REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 8/2002

TABLE OF CONTENTS

1. Overall out-turn in monthly expenditure

2. Provisional utilisation of appropriations

3. Comments

4. Conclusions

1. Overall outturn in monthly expenditure

The following tables show the overall out-turn in monthly expenditure in relation to the expenditure profile. This situation corresponds to expenditure incurred in the Member States from 16 October 2001 to 30 June 2002.

1.1. Subheading 1a: CAP

>TABLE POSITION>

1.2. Subheading 1b: Rural Development

>TABLE POSITION>

2. Provisional utilisation of appropriations

>TABLE POSITION>

3. COMMENTS

3.1. The uptake of appropriations for August 2002

The uptake of appropriations under heading 1 of the budget for August 2002 (Member States' expenditure from 16 October 2001 to 30 June 2002) is EUR 35 536,7 million, i.e. 80,3% of appropriations. Expenditure is

- EUR 1 968,3 million below the indicator for subheading 1a (traditional EAGGF Guarantee Section expenditure and veterinary expenditure), and

- EUR 8,5 million above the indicator for subheading 1b (rural development).

3.2. Monetary factors

The dollar/euro rate

The expenditure indicated in point 3.1 above takes account of the movement in the Euro/dollar rate. In the case of a large part of export refunds for agricultural products, particularly for cereals and sugar, and of some internal aids such as aid for cotton, expenditure depends on the trend in the dollar rate.

In accordance with the Council Regulation on budgetary discipline (Council Regulation (EC) No 2040/2000 of 26 September 2000), the letter of amendment to the 2002 agriculture budget was drawn up on the basis of the average dollar rate for July, August and September 2001, i.e. EUR 1 = $ 0,89. For the period 1 August 2001 to 30 June 2002 the average dollar rate was equal to EUR 1= $ 0,90, i.e: at a level slightly above the rate used for the establishment of the 2002 budget.

3.3. Market factors

Subheading 1a

For subheading 1a, the overall budget execution was under the level foreseen by the indicator and it concerned all three major categories of expenditure. Specifically:

- for plant products, the under-execution resulted, mainly, from under-spending for cotton, wine and tobacco,

- for animal products, the under-execution resulted, mainly, from under-spending for beef and veal as well as for sheep- and goatmeat, and

- for ancillary expenditure, the under-execution resulted, mainly, from under-spending for veterinary and plant health measures as well as from agrimonetary measures.

The observed overall divergence amounts to EUR -1 968,3 million equal to -4,9% of the budget's appropriations. However, the divergence for certain individual chapters is more important, thus, inviting the following explanations:

Chapter B1-14: Fibre plants and silkworms // Divergence: - EUR 130 million (-13,7%)

// (expenditure: EUR 679 million)

(indicator: EUR 809 million)

At the time of writing this report, there are still uncertainties as to the level of effective production of cotton in Greece and this situation affects the expected rhythm of expenditure for this chapter. The situation should be clarified by the end of July.

Chapter B1-15: Fruits and vegetables // Divergence: + EUR 7 million (+0,5%)

// (expenditure: EUR 1 187 million)

(indicator: EUR 1 180 million)

This slight over-spending is considered temporary. The Commission expects that this chapter will be under-executed by the end of the year. This under-execution will be attributable to fresh fruits and vegetables and primarily to smaller compensation payments because of lower quantities of fruits and vegetables withdrawn from the market and to lower payments for the compensatory aid for bananas because of smaller quantities and of lower levels of aid for bananas. The Commission estimates that savings of approximately EUR 100 million can be expected by the end of the year for this chapter of the budget.

Chapter B1-16: Wine // Divergence: - EUR 139 million (-10,0%)

// (expenditure: EUR 1 035 million)

(indicator: EUR 1 174 million)

The under-spending is primarily related to delays in carrying out the various types of approved distillations in the Member States concerned. If these Member States use the maximum time allowed to implement the various crisis distillation measures decided, then this chapter's budget will be significantly under-executed by the end of the financial year. At the time of writing this report, on the basis of the hypothesis that distillation delays will be limited, the Commission estimates that savings of approximately EUR 50 million can be expected by the end of the year for this chapter of the budget.

Chapter B1-20: Milk and milk products // Divergence: + EUR 74 million (+3,9%)

// (expenditure: EUR 1 493 million)

(indicator: EUR 1 419 million)

This chapter is expected to be over-implemented by the end of the year. This over-implementation is primarily attributable to the increased recourse to public storage for both butter and skimmed milk powder owing to the deterioration of the market situation for these products. The Commission estimates that over-spending of approximately EUR 200 million can be expected by the end of the year for this chapter of the budget.

Chapter B1-21: Beef and veal // Divergence: - EUR 810 million (-10,1%)

// (expenditure: EUR 6 455 million)

(indicator: EUR 7 265 million)

The Commission expects significant under-execution for this chapter of the budget by the end of the year. This under-spending is primarily attributable to beef intervention which has been substantially lower than the level expected when the budget was established, thus, resulting in lower technical, financial and other costs. Nevertheless, under-spending is also expected for refunds due to the smaller quantities of beef exported as well as to lower payments for the slaughter premium, for the exceptional measures for the UK and for the purchase for destruction and for the special purchase schemes. The Commission estimates that savings of approximately EUR 1 billion can be expected by the end of the year for this chapter of the budget.

Chapter B1-22: Sheepmeat and goatmeat // Divergence: - EUR 131 million (- 19,5%)

// (expenditure: EUR 520 million)

(indicator: EUR 651 million)

The Commission expects significant under-execution for this chapter of the budget by the end of the year. This under-spending is primarily due to the fact that higher than foreseen market price levels for sheep- and goat-meat led to the fixing of the ewe/goat premium at a level lower than the one foreseen when the budget was established. The Commission estimates that savings of approximately EUR 100 million can be expected by the end of the year for this chapter of the budget.

Chapter B1-33: Veterinary and plant health measures // Divergence: - EUR 395 million (-69,4%)

// (expenditure : EUR 167 million)

(indicator : EUR 562 million)

This under-execution is primarily due to the delays observed in the liquidation of the files, especially for foot and mouth disease, and the subsequent payment of the balance of the amounts due.

Chapter B1-39 : Other measures // Divergence: - EUR 88 million (-33,8%)

// (expenditure: EUR 141 million)

(indicator: EUR 229 million)

The Commission expects significant under-execution for this chapter of the budget by the end of the year because the UK decided not to claim a part of the agrimonetary aids designed to compensate beef, sheep and dairy farmers for the strength of the pound against the Euro. The Commission estimates that savings of approximately EUR 60 million can be expected by the end of the year for this chapter of the budget.

Subheading 1b

Chapter B1-40:Rural development // Divergence: + EUR 8 million (+ 0,2%)

// (expenditure: EUR 1 456 million)

(indicator: EUR 1 448 million)

This chapter's execution is at the level of the indicator. The Commission considers that the execution of the budget for rural development will proceed as it was foreseen at the time of establishment of the budget.

4. CONCLUSIONS

Implementation of appropriations in August 2002

The uptake of appropriations in August 2002 (Member States' expenditure from 16 October 2001 to 30 June 2002) is EUR 35 536,7 million, i.e. 80,3% of appropriations. Expenditure is EUR 1 968,3 million below the indicator for subheading 1a and EUR 8,5 million above the indicator for subheading 1b.

The discrepancy for subheading 1a is important. For certain chapters of the budget (fibre plants, fruits and vegetables, wine, beef and veal, sheep- and goatmeat and agrimonetary measures) this under-execution should be confirmed by the end of the year, thus, leading to an under-spend of the 2002 budget estimated at approximately EUR 1,3 billion.