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COM (84) 129 
 
 
 
Vol. 1984/0 048 
  
 
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européenne et de la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, 
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983 
concerning the open ing to the public of the historical archives of the European Econom ic 
Communit y and the European Atom ic Energy Communit y (OJ L 43, 15.2.1983, p. 1), as 
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file have been declassified in conformity with Article 5 of the aforementioned regulation.  
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom  1. 
Februar 1983 über die Freigabe der historischen Archive der Europäischen  
Wirtschaftsgemeinschaft und der Europäischen Atomgem einschaft (ABI. L 43 vom  15.2.1983,  
S. 1), geändert durch die Verordnung (EG, Euratom) Nr. 1700/2003 vom 22. Septem ber 2003  
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COMMISSION O F THE EUROPEAN COMMUNITIES
COM(84) 129 final  
Brussels, 14 March 1984
REPORT FROM THE COMMISSION TO THE COUNCIL
on the system of uniform interest rates used to calculate financing  
costs in respect of funds mobilized by the Member States to finance  
buying-in of agricultural products for public storage
C O M (84) 129 final

Report on the system of uniform interest rates used to calculate financing  
costs in respect of funds mobilized by the Member States to finance buying-in  
of agricultural products for public storage
I. Introduction
1. At the Council meeting of 16-17 May 1983, the Commission stated that  
it was closely following interest movements and that it was ready to  
examine the system of uniform interest-rate payments for interven­
tion buying of agricultural products, with a view to submitting a  
report to the Council on 1 October 1983·
II. Origins of the existing system
2. From its beginnings in 1969, the system for the financing of  
intervention stocks by the EAGGF Guarantee Section was based on the  
financing of the net losses borne by the intervention agencies as a  
result of obligations under the Community rules.
The net losses consist of the standard amounts for the storage  
operations as such, any losses resulting from the difference between  
the buying-in price and the selling price for the products stored  
and the interest charges on the funds used by the intervention  
agencies to buy in the products offered for intervention. Like the  
other standard amounts, the interest charges are calculated at a  
single uniform rate for the Community as a whole and by a single  
method.
3. With effect from 1 January 1977, Council Regulation (EEC) No
3180/76^ harmonized the system of calculating financing costs  
for all sectors where intervention took the form of buying-in and  
public storage. The method of calculation was subsequently defined  
in Commission Regulation (EEC) No 467/77 *
(1) OJ L 359, 30.12.1976, p. 11
(2) OJ L 62, 08.03.1977, P- 9

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On that occasion, several delegations requested that a single rate  
of interest should be adopted for all Member States and all products  
for the purpose of calculating the financing costs to be borne by  
the EAGGF Guarantee Section. The adoption of Regulation No 3180/76  
was therefore accompanied by a Commission declaration to the effect  
that it would fix an interest rate for the calculation of net losses  
which would be consistent with the rule that uniform rates should  
apply.
4· In 1978 the Council adopted general rules for the financing of
intervention by the EAGGF Guarantee Section (Regulation (EEC) No  
(3)1883/78),  reaffirming that the method and interest rate for  
calculating the interest charges to be borne by the EAGGF were to be  
uniform throughout the Community.
The Commission proposal for this Regulation had been more flexible.  
Noting that the charges on the funds tied up varied greatly from one  
Member State to another, the Commission had proposed that an inte­
rest rate higher than the uniform rate could be adopted, providing  
that the Member State concerned showed that its interest rate was  
higher and that there were no other ways of financing intervention.  
It was planned, however, that this flexibility should be contained  
within certain limits, with some of the extra cost being borne by  
the Member State to encourage the latter to minimize costs (see  
extract from the proposal, Annex III).
The Council did not adopt this flexible approach, but, whilst  
reaffirming that the interest rate should be uniform, it included  
the following declaration in its Minutes relating to the adoption of  
Regulation No 1883/78 :
"The Council agrees to review the provisions of Article 5 at a later  
date on the basis of a report accompanied, if need be, by proposals  
from the Commission, with a view to devising alternative measures  
for providing the funds required to buy in the goods."
(3) OJ No L 216, 05.08.1978, p. 1

III» The existing system in practice
5· For the financing of net losses, interest charges have been determi­
ned in the past by the following uniform interest rates :
These interest rates are fixed by the Commission on the basis of re­
gular surveys of the Member States to ascertain the financing costs  
incurred in respect of the funds used by the intervention agencies  
for the buying-in of products. The national data are then weighted  
according to the value of the products stored and are used to calcu­
late a representative interest rate for the Community.
The costs borne by the EAGGF vary according to the volume of the  
products in intervention and the level of the standard interest  
rate. In 1982 the EAGGF Guarantee Section spent 204.8 million ECU.
Because of the high level of stocks, this figure has been estimated at  
415 million ECU in 1983, and it could reach 500 to 550 million ECU in 1984.
6. The data from the Member States vary according to conditions on the  
national financial markets and according to the source of funds (see  
Annexes I and II). The sources of financing may be :
- funds from the national budget
- cash advances (budget or national bank)
- intervention agency funds
- short or medium-term loans
- credit from the national bank,1981 to Oct. 1983  
From 1.11.19831969 to 1973  
1974 to 1976  
1977 to 19806% (various sectoral regulations)
8% (various sectoral regulations)
8$ (Regulation 467/77)
9% (Regulations 175/81, 3651/81, 2723/81)  
8% (Regulation 3141/83)
from special (agricultural) banks,  
public-sector banks or  
private-sector or cooperative banks
- treasury bills
- commercial promissory notes.
Consequently, the interest rates payable by the intervention agen­
cies on such funds vary greatly.
IV.Problems encountered in certain Member States
7· In certain Member States (those with high interest rates) the obtai­
ning of funds entails expenditure higher than the amount reimbursed
by the E E C  at the uniform rate.~ 3 -

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These Member States are obliged to cover the difference at national  
level.
As a general rule, high interest rates derive from the economic  
situation and the monetary policy of the Member State concerned.
The question is whether the Community should foot the bill.
8. In the smaller Member States, the mobilization of funds may cause
certain problems, either at budgetary level or on the capital market.
If the necessary funds for the buying-in of products come from the  
national budget or treasury, e.g. in the form of advances, the  
strong demand for funds may disturb the finances of the Member 
States concerned.
On the other hand, if an intervention agency seeks the necessary  
capital from banks, the strong demand may force up interest rates  
and will thus have an effect on the capital market in the Member  
State concerned.
If such a Member State obtains the necessary funds on the interna­
tional market, to avoid disturbing its own capital market, it runs  
the risk of exchange rate fluctuations, even if the interest rate is  
relatively low.
V. Possible alternatives and developments
9· In the Commission's opinion, the "Community" solution would be to  
place at the disposal of the Member States all the funds necessary  
for the buying-in of products, that is, to have full-scale Community  
financing.
Such a solution poses, of course, the question of financing. This  
could be done within the budget or by some other means.
Financing through the budget would mean a sharp new increase in  
agricultural expenditure, by 2 000 to 4 000 million ECU depending on  
the quantity of products in storage, and in view of the general  
budget situation this is not a practical proposition at the present  
time.
Non-budgetary financing by means of a loan arrangement would have  
little or no effect on the volume of agricultural expenditure or of  
the budget but would necessitate a new legislative framework. This  
solution could also be implemented in stages, by providing for  
instalments of Community financing or responding only to requests  
from Member States in difficulties.

- 5  -
10. Another possibility would be to introduce more flexible arrangements  
for the reimbursement of the interest borne by the Member States, as  
was proposed in 1977 (see Annex III). This solution would make it  
possible to maintain a uniform Community rate corresponding to  
weighted interest charges in the Community but, subject to certain  
limits, it would mean an increase in reimbursements to Member States  
in difficulties. High interest charges in a Member State should not  
be fully borne by the Community, since this could place a heavy  
burden on the Community budget without having any influence on the  
Member State’s choice of financing.
On the other hand, a reduction in the uniform rate should be applied  
to Member States with lower interest rates, to prevent them  
from making profits at the expense of the Community.
11. For some time it has been possible to borrow in ECU on the capital  
market. Thus, a Member State with high interest rates could raise  
the necessary funds in ECU from the capital market, at the interest  
rate applicable to the ECU.
12· The Commission maintains the system of uniform rates. However, 
it must be supplemented by a provision for reducing Community  
financing if actual interest rates in a Member State are lower  
than the uniform interest rate.

- 6  -
ANNEX' I
Interest rates in the Community
1. Yield on public-sector bonds (considered as an indicator of the interest  
paid on public-sector borrowing over several years)
B :  DK DGRF:  IRL ITLUXNLUK
1979 9.7 :  15.9 7.4-10.0:15.1 14.3 6.8— o r"13.0
1980 12.2 :  18.9 8.5-13.8:15-4 16.4 7-4 10.2 13.8
1981 13.8 :  19.2 10.4 -16.3:  I7.3 19.8 8.7 11.6 14.7
1982 13.5 :  20.8 9.0 -16.0:17.1 20.7IO.4 10.0 12.9
1/8312.5 :  16.4 7.516.814.8:  14.6** 20.1*10.5 8.011.4
11/83 11.6 :  13.4 7.7-14.5:  - -10.1 8.710.5
III/83·  _ _  · ---:  - ----
* January ** January + February
2. Sates for treasury bills (3 months)
BDKDGRFIRLITLUXNLUK :
:  1979 14.4 ---11.916.4 16.5-I3.8I5.8 :
:  1980 12.8 -- -11.312.816.5-9.4 13.I :
:  1981 15.5 - - - -17.422.1 -10.1I4.5 :
:  1982 12.3 --- -14.7I9.5- 5.69.9 :
:  1/83 12.7 -4.3 - -I4.5I9.I- 4.610.6 :
:  11/83 10.3 -3.7- -I3.717.5 5.59.6 :
3· Interest on 3- -month bank deposits (reflecting interest charges (+1 to 2% )
over the same period)
BDKDGRFIRLITLUXNLUK :
:  1979 5.59.15.112.4 4.39.45.2 -5.3 13.8 :
:  1980 7.712.1 : 8.0I5.O5.09-7 15.9-5.916.5 :
:  1981 7.510.8 9.7I5.O5.38.7 19.9—6.1I3.8 :
:  1982 7.510.6 7.5 -5.310.0I9.4-5.912.2 :
:  1/83 7.39-3 4.8 -5-39.0I9.I_4.011.1 :
:  H/83 6.87.34.1-5.39.017.5_3.910.1 :
:  III/83
4. Rates for call money (reflecting interest charges (+0.5 to 1.5$) over short  
periods)
BDKDGRFIRLITLUXNLUK :
:  1979 8.0-5.9-9.0l6T7~11.9 -9.0I2.3 :
:  1980 11.2 -9.1-11.8I7.OI7.O-10.1 15.3 :
:  1981 11.5 -11.2 -I5.3I5.9I9.3-11.012.1 :
:  1982 11.4 -8.7-I4.9I7.3I9.9-8.111.0 :
:  1/83 10.6 -5.7-12.814.7I9.I_4.810.0 :
:  H/83 8.0-5.0-12.514.818.3 5.19.0 :
:  III/83 --------
Sources :  EUROSTAT

- 7 -
5· Interest rates for the ECU
a) yield on (public and private) bond issues of several years' duration
1981 1982 1st q. 1983 2nd q. 1983 :
:  average  
:  min. - max.14.0 % 
15.0 - 14.713-4 % 
12.5 - 14.112.0 % 
11.3 - 12.711.6 % : 
11.2 - 12.3 :
b) three month interest rates for the ECU (buying rates)
1978 1979 1980 1981 19821st q. 
19832nd q. 
1983
:  average  
:  min-max6.8 % 
6.5-7.310.7 % 
7.9-13.512.7 % 
11.6-13.914.6 % 
11.4-18.112.9 %
II.O-I 5.411.5 % 
8.9-12.28.6 % 
8.4-8.9

ANNEX II
Comparison of interest charges on funds mobilized by the Member States
1. Volume of funds mobilized by the Member States for intervention products- 8 -
(million ECU)
BDKDGRFIRLITLUXNLUK
:  1981 
:  1982 
:  1983 
:(l to 6)6.0
26.1
37.9*60.8
179.2
210.1858
1023
1884187.4
423.7
82.0540.3
344-3
745.097
249
266266,8
364,3
248,20.4
1.225-1
133.3
346.0- 73.3*
286.3
348.3
5 months ** cash surplus
2. Average interest charges on funds mobilized
(in % )
B DKD :  GR  
•FIRLITLUXNL UK
1981 (15.25) 19-212.1 :  8.0* 12.3115.522 (11.56) (13-93)
1982 (14.09) 20.7 9.8 :  8.75* 12.4915.7823-(10.61) (12.26)
1983
(11.47):
(1 to 6) 14.9 6.5 :  9.0* 11.9214.2820,7(9.75( 7.84) (10.53)
• to•• 10.75)
( ) - The Member State has no direct interest charges. The figures shown relate  
to public debt as a whole.
* - net of VAT.

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ANNEX III
Extract from the proposal for a Council Regulation laying down general  
rules for the financing of certain intervention by the EAGGF  
Guarantee Section (COM(77) 723 final of 23.12.1977;
(not adopted)
Article 3
1. The intervention agencies and, where necessary, the Member States shall  
obtain the funds required for buying-in goods. With regard to these  
funds, the amount of the interest charges to be financed by the EAGGF 
Guarantee Section shall be calculated using a method and an interest rate  
which are uniform throughout the Community, to be determined in accordance  
with the procedure laid down in Article 13 of Regulation (EEC) No 729/70.  
The interest rate thus fixed must be representative of the interest rates  
actually borne.
2. If, when the interest rate is being fixed in accordance with the preceding  
paragraph, a Member State records in respect of all intervention an inte­
rest rate higher by at least 10$ than that so determined, additional  
financing may be decided on in accordance with the procedure laid down in  
Article 13 of Regulation (EEC) No 729/70 by increasing the standard rate  
fixed under paragraph 1 in respect of the Member State concerned.
This additional financing may be decided on only :
- at the request of the Member State concerned;
- on condition that that Member State provides proof that the interest  
rate recorded has been higher than that adopted under paragraph 1 for a  
period to be determined according to the procedure under Article 13 of  
Regulation (EEC) No 729/70;
- if the situation as regards the interest rate for that Member State is  
not likely to change in the near future, and
- if it is not possible for that Member State to obtain funds more cheaply.
3. The increase referred to in the preceding paragraph shall be equal to half 
the difference between :
- the interest rate recorded by the Member State, subject to a ceiling  
equal to the standard interest rate fixed under paragraph 1 multiplied  
by 1.5, and
- the standard interest rate as fixed under paragraph 1 multiplied by 1.1.