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Brussels, 29.7.2005

SEC(2005) 1042 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

on EAGGF Guarantee Section expenditure Early warning system No 6/2005

TABLE OF CONTENTS

1. INTRODUCTION 3

2. COMMENTS ON THE IMPLEMENTATION OF THE 2005 BUDGET 3

3. CONCLUSIONS 5

INTRODUCTION

Annex 1 presents the budget’s actual implementation, for the period 16 October 2004 to 30 April 2005, compared to the expenditure profile determined by the indicator which was established on the basis of the dispositions of Council Regulation (EC) No 2040/2000[1] of 26 September 2000 on budgetary discipline.

COMMENTS ON THE IMPLEMENTATION OF THE 2005 BUDGET

Hereafter follows a brief commentary on the most significant divergences between the actual and the level of implementation pointed out by the indicator for the various sectors of the 2005 budget (NB: In parenthesis, the current level of over (+) or under (–) execution is presented).

Monetary factors

The dollar/euro rate

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

The budget adopted by the Budgetary Authority was based on the appropriations requested in the 2005 PDB which was drawn up on the basis of the average parity rate of EUR 1 = $ 1.25. It should be noted that for the period 1 August 2004 to 30 April 2005 the average parity rate was approximately equal to EUR 1 = $ 1.28, i.e. approximately 2% above the rate used for the establishment of the 2005 PDB.

Subheading 1a – Market factors

Market measures on cereals (+ EUR 22.9 million)

This month’s level of implementation points to a slight over-execution of only EUR 23.0 million as compared to the level of the indicator. The Commission expects that this divergence between the indicator and this measure’s implementation will continue increasing and a significant over-implementation of this sector’s appropriations is expected from the increased quantities of cereals going into public storage following the over-abundant 2004/05 cereals harvest.

Direct payments for arable crops (+ EUR 336.0 million)

The Commission is considering that the current level of over-execution of this sector’s appropriations compared to the level of the indicator does not reflect the probable tendency on an annual basis. Following an enquiry as to the Member States’ expected payments, based on their communications with regard to the parameters underpinning the implementation of this scheme, the Commission estimates that a lower over-execution of available appropriations will be realised by the end of the budget year.

Food programmes (+ EUR 99.1 million)

As already pointed out in the previous report, the over-execution of appropriations for this period is expected to be temporary and to be eliminated by the end of the budget year.

Sugar (– EUR 199.7 million)

The sector’s current under-execution compared to the level of the indicator results from a slowing down of the rhythm of export refund payments compared to their rhythm of previous budget years. The effect of the significant quantities of sugar entering public storage has not yet been reflected on the expenditure for this sector.

Textile plants (+ EUR 97.7 million)

The Commission took its decision on the final rate of aid for cotton. The resulting expenditure for cotton will be approximately EUR 67.0 million higher than the amount retained in the 2005 budget for this measure.

Direct aids of a horizontal nature (+ EUR 51.7 million)

The over-execution of appropriations for the Simplified Area Payments Scheme (SAPS), which involves eight out of the ten new Member States, is due to the double rate effect arising from the payment of aids in national currency by the Member States non-participating in the common currency.

Milk and milk products (– EUR 319.1 million)

The Commission agrees with the under-execution trend shown in this sector by the indicator since the month of February and considers that it will continue to the end of the budget year and that it could even double if current favourable internal and external market conditions persist. These conditions have allowed the Commission to reduce the level of export refund rates and of internal market aids for the different products of this sector.

Beef and veal (– EUR 30.4 million)

At this point in time, the indicator shows an under-execution which the Commission considers temporary. However, on the basis of available data and if Member States pay all animal premiums due for 2004, then this sector’s appropriations will be over-executed by the end of the budget year.

Clearance of accounts (– EUR 500.0 million)

Under the conformity clearance procedure, the budget foresaw claw-backs amounting to – EUR 330.0 million. Despite the fact that the Commission has not as yet formally taken all the proposed clearance decisions, it is currently expected that these decisions will amount to approximately – EUR 500.0 million, thus, leading to an increase in the amounts clawed back of approximately – EUR 170.0 million by the end of the budget year.

Sub-heading 1b – Rural Development (+ EUR 56.3 million)

The appropriations for rural development (EU-15) and for the transitional instrument for the new Member States were set at th e ceiling for this subheading. All commitments for the transitional instrument were made as of April 2005. The current over-execution is temporary and it involves the EAGGF-Guarantee’s rural development appropriations. Having set these appropriations at the ceiling, an over-execution of appropriations by the end of the budget year for this sub-heading can not arise.

CONCLUSIONS

For sub-heading 1a, the uptake of appropriations for the Member States' expenditure from 16 October 2004 to 30 April 2005 amounted to EUR 34 985.0 million, i.e: 81.7% of available appropriations. For this period, the over-spending of the budget’s appropriations when compared to the indicator amounted to approximately EUR 24.0 million. This is mainly attributable to the plant products’ sector while the animal products’ sector showed an under-execution of the budget’s appropriations. At this point in time, the Commission considers that the trends as to the direction of the indicator for both the plant products’ sector (over-execution of appropriations) and for the animal products’ sector (under-execution of appropriations) will continue to the end of the budget year.

For sub-heading 1b, the uptake of appropriations for the Member States' expenditure from 16 October 2004 to 30 April 2005 amounted to EUR 3 291.8 million, i.e: 48.1% of available appropriations. At this point in time, the Commission expects that this sector’s appropriations will be executed as foreseen in the 2005 budget.

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