[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 20.11.2006

SEC(2006) 1493 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

on EAGGF Guarantee Section expenditure Early warning system No 9–10/2006

TABLE OF CONTENTS

1. INTRODUCTION 3

2. COMMENTS ON THE IMPLEMENTATION OF THE 2006 BUDGET 3

3. CONCLUSIONS 5

1. INTRODUCTION

Annex 1 presents the budget’s actual implementation, for the period 16 October 2005 to 31 August 2006, compared to the expenditure profile determined by the indicator which was established on the basis of the dispositions of Article 7 of Council Regulation (EC) No 2040/2000 of 26 September 2000 on budgetary discipline[1].

2. COMMENTS ON THE IMPLEMENTATION OF THE 2006 BUDGET

Hereafter follows a brief commentary on the most significant divergences between the actual implementation and the corresponding level pointed out by the indicator for the various sectors of the 2006 budget (NB: in parenthesis, the current level of over (+) or under (–) execution is presented).

2.1. Monetary factors

The dollar/euro rate

The expenditure incurred in the aforementioned period takes account of the movement in the dollar/euro rate. For a large part of export refunds for agricultural products, particularly for cereals and sugar, and of some internal aids such as aid for cotton, expenditure is influenced by the euro/dollar rate.

In accordance with Article 8(1) of Regulation (EC) No 2040/2000, the budget adopted by the Budgetary Authority was drawn up on the basis of the average parity rate for July–September 2005 of EUR 1 = $ 1.22. It should be noted that for the period 1 August 2005 to 31 July 2006 the average parity rate was approximately equal to EUR 1 = $ 1.22, i.e. at the level of the rate used for the establishment of the 2006 budget.

2.2. Subheading 1a – CAP expenditure (excluding rural development)

2.2.1. Interventions in agricultural markets (– EUR 399.1 million)

The Commission notes that, on the basis of the Member States' forecasts, this under-implementation for the period to 31 August 2006 subsequently drops to approximately – EUR 363.0 million by the end of the budget year. The Commission updated its estimates of budgetary requirements and expects that the under-execution, to the end of the budget year, will stand at approximately – EUR 250.0 million, i.e: it will be lower than the level pointed out by the Member States' forecasts.

2.2.2. Fruit and vegetables (– EUR 162.1 million)

The reasons behind the implementation pattern for this sector remain identical to the ones presented in the Early Warning System Report No 5–6/2006.

2.2.3. Refunds on non-Annex I products (– EUR 123.7 million), textile plants (– EUR 33.1 million), pigmeat, eggs and poultry (– EUR 54.9 million)

The reasons behind the implementation patterns for these sectors remain identical to the ones presented in the Early Warning System Report No 7/2006.

2.2.4. Sugar (+ EUR 254.5 million), ilk and milk products (– EUR 161.5 million)

The situation with regard to the expected implementation pattern for sugar was presented in the Early Warning System Report No 8/2006.

The Commission notes the current level of execution for the milk sector. However, the Council adopted the proposal with regard to the timing of the milk levy payments by the Member States concerned. Therefore, an over-execution of the budget's appropriations, currently estimated at EUR 160.0 million is expected in this sector by the end of the budget year. (NB: Early Warning System Report No 8/2006 presents a detailed explanation with regard to the expected implementation level for this sector up to the end of the budget year)

2.2.5. The rest of the market measures

As it regards the rest of the market measures, the Commission expects an under-execution in the following markets: cereals, rice, food products, olive oil, wine, promotion, and beef and veal.

2.2.6. Direct aids (– EUR 932.1 million)

The Commission notes that this overall current level of under-execution pointed out by the indicator for the period to 31 August 2006 drops to – EUR 785.0 million by the end of the budget year. The Commission updated its estimates of budgetary requirements and expects that the under-execution, to the end of the budget year, will stand at approximately – EUR 660.0 million by the end of the budget year in this sector.

This under-execution is mainly concentrated in certain Member States which justified it by invoking the numerous administrative appeals of beneficiaries which arise primarily from the distribution of rights to them. They also invoked administrative difficulties in liquidating and paying aid files. Finally, some Member States indicated that the small amounts of aid expected to be received led many small beneficiaries to renounce their right to these payments, thus, also contributing to the under-execution of the budget's appropriations.

2.2.7. Audit of agricultural expenditure (EUR 160.9 million)

The reasons behind this implementation pattern in this area, which is expected to last to the end of the budget year, remain identical to the one presented in the Early Warning System Report No 8/2006.

3. CONCLUSIONS

For subheading 1a, the uptake of appropriations for the Member States' expenditure from 16 October 2005 to 31 August 2006 amounted to EUR 41 144.7 million, i.e. 95.1% of available appropriations. The overall under-spending of the budget’s appropriations, when compared to the indicator, amounted to approximately– EUR 1 191.7 million for the same period and mainly relates to direct aids. The Commission closely monitors this situation. The final level of under-execution for the year will depend on the success with which Member States will resolve this scheme's implementation difficulties by the end of the budget year.

For subheading 1b, the uptake of appropriations for the Member States' expenditure from 16 October 2005 to 31 August 2006 amounted to EUR 4 736.9 million, i.e. 61.0% of available appropriations. At this point in time, the Commission expects that the appropriations for rural development will be executed as proposed in the 2006 budget.

ANNEX

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[1] OJ L 244, 29.9.2000, p. 27.