REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 3/2003

TABLE OF CONTENTS

1. Overall outturn in monthly expenditure

2. Provisional utilisation of appropriations

3. COMMENTS

4. CONCLUSIONS

1. Overall outturn in monthly expenditure

The following tables show the overall out-turn in monthly expenditure in relation to the expenditure profile. This situation corresponds to expenditure incurred in the Member States from 16 October 2002 to 31 January 2003.

1.1. Subheading 1a: CAP

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1.2. Subheading 1b: Rural Development

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2. Provisional utilisation of appropriations

The following table presents the provisional utilisation of appropriations for the first three months of the 2003 budget year:

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3. COMMENTS

3.1. The uptake of appropriations for March 2003

The uptake of appropriations under heading 1 of the budget for March 2003 (Member States' expenditure from 16 October 2002 to 31 January 2003) amounts to EUR 27 287,9 million, i.e. 60,9 % of appropriations. Expenditure is

- EUR 570,4 million above the indicator for subheading 1a (traditional EAGGF Guarantee Section expenditure and veterinary expenditure), and

- EUR 40,6 million above the indicator for subheading 1b (rural development).

3.2. Monetary factors

The dollar/euro rate

The expenditure indicated under the above point takes account of the movement in the dollar/euro rate. In the case of a large part of export refunds for agricultural products, particularly for cereals and sugar, and of some internal aids such as aid for cotton, expenditure depends on the trend in the dollar rate.

In accordance with the Council Regulation on budgetary discipline (Council Regulation (EC) No 2040/2000 of 26 September 2000), the letter of amendment to the 2003 agriculture budget was drawn up on the basis of the average dollar rate for July, August and September 2002, i.e. EUR 1 = $ 0,98. For the period 1 August 2002 to 31 January 2003 the average dollar rate was equal to EUR 1 = $ 1,00, i.e. at a level slightly above the rate used for the establishment of the 2003 budget.

3.3. Market factors

Subheading 1a

For subheading 1a, the rhythm of execution is above the level of the indicator for both the plant and animal products sectors. For the plant products sector, this over-execution is primarily related to arable crops and to olive oil. For the animal products sector, this over-execution is mainly attributed to sheep-meat. For the ancillary expenditure, budget chapter B1-39 shows an over-execution, which is currently under investigation by the Commission as it might involve a mis-posting of the expenditure declared by the Member States.

The following comments are called for certain chapters of the budget:

Chapter B1-10: Arable crops // Divergence: + EUR 318 million (+1,9%)

// (expenditure: EUR 16 176 million)

(indicator: EUR 15 858 million)

At the start of the financial year, the majority of payments under this chapter relate to payments for direct aids, which have to be made in the period from 16 November 2002 to 31 January 2003. According to the Commission's estimates, the over-execution observed by comparison to the level of the indicator points out to an acceleration in the rhythm of payments for these aids. Indeed, it is estimated that Member States have already paid on average 98% of the direct aids due while the average level of the indicator for these schemes was calculated at approximately 95% of the budget's appropriations for the period in question. At this point in time, this over-execution is deemed to be temporary.

Chapter B1-12: Olive oil // Divergence: + EUR 78 million (+ 3,3%)

// (expenditure: EUR 1 894 million)

(indicator: EUR 1 816 million)

This over-execution is partly due to a slight acceleration of the rhythm of payments of the advances for the production aid for olive oil as compared to the level of the indicator. In addition, within the expenditure declared by the Member States, approximately EUR 34,0 million concern payments of production aid for the previous marketing year 2000/01 which were not foreseen to be paid when the indicator was established.

Chapter B1-14: Fibre plants and silkworms // Divergence: + EUR 31 million (+ 3,4%)

// (expenditure: EUR 680 million)

(indicator: EUR 649 million)

This over-execution is partly due to an acceleration of the rhythm of payments for the aid for cotton. The situation is expected to be regularised in the coming months.

Chapter B1-21: Beef and veal // Divergence: - EUR 119 million (- 1,4%)

// (expenditure: EUR 2 926 million)

(indicator: EUR 3 045 million)

This under-execution is due to the reduction of the volume of beef exported with refund. This decrease in the exported quantities of beef is expected to continue to the end of the year, therefore, under-implementing the corresponding appropriations.

Chapter B1-22: Sheepmeat and goatmeat // Divergence: + EUR 356 million (+ 19,8%)

// (expenditure: EUR 1 505 million)

(indicator: EUR 1 149 million)

A linear profile for the period from 16 October 2002 to 31 March 2003 has been established for premium payments under the new rules for this scheme. According to the Commission's estimates, the over-execution observed by comparison to the level of the indicator points to an acceleration in the rhythm of the sheep- and goat-meat premium payments by the Member States concerned. Indeed, it is estimated that Member States have already paid on average 83% of the premiums due while the average level of the indicator for this scheme was calculated at approximately 64% of the budget's appropriations for the period to 31 January 2003.

4. CONCLUSIONS

Implementation of appropriations at 31 March 2003

The uptake of appropriations for March 2003 (Member States' expenditure from 16 October 2002 to 31 January 2003) shows an over-execution for sub-heading 1a. This over-execution relates to certain individual chapters of the budget and, at this point in time, it is expected to be temporary. The over-execution for sub-heading 1b is minimal inviting no comments for the moment.