope foreseen in the corresponding two chapters of the preliminary draft. That is, without the EUR1 billion special provision for additional BSE/FMD needs, which it is proposed to annul. This is possible for two reasons. On the one hand, an amount of EUR400 million is charged to the 2001 budget for FMD eradication, lowering the 2002 needs correspondingly. On the other hand, the overall market situation of beef meat appears to be less dramatic than initially expected, as is shown by the significant under-consumption of appropriations in 2001.

As to the other sectors, significant savings appear in some key sectors, only partially offset by increased needs in some others. Considerable savings are seen for arable crops (-EUR781 million). These are mainly due to the payment of an advance on the 2001 budget for the direct aids in Spain and Portugal, an update of the other direct aids on the basis of Member States declarations, and the repatriation of direct aids budgeted in the preliminary draft in line with the rice reform proposal and now re-integrated into the rice chapter. Finally, lower stocks of cereals also account for a considerable reduction of the needs of this sector. Further significant savings occur for dairy products (-EUR424 million), due to the improved situation on the milk market, accompanied by a downward revision of several rates of refund and aid, as well as public intervention. Needs are also lower for sheep meat (-EUR298 million, due to sustained market prices as a consequence of BSE in the beef sector and of FMD).

On the other hand, requirements for cotton are rising sharply (+EUR253 million), in line with the latest production figures communicated by Member States and reducing world market prices. Appropriations for wine (+EUR117 million) are to be increased as a result of higher needs for distillation. Finally, "receipts" on the clearance of accounts are budgeted at a lower level (-EUR 200 million) as in the preliminary draft, awaiting the position of the Court of Justice on some pending dossiers in respect of the milk superlevy.

The other changes are not so pronounced, and chiefly concern sugar (-EUR19 million, due to slightly increased world prices and a more favourable EUR/$ exchange rate), olive oil (-EUR23 million, because of the drop in production levels), fruit and vegetables (+EUR 12 million), poultry (+EUR14 million, due to the upward revision of export refunds), food programmes (-EUR8 million, in line with the evolution of export refunds rates), promotion measures (+EUR10 million, ) and finally, agri-monetary aids (-EUR 33 million).

Overall needs are estimated at around EUR 39 656 million, EUR 1 971 million (-4.7%]) lower than in the preliminary draft, leaving a margin of approximately EUR 2 336 million below the ceiling in the financial perspective for subheading 1a. This margin was EUR365 million in the preliminary draft.

2.1.2. Changes in legislation

The Council of Ministers (Agriculture) adopted a number of important decisions in June and July 2001. However, compared to the Commission's proposals, these are broadly budgetarily neutral for 2002. As the financial impact of the proposals was already included in the preliminary draft budget, they do not have a major impact on the letter of amendment.

First, there are the reforms of the sugar sector (B1-11) and of the schemes applied in the French overseas departments, the Azores and Madeira, and the Canary Islands (B1-32), which were decided by the Council in June 2001. Additional costs compared with the preliminary draft budget, are limited to EUR16 million for sugar.

As concerns the so-called "seven point plan" for the beef sector, a final compromise was adopted by the Council in July. The Commission decided on the Special Purchase Scheme already in March 2001. These decisions only deviate on minor points from the proposal, and in any case, do not affect the 2002 budget.

The preliminary draft budget also took account of the proposed reform of the sheep and goat meat sector. Discussions at Council and Parliament are at an advanced stage, and a decision is awaited by the end of 2001. Although the decision might deviate from the initial Commission proposal, budgetary savings expected for 2002 should remain untouched (these are the consequence of the "rescheduling" of the payment of the advance, which should be shifted to the following year 2003). If for any reason that proposal was not adopted for application as from January 2002, the existing regime would continue for at least a further marketing year, involving additional needs for 2002. These are estimated at around EUR400 million if the present firm level of market prices is maintained into 2002, but could become much more if prices were to fall significantly.

The letter of amendment incorporates the effects on the 2002 budget resulting from the fact that the Council has not, at this stage, adopted the reforms in the rice sector. Although without significant impact on global needs, the transfer of appropriations, presented in the preliminary draft, from the rice sector (B1-185) to the arable crops sector (B1-10), is annulled (the reform proposals foresee the establishment of direct aids which were meant to be financed in the arable crops sector). The new lines, proposed in the arable crops sector (B1-1048 and B1-1054) in order to budget the planned per hectare premiums for rice, are removed.

More detailed information is given in the section on sectoral developments.

2.1.3. Euro-dollar exchange rate

The adoption, last year, of the Council Regulation on budgetary discipline (Regulation (EC) No 2040/2000 of 26 September 2000) leads to a fundamental change in the rules concerning the exchange rate to be used in drawing up the agricultural budget. While the rate used in the past remained the same throughout the whole budgetary procedure and during the whole budget implementation, Article 8(1) of the new Regulation states that the rate to be used is the average rate over the most recent three-month period ending at least 20 days before adoption by the Commission of the budget document. In the case of this letter of amendment, this means the period between 1 July and 30 September 2001. The average exchange rate recorded is EUR1 = $0.89, which is slightly lower than the rate used for the preliminary draft (EUR1 = $0.92). This leads to a reduction in the level of appropriations requested of roughly EUR83 million. As compared to the exchange rate of 1.15 used for the Agenda 2000 calculations, the need would have been several hundred million euros higher compared to the amending letter.

Should there be any supplementary and amending budgets, Article 8(2) of the Budgetary Discipline Regulation states that the exchange rate to be used is based on the rate actually recorded.

It is recalled that the 2002 is the last year where the agricultural budget is endowed with a monetary reserve, established at EUR250 million.

2.1.4. Sectoral developments

The comments below, set out chapter by chapter, the main details of the changes in appropriations in the letter of amendment compared with the preliminary draft.

Chapter 10 - Arable crops (appropriations - EUR781 million)

appropriations in preliminary draft budget: EUR18 697 million

appropriations after letter of amendment: EUR17 916 million

The requirements estimated at the time the preliminary draft budget was drawn up are now some 4.2% lower. The most significant reductions are for intervention stocks (-EUR290 million) and for direct area aids (-EUR 498 million).

However, the appropriations requested for export refunds do not differ greatly from the preliminary draft (-EUR1 million). The volume of exports has been raised very slightly from 26.3 million to 27 million tonnes. It is assumed that exports for common wheat and barley will take place without refunds. Refund rates for maize are slightly higher, but are considerably lower for rye and oats.

Important savings are recorded in the cost of public storage (-EUR290 million) owing to the downward revision of stocks:

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Appropriations for direct aids are reduced by EUR 498 million. EUR 161 million of this amount represents the per hectare aid for rice, which was to be paid under Chapter B1-10 as a result of the proposed reform of the common market organisation for rice, COM(2000)278. Since the proposal has not been adopted in time for application in 2001/2002, the per hectare support for rice will be paid as previously under Chapter B1-18, governed by regulation 3072/95.

A further reduction of EUR155 million is due to the Commission's decision to permit Spain and Portugal to pay in 2001 a part of the aids for 2001/2002. This would normally be paid in 2002, but adverse weather conditions damaged crops, and threatened to leave farmers in dire financial situations. The remaining decrease is due to an adjustment in surface areas planted and yields.

Chapter 11 - Sugar (appropriations - EUR19 million)

appropriations in preliminary draft budget: EUR1 420 million

appropriations after letter of amendment: EUR1 401 million

In the sugar sector estimated expenditure is EUR19 million less than the appropriations in the 2001 preliminary draft budget. Firstly, the Commission expects a slight recovery in world market prices. To calculate refund rates, a world price of USD 210/tonne has been used, instead of the USD 200/tonne in the preliminary draft. Also the updated Euro/dollar exchange rate induces some savings. Both elements combined translate into a refund rate of EUR441, instead of EUR460 a tonne. Taking into account some slight changes on export volumes, this leads to savings of EUR40 million.

The sugar reform approved by the Council in May 2001 includes some transitional measures to ensure a smooth transition to the new regime, under which the storage regime is abolished. These measures were not part of the Commission proposal and therefore their cost was not included in the preliminary draft budget. Therefore, additional appropriations of EUR16 million are needed to finance the storage of C sugar, carried-over from the marketing year 2000/2001, until the end of the corresponding compulsory period.

Chapter 12 - Olive oil (appropriations -EUR23 million)

appropriations in preliminary draft budget: EUR2 389 million

appropriations after letter of amendment: EUR2 366 million

The appropriations for olive oil have been reduced, mainly because of the drop in production levels. The preliminary draft requirements were based on a first estimate of production. According to the final production statements, Portugal has produced, in the campaign 2000/01, 22 000 tonnes, instead of 43 000 tonnes. The decrease in appropriations for production aid comes to EUR17 million.

In the current circumstances, the EUR20 million foreseen in the preliminary draft budget for private storage seems too high. The Commission proposes to reduce this amount to EUR14 million.

Chapter 14 - Fibre plants and silkworms (appropriations +EUR253 million)

appropriations in preliminary draft budget: EUR703 million

appropriations after letter of amendment : EUR956 million

Expenditure for cotton is seen to increase dramatically (+EUR253 million). This is the consequence of, on the one hand, a revision of estimated production, and on the other, the substantial drop in world market prices.

According to Member States' declarations presented by 10 September 2001 in agreement with current legislation, production would be 1 096 000 tonnes in Greece and 314 000 tonnes in Spain. The preliminary draft budget is based upon the average production of previous years (respectively 1 250 000 tonnes and 350 000 tonnes). The new estimates, as communicated by Member States, remain below the ceiling established for the "stabilisation mechanism" and as a consequence, there would not be a supplementary aid cut. The final level of the aid will only be known in the course of 2002, as Member States are due to declare the definitive production figures by the end of June 2002.

On top of the unfavourable evolution of production figures (from a budgetary point of view) comes the progress of world market prices. At the beginning of October 2001, the world market price of unginned cotton was below 40 cts/lb. For the purpose of the amending letter, a price of 40 cts/lb. is taken for the marketing year 2001/2002 (instead of 59 cts/lb. for the preliminary draft budget). This means a price of only 204 EUR/tonne for unginned cotton (instead of 345 EUR/tonne), and an equivalent increase in the level of the aid by 141 Euro/tonne.

Chapter 15 - Fruit and vegetables (appropriations +EUR12 million)

appropriations in preliminary draft budget: EUR1 638 million

appropriations after letter of amendment : EUR1 650 million

Regarding the compensation to encourage processing of citrus fruits, the level of aid and the estimation of the quantities have not been changed. However, there is acceleration in the uptake (+EUR35 million).

When the preliminary draft for 2002 was drawn up, the Commission estimated that EUR20 million would be used in 2002 for the preliminary recognition of producer organisations . However, at present it appears that expenditure in 2002 should not exceed EUR5 million (-EUR15 million).

The appropriations for the compensation for withdrawals and buying in have been reduced by EUR5 million in line with the reduction of the quantities for some products.

Chapter 16 - Products of the vine-growing sector (appropriations +EUR117 million)

appropriations in preliminary draft budget: EUR1 275 million

appropriations after letter of amendment: EUR1 392 million

Requirements are higher than estimated at the time of the preliminary draft for storage of wine and must (+EUR11 million), distillation (+EUR46 million mainly due to the increase in crisis distillation), storage of alcohol (+EUR58 million), and aid for the use of must (+EUR4 million). Estimated requirements for refunds (EUR25 million) and restructuring (EUR422 million) remain unchanged.

Estimated wine production for 2000/2001 remains largely unchanged compared to the preliminary draft (173 instead of 174 million hl). The initial data supplied by the Member States indicate that in 2001/2002, the production of wine should be broadly at the same level as in 2000/2001. As a consequence, compared with the preliminary draft,, a significantly higher quantity of wine will have to be withdrawn from the market through the so-called crisis distillation, with consequences not only for distillation costs, but also for public storage and exports of the alcohol produced.

Finally, expenditure in 2002 will also be considerably affected by the large volume of existing stocks, due to the significant volume of wine distilled in 2000/2001.

Chapter 17 - Tobacco (appropriations -EUR1 million)

appropriations in preliminary draft budget: EUR984 million

appropriations after letter of amendment: EUR983 million

Expenditure has been relatively stable since the reform of the tobacco sector. The only two instruments which still exist are premiums, granted under a system of production quotas for each variety, and the Community fund for research and information.

The reduction of EUR1 million in estimated expenditure between the preliminary draft and the letter of amendment relates to premiums. It is linked to changes in the distribution of quotas between varieties.

Chapter 18 - Other plant sectors (requirements +EUR136 million)

appropriations in preliminary draft budget: EUR164 million

appropriations after letter of amendment : EUR300 million

A number of measures are financed from this Chapter: production aid for seeds, aid per hectare for hops, and intervention measures and income support under the common organisation of the market in rice.

The appropriation for seeds is raised by EUR5 million because of an expected increase in quantities receiving aid (370 000 tonnes as against 350 900 tonnes in the preliminary draft). For hops, nothing changes.

As for rice (+EUR131 million), the substantial increase in appropriations (B1-185) is a result of the non-adoption of the proposal to reform the common market organisation for rice as from 2001/2002. In the preliminary draft budget, needs were estimated at EUR47 million, but this increases to EUR178 million in the letter of amendment.

For refunds the estimated needs of EUR32 million remain the same. For the 2000/2001 campaign, 30% of which is paid on the 2002 budget, there is a reduction in the quantity for export of 5 600 tonnes milled equivalent compared to the PDB. However, this is counterbalanced by a higher export refund (EUR271 as compared to EUR259 in the PDB), necessitated by lower world prices . For the 2001/2002 campaign the refund calculated is only marginally higher (EUR224/t as compared to EUR222/t) and the estimated quantities for export with refund remain at the WTO limit of 133 400 tonnes.

Under the proposed reform, per hectare payments for rice were to be integrated into Chapter B1-10, and governed by Council regulation n°1251/2000. However, since this is not to be the case, the previous system of support within Chapter B1-18 remains, thus adding EUR 114 million to the chapter.

The reform proposal also foresaw an end to intervention purchases. This will no longer be the case, and the estimated needs for stocks rise by EUR17 million to EUR32 million. This is not as severe as might have been the case, since opening balances are some 107 000 tonnes lower than anticipated in the PDB.

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Chapter 20 - Milk and milk products (appropriations -EUR424 million)

appropriations in preliminary draft budget: EUR2 366 million

appropriations after letter of amendment : EUR1 912 million

The situation on the milk market has improved since the preliminary draft was drawn up. In view of the buoyancy of the market, the Commission has been able to reduce several rates of refund and aid. It has also been able to revise its assumptions regarding intervention.

A reduction in the refund rates for skimmed milk powder and "other products" has led to savings of EUR72 million and EUR196 million respectively. The reduction amounts to EUR26 million for cheese, and EUR20 million for butter and butteroil.

As regards intervention in the form of aid for the use of skimmed milk, a reduction in quantities attracting aid has led to savings of EUR37 million for skimmed milk powder for use as feed for calves, whilst a reduction in the rate of aid has led to savings of EUR11 million for skimmed milk processed into casein.

As for public intervention for butter and skimmed milk powder, the satisfactory level of internal prices allowed the rate of depreciation on entry to be set at 0% instead of 40%. The savings on intervention are EUR11 million for butter, and EUR6 million for skimmed milk powder.

Given the reduction of the fixed cost allowance for the private storage of cheese requirements also fall (- EUR14 million).

Chapter 21 - Beef/veal (appropriations -EUR276 million)

appropriations in preliminary draft budget: EUR8 371 million

appropriations after letter of amendment: EUR8 095 million

The Commission has a much better view of the budgetary needs of the sector than at the time of the presentation of the preliminary draft budget. Also a certain number of significant measures have been adopted since then which should help to keep expenditure under control.

The latest forecasts indicate that consumption is continuing to recover from the very depressed levels recorded in the first months of 2001; for the 2001 calendar year is a whole, the average drop in consumption is expected to be no more than 10% compared to the normal trend before the BSE crisis. For the 2002 calendar year, consumption should remain at about 7% under normal consumption. These consumption trends are broadly in line with the Commission's forecasts when it presented its 7 point plan, as well as with the PDB.

For the financial year 2002, the reduction in consumption compared to the normal trend without BSE is 8.5%. this corresponds to an internal consumption level of 7.03 million tonnes, slightly lower than the assumption used in the PDB of 7.09 million tonnes. However, the level of beef production in the EU is expected to be significantly lower than initially forecast. In effect, the production impact for 2002 of longer on-farm retentions of cattle has been less than was assumed at the time of the PDB. Consequently, net production for the financial year has been revised downwards to about 7.7 million tonnes instead of 8.0 million tonnes used for the PDB. This reduction to forecast production is the principle factor which leads to lower needs for internal intervention measures.

For this reason, the reserve of EUR1 billion, proposed in the preliminary draft budget, has become obsolete. However, significant uncertainties remain. A high proportion of animals is kept on the farms, awaiting a rise of market prices. These animals will have to be sold at the beginning of the winter, as sufficient livestock housing is lacking. A further, or continued, pressure on the market can thus be foreseen, but it is not yet possible to measure the precise impact on the market.

Requirements for export refunds (EUR488 million) are foreseen to be close to the level of appropriations in the preliminary draft budget. A decrease in quantities compared to those estimated in May offsets the impact of upward revisions in forecast export refund rates.

Requirements for storage (EUR522 million) should be lower than the level estimated in the preliminary draft (-EUR273 million). This decrease in needs is mainly due to a more positive assessment of quantities to be purchased, than in the preliminary draft. Although the BSE outbreak is still affecting the market balance, the effect of the specific measures (destruction and special purchase schemes), combined with a positive trend in the recovery of the normal consumption level, is seen to reduce the needs for public storage.

Estimated requirements for the premium schemes (EUR6 162 million) are close to those forecast in the preliminary draft. An increase of EUR140 million in the requirements for 2002 is expected for the extensification premium (total EUR891 million) on the basis of latest information submitted by the Member States, and shows an increase in the number of animals. However, requirements (EUR 1 184 million) have fallen for the slaughter premium since less animals have been slaughtered than estimated in the preliminary draft (-EUR187 million).

As regards the measures decided after the 1996 BSE outbreak, the requirements in the preliminary draft for the voluntary slaughter programme in the United Kingdom have been increased to EUR390 million, a rise of EUR56 million. This is due to a combination of the rise in the number of animals expected and the outstanding amounts. The previous estimate of EUR75 million for the compulsory selective slaughter programme is maintained. The total cost of market measures (including storage) linked to the first BSE crisis is now estimated at EUR5 050 million for the period 1996-2002, including EUR359 million in the 2001 budget and EUR465 million in this letter of amendment for 2002.

As regards the specific measures decided after the 2000 BSE outbreak, the requirements in the preliminary draft for the Special Purchase Scheme have been decreased to EUR256 million (-EUR165 million), because of a decrease in the quantities expected. In addition, EUR210 million are estimated as remaining payments to be made for the destruction scheme.

Chapter 22 - Sheep meat and goat meat (appropriations -EUR298 million)

appropriations in preliminary draft budget: EUR970 million

appropriations after letter of amendment: EUR672 million

Apart from a small amount for private storage, all expenditure in this chapter is on the ewe and goat premiums. The expenditure forecasts are based mainly on developments in market prices and the volume of eligible livestock.

Expenditure in the 2002 financial year covers some 75% of the premium for the 2001 marketing year, the remainder being charged to the 2001 budget (payment of the first advance in some Member States).

Because of the switch from consumption of beef to sheep meat, linked with the BSE crisis, prices for sheep meat increased considerably. The Commission estimates the average price at EUR4 000 a tonne for the marketing year 2001, instead of EUR3 700/tonne in the preliminary draft. The requirements for the premium, calculated in line with the difference between the base price and the market price, will therefore be considerably lower than calculated in the preliminary draft (EUR10.78 per ewe instead of EUR15.48).

As a rule, the forecast for eligible livestock is based on the most recent data concerning the actual use made of the entitlement to a premium. In April 2001 the Commission had only incomplete information for the 2000 marketing year. The premiums paid in respect of 1999 are now known and conclusions can thus be drawn about the volume of livestock on which the forecasts are to be based. From this data, the Commission estimates that 72.7 million animals may be eligible for premiums in 2001, i.e. 500 000 less than assumed in the preliminary draft.

Given the improvement in the market situation described above, requirements for private storage have also fallen sharply (from EUR15 million to EUR8 million).

It is recalled that the appropriations entered in the preliminary draft budget are in line with the new regime proposed by the Commission for this CMO. The main modifications of the regime concern the ewe and goat meat premium. In particular, the Commission proposed that the actual premium, which is paid as a compensation between the "basic price" and the average market price, be replaced by a flat rate premium. This will be stable and predictable for farmers and for the EU budget, and simplify the administration of the regime. The proposal also foresees that the advance is no longer payable before 16 October of each year. Consequently, the first payment of the advance under the new regime should occur from 16 October 2002, falling under the 2003 EAGGF-Guarantee budget, and induces one-off savings of EUR650 million in 2002.

Council and Parliament have analysed the Commission's proposal, and a decision is expected by the end of 2001. This means that the reform could enter into force from the marketing year 2002 on, and that the expected savings would be realised. These savings are estimated at EUR400 million on the basis of the current firm level of market prices.

Chapter 23 - Pig meat, eggs, poultry and other animal product aid measures (appropriations +EUR14 million)

appropriations in preliminary draft budget: EUR147 million

appropriations after letter of amendment : EUR161 million

Expenditure in this sector consists of export refunds. It also includes intervention in respect of private storage of pig meat, and measures to improve the production and marketing of honey.

The difference in relation to the preliminary draft is entirely accounted for by an increase in refund rates for poultry meat (+EUR15 million).

Chapter 30 - Non-Annex I products (appropriations: remain unchanged)

appropriations in preliminary draft budget: EUR415 million

appropriations after letter of amendment: EUR415 million

This chapter covers products obtained by processing agricultural products such as cereals, sugar, milk products and eggs, into spirits made from cereals, chocolate products, preparations for dietary or kitchen use, bakery products, etc.

The overall budget appropriations for this chapter are governed by a WTO ceiling of EUR415 million. Although this remains unchanged in the letter of amendment, there is some alteration in the base product quantities and refund rates.

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Chapter 31 - Food programmes (appropriations -EUR8 million)

appropriations in preliminary draft budget: EUR314 million

appropriations after letter of amendment : EUR306 million

The appropriations for refunds in connection with food aid have been reduced by EUR8 million in line with the reduction of some of the refund rates for the sectors concerned, and the reduction of the quantity of rice, in line with recent developments.

Chapter 33 - Veterinary and plant health measures (appropriations +EUR150 million)

appropriations in preliminary draft budget: EUR419.5 million

appropriations after letter of amendment: EUR569.5 million

This chapter includes a series of interventions in the field of veterinary and plant health, and in particular the measures taken for eradication of BSE and Food and Mouth Disease (FMD).

Concerning the eradication of FMD, the Emergency Veterinary Fund (B1-332) was allotted EUR250 million in the preliminary draft budget 2002. As at the stage of the preliminary draft budget 2002, it was very difficult to assess the costs linked to FMD and BSE, the Commission proposed a provision of EUR1 billion, to cover potential veterinary (as well as market related) expenditure.

In October 2001, a sum of EUR400 million, charged to the 2001 budget, has been transferred to the Fund in order to finance advances to the four Member States where the disease broke out, awaiting further controls by the Commission. This sum is expected to be used before the end of 2001, and reduces the budgetary needs for 2002.

The situation remains uncertain, and the Commission must stay prudent. On the basis of the data currently available, the Commission is of the view that a global envelope of EUR800 million should be made available to finance the Community part of expenditure incurred by Member States for FMD. This amount of EUR800 million contains a certain margin to finance future needs for new cases, in particular in the UK. As EUR400 million is already charged to the 2001 budget, an equal amount should be foreseen in the 2002 budget. To this end, the Commission proposes to increase the sum of EUR250 million, foreseen in the preliminary draft budget for FMD in the Emergency Veterinary Fund by EUR150 million. There is no need to keep the special provision (EUR1 billion) presented in the PDB.

The Commission underlines that it is at present impossible to give any final figures on the cost charged to the EU budget for FMD eradication. In fact, the Commission has to first finish its control missions in order to check if the Member States have respected Community legislation. Given the vast number of animals involved, this will take considerable time. The Commission reiterates however its objective to cover all identified and eligible cost at date under the appropriations available in the 2001 and 2002 budgets.

Concerning the other items in this chapter B1-33, the Commission proposes to maintain the appropriations of the preliminary draft budget.

Chapter 37 - Clearance of accounts and reduction/suspension of payments (appropriations +EUR200 million)

appropriations in preliminary draft budget: -EUR700 million

appropriations after letter of amendment: - -EUR500 million

For the clearance of accounts (line B1-3700), the preliminary draft budget has provided for a negative correction of -EUR600 million, in line with the results for previous financial years. Traditionally, corrections in respect of the under-utilisation of the milk super-levy have accounted for an important proportion of the total negative correction. However, a number of cases have been presented to the Court of Justice by Member States concerning past clearance decisions in respect of the milk super-levy, notably for that part of the correction which related to the deliveries of producers who have contested their levy liability in the national courts. The conclusions of the Advocate General have indicated that corrections should not have been applied in respect of undeclared levy for these disputed cases. For that reason, in July 2001, the correction applied in respect of "ad hoc" decision n° 7 was reduced in order to suspend any correction related to these disputed cases. Consequently, the total negative correction falling on the 2001 financial year will only amount to about -EUR400 million compared to -EUR600 million in the budget.

In these circumstances and given that final judgement by the Court is still awaited, , it is proposed that the forecast negative correction for 2002 be reduced to -EUR400 million.

Chapter 38 - Promotion measures (appropriations +EUR10 million)

appropriations in preliminary draft budget: EUR66.8 million

appropriations after letter of amendment: EUR76.8 million

The launching of the internal promotion programme for beef has been delayed in 2001. An additional need of 5 MioEUR is considered necessary for 2002 to cover the expenditure which should have taken place in 2001.

The new system for external promotion was applied for the first time in 2001, according to revised rules and approval procedures. The approval of programmes is taking place in the latter part of 2001 so that 2002 will be the financial year that will have to cover expenditures in respect of programmes for 2001 as well as measures which will be launched in 2002. For this reason, an increase in needs of 5 MioEUR is foreseen.

Chapter 39 - Other measures (agri-monetary aid) (appropriations -EUR 33 million)

appropriations in preliminary draft budget: EUR304 million

appropriations after letter of amendment: EUR271 million

First, there is the aid adopted under the old system in force before introduction of the Euro. In its preliminary draft, the Commission estimated that Italy would pay roughly half of the last tranche on the 2001 budget and the remainder on the 2002 budget. Due to delay, it appears that the full amount will be paid in 2002 (i.e. 43 million).

The second type of aid was created in order to compensate for income losses due to the introduction of the Euro and the simultaneous abolition of "green rates" (the so-called transitional regime). Recent information suggests that the estimate of expenditure given in the preliminary draft is still fairly valid. The letter of amendment provides for EUR115 million (instead of EUR120 million).

The third type of agri-monetary aid relates to the new system which is limited to the Member States which are not taking part in the Euro and is intended to offset the lower prices and/or direct aids (in national currency) resulting from the rise in the value of their currency against the Euro. Estimated expenditure falls from EUR161 million in the preliminary draft to EUR139 million in the letter of amendment.

2.2. Subheading 1b: rural development

Chapter 40 - Rural development (appropriations unchanged)

appropriations in preliminary draft budget: EUR4 595 million

appropriations after letter of amendment: EUR4 595 million

In accordance with Regulation 1750/2000, the Member States communicated their estimates of expenditure for 2002 to the Commission by 30 September 2001. Overall, these estimates exceed the ceiling in the financial perspective for subheading 1b in 2002. The Commission therefore proposes entering appropriations corresponding to this ceiling in the 2002 budget. It should be noted that the Commission had already entered appropriations up to the level of the ceiling in its preliminary draft.

While the Commission has not therefore changed its position regarding the overall level of appropriations, it has updated the breakdown of appropriations between the various measures in line with the Member States' communications.

2.3. Changes in the nomenclature and in the budget remarks - deletion of items

At present, the Council has not decided on the reform of the rice sector. The Commission proposes to annul the creation of two new lines, that it had created under chapter B1-10 Arable Crops, aimed at paying the new direct aids to rice producers. The first (B1-1048) concerns small producers, the latter (B1-1059) professional producers.

The Commission also proposes to cancel line B1-1514 - Production aid for tinned pineapple. In fact, as this measure is only intended for French Overseas Departments, the Commission already proposed in the preliminary draft to transfer the corresponding appropriations into line B1-3201 - Other Measures (Poseidom). However, it omitted to delete line B1-1514, which it proposes to correct in this amending letter.

Finally, as stated above, the new line, proposed in the preliminary draft for the special provision for additional BSE/FMD needs of EUR1 billion, becomes obsolete and should be cancelled.

Deletion of items:

- Article B1-1048 - Aid for rice

- Article B1-1059 - Aid for rice

- Item B1-1514 - Production aid for tinned pineapple

- Item B0-4000 - Provision for additional BSE/FMD needs

3. HEADING 2: STRUCTURAL OPERATIONS

3.1. General presentation

3.1.1. Background

The former fishing agreement between the European Community and the Kingdom of Morocco became null and void on 30 November 1999. At that date, 406 vessels and about 4300 fishermen were forced to stop their activities. On 7 December 2000, the European Council of Nice "[asked] the Commission to propose, keeping within the financial perspective, a specific action programme for restructuring the Community fleet which has fished in the framework of the old agreement [of fishing with Morocco] and to extend the current system of aid for the inactivity of the fleet" [4].

[4] Document SN 400/00 (« conclusions of the Presidency »), point 59.

Since the end of the former agreement, fishermen have benefited from the temporary compensation provided for in the relevant regulation [5] with the assistance of the Financial Instrument for Fisheries Guidance (FIFG). However, last spring, the Council noted the rupture of the negotiations on a new fishing agreement. As the vessels and fishermen concerned were permanently deprived of fishing opportunities in the Moroccan waters, a vast conversion operation had to be considered.

[5] Article 16(1), item b), of Council Regulation (EC) No 2792/1999

This operation was designed to supplement the actions already financed in the current fisheries programmes 2000-2006 co-financed by the FIFG and the socio-economic diversification of the coastal areas included in the Objective 1 Structural Funds programmes for the regions most directly concerned (Andalucia, Galicia, Canary Islands in Spain and the Azores in Portugal).

In accordance with the conclusions of the European Council of Nice, the Commission decided on the 18th of July 2001 to propose a Council regulation establishing a specific measure aiming to promote the conversion of vessels and of fishermen that were, up to 1999, dependent on the fishing agreement with Morocco [6]. This proposed regulation, based on articles 36 and 37 of the Treaty, is now under consideration in the Council.

[6] Proposal for a Council Regulation aiming to promote the conversion of vessels and fishermen that were, up to 1999, dependent on the fishing agreement with Morocco. COM(2001)384 final du 18.7.2001

3.1.2. Actions envisaged

The proposed specific action includes the following measures:

- Scrapping or reassignment for purposes other than fishing of vessels

- Permanent transfer of vessels to third countries, including in the framework of joint enterprises.

- Modernisation of vessels

- Re-training or pre-retirement scheme for the fishermen

As mentioned in the draft legislative proposal and in accordance with the aims of the Common Fisheries Policy, a minimum of 40% of the amount must be used for scrapping of vessels and change to non-fishing activity, not more than 28% can be used for the export of vessels, joint ventures and modernisation of vessels and a minimum of 32% must be used for socio-economic measures.

3.1.3. Cost of the specific action

Based on information provided for in the national plans submitted by the Spanish and Portuguese Authorities, it has been estimated that 406 vessels will have to be decommissioned, transferred to third countries or modernised and that some 4300 fishermen should benefit from requalification (in fisheries or outside fisheries) or early retirement scheme measures.

Thanks to relevant detailed data available on each of the vessels concerned (age, tonnage and therefore amount of the reference scrapping premium) and by applying the rates of interventions applicable in Objective No 1 regions, including derogatory conditions proposed simultaneously to the specific measure, the Community assistance necessary for the reconversion of the whole fleet and all fishermen is estimated at approximately 281 Mio EUR.

Taking into account funding already available in the 2000-06 FIFG programmes, the Commission has proposed that the specific measure would include a maximum supplementary Community funding - additional to the FIFG - of 197 Mio EUR, i.e. some 70% of total requested Community support.

The following table details the indicative assessment of the needs by measures for both countries

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* Community aid

The breakdown of these credits between Spain and Portugal is calculated from the lists of vessels having operated under the fishing agreement with Morocco, i.e., 186.36 Mio EUR (94.6%) for Spain and 10.64 Mio EUR (5.4%) for Portugal.

3.1.4. Modalities of intervention

The proposed amount of EUR 197 Mio will be committed in one single year in 2002 in the Community budget. The payment of an instalment is envisaged as from adoption of the regulation (39.4 Mio EUR in 2002), then the reimbursement of expenditure actually paid, and finally the payment of the balance, which must be requested 30 June 2004 at the latest.

This measure will be managed as two structural programmes (one for Spain, the other for Portugal), where the implementation criteria of the FIFG and the provisions in force for the Structural Funds will apply.

The FIFG co-financing rates in force for the structural programme measures will be applied. The management / payment authorities designated by the Member States for the implementation of the Spanish and Portuguese FIFG structural programmes will be charged with the implementation of this measure, with the same duties and responsibilities.

3.1.5. Arrangements for budget intervention

The financing of the specific measure in the Community budget requires the insertion of a new budget line (B2-200 N) in a new chapter (B2-20) for that purpose in the preliminary draft budget. This new budget line will be included in the activity "structural policy" included in the policy area "Fisheries" and will have the following characteristics:

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As all the measures concerned would have been eligible for the FIFG intervention and the main provisions of the structural funds and FIFG regulations will be applied, the new line has to be financed under heading 2 of the financial perspective. In accordance with the Interinstitutional Agreement of 9 May 1999 (item 10 subparagraph 3), the financing of specific expenditure items can indeed be carried out only within the ceiling fixed for this purpose.

However, the structural operations are budgeted at the ceiling of the corresponding heading. As announced when proposing the legislative proposal, the Commission proposes, simultaneously to this letter of amendment, to mobilise the flexibility instrument in 2002 and to allocate the corresponding appropriations to heading 2 of the financial perspectives for that purpose (item 24 of the Interinstitutional Agreement).

PROPOSED CHANGES IN THE PRELIMINARY DRAFT BUDGET

3.1.6. Change in the nomenclature: insertion of a new line

New title: B2-2 N Other specific structural operations

New chapter: B2-20 N Other specific structural operations

New article: B2-200 N Specific measure aiming to promote the conversion of vessels and of fishermen that were, up to 1999, dependent on the fishing agreement with Morocco

3.1.7. Commitment and Payment appropriations in 2002 for the new line

Commitment Appropriations: EUR 197 000 000

Payment Appropriations: EUR 39 400 000

3.1.8. Remarks for the new line

The likely schedule of payments vis-à-vis commitments is as follows:

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This appropriation is intended to cover the specific measure aiming to promote the conversion of vessels and of fishermen that were, up to 1999, dependent on the fishing agreement with Morocco.

Legal basis

Proposal for a Council Regulation aiming to promote the conversion of vessels and fishermen that were, up to 1999, dependent on the fishing agreement with Morocco, COM (2001) 384 final du 18.7.2001.

4. EXTERNAL ACTIONS: International fisheries agreements

The Commission proposes to amend the Preliminary draft budget as follows:

* Item B7-8000 (International fisheries agreements): EUR 144 969 000 in commitment appropriations, i.e. an increase of EUR 24 298 000 on the PDB and EUR 148 321 000 in payment appropriations, i.e. an increase of EUR 21 900 000 on the PDB for agreements in force by 31 December 2001. Five agreements have been renewed during 2001 (Comoros, Madagascar, Cape Verde, Guinea Bissau and Mauritania). Although the PDB estimate included some allowance for increases, it did not cater for the full impact of a new agreement with Mauritania that represents an increase of EUR 33 million over the previous annual average. A number of factors contributed to this rise not the least of which was the political knock-on effect of the non-renewal of the agreement with Morocco. The fishing possibilities were also increased particularly as regards the high value stocks such as crustaceans, cephalopods and pelagics. Lastly, the figures for payments appropriations on item B7-800 is overall some EUR 3.5 million higher compared to the commitment appropriations to allow for some outstanding payments to be made.

* On the other hand, the amounts entered in the reserve are significantly reduced since many of the uncertainties that remained at the time of the drafting of the PDB have been removed. In the provisional appropriations chapter B0-40 the Amending Letter proposes: EUR 43 824 000 in commitment appropriations, i.e. a decrease of EUR 104 543 500 on the PDB and EUR 43 505 000 in payment appropriations, i.e. a decrease of 104 862 500 on the PDB. In line with the conclusions from the Council meeting of 25 April 2001, it is clear that the EUR 125 million initially included for the agreement with Morocco will not be required. This amount was maintained, also in the Council first reading, in order to provide a margin for possible increases in other negotiated protocols, particularly as some major agreements were in the process of renewal. There remains the agreements with Equatorial Guinea, which has been suspended and will therefore figure in the reserve for 2002, and Senegal which, as a prolongation, was stable in cost for 2001 and figures in the reserve for 2002. The reserve also has to allow for the conclusion of other possible new agreements, of which Gabon and Seychelles have already been initialled but Senegal (see above), Republic of Guinea and, above all, Angola still have to be concluded. Taking into account probable increases makes it nevertheless possible to reduce the reserve by some EUR 104 million.

The reduction of the reserve amounts to EUR 104 million of which EUR 24 million are reallocated to item B7-8000. The overall effect is a reduction of the total amount for international fisheries agreements (on the line B7-8000 and in the B0-40 reserve) of EUR 80 million thus bringing the margin under the ceiling of heading 4 to EUR 128 million approximately. The Commission proposes to the budgetary authority to keep a margin of this order of magnitude in view of the uncertainties prevailing in the external field and the potential needs arising in Asia and Middle East.

5. SUMMARY TABLE BY FINANCIAL PERSPECTIVES

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(*) including 167 mEUR for staff contributions to the pension scheme, according to footnote n°2 in the tables of the financial perspectives and the financial framework for the EU21 attached to the IIA of 6/5/1999.

(**) after 200 mEUR in commitment appropriations is drawn from the flexibility instrument.