The Agricultural Situation in the European Union - 2000 Report

(presented by the Commission)

TABLE OF CONTENTS

1. The agricultural year

1.1. Overview

1.2. Output

1.3. Producer prices and market prices

1.4. Input prices

1.5. Farm income

1.6. Farm accountancy data network (FADN)

1.6.1. Farm incomes

1.6.2. Income by type of farming

2. Policy developments and legislative initiatives in 2000

2.1. Quality policy

2.2. Organic farming

2.3. Promotional measures

2.4. Simplification of agricultural legislation

2.4.1. Introduction

2.4.2. Transparency and accessibility of agricultural legislation

2.4.2.1. Consolidation

2.4.2.2. Recasting of the regulations relating to import and export licences

2.4.2.3. Export destination codes

2.4.2.4. Paying agencies' proposals

2.4.2.5. New guidelines for state aids

2.4.3. Simplification measures in the market sectors

2.4.3.1. Flax and hemp

2.4.3.2. Meat

2.4.3.3. Milk and milk products

2.4.3.4. Fruit and vegetables

2.4.3.5. Rice

2.4.4. Small farmers' scheme

2.5. State aids

2.5.1. A new legal framework

2.5.2. Overview of the year

2.5.3. Exceptional occurrences and natural disasters

2.5.3.1. Dioxin - (B)

2.5.3.2. Recovery of the French forestry sector - (F)

2.5.4. Privatisation and restructuring

2.5.4.1. Aid for land purchase - (D)

2.5.4.2. Restructuring and privatisation plans of EPAC and Silopor - (P)

2.5.4.3. Centrale del Latte di Roma - (I)

2.5.5. Fiscal measures

2.5.5.1. CO2 tax exemption for the glasshouse horticulture sector - (NL)

2.5.5.2. Exemption from mineral levies - (NL)

2.5.6. Operating aids: Greek cooperatives - (EL)

2.5.7. RIBS: State aid granted under market conditions - (I)

2.5.8. Pigmeat sector

2.5.8.1. Aid for pigmeat production - Stabiporc - (F)

2.5.8.2. Pig assembly centres - (NL)

2.5.9. Livestock sector: general measures

2.5.9.1. Abandoning capacity: exiting scheme for intensive livestock farming- (NL)

2.5.9.2. Livestock transport: "Gaelic Ferries"- (IRL)

2.5.9.3. Aid to livestock farmers affected by adverse weather conditions - (IRL)

2.5.10. Sugar sector

2.5.11. Citrus sector

2.5.11.1. Aids for the citrus sector in Sicily - (I)

2.5.11.2. National action plan for the citrus sector - (I)

2.5.12. Wine-growing

2.6. Assistance to the needy

2.7. The outermost regions

2.8. Information measures concerning the CAP

2.9. Report on activities in the field of ICT (information and communication technologies)

2.10. Advisory committees and relations with bodies representing the trade

3. Agricultural markets

3.1. The 2000/01 price package

3.2. Crop products

3.2.1. Cereals

3.2.1.1. World market

3.2.1.2. Community market

3.2.2. Oilseeds

3.2.3. Peas, field beans and sweet lupins

3.2.4. Linseed

3.2.5. Grain legumes (chickpeas, vetches and lentils)

3.2.6. Non-food production

3.2.7. Rice

3.2.7.1. Reform of the rice sector

3.2.8. Starch

3.2.9. Sugar

3.2.9.1. World market

3.2.9.2. Community market

3.2.9.3. Main legislative and policy developments

3.2.10. Potatoes

3.2.11. Dried fodder

3.2.12. Fibre flax and hemp

3.2.12.1. Fibre flax

3.2.12.2. Hemp

3.2.12.3. Reform of fibre flax and hemp

3.2.13. Cotton

3.2.13.1. Reform of the aid scheme for cotton

3.2.14. Silkworms

3.2.15. Olive oil

3.2.16. Fresh fruit and vegetables

3.2.16.1. World market

3.2.16.2. International trade

3.2.16.3. Community market

3.2.16.4. Reform of the fruit and vegetables sector

3.2.17. Bananas

3.2.17.1. Community production

3.2.17.2. Imports from ACP countries

3.2.17.3. Reform of the market organisation for bananas

3.2.18. Processed fruit and vegetables

3.2.18.1. World and Community markets

3.2.18.2. Main developments in legislation and policy (see Section 3.2.16.4)

3.2.19. Wine

3.2.20. Tobacco

3.2.20.1. Market developments

3.2.20.2. Main legislative and policy developments

3.2.21. Seeds

3.2.21.1. Market developments

3.2.21.2. Main legislative and policy developments

3.2.22. Hops

3.2.22.1. World market

3.2.22.2. Community market

3.2.22.3. Main legislative and policy developments

3.2.23. Flowers and live plants

3.3. Animal feed

3.4. Animal products

3.4.1. Milk and milk products

3.4.1.1. World market

3.4.1.2. Community market

3.4.2. Beef and veal

3.4.2.1. Implementing the reform of the beef and veal sector

3.4.2.2. Beef labelling

3.4.2.3. World market in 1999

3.4.2.4. Community market

3.4.3. Sheepmeat and goatmeat

3.4.4. Pigmeat

3.4.4.1. Main legislative and policy developments (Pigmeat regulatory fund)

3.4.5. Poultrymeat

3.4.6. Eggs

3.4.7. Honey

4. AGRIMONETARY ARRANGEMENTS

4.1. Developments in 2000

5. Rural development in 2000

5.1. Belgium

5.1.1. Adoption of the new programmes

5.1.1.1. Flanders

5.1.1.2. Wallonia

5.1.2. Evaluation of old programmes

5.1.2.1. Belgium - Federal

5.1.2.2. Brussels Region

5.1.2.3. Flemish Region

5.1.2.4. Wallonia

5.2. Denmark

5.2.1. Adoption of new programmes

5.3. Germany

5.3.1. Adoption of new programmes

5.3.1.1. Background and programming framework

5.3.1.2. Fabric of programmes and priorities

5.3.1.2.1. Baden-Württemberg

5.3.1.2.2. Bavaria

5.3.1.2.3 Brandenburg

5.3.1.2.4 Bremen

5.3.1.2.5 Hamburg

5.3.1.2.6 Hessen

5.3.1.2.7 Mecklenburg-Western Pomerania

5.3.1.2.8 Lower Saxony

5.3.1.2.9 North Rhine-Westphalia

5.3.1.2.10 Rheinland-Pfalz

5.3.1.2.11 Saarland

5.3.1.2.12 Saxony

5.3.1.2.13 Saxony-Anhalt

5.3.1.2.14 Schleswig-Holstein

5.3.1.2.15 Thuringia

5.3.2. Evaluation of the old programmes

5.3.2.1. Objective 1

5.3.2.2. Objective 5(b)

5.3.2.3. Leader II

5.4. Greece

5.4.1. Adoption of new programmes

5.4.2. Evaluation of old programmes

5.5. Spain

5.5.1. Adoption of new programmes

5.5.1.1. Aragon

5.5.1.2. Catalonia

5.5.1.3. Balearic Islands

5.5.1.4. Rioja

5.5.1.5. Madrid

5.5.1.6. Navarre

5.5.1.7. Basque Country

5.5.2. EAGGF Guidance Section programming

5.5.3. Evaluation of old programmes

5.6. France

5.6.1. Adoption of new programmes

5.6.1.1. Objective 1 programmes

5.6.1.2. Objective 2 programmes

5.6.1.3. Leader+

5.6.2. Evaluation of old programmes

5.7. Ireland

5.7.1. Adoption of new programmes

5.7.1.1. Background and programming framework

5.7.1.2. Fabric of programmes and priorities

5.7.2. Evaluation of old programmes

5.8. Italy

5.8.1. Adoption of new programmes

5.8.1.1. Abruzzi

5.8.1.2. Bolzano

5.8.1.3. Emilia-Romagna

5.8.1.4. Friuli-Venezia Giulia

5.8.1.5. Lazio

5.8.1.6. Liguria

5.8.1.7. Lombardy

5.8.1.8. Marche

5.8.1.9. Umbria

5.8.1.10. Piedmont

5.8.1.11. Tuscany

5.8.1.12. Trento

5.8.1.13. Valle d'Aosta

5.8.1.14. Veneto

5.8.2. Evaluation of old programmes

5.9. Luxembourg

5.9.1. Adoption of new programmes

5.9.2. Evaluation of old programmes

5.10. Netherlands

5.10.1. Adoption of new programmes

5.10.2. Evaluation of old programmes

5.11. Austria

5.11.1. Adoption of new programmes

5.11.1.1. Objective 1 programme for Burgenland

5.11.1.1.1. Strategy

5.11.2. Evaluation of old programmes

5.12. Portugal

5.12.1. Adoption of new programmes

5.12.1.1. Community support framework and other instruments

5.12.1.2. Aim

5.12.1.3. Programme priorities and structures

5.12.2. Evaluation of old programmes

5.13. Finland

5.13.1. Adoption of new programmes

5.13.1.1. Continental Finland

5.13.1.2. Åland islands

5.13.2. Evaluation of old programmes

5.14. Sweden

5.14.1. Adoption of new programmes

5.14.1.1. Objective 1

5.14.2. Evaluation of old programmes

5.15. United Kingdom

5.15.1. Adoption of new programmes

5.15.1.1. England

5.15.1.2. Northern Ireland

5.15.1.3. Scotland

5.15.1.4. Wales

5.15.1.5. Objective 1

6. Environment and Forestry

6.1. Other environmental measures

6.2. Forestry

7. Financing of the CAP in 2000

7.1. Berlin Summit Agreement and budgetary discipline

7.2. EAGGF Guarantee Section

7.2.1. Stages of the budgetary procedure

7.2.1.1. The monetary reserve

7.2.2. The EAGGF Guarantee Section in the context of the general budget

7.2.3. The EAGGF and its financial resources

7.2.4. EAGGF Guarantee Section expenditure

7.2.4.1. Public storage

7.2.5. Clearance of accounts

7.2.6. Expenditure on agricultural markets in 2000

7.3. EAGGF Guidance Section

7.3.1. Funding carried out

7.3.2. Budget execution

7.4. Evaluation

7.4.1. Evaluation of market-related measures

7.4.2. Evaluation of structural and rural development measures

8. Preparing for enlargement

8.1. Main developments

8.1.1. Accession negotiations

8.1.2. Pre-accession strategy

8.1.3. SAPARD

8.1.4. CEECs, progressive liberalisation of bilateral agricultural trade

8.1.4.1. List 1:

8.1.4.2. List 2:

8.1.4.3. List 3:

8.1.5. Results of the negotiations

8.2. Bulgaria

8.3. Czech Republic

8.4. Estonia

8.5. Hungary

8.6. Latvia

8.7. Lithuania

8.8. Poland

8.9. Romania

8.10. Slovakia

8.11. Slovenia

9. International relations

9.1. International organisations and agreements

9.1.1. World Trade Organisation (WTO)

9.1.1.1. WTO consultations and dispute settlement

9.1.2. Organisation for Economic Cooperation and Development (OECD)

9.1.3. Generalised System of Preferences (GSP)

9.1.4. United Nations Food and Agriculture Organisation (FAO)

9.1.5. International Grains Agreement (IGA)

9.1.5.1. Grains convention

9.1.5.2. Food Aid Convention

9.1.6. International Sugar Organisation

9.2. Bilateral and regional trade relations

9.2.1. United States

9.2.2. Canada

9.2.3. Mexico

9.2.4. Mercosur and Chile

9.2.5. South Africa

9.2.6. Japan and South Korea

9.2.7. New Zealand

9.2.8. Mediterranean countries

1. The agricultural year

1.1. Overview

1. The 2000 agricultural year was notable mainly for three trends:(a) the recovery of prices in the pigmeat and poultry sectors after the falls in 1999, (b) a surge in oil prices, leading to a steep rise in energy costs and, to a lesser degree, the cost of fertilisers, and (c) the collapse of consumption and prices of beef and veal from October onwards as a new BSE crisis struck following the discovery of fresh cases of the disease in several Member States. On the whole, weather conditions over the agricultural year were favourable, contributing to a record cereals harvest, while the overall domestic and international economic situation remained conducive to growth and helped ensure EU agricultural exports remained competitive.

2. Overall, initial estimates at the end of 2000 (before the full impact of the BSE crisis could be assessed) put farm incomes for the European Union as a whole on an upward trend by 1.3% in real terms, following the slight rise recorded in 1999 (+ 0.7%, according to the most recent figures). This provisional estimate for 2000 will probably have to be revised downwards, however, to account for the fall in beef and veal prices in the final quarter of the year. This news should be tempered by the fact that the fall was accompanied by a contrasting recovery in pigmeat and poultry prices, a process that had started before the crisis and which picked up over the year.

3. In terms of weather conditions, the 2000 agricultural year generally started out quite favourably at the winter sowing period (autumn 1999). This led to an increase in the area sown with common wheat in France, the Benelux countries and especially Germany, compared with the previous year's contraction. In addition, water reserves in southern Europe, low after a summer marked by relatively high temperatures and a long drought in Spain, were replenished by substantial rainfall just before the winter sowing period. This largely offset the mix of low rainfall and above-average temperatures experienced by these regions over the winter. Indeed, most regions in central Europe and Scandinavia also enjoyed a mild winter (with temperatures some 2 degrees above average) and a generally fair spring, with relatively high temperatures accelerating crop growth. In the summer, however, conditions deteriorated somewhat, with excessive rainfall in northern Europe and the unseasonably high temperatures lingering in the south. The heavy rainfall in the north in July and August considerably delayed the winter cereals harvest and affected the quality of the harvested crop. On the other hand, these conditions were relatively favourable for summer crops, especially potato and beet, although beet yields were generally below the record harvest of the previous year. These two crops, in particular beet, suffered from the excessive autumn rainfall in the north, which delayed harvests in most areas.

4. Domestic demand for cereals is estimated to have risen 2.5%, after levelling off in 1999, due mainly to the resumption of cereal use in animal feed as cereals regained their competitive position in relation to substitutes. Before the BSE crisis, the forecast for beef and veal consumption in 2000 was for flat or limited growth compared with 1999, putting it slightly above the long-term trend (which, despite everything, was still on a downward curve - from over 23 kg per capita in 1986 to some 20 kg in 1999). The widespread loss of consumer confidence in the wake of the discovery of fresh cases of "mad cow disease", even in Member States which had hitherto been considered BSE-free, sparked a nosedive in beef and veal sales in most Member States, with some seeing falls of up to 60-70%. Averaged out over the year, it is estimated that the crisis will eventually be responsible for beef and veal consumption dropping by 5% in 2000, although significant fallout from the crisis could continue into 2001. As in the past, the slump in beef and veal sales has led to a corresponding increase in poultry and pigmeat consumption, which, according to estimates, was in decline somewhat before the BSE crisis. As a result, consumption levels for these meats should on the whole remain more or less flat in 2000 compared with the previous year, with poultry consumption perhaps dipping slightly. Lastly, while butter consumption fell off again after having picked up slightly in 1999, consumption of cheese continued its upward trend, growing by some 1.5% in 2000.

5. The general economic scene was characterised by relatively steady growth in the European Union and the world at large, a steep fall in the euro against the dollar (increasing the competitiveness of Community exports in world markets), and rocketing oil prices, which, together with the weak euro, put upward pressure on inflation in most Member States.

6. Globally, agricultural markets continued their improvement on 1999, although in the context of recent years they remained relatively depressed. While world wheat prices, in particular, recovered in the second half of the year on the expectation of reduced stocks for the marketing year 2000-01, they were still down considerably on the record prices of 1994-96. In the maize sector, despite rallying in the second half of the year, world prices at the end of 2000 had done little more than return to their levels of the start of the year, having plummeted some 20% between May and July. Similarly, over the year world soya prices fluctuated around levels just slightly above those of the previous year, even though, as mentioned above, the depreciation of the euro against the dollar made Community grain and oilcake imports more expensive. World beef and veal prices were on an upward trend during 2000 as demand picked up, particularly in North America. Poultry prices, however, remained in the doldrums, depressed by a combination of increased supply and sluggish demand. In the global markets for milk products, cheese and butter prices rose slightly and those for skimmed milk powder steeply, following their sharp drop of recent years in the wake of the economic and financial crisis in Asia, Latin America and Russia.

7. The solid overall performance of the European Union on world agricultural markets in 2000 (with the exception of some sectors, such as beef, veal and grain oils) can largely be attributed to the improvement in international markets and the weak euro boosting the competitiveness of Community exports. In the first ten months of 2000, the value of Community agricultural exports was up 13.6% on the same period in 1999. Cereal exports in particular increased by some 7% in volume and 27% in value, with Community exports of wheat and barley competitive enough to be made without export refunds in the second half of the year. The value of milk product exports also surged ahead (by more than 22.6% overall), especially milk powder (up 84.7%) and cheese (up 19.8%). The same was true of sugar (up 22.7%), fruit (up 25.7%), vegetables (up 7.2%), olive oil (up 46.9%) and wine (up 7.2%). Pigmeat exports, which had reached record levels in 1999, remained relatively constant in 2000 (up 0.6% in volume in the first ten months of the year, compared with the same period the previous year) but leapt in value (up 24.3%). Exports of poultrymeat moved ahead slightly (up 4.2% in value), while those of beef and veal lost more than 20% in both volume and value.

8. On the whole, for most agricultural products covered by the intervention regime, intervention stocks fell considerably in 2000. This was especially true of cereals, with stock levels easing from a level of 14.9 million tonnes to 7.8 million tonnes in the eight months from the end of January 2000. While wheat and barley stocks were run down appreciably, stocks of rye, which did not dip below 3 million tonnes during the year, remained a cause for serious concern. Intervention stocks of milk powder practically disappeared in the first eight months of the year. Butter stocks, however, were mounting until May, after which they fell back slightly. Another development worthy of note was the big increase in rice stocks, which had breached the 700 thousand tonne mark by September 2000 as a result of mushrooming imports and internal production.

1.2. Output

9. Cereal production hit new highs in 2000 (over 211 million tonnes), breaking the record levels of 1998, due to increases in the area under cultivation and in yields. The area under cereals grew by some 3% in 2000, linked to the fall in the area under oilseeds, protein crops and non-fibre flax. The move from oilseeds/protein crops to cereals can be partly explained by the relatively low prices for the latter in the 1999/2000 marketing year, but also by the disruption caused to winter cereal sowing in the previous year by poor soil conditions in certain regions. Of the different cereal crops, the area under common wheat grew by 6%, that under maize by 4.5% and that under rye by 7%.

10. Cereal yields rose by 3% compared with 1999, reaching 5.7 t/ha on average, i.e. some 1% above the long-term trend. However, the pattern of development differed greatly from one Member State to another. For example, while yields leapt by over 30% in Spain and in Finland following 1999's disastrous results, they fell in Austria, Germany, Belgium and France as a result of less favourable weather than the previous year. The return to normal in Spain largely accounts for the big rises in average yields for durum wheat (17% up in the European Union as a whole) and barley (up 7%). Yields of common wheat rose slightly and those of maize fell somewhat.

11. Overall, cereal production was more than 11 million tonnes up on the previous year (i.e. some 6%). About half of this rise was accounted for by common wheat, with the other half being feed grains (in particular barley).

12. After 1999's record harvest, total oilseed production (rape, sunflower and soya) fell off by 15% in 2000 as a result of the smaller area under cultivation (8% down) and lower yields (7% down). Most of the overall drop in oilseeds production could be attributed to the fall in rape production (down 24%) as a result of the smaller cultivated area (down 13%) and lower yields (down 11%). Sunflower production, however, rose by 11%, driven by a big increase in yields in Spain following 1999's catastrophic drought-affected harvest. Overall the area under sunflowers remained the same. Soya production was 5% down on the previous year.

13. Protein crop output also fell in 2000 (by 15%), due to a smaller area under cultivation and lower yields, reaching its lowest level since 1995. In addition, non-fibre flax production fell by almost half from the previous year's level as the area under cultivation returned to normal following spectacular increases the previous year in the United Kingdom and Germany.

14. Following substantial growth in 1999, sugar production was estimated to have fallen by over 5% in 2000 as the area under beet declined steeply (down 7.3% on 1999) in anticipation of the cuts in production quotas and also as a result of less favourable world export markets. However, generally favourable climatic conditions for beet, at least up to the harvest period, ensured that sugar yields in 2000 were relatively high in spite of the smaller area planted. In several regions, however, harvesting was disrupted by heavy rainfall, leading to a somewhat lower sugar yield.

15. Early estimates (as of mid-January 2001) put olive oil production in 2000 at some 1.9 million tonnes, an increase of around 12% on the previous year.

16. Early estimates have production of both fruit (-2.5% on 1999) and vegetables (-2.0%) down in 2000. Potato output is estimated to have remained more or less stable compared with the previous year.

17. Following an exceptional harvest in 1999, up by some 20 million hectolitres on the previous year, wine production fell again in 2000 (down 8% approximately) to around 165 million hectolitres. Big falls were seen in Austria and Portugal (some 25% in each), Germany (around 13%), France (9%) and Italy (8%). Spanish wine production, on the other hand, was estimated to have risen by 7% following its decline the year before.

18. While beef and veal production was continuing to grow in 2000 before the new BSE crisis broke, and up slightly on the previous year, the collapse in consumption in the last months of the year - despite the measures taken to strengthen existing consumer protection arrangements - led to an estimated fall in slaughterings, and thus in production, of some 5% for the year as a whole. Similarly, while per-capita consumption of beef and veal seemed to have recovered completely from its post-1996 falls in the wake of the first BSE crisis, it was hit again at the end of the year, especially in those Member States in whose national herd BSE was detected for the first time.

19. Pigmeat production was estimated to have fallen by 2.5% following strong growth in recent years and the price falls of 1998 and 1999. However, the impetus given to white meat consumption by the BSE crisis had by the end of the year curtailed the overall fall in pigmeat production (-1.8% for the year).

20. The long upward trend in poultrymeat production was halted in 1999 due partly to lower export growth and partly to the impact on consumption of the dioxin crisis that hit Belgium in spring 1999. Fresh falls in output were forecast for 2000, in the wake of the previous year's falls. As with pigmeat, however, output fell less than initially anticipated (some 1.1% down for the year) due to the revival of poultrymeat consumption as a result of the BSE crisis.

21. After recovering in 1998 from falls the previous year, production in the sheepmeat and goatmeat sectors more or less stabilised in 1999 and 2000 at levels well down on those of the early 1990s.

22. While the Community dairy herd is still shrinking by around 1.5% a year, milk production for 2000 should be around the 122 million tonne mark, i.e. more or less unchanged from 1999, although that year's output was up one million tonnes on the previous year. Yields are still growing and generally offsetting the fall in the size of the herd. Deliveries to dairies were also flat or even slightly down on the previous year, although reference quantities were increased for a number of Member States under the Agenda 2000 package. However, the impact of these measures had probably been felt already in the 1999 deliveries.

23. After the increases posted the previous year, butter production is estimated to have turned down again in 2000 (by 1.2% according to initial estimates), in parallel with the fall in domestic consumption and despite the recovery of exports from the previous year's difficulties on the Russian market. Cheese production, however, rose by 2.3%, boosted both by rising domestic consumption and export growth. Production of skimmed milk powder fell off heavily in 2000 (-5%) following the previous year's rise.

1.3. Producer prices and market prices

24. According to the figures available at the end of December 2000, the index of farm-gate prices was estimated to have grown in 2000 by an average of 2.9% in nominal terms compared with the previous year, fuelled by a 7.7% increase in the price of animal products (compared with the previous year's fall), as against a 1.5% drop in crop prices. It should however be pointed out that these estimates probably do not take full account of the impact of the beef price collapse in the wake of the new BSE crisis. The steepest drops in crop prices were recorded by potatoes (down 19.5%), wine (down 5.3%), rice (down 4.3%) and fresh fruit (down 2.0%). Falls were also registered by cereals (down 1.5%), sugar beet (down 1.7%) and dried pulses (down 1.4%). This trend was bucked by fresh vegetable prices, which improved slightly (up 2.6%). As regards animal products, pigmeat prices (as already mentioned) leapt by 25.0% following their fall the previous year. Significant rises were also recorded for beef and veal (up 2.0%), mutton and lamb (up 5.1%), poultry (up 7.0%) and milk (up 2.6%). Egg prices also leapt upwards by 20.0%.

25. After accounting for inflation, the producer price index for the European Union as a whole was estimated to have risen by 0.6% on the previous year. The biggest rises were in Belgium (up 6.3%), Denmark (up 7.2%), Germany (up 7.6%) and the Netherlands (up 7.2%), i.e. those Member States in which the recovery of pigmeat prices from the previous year's falls had the greatest effect on overall prices. Farm-gate prices also rose slightly in Greece (up 1.0%), Ireland (up 1.3%) and Austria, while holding more or less steady in France in real terms. Real producer prices fell, however, in Spain (by 2.4%) Italy (1.6%), Luxembourg (3.5%), Portugal (1.1%), Finland (1.8%), Sweden (2.9%) and the United Kingdom (4.7%).

26. Having bottomed out at the beginning of the 1999/2000 marketing year, cereals prices made modest gains up to May 2000, as intervention stocks were wound down (from 18 million to some 9 million tonnes over the marketing year from start to finish) through a combination of increased exports and greater internal demand, in particular for feed grains. From June onwards, however, cereal prices in the Community slumped as prospects firmed for a record cereals harvest. The fall was, however, exacerbated by the entry into force on 1 July 2000 of the cuts (of some 7.5%) in intervention prices decided under Agenda 2000, although this downward pressure on prices was attenuated somewhat by an increase in assistance levels (from EUR 54.34/t to EUR 58.67/t).

27. The cuts in intervention prices were fully reflected in market prices. However, the picture varies appreciably from one Member State to the other and between different types of cereal. While in France, for example, prices for common wheat remained at relatively low levels just above the intervention price because of the poor quality of bread wheat, Italian and German market prices for this cereal recovered steadily to reach a level comfortably above the intervention price at the year end. Similarly, French barley prices surged ahead early in the marketing year on the back of a comparatively poor harvest of brewing barley, whereas increases in Spain and Germany were much more muted. Lastly, although still below 1999 levels, maize prices remained well above intervention prices in most producer Member States.

28. Olive oil prices remained relatively depressed throughout 2000, with Spanish and Greek extra-virgin even dipping below the trigger rate for private storage as the new harvest, higher than in the previous year, was brought in. In Italy, however, rates for both extra-virgin and lampante remained above this level.

29. Wine prices continued to fall from the levels of the previous year. At the beginning of January 2001, compared with the same period the previous year, market rates for red wine were down by 4% in Italy, 10% in France and 37% in Spain; white wine prices had fallen by 3% in Italy, 7% in France and 27% in Spain.

30. Butter prices remained relatively depressed (fluctuating between 90 and 93% of the intervention price) during the first part of the year. From June they picked up, however, finishing the year at a level close to the intervention price, having even exceeded this level during the autumn. Skimmed milk powder prices increased markedly in the first six months of the year as intervention stocks were gradually run down to zero by August 2000 by the sharp increase in demand, especially on world markets. Thereafter, they more or less stabilised at relatively high levels. Cheese prices were also higher than the previous year.

31. Before the new BSE crisis broke, prices on beef and veal markets had been relatively stable, at levels comfortably above previous years and - in the case of cows - even rising steadily. From October onwards, however - following the discovery of fresh cases of BSE, in particular in France, Belgium, Germany and Italy - the beef and veal market collapsed abruptly in the face of tumbling domestic consumption. For example, prices for adult bovines fell by some 14% in November and December 2000, young bovines by 14% and cows by over 20% (in some Member States ending the year at levels close to the "safety net" value - between 60 and 70% of the intervention price).

32. The poultry market made a strong recovery in 2000, after its collapse the previous year when consumers abandoned poultry in reaction to the contamination of poultry feed by dioxin. Near the year end, moreover, prices were given a fillip by the BSE crisis and the resultant increase in demand for white meats. Chicken prices, in particular, rose by an average of more than 8% in the last two months of the year.

33. Driven by falling output and rising demand, pigmeat prices improved markedly throughout 2000, following the previous year's falls. At the end of 2000, prices were up some 30% on those of twelve months earlier.

34. The markets for sheep- and goatmeat products remained buoyant throughout 2000, well in excess of the previous year when they had been depressed by rising production in the United Kingdom and Ireland. The recovery was particularly strong after the summer, with prices rising some 25% between August and December.

1.4. Input prices

35. In 2000, the index of purchase prices for staple goods and services in agriculture was up by an average of 5.8% in nominal terms on the previous year. The biggest rises were in energy (up 25.4%, mainly due to soaring oil prices), livestock (up 13.5%), fertilisers (up 6.5%) and feedingstuffs (up 3.4%).

36. When account is taken of inflation, the real increase in the index of purchase prices for staple goods and services in agriculture since 1999 was 3.7% for the European Union as a whole. Above-average rises were recorded in Belgium (up 5.6%), Germany (up 7.9%), Finland (up 4.1%), Sweden (up 4.1%) and the Netherlands (up 3.9%). The input price index was also up in Greece (by 3.2%), Spain (2.0%), France (3.3%), Austria (2.6%), Portugal (1.9%) and the United Kingdom (2.2%), and more or less stable in Denmark and Italy.

1.5. Farm income [1]

[1] A more detailed analysis of trends in farm incomes in 2000 can be found in Eurostat's booklet Statistics in Focus - Theme 5 (22/2000).

37. Eurostat's initial estimates, based on information received by Member States as at mid-December 2000 and using the new agricultural accounting methods, put average farm income [2] across the European Union as a whole 1.3% up on the previous year. Income was up in Belgium (by 12.2%), Denmark (24.1%), Germany (6.9%), Spain (4.6%), France (1.3%), Ireland (6.5%), the Netherlands (3.7%), Finland (22.0%) and Sweden (4.9%). Italy (down 4.3%), Austria (down 4.8%), Portugal (down 7.5%) and the United Kingdom (down 10.8%), on the other hand, all recorded contractions in farm income. Income levels in Greece and in Luxembourg remained stable.

[2] Measured by net value added at factor cost per unit of work.

Changes in nominal farm-gate prices in 2000* and 1999

(%)

>TABLE POSITION>

* 2000 forecasts

Source: Eurostat

Changes in nominal purchase prices for agricultural inputs in 2000* and 1999

(%)

>TABLE POSITION>

* 2000 forecasts

Source: Eurostat

Real producer price indices

(1990=100)

>TABLE POSITION>

* 2000 forecasts

Source: Eurostat

Indices of real purchase prices for staple goods and services in agriculture

(1990=100)

>TABLE POSITION>

* 2000 forecasts

Source: Eurostat

1.6. Farm accountancy data network (FADN)

1.6.1. Farm incomes

38. The FADN is used to calculate output, costs and incomes of commercial farms in the EU from observed data collected in a survey of harmonised farm accounts (see Chapter VII, Table 3.2.1). The survey provides valuable information on the way in which farm incomes vary according to type of farming and location, information which is not apparent from the global averages in the results for the agricultural sector as a whole. This section features information by type of farming and by country. For an explanation of the various types of farming, see Statistical annex, Table 3.2.2.

39. At the time of going to press, some results for 1998 were not yet available and those available were still provisional for some countries. More detailed results for the different types of farming and different levels of economic size are given in the Statistical annex, Tables 3.2.3 and 3.2.4.

1.6.2. Income by type of farming

40. The considerable differences in average income between Member States are inherent in the structure of their agriculture (Tables 1, 2 and 3).

41. The Member States with the highest average incomes are, generally speaking, those with a sizeable number of large-sized farms specialising in arable crops or involved in the most competitive sectors of production (pigs and/or poultry, horticulture and dairy). In the southern Member States, where large numbers of small farms are engaged in "mixed" farming (crop and livestock production) or "other permanent crops" (mixes of different cropping enterprises), incomes tend to be below the EU average.

42. Table 3 shows the wide range of incomes among Member States for each type of farming. Particularly significant are the negative income figures for several Member States for 1998 in the pigs/poultry and mixed type of farms. This mainly reflects the severity of the crisis in the pig sector in that year.

43. Table 4 shows the contribution of the balance of subsidies and taxes to family farm incomes. For the Community of Fifteen in 1997 the proportion of subsidies, net of taxes, to family farm income was 47% but there were considerable differences among Member States and between types of farming.

44. Luxembourg, Finland, Sweden and the United Kingdom had an average family farm income that was lower than the balance of subsidies and taxes. This means that revenue from the market was not enough to cover production costs. On the other hand, the share of income represented by subsidies was lowest in the Netherlands, Italy, Belgium, Greece and Spain.

45. There are also considerable differences with regard to types of farming. Net subsidies in the drystock, mixed and arable types of farming were the highest in proportion to income. The horticulture and vineyard sectors were by far the least subsidised.

>TABLE POSITION>

>TABLE POSITION>

>TABLE POSITION>

>TABLE POSITION>

2. Policy developments and legislative initiatives in 2000

2.1. Quality policy

46. It is increasingly clear that there is growing concern about food quality among consumers, a concern which producers cannot ignore. Now that food safety - a basic requirement - is assured, the quality demanded by consumers must also be expressed via a wide choice of food products with objective and guaranteed characteristics. Moreover the long-lasting nature of this choice underpins the potential for diversifying production, something which is particularly important for the least-favoured rural areas of the Union. It is against this background that the Community has proceeded with the development of a policy of identification based on products quality guarantee symbols. The aim under that policy is to provide guarantees as to both the origin of the products and the way in which they are produced.

47. The Commission has, pursuant to Council Regulation (EEC) No 2081/92 [3], made additions to the list of protected designations of origin (PDOs) and protected geographical indications (PGIs), the combined total of which now stands at 544.

[3] OJ L 208, 24.7.1992, p. 1.

48. In terms both of the number of Member States and the types of products concerned, the new product registrations reflect growing interest in the production of foodstuffs which consumers can associate with a particular production method and geographical origin.

49. A further two designations have been registered under Regulation (EEC) No 2082/92 on certificates of specific character and introducing the "guaranteed traditional speciality" GTS indication [4]. On the whole, though, very little use has been made of the Regulation, with a total of only nine GTSs registered to date. Following a report from the Commission to the Council on the detailed implementing rules concerned, a Regulation is being drafted which, it is hoped, will resolve the difficulties that have come to light. The aim is, in particular, to specify legitimate grounds for objection.

[4] OJ L 208, 24.7.1992, p. 9.

50. At multilateral level, work is under way on clarifying certain aspects of Regulation (EEC) No 2081/92 as regards the TRIPS (Trade-Related Aspects of Intellectual Property Rights) Agreement. Moreover the European Union is seeking progress via proposals for a system of notification of registered designations of origin. This is a priority objective, which will help Community producers entitled to the use of a geographical indication to protect themselves more effectively and find a niche on the international market.

List of PDOs, PGIs and GTSs registered in 2000

>TABLE POSITION>

2.2. Organic farming

51. On 19 May and 25 September 2000 the Commission adopted Regulation (EC) No 1073/2000 [5] and Regulation (EC) No 2020/2000 [6] respectively, the aim being to update technical Annexes II and VI to Regulation (EEC) No 2092/91 [7].

[5] OJ L 119, 20.5.2000, p. 27.

[6] OJ L 241, 26.9.2000, p. 39.

[7] OJ L 198, 22.7.1991, p. 1.

52. Following the adoption of Regulation (EC) No 1804/1999 [8] bringing organic livestock production within the scope of Regulation (EEC) No 2092/91, the Commission launched a work programme aimed at clarifying certain issues relating to organic livestock production which were raised by the Council at the time of the adoption of Regulation (EC) No 1804/1999. The main issues currently covered by the programme are as follows:

[8] OJ L 222, 24.8.1999, p. 1.

- amendment of Annex III concerning minimum inspection requirements and precautionary measures,

- development of a regulation establishing labelling and inspection requirements for animal feedingstuffs,

- additions to sections A and B of Annex VI as regards the non-agricultural ingredients and processing aids used in processed livestock products,

- examination of the conditions governing access to pasturage,

- implementation measures concerning the prohibition of the use of GMOs (genetically modified organisms) and GMO derivatives.

53. The assessment of equivalency according to Article 11(1) of Regulation 2092/91 is ongoing for several third countries, in particular with regard to the extension of the equivalency to livestock production. On 24 July and 31 October 2000 the Commission adopted Regulations (EC) Nos 1616/2000 [9] and 2426/2000 [10] extending the equivalency recognition to livestock production for Argentina and Switzerland and adding a new inspection body for Argentina.

[9] OJ L 185, 25.7.2000, p. 62.

[10] OJ L 279, 1.11.2000, p. 19.

2.3. Promotional measures

54. In the context of a reorientation of the policy on the promotion of agricultural products, the Council adopted a Regulation on measures to provide information on, and to promote, agricultural products in third countries [11]. Under the Regulation, support may be given to information and promotional measures for agricultural products in any third country. The recently adopted Commission Regulation No 2879/2000 of 28 December 2000 [12] lays down the detailed implementing rules applicable to the promotional scheme in third countries.

[11] Regulation (EC) No 2702/1999 (OJ L 327 of 14.12.1999, p. 7).

[12] OJ L 333, 29.12.2000, p. 63.

55. As part of the programmes run directly by the Commission, 1999 saw the preparation of a new three-year campaign for olive oil based on the results of the evaluation of the preceding campaign. A new two-year campaign for fibre flax was launched in September. The programmes run indirectly by the Commission comprised a continuation of the promotional campaigns for milk and milk products, quality beef, potatoes, citrus fruit and grape juice. The assessment reports were encouraging for these groups of products too.

56. In addition, information measures were drawn up for the new labelling system for beef and veal (EUR 7 million).

57. The final set of promotion programmes for flowers and live plants (EUR 15 million) was launched in 14 Member States.

58. The information campaign on the logos identifying quality agricultural products from the outermost EU regions has now ended.

59. Budget spending by group of products was as follows (EUR million):

// Payments in 1999

Programmes run directly by the Commission

(Olive oil, Fibre flax, Quality agricultural products from the outermost EU regions)

Measures run indirectly

(Grape juice, Apples/citrus fruit, Table olives, Quality beef/veal, Milk and milk products, Flowers and live plants)

Total // 21.1

47.4

68.5

60. On 8 September 2000, moreover, the Commission adopted a proposal for a Council Regulation aimed at harmonising information and promotion measures for agricultural products on the internal market [13]. This was adopted by the Council as Regulation (EC) No 2826/2000 [14] of 19 December 2000.

[13] COM(2000) 538 final.

[14] OJ L 328, 23.12.2000, p. 2.

2.4. Simplification of agricultural legislation

2.4.1. Introduction

61. Over the past few years the Commission has undertaken a number of major concrete initiatives aimed at simplifying agricultural legislation. The simplification work in 2000 focused on making agricultural legislation as clear, transparent and easily accessible as possible and reducing the administrative workload that the common agricultural policy (CAP) imposes on farmers and administrative authorities.

2.4.2. Transparency and accessibility of agricultural legislation

2.4.2.1. Consolidation

62. A project to consolidate agricultural legislation in all official languages of the EU and make it available on the internet for the general public was launched at the beginning of 1999. Modifications to agricultural legal acts are integrated into the basic texts so that a single and updated version of the text can be consulted. Although not legally binding, the consolidated versions substantially facilitate the consultation of the rules in force.

63. By the end of 2000 around 500 consolidated agricultural acts had already been made available on the EUR-LEX website.

2.4.2.2. Recasting of the regulations relating to import and export licences

64. The horizontal regulations on import and export licences have been amended on many occasions, in some cases substantially. In the interests of clarity and administrative efficiency these rules have been consolidated to form a single text: Commission Regulation (EC) No 1291/2000 [15]. The new Regulation entails substantial simplification, e.g. Member States may introduce a simplified procedure avoiding the physical transmission of licences, and the amount below which no licence is required has been raised from EUR 5 to EUR 60. These changes will substantially ease the administrative burden both on trade and on the national administrations concerned.

[15] OJ L 152, 24.6.2000, p. 1.

2.4.2.3. Export destination codes

65. A simplified system for indicating destinations when fixing export refunds has been applied since September 2000. This new unified system, which replaces the different and complex systems used in the various sectors to date, will reduce the risk of misunderstanding and error. Furthermore, it will facilitate electronic exchange of data and information between the Commission and Member States.

2.4.2.4. Paying agencies' proposals

66. Over the last few years, the national paying agencies in the Member States have submitted for consideration 246 proposals for legislative and/or administrative simplification. The Commission has now reviewed these proposals [16], and a significant number of them have been partially or fully adopted. Some of the proposals are still under consideration and may lead to further simplification in the future.

[16] SEC(2000) 1775.

2.4.2.5. New guidelines for state aids

67. The new Community guidelines for state aids in the agricultural sector adopted in February 2000 replace and consolidate a great variety of other frameworks, guidelines and Commission working documents and practices. This review results in greater transparency and facilitates the task of the competent authorities.

2.4.3. Simplification measures in the market sectors

68. Reforms adopted or proposed in 2000 have brought or will bring about simplification of agricultural legislation in a number of market sectors.

2.4.3.1. Flax and hemp

69. The reform of the fibre flax and hemp sector, which was adopted in July 2000, integrates these crops into the arable system as regards direct aid to producers. In addition, the reform has reduced the number of regulations.

2.4.3.2. Meat

70. A number of simplification measures have been adopted in the meat sector in 2000, for example:

- slaughter premiums in the beef sector can, under certain conditions, be paid automatically to the farmer concerned,

- Member States may allow farmers to opt for simplified application of the extensification premium,

- the export refund nomenclature for processed beef has been significantly simplified, with 47 highly technical and complex product lines being reduced to eight,

- in line with the approach followed by other sectors under Agenda 2000, the basic prices for pigmeat and sheepmeat will, instead of being fixed annually, be set - without specific time limits - under the respective basic regulations,

- the procedures for "immediate" export licences for pigmeat, eggs and poultrymeat have been simplified and aligned with the licence system in the beef sector.

2.4.3.3. Milk and milk products

71. Following the adoption of a new basic Regulation in the milk sector, a substantial number of consequential amendments to Commission implementing regulations were required. It was decided that, instead of amending existing regulations, the opportunity should be used to consolidate large sections of the legislation in the dairy sector. This consolidation served to reduce the number of regulations, simplify administrative procedures and harmonise administrative and control procedures between different schemes.

2.4.3.4. Fruit and vegetables

72. The proposal to amend the common organisation of the market in fruit and vegetables, including processed fruit and vegetables, aims to rationalise and simplify the arrangements and adapt the relevant production thresholds. It will simplify and stabilise the support scheme for producer organisations and improve the management of export refunds for fresh fruit and vegetables.

2.4.3.5. Rice

73. Under the Commission proposal of June 2000, rice will be integrated into the arable crop system. Major advantages in terms of simplification should result from this integration.

2.4.4. Small farmers' scheme

74. In December 2000 the Commission adopted a proposal for a simplified scheme for paying small amounts of direct aid to farmers [17]. Under the proposal, farmers entitled to EUR 1 000 or less in direct aid may submit a single application and receive one global amount per year instead of several small payments.

[17] COM(2000) 841.

2.5. State aids

2.5.1. A new legal framework

75. On 1 January 2000 the Commission began applying the "Community Guidelines for State aid in the agriculture sector" [18], as adopted on 24 November 1999, to new state aids introduced after that date. Member States have until the end of 2000 to adjust their existing aid schemes and thereby comply with the new rules.

[18] OJ C 28, 1.2.2000, p. 2; OJ C 232, 12.8.2000, p. 19.

76. The new guidelines consolidate and simplify the rules applied by the Commission in the past. In addition, a number of important changes have been made to ensure that the European Union rules for State aids are consistent with the new rural development policy introduced as part of the "Agenda 2000 reforms".

77. The starting point for the new guidelines is that any state aid for the agriculture sector must be compatible with the EU's common agricultural policy (CAP) and with the EU's international obligations, in particular the WTO Agreement on Agriculture. As the Member States decided to rule out the possibility of individual Member States distorting the delicately balanced EU support for product prices or rural development schemes, any state aid which interferes with the mechanisms of the common market organisations is prohibited.

78. In essence, the following aid granted by Member States can, subject to certain conditions, be approved by the EU under the new guidelines:

- investment aid for farms can normally be approved at up to 40% of eligible expenditure (50% in less-favoured areas); higher rates of aid may be allowed for investments linked to the conservation of traditional landscapes, for the relocation of farm buildings in the public interest or for the improvement of the environment, animal welfare or hygiene,

- aid for investment in the processing and marketing of agricultural products can normally be permitted at rates of up to 40%, or 50% in Objective 1 areas, provided that it can be shown that normal market outlets exist for the products concerned,

- aid granted in return for agri-environmental undertakings given by farmers and other environmental aids,

- aid to compensate for handicaps in less-favoured areas,

- aid to help the installation of young farmers,

- aid for early retirement, the cessation of farming, or for closing down production, processing and marketing capacity,

- aid for the establishment of producer groups,

- aid to compensate for damage caused to agricultural production or the means of production caused by natural disasters or exceptional occurrences, adverse weather conditions or outbreaks of animal or plant disease, and aid granted towards insurance cover against such risks,

- aid to encourage the production and marketing of quality agricultural products, the provision of technical support for producers and the improvement of the genetic quality of livestock,

- aid to grant specific support for the outermost regions and the Aegean islands.

79. In addition to these categories, which are specifically covered in the guidelines, aid may also be granted in accordance with other Community texts for research and development, for short-term operating loans, for rescue and restructuring farms in difficulty, and for employment support.

80. Furthermore, consideration is being given by the Commission to a new promotion and advertising framework for agricultural products. Accordingly, the new guidelines simply refer to the existing guidelines, which were published in 1987.

2.5.2. Overview of the year

81. In 2000 the Commission received 248 notifications of draft state aid measures to be granted in the agricultural and agro-industrial sector. The Commission also began a scrutiny of 26 aid measures which had not been notified beforehand in accordance with Article 88(3) of the EC Treaty. No review of existing aid measures pursuant to Article 88(1) of the EC Treaty began or was concluded. The Commission decided to raise no objection against a total of 183 measures. Several of these were approved after the Member States concerned amended or undertook to amend them in order to bring them into line with Community rules on state aid. The Commission initiated the procedure provided for in Article 88(2) of the EC Treaty in respect of seven cases in which the measures concerned raised serious doubts as to compatibility with the common market. The Commission brought to a close the procedure provided for in Article 88(2) of the EC Treaty in respect of 13 cases, taking a final negative decision in seven of them. In all the cases in which a negative decision was taken and state aids had already been granted by the Member State concerned, the Commission requested recovery of the aids paid.

82. The following overview includes a selection of cases which raise interesting issues of state aids policy in the agricultural and agro-industrial sector. For the sake of clarity, the cases have been classified by topic and sector.

2.5.3. Exceptional occurrences and natural disasters

2.5.3.1. Dioxin - (B)

83. State aid for "exceptional occurrences" covered by Article 87(2)(b) of the EC Treaty: in 2000 the Commission authorised, as in the previous year, an aid package for producers and undertakings affected by the crisis resulting from dioxin contamination of feedingstuffs. The aid package included an allowance designed to offset the economic harm suffered by agricultural producers as a result of the crisis [19]. The aid applies to all livestock products but excludes the value of destroyed animals and products already covered by other national provisions authorised by the Commission [20]. It is in the form of a single payment and is arrived at only on the basis of flat-rate amounts derived from macroeconomic calculations, with payments taking place solely per unit marketed or per means of production. This avoids the risk of cumulation with other aids authorised in the past, in particular allowances for the destruction of animals or products of animal origin that are unfit for consumption or marketing. The Commission took the view that a link had clearly been demonstrated between the reduction in turnover and the exceptional occurrence resulting from the dioxin crisis. The reduced turnover was allegedly attributable in particular to losses of market share and to a sharp drop in consumption brought about by public anxiety, by chaotic management of the crisis and by special measures which prevented the products concerned from being marketed normally.

[19] Case No N 770/1999. (Where no specific reference to the publication of a decision in the OJ is made in this text, the decision has not yet been published. The authentic texts of the decisions approving aids can generally be found at http://europa.eu.int/comm/sg/sgb/state_aids).

[20] Cases Nos NN 87/1999, NN 88/1999, NN 89/1999, N 380/1999 and N 386/1999.

2.5.3.2. Recovery of the French forestry sector - (F)

84. Aid to make good the damage caused by natural disasters within the meaning of Article 87(2)(b) of the Treaty: the Commission authorised a scheme designed to help the French forestry sector recover from severe damage caused by bad weather towards the end of December 1999. The scheme, with a total budget of about EUR 3 billion for the various types of aid [21], included urgent measures such as aid for reopening forest roads and tracks, building forest tracks and damp-timber storage areas, preparing temporary storage sites and financing timber removal costs; timber storage aid; and aid for treating windthrow timber, repairing damaged forests and deducting storm-related costs from the flat-rate forestry income of the owners whose forests were damaged by the storms. Also covered by the plan were incentives such as: aid for timber transportation; investment aid, in particular for the purchase and rapid depreciation of forestry equipment; training and employment aid; and aid for organisational and technical monitoring. The Commission felt that, although outwardly different, the measures provided for in the plan were part of a whole and had a common objective - the recovery of an entire sector following a natural disaster - and should therefore be regarded as measures intended to make good damage caused by natural disasters as referred to in the Treaty.

[21] Case No N 92/2000.

85. Also in the forestry sector but not in relation to the damage caused by storms in December 1999, the Commission authorised aid to ONF (Office national des forêts) [22] in a case where there was a potential problem of central government resources being used to support the competitive activities of a public agency. ONF is a national public body whose activities are of a twofold nature in so far as, on the one hand, it carries out an exclusive public mandate and, on the other, it is engaged in a commercial activity in competition with other market operators. The public activity consists in managing, on behalf of their owners, forests subject to the French forestry regime. ONF receives a central government contribution in the form of compensatory payments designed to cover its management costs. Further public, or even private, funding is available for general-interest operations of the State carried out by ONF. Such activities may involve in particular protecting and monitoring forests, preventing fires, combating erosion and avalanches, etc. The Commission concluded that they constituted activities pursued in the general interest and that the transfer of funds should be seen as taking place from one level of the state apparatus to another. Moreover, since some public-service activities are carried on throughout the State, they should be regarded as measures which do not favour certain undertakings or the production of certain goods and do not, therefore, fulfil all the criteria of Article 87(1) of the Treaty. With regard to its commercial activities, ONF may conclude agreements with private or public bodies with a view to carrying out management operations, studies, surveys and works and to protecting, improving and developing forestry resources. For this type of activity, the Commission did not detect any public aid element in the form of a cross-subsidising of these competitive activities; the prices charged by ONF are not lower than those of its competitors and at all events the compensatory payments made by the State do not even cover all "public" ONF expenditure, which in practice would rule out any cross-subsidising.

[22] Case No NN 96/95.

2.5.4. Privatisation and restructuring

2.5.4.1. Aid for land purchase - (D)

86. In 1999 the Commission communicated to Germany a final negative decision on the aid granted by the German government under the "Entschädigungs- und Ausgleichsleistungsgesetz" Law (EALG) [23]. The Law provides for a scheme for the purchase of land at reduced prices in former Eastern Germany which amounted to state aid to some beneficiaries.

[23] Opening of the procedure in Case No C 17/98, OJ C 215, 10.7.1998, p. 7; final negative decision adopted on 20.1.1999, OJ L 107, 24.4.1999, p. 21.

87. The aid rate granted to certain beneficiaries appeared too high in relation to the rates that the Commission could normally accept for the purchase of farmland. In addition, the aid in question appeared to be discriminatory and thus infringe Articles 12, 34(3) and 43 of the EC Treaty.

88. In the course of 1999 an amended version of the land purchase programme was notified to the Commission and approved by letter of 19 January 2000 [24]. The problems which had led to a partially negative decision in 1999 have been resolved:

[24] Case No N 506/1999.

- in its decision of 20 January 1999 regarding the erstwhile EALG the Commission considered that discrimination existed in the requirement of residency on a given date for eligibility under the programme, a requirement which in practice this requirement could be met by (East) Germans only. All such dates have been deleted from the new programme;

- the Commission further objected to the aid intensity for the purchase of agricultural land outside LFAs. The aid rate has now been brought fully into line with the rates the Commission usually accepts. Any aid granted in excess under the erstwhile EALG will be recovered, with interest, as required by the Commission decision of 20 January 1999.

89. In the light of the assurances provided by the German authorities, the Commission has established that there is sufficient land to remove any potential discrimination without rescinding contracts already concluded under the erstwhile EALG. In so far as residual elements in the new scheme would, all other criteria being equal, give priority to East Germans, the Commission regards such preference as falling within the objective of restructuring agriculture in the new Länder while at the same time ensuring that potential purchasers - or their families - who had lived and worked in the former GDR for several decades may participate in the land purchases, an objective which has been accepted as legitimate in the Commission decision of 20 January 1999 and which has not been challenged.

90. The Commission therefore considers that the new scheme proposed by the German government will facilitate the development of economic activities in the sector. The measure therefore falls within the scope of Article 87(3)(c) of the Treaty.

2.5.4.2. Restructuring and privatisation plans of EPAC and Silopor [25] - (P)

[25] Case No C 51/98 (ex Nos N 852/97 and N 6/98).

91. In 1998 the Commission opened the procedure pursuant to Article 88(2) of the EC Treaty in relation to the restructuring and privatisation plans of both publicly owned companies: the cereal trading company EPAC and the port handling company Silopor [26]. In the meantime, Portugal decided to liquidate both companies, but has so far failed to present an official position on this to the Commission.

[26] OJ C 363, 25.11.1998, p. 4.

92. On 27 June 2000 the European Court of Justice issued a judgement concerning Portugal's failure to comply with the 1997 Commission Decision to the effect that the guarantee provided to EPAC constituted illegal and incompatible state aid [27]. In essence, the Court confirmed the Commission's position as to the aid character and incompatibility of the guarantee provided to EPAC by the State.

[27] Case No C 404/97.

2.5.4.3. Centrale del Latte di Roma [28] - (I)

[28] Case No C 28/98 (ex NN 185/97).

93. The Commission also decided to close, by the adoption of a partially negative decision [29], the procedure on aids granted to Centrale del Latte di Roma. The Commission took the view that the operating losses systematically written off by the municipality of Rome in 1992 and 1997 were operating aids that could not be regarded as constituting a public service, but that there was no state aid to the Lazio milk producers or to the buyer in the privatisation procedure. As the transfer of the factory can be considered an asset deal, recuperation of the aids will concern the erstwhile Centrale del Latte (in liquidation).

[29] OJ L 265, 19.10.2000, p. 15.

2.5.5. Fiscal measures

2.5.5.1. CO2 tax exemption for the glasshouse horticulture sector [30] - (NL)

[30] Case No N 589/B/98.

94. On 5 January 2000 the Commission approved partial relief from a Dutch CO2 tax for the glasshouse horticulture sector.

95. The original version of the Law on environmental taxes "Wet belastingen op milieugrondslag" was approved by the Commission on 3 December 1992. Various amendments were made to this Law, among them the introduction of a regulatory energy tax, the purpose of which is to contribute to reducing CO2 emissions and to promote energy conservation. The Dutch government has amended the energy tax rates applicable with effect from 1 January 1999. The rates have been increased and the tax brackets adjusted. The revenues obtained from this increase will be clawed back to households and businesses in the form of a reduction in wage and income tax. The Dutch government expects this heavier taxation of energy consumption to have a positive effect on CO2 emissions.

96. The regulatory energy tax also applied a zero rate on natural gas used in glasshouse cultivation. The Dutch authorities requested an extension of the zero rate on such natural gas for the glasshouse horticulture sector for at least another year. If a glasshouse has no natural gas connection, a zero rate applies to middle oil, gas oil and liquefied petroleum gas.

97. Following contacts with the Commission services, the Dutch authorities amended the measure: the zero rate would apply only in 1999. In 2000 and 2001 the sector would be taxed on a (gradually increasing) basis similar to other energy-intensive sectors. The Dutch authorities undertook to re-notify the scheme in 2002.

98. The measure falls within the scope of the Community guidelines on State aid for environmental protection because its objective is precisely environmental protection. It is intended to reduce energy consumption through an increase in energy taxation. The tax exemption would appear to be an operating aid. The Community guidelines apply strict conditions on operating aid awarded in relation to environmental problems:

- the aid should be temporary and, in principle, degressive: the Dutch authorities have given a precise date by which the zero rate will end and gradually be brought within the general framework. The measure is degressive since the zero rate is applicable in 1999 only, with taxation increasing gradually thereafter;

- the aid should be necessary to offset a competitive disadvantage: the Commission has taken account of the fact that the glasshouse horticulture sector has below average relative labour costs. Therefore, these undertakings will derive very limited benefits from the reductions in labour taxes. The previous preferential pricing system for natural gas to the glasshouse horticulture sector ceased to exist at the end of 1998;

- a counterpart must be provided by the beneficiaries: a covenant has been concluded with the sector under which targets are also set for renewable energy use: 4% of the energy use in 2010 must consist of renewable energy. Energy efficiency must improve by 65% compared with 1980. A further counterpart can be seen in the increasing total tax burden. Indeed, by providing for gradually increasing taxation of gas (and full taxation of electricity use), the new measure gives a clear impetus to the glasshouse horticulture sector for a rational use of energy and a reduction of CO2 emissions.

99. The Commission therefore concluded that the measure met the requirements applicable under the environmental guidelines, and approved it.

2.5.5.2. Exemption from mineral levies [31] - (NL)

[31] Case No C 14/2000, OJ C 190, 8.7.2000, p. 4.

100. The Dutch authorities intend to introduce certain exemptions from the mineral levies introduced under the manure law. This provides for an obligatory bookkeeping system for minerals on each individual holding and establishes maximum phosphate and nitrogen emissions into the environment for each holding. If emissions exceed these maximum quantities, taxes will become payable in respect of the quantities concerned. The farmer can choose how to reduce mineral emissions to the maximum quantities allowed. Prohibitive mineral levies are levied only if the total amount of phosphate and nitrogen produced on a farm, less the total amount of minerals removed in a calendar year, exceeds the norms for permissible releases of phosphate and nitrogen into the environment (the so-called "loss norms"). If an undertaking takes effective measures, e.g. the removal of manure that may not be spread on the land, it will not have to pay any levies.

101. Under the proposed measure, small undertakings (so-called "hobby-undertakings") and garden centres are fully exempt from the mineral levies provided for in Chapter IV of the manure law. Horticultural farms growing crops in glasshouses or on substrate are partially exempt.

102. Point 23 of the Commission notice on the application of the state aid rules to measures relating to direct business taxation [32] provides that the differential nature of fiscal measures does not necessarily mean that they must be regarded as state aid. This is the case with measures whose economic rationale makes them necessary for the functioning and effectiveness of the tax system. It is up to the Member State, however, to provide such justification.

[32] OJ C 384 of 10.12.1998, p. 3.

103. At the present stage in the procedure, the Commission considers that the Dutch authorities have not shown that the various tax exemptions are justified by the nature and economy of the mineral levy system.

104. In the absence of such justification, the exemptions must be regarded as constituting state aid since they would appear to meet all the conditions mentioned at points 9 to 12 of the Commission notice on the application of the state aid rules to measures relating to direct business taxation, and must therefore be regarded as operating aid. The Commission has therefore decided to open the procedure against the proposed measures.

105. The Commission also has doubts regarding the environmental impact of the proposed exemptions and compatibility with the nitrates Directive. It has issued a letter of formal notice [33], to which the Netherlands has sent a reply. The latter is currently being examined by the Commission.

[33] Letter of 29.9.1998.

2.5.6. Operating aids: Greek cooperatives - (EL)

106. In 2000, by virtue of the general principle whereby Member States are prohibited from granting operating aid in the agriculture sector, the Commission adopted a final negative decision on two illegal Greek national measures writing off and consolidating loans for a significant number of agricultural cooperatives (116 for each measure) [34]. The debts are accounted for mainly by the operational losses of the holdings, which are caused by intervention from the Greek State in the production and marketing of the products concerned (price-fixing, storage, intervention and export). Other debts relate to investments and natural disasters. These measures are of the same nature as the 1997 Law - cleared by the Council in December 1998 - on a EUR 450 million debt write-off for agricultural cooperatives.

[34] Cases No C 78/97 and No C 82/97 (ex NN 33/96 and NN 168/97).

107. The measures currently under scrutiny were taken in application of two laws adopted in 1992 and 1994. The Commission decision was taken following a complaint in relation to illegal and incompatible state aids received by the AGNO dairy cooperative. In the final negative decision, the Commission also issued an injunction to Greece to supply all relevant information in order to launch a state aid investigation into the activities of the Agricultural Bank of Greece.

2.5.7. RIBS: State aid granted under market conditions - (I)

108. In 1999 and 2000 Italy notified three projects supported by Itainvest, a public financing company. In essence, aid is granted by the company in the form of the acquisition of a holding in the beneficiary company's capital in accordance with the principle of a private investor operating under normal market economy conditions, as defined in the document "Application of Articles 92 and 93 of the EC Treaty to public authorities' holdings" [35]. The capital injection is reimbursed after a number of years at a rate of interest higher than the reference rate used by the Commission, and with guarantees enabling the financing company to take control of the recipient company. To date, two of the projects have been approved [36]. The third is still under scrutiny. Concomitantly with this, Italy notified five aid projects funded by the public financing company RIBS. It withdrew four of them when the Commission expressed doubts as to whether the assistance was being provided under market conditions. In 2000 Itainvest and RIBS were merged to form a new public financing company called Sviluppo Italia. Just as it did in the case of RIBS, Italy submitted an outline of the activities of the new financing company, an outline which is under scrutiny by the Commission.

[35] Bulletin of the European Communities 9-1984.

[36] Cases Nos N 652/1999 and N 164/2000.

2.5.8. Pigmeat sector

2.5.8.1. Aid for pigmeat production - Stabiporc - (F)

109. The Commission adopted a partly negative final decision on a three-stranded French scheme to assist pigmeat production [37] in respect of which it had initiated the scrutiny procedure provided for in Article 88(2) of the Treaty [38]. The French authorities wished first of all to reactivate the system of refundable advances of Stabiporc, the pigmeat regulatory fund. Under the system, producer groups receive fully refundable cash advances to enable them to adjust the price of fattening pigs belonging to producers who are members of the scheme and hence to even out pigfarmers' incomes, affected as they were by crises in pigmeat production. The Commission concluded that reactivating Stabiporc did not constitute state aid since the intervention of the State was limited to granting a loan at the market interest rate. Moreover, should the capital and interest on the loan not be paid or be paid late, the public bodies involved would still seek to claim the sums due, plus interest, from the groups concerned. The Commission did, however, conclude that the other two strands under scrutiny were incompatible with the Treaty. They concerned in particular the possibility of staggering the payment of social security contributions in the case of farms experiencing financial difficulties, and relieving farmers from part of the burden of interest payments on bank loans intended to finance initial investment in pigmeat production. The negative decision was based on the fact that not all the requirements laid down in the Community guidelines on state aid for rescuing and restructuring firms in difficulty had been satisfied: there was insufficient evidence that the situation was a "difficult" one; there was no viability plan for the firms concerned and respect for the principle that the rescue should be a one-off operation could not, therefore, be guaranteed.

[37] Case No C 74/98.

[38] Decision published in OJ C 61 of 3.3.1999, p. 7.

2.5.8.2. Pig assembly centres [39] - (NL)

[39] Case No C 80/98; opening of proceedings published in OJ C 108, 17.4.1999, p. 5.

110. All pig assembly centres in the Netherlands have been closed since the outbreak of classical swine fever. Every operating permit was revoked. The undertakings cannot reopen unless they apply for a new permit, which can be obtained only if the centres meet new hygiene requirements, regarded as necessary to avoid the spread of classical swine fever. Undertakings that do not want or are not able to meet the new hygiene requirements - and therefore remain closed - are offered subsidies for permanently closing down their activities. The recipients (including their shareholders) must undertake not to participate directly or indirectly in the operation of a pig assembly centre. The subsidy on offer is in two parts: compensation for loss of income and compensation for loss of capital.

111. When it initiated the procedure, the Commission indicated that undertakings which are unable or unwilling to meet the new hygiene requirements would be regarded as making a normal business decision to close down. In principle, aid for closing down in such circumstances would not be acceptable, as the new hygiene requirements constitute a normal entrepreneurial risk.

112. It became evident, however, that such closing down following the tightening of hygiene requirements should be viewed in the context of a broader policy, in which the aim is to reduce veterinary risks through a reduction in the number of pig assembly centres, and thus to contribute to the development of the sector.

113. Aid is given for investments to upgrade the facilities and meet the new hygiene requirements, but such aid alone would certainly not attain the additional objective of reducing the number of pig assembly centres, an objective which further contributes to reducing the veterinary risk. This animal health aspect justifies the aid for abandoning production.

114. The aid measure must be examined in the context of a two-track policy whereby aid is given for both upgrading and abandoning production. Accordingly, pig assembly centres had to choose between upgrading or closing down in the same way as they would have done for reasons other than as a result of government intervention. The aid clearly constitutes an inducement for the undertakings to adopt a certain course of action (i.e. closure) that they would not have chosen otherwise. The aid can therefore be regarded as having an incentive effect.

115. All other conditions required by the Commission before accepting aid for abandoning production capacity would also seem to have been met in this particular case.

116. The Commission accordingly accepted that the aid measures proposed by the Dutch Government facilitate the development of economic activities in the sector. The measure thus falls within the scope of Article 87(3)(c) of the Treaty.

2.5.9. Livestock sector: general measures

2.5.9.1. Abandoning capacity: exiting scheme for intensive livestock farming [40]- (NL)

[40] Case No N 177/2000.

117. The Dutch authorities have proposed an integrated approach for tackling the manure problem. This approach will require a special effort from the agriculture sector.

118. Within this context, farmers are given an opportunity to cease farming or one or more of the intensive livestock farming activities carried on on their farms. This scheme should lead to a permanent reduction in the production of animal manure. The scheme is also linked to the improvement of the countryside in areas with high livestock density. In these areas, livestock farmers who cease (part of) their activities can receive compensation for the demolition of their redundant buildings.

119. To qualify under the scheme, the pig or manure production rights must be sold to the government. In the "concentration areas" (i.e. areas in the east and the south of the Netherlands with a high pig density), an allowance can be obtained for the demolition of farm buildings which consequently become redundant.

120. The subsidy granted under the scheme consists of two elements. The first consists of an amount for the cancellation of the part of the pig rights not tied to land or manure production rights. The second is an allowance for the costs of the demolition of the redundant farm buildings for livestock farmers situated in the concentration areas. Part of the demolished farm buildings can, in certain cases, be replaced by residential dwellings. In such cases no subsidies are granted. This conversion generates additional financial means that can be used for financing the demolition of further farm buildings.

121. The Community guidelines for state aid in the agriculture sector refer at point 8 to aid for early retirement or for the cessation of farming activities and at point 9 to aid for closing production, processing and marketing capacity. Point 8 is clearly not applicable, as such aid requires the permanent and definitive cessation of all farming activities. It would therefore seem that the scheme should be examined in the light of point 9 of the Community guidelines.

122. The Commission concluded that the scheme meets the requirements set out at point 9 of the Community guidelines:

- the aid is in the general interest of the sector concerned. The scheme benefits the whole sector, which is under pressure from environmental and animal welfare constraints. The scheme will also benefit the environment through a reduction in animal manure production. Other (non-participating) undertakings will be able to continue farming operations in a better business environment;

- there is a counterpart on the part of the beneficiary. Participants must give up pig rights or manure production rights and demolish their farm buildings. The location can no longer be used for similar livestock activities for a period of 10 years;

- there is no possibility of the aid being used for rescue and restructuring. Although the scheme can be expected to be used especially by farmers who see no long-term prospects in continuing their activities, the aid is not granted on the basis of past or current commercial problems but is open to all livestock farmers;

- there will be no overcompensation of loss of capital value and of future income.

123. As regards the other requirements mentioned at point 9 of the Community guidelines, the aid scheme is of limited duration. The aid does not appear to interfere with the mechanisms of the various common market organisations. The scheme is accessible to all economic operators in the sector concerned. No contribution from the sector is required as capacity is closed for environmental reasons.

124. As regards the environmental benefits of the scheme, the Dutch authorities explained that in the Netherlands manure production not tied to the land is fully subject to a quota system. Thus the total amount of production rights cannot increase; it can only go down. Any undertaking participating in the exiting scheme must totally or partially cancel its production rights. At national level, the exiting scheme will lead to a considerable and permanent reduction in manure production and the number of animals kept.

125. The Commission therefore concluded that the measure satisfies the criteria for exemption under Article 87(3)(c) of the Treaty because it facilitates the development of the sector concerned without affecting conditions of trade to an extent contrary to the common interest.

2.5.9.2. Livestock transport: "Gaelic Ferries" [41]- (IRL)

[41] Case No C 7/90 (ex NN 1/98).

126. The Commission decided to adopt a final negative decision on operating aid, granted by Ireland, which related to both agriculture and transport. It concerned in particular the payment of State aid of IEP 1.58 million to the Irish company Gaelic Ferries for the operation of a ferry service available for livestock transport from Ireland to continental Europe [42]. The State intervention was triggered by the decision of a private ferry operator to discontinue a livestock transport service for commercial reasons relating to pressure from animal welfare groups. The Commission considered that the beneficiary of the aid was the entire Irish livestock sector, since the professed objective and the effect of the State aid was to guarantee access to the continental market to Irish producers of livestock. Ireland is now obliged to recover the aid granted from the beneficiaries.

[42] OJ L 263, 18.10.2000, p. 17.

2.5.9.3. Aid to livestock farmers affected by adverse weather conditions - (IRL)

127. The Commission has decided to authorise the Irish culling programme under the "Ewe Supplementary Measure" and three items under the "Scheme for assistance of winter fodder losses" [43]. These programmes provided for a number of aid measures aimed at alleviating the situation of livestock farmers whose production was affected by adverse weather conditions in the summer and autumn of 1998.

[43] Case No N 44/1999.

128. Earlier on, the Commission had expressed doubts about compatibility with Articles 87 and 88 of the Treaty. In particular, the measure appeared to constitute operating aid, possibly in that it helped farmers to dispose of their (at the time) worthless sheep.

129. On the basis of additional information supplied by the Irish authorities, however, the Commission accepted that the primary objective of the measure was to minimise environmental damage resulting from overgrazing and the presence of dead and dying livestock on the land. It enabled the Commission to treat the measure in the same way as aid for the disposal of waste.

130. In accordance with 3.4 of the Commission's guidelines on state aid for environmental protection [44], which were applicable to the agriculture sector when the aid was granted, aid for the collection, recovery and treatment of agricultural waste has to be considered on a case-by-case basis. However, since the acceptance of such aid implies derogating from the "polluter pays" principle, it may be permitted only in specific and well-justified cases.

[44] OJ L 72, 10.3.1994, p. 3.

131. In the present case it appeared that the aid had a clear incentive effect, and that there was a counterpart from the producers who agreed to the slaughter of 30% of their ewes, some of which might have survived the winter. From the farmers' standpoint the aid was limited to the free disposal of the animals. No payment was made in return for the livestock. These factors encouraged farmers to dispose of stock which was of the worst quality and had the fewest prospects of survival. The aid thus produced durable benefits both for the sector and, by avoiding environmental problems, for the wider community. Given that the aid was granted on a one-off basis to resolve a specific environmental problem resulting from a very unusual combination of events and with an additional risk for animal welfare, the Commission took the view that derogating from the "polluter pays" principle was justifiable in this case.

2.5.10. Sugar sector

132. In 1999, the Commission adopted a final negative decision in relation to several Italian State aid measures in the sugar sector granted through the State holding company RIBS between 1988 and 1992 [45]. These aids, which were linked to the operation of two sugar plants in Central Italy (Abruzzi and Tuscany), included commercial guarantees, capital holdings to cover losses, capital holdings for investments, extension of capital holdings, renunciation of privileged credits, favourable terms for the sale of public property, and loans at subsidised rates. The recipient of the aid was the SADAM group and the overall amount to be repaid (including interest) was estimated at EUR 45.548 million. Following this decision, the Commission was notified of five other cases where aids were granted through the State-owned holding RIBS to undertakings operating in the sugar sector in the same time frame.

[45] OJ L 236, 7.9.1999, p. 14.

133. Following a request from Italy, the Council approved an overall aid package to the sugar sector in Italy. This aid package included clearance of the five newly notified cases, the closure of a pending aid file concerning a factory at Ostellato, as well as aid to the SADAM group to repay the amounts outstanding following the 1999 Commission Decision. With regard to the latter, there is a new element in this Council Decision, since it is the first time the Council has cleared new aid with the economic effect of annulling the effect of a Commission final negative decision ordering recovery. The Commission decided not to appeal against this Council decision, however, in order not to discriminate between sugar operators in Italy.

134. In the wake of the Council Decision, the Commission approved a EUR 34 million investment aid package for the Villasor sugar plant - owned by the SADAM group - in Sardinia [46]. The aid was granted according to the rules of the public agency RIBS (shareholding and loan at a subsidised rate). The aid was approved under the national aid provisions of the market organisation for sugar which, until 2001, exempt the South of Italy from the general ban on processing and marketing investment in the sugar sector.

[46] Case No N 157/99.

135. Moreover, the package was authorised by the Commission on the strength of an undertaking by the Italian authorities that they would recover previous operating aids granted to the owner of the sugar plant.

2.5.11. Citrus sector

2.5.11.1. Aids for the citrus sector in Sicily [47] - (I)

[47] Case No C 1/98.

136. In January 2000 the Commission communicated to Italy its final negative decision on the aid provided for in Articles 1, 3, 5, 6 and 7 of Law No 68/95 of the Sicily Region ("Establishment of a guarantee fund for the consolidation of debts of industrial and commercial undertakings and of a guarantee fund for the consolidation of debts of craft undertakings - Aid to commercial operators") [48]; in so far as it applied to undertakings engaged in the production, processing and marketing of Annex I products.

[48] Case No C 1/98 (ex-N 750/B/95); Commission Decision of 22.12.1999 (OJ L 110, 6.5.2000).

137. Article 6 of the Regional Law provided for the financing, in 1995-97, of aid in respect of 1993/94, 1994/95 and 1995/96. This consisted in contributions towards the interest payable on loans granted, for a period not exceeding one year, to traders operating in Sicily whose sales of citrus fruit, fruit and vegetables outside the region accounted for 70% or more of their turnover. Altogether, 70% of the financial resources allocated to Article 6 was earmarked for the citrus sector.

138. According to Commission practice, short-term loans ("crédits de gestion") are aids granted in order "to allow the operator to cover advance payment of his expenditure linked to the agricultural production cycle pending receipt of income during that same cycle". The loans must be "seasonal credits" to cover general overheads: the purchase of inputs, wages, etc.

139. Before the application of the Commission communication on subsidised short-term loans in agriculture [49], the Commission regarded these aids as compatible if the following requirements were satisfied: the loan may not be granted for a single product or linked to a single operation and the duration of the loan may not exceed 12 months. Export aids per se are prohibited (see Commission communication on application of the de minimis rule [50]).

[49] OJ C 44, 16.2.1996, p. 2.

[50] OJ C 68, 6.3.1996.

140. Accordingly, the Commission considers that: (i) a short-term loan ("crédit de gestion") cannot be granted "retroactively", since it then simply constitutes operating aid which has no justification in agriculture (Annex I products); (ii) if aid notified as a crédit de gestion may de facto also constitute export aid (although it fulfils the criterion of seasonality and the other applicable criteria), it cannot be regarded as "crédit de gestion" compatible with the common market.

141. Following the opening of the procedure in Case No C 1/98, the national authorities claimed that the measure was the refinancing of an aid scheme already approved by the Commission in the past (Article 48 of Act No 32/91) and that it constituted a "subsidised short-term loan" to be examined in the light of the criteria applicable to this type of measure before the entry into force of the Commission communication on subsidised short-term loans in agriculture [51].

[51] OJ C 44, 16.2.1996, p. 2.

142. In its final negative decision, the Commission decided that the measure could not be regarded as the refinancing of an aid scheme approved by the Commission, because the measure previously approved (Article 48 of Act No 32/91) concerned financing limited both in its amount (ITL 30 billion) and in its period of application (1991-93).

143. Moreover, the criteria for subsidised short-term loans did not appear to be fulfilled for the following reasons:

- firstly, since the national authorities specified that the aid concerned the repayment ("ripianamento") of debts arising from short-term banking credits granted at very high interest rates, the aid did not appear to satisfy the core requirement underlying "seasonal credits", which is: to allow the operator to cover advance payment of his/her general management expenditure linked to the agricultural production cycle pending receipt of income during that same cycle;

- secondly, Article 6 concerned only trading undertakings in Sicily at least 70% of whose turnover was accounted for by the sale of citrus fruit, fruit and vegetables outside the region (70% of the resources was reserved for citrus fruits); therefore the aid would appear to be granted exclusively for two specific categories of products (and mainly for one of them) and to be linked, mainly, to a single operation (export from Sicily);

- thirdly, considering the unclear observations of the national authorities reported in the decision on the amortisation of loans in 36 months, it could not be excluded that the loans in question had a maximum duration of more than 12 months.

144. Furthermore, with regard to the export-oriented nature of the measure, the national authorities could not dispel the Commission's doubts that the measure could be an export aid. Therefore the measure, which the national authorities stated was aimed at the repayment of debts, appeared to be a retroactive operating aid, mainly addressed to "export-oriented" citrus undertakings, which did not comply with any of the rules applicable to state aids in agriculture.

145. An application for annulment of the Commission decision was lodged by the Region of Sicily before the Court of First Instance in July 2000. The case is pending.

2.5.11.2. National action plan for the citrus sector [52] - (I)

[52] Case No 560/1999.

146. In May 2000 the Commission adopted a decision approving a comprehensive action plan for the citrus sector in Italy. The plan provided aid for the following measures: monitoring of markets; citrus classification system; R&D; communication and promotion; creation of, and increased tasks for, consortia and associations of producers of quality products; and technical assistance and monitoring.

147. The plan originally notified envisaged total support amounting to ITL 110 000 million (± EUR 55 million) over three years and included a measure entitled "Support for the integrated intervention plans of producers' associations for improving marketing and strengthening producers' organisations", providing aid for the capitalisation of producers' organisations, for the acquisition of liquidity, for acquisitions of shares in marketing, processing, transport companies in Italy and abroad, mergers, etc.

148. The Commission departments expressed doubts as to the compatibility of the latter measure both with EC legislation on the common market organisation for fruits and vegetables and with state aid rules applicable to agriculture.

149. Given the need to reconsider this measure and to further clarify and define its content, the national authorities have undertaken to notify separately, at a future stage under Article 88(3) of the EC Treaty, the detailed implementing measures of the aid included under the title "Support to the integrated intervention plans of the producers' organisations for improving marketing and strengthening producers' organisations" (ITL 60 200 million), which will therefore not be applicable until its specific approval by the Commission.

2.5.12. Wine-growing

150. The Commission adopted a negative final decision on a scheme, notified and implemented by France in favour of wine-growing [53], against which the Commission had initiated a scrutiny procedure in October 1999 [54].

[53] Aid No C 70/99; Decision No C(2000) 2754 of 20.9.2000, yet to be published.

[54] OJ C 359, 11.12.1999.

151. The scheme concerned proceeds with the conversion of the charentais vineyards - currently used for cognac production - to the production of other wines: local wines. The conversion is centred on a supplement to the national aid for vine improvement, the objective of which is the qualitative improvement of vineyards. The measure is thus intended to help cognac producers convert to the production of local wines by encouraging the use of certain varieties of vine. The scheme is a consequence of the crisis experienced by the sector, a crisis which has resulted in a heavy build-up of stocks.

152. The Commission concluded that one of the objectives pursued by the legislator in drawing up Council Regulation (EC) No 1493/1999 of 17 May 1999 on the common organisation of the market in wine [55] was that of preventing an increase in wine production in the Community. While accepting that the varietal conversion of vineyards in the Charentes region had the advantage of reducing the production of wine for which there was no market, the Commission took the view that the resulting increase in the production of local wine in France would not be in keeping with the principles enshrined in the new market organisation in wine and was likely to distort competition on a market which, judging from the figures available, shows no signs of growth. Wines resulting from the conversion of the vineyards would enter the ordinary wine market, whereas current production by definition goes to other destinations outside that market. Accordingly, the general conversion of these vineyards could well shift the problem onto other markets. Moreover, the Commission feels that the conversion ought to have been accompanied by a substantial reduction in wine-growing areas and in yields.

[55] OJ L 179 of 14.7.1999.

153. The Commission takes the view that only measures adopted under the common agricultural policy and more specifically the market organisation in wine can ensure that the interests of those involved in this market generally, i.e. in the Community as a whole, are taken into account.

2.6. Assistance to the needy

154. The European Union continued to implement its food aid programme for the needy [56]. This involved making agricultural produce and processed agricultural produce from intervention stocks available to the organisations concerned working in the field in the Member States.

[56] Regulation (EEC) No 3730/87 of 10.12.1987 (OJ L 352, 15.12.1987, p. 1); Commission Decision 2000/32/EC of 16.12.1999 (OJ L 11, 15.1.2000, p. 51).

155. The table below gives a breakdown of the total budget and shows the quantities, as adjusted during the year, that can be withdrawn from intervention stocks by each participating Member State.

Free distribution of agricultural products (2000)

>TABLE POSITION>

2.7. The outermost regions

156. The Treaty of Amsterdam includes a new provision (Article 299(2)) on the outermost regions of the Community (the Spanish archipelago of the Canaries; the French overseas departments of Martinique, Guadeloupe, French Guiana and Réunion; and the Portuguese archipelagos of Madeira and the Azores).

157. On 14 March 2000 the Commission produced a report on measures intended to implement that new provision (doc. COM(2000) 147 - C5-0247/2000). The report includes a major section on agriculture, given the role played by the latter in the economy of those regions. It takes stock of Council Regulations Nos 3763/91 (POSEIDOM) [57], 1600/92 (POSEIMA) [58] and 1601/92 (POSEICAN) [59], and maps out future courses of action in the sector.

[57] OJ L 356, 24.12.1991, p. 1.

[58] OJ L 173, 27.6.1992, p.