COMMISSION OF THE EUROPEAN COMMUNITIES 
COM(94) 498 final 
Brussels, 16.11.1994 
94/ 0265(CNS) 
REPORT TO THE COUNCIL OF THE EUROPEAN UNION 
ON THE AGRIMONETARY SYSTEM FOR THE SINGLE MARKET 
Period from 1 January 1993 to 30 June 1994 
This Commission report has been drawn up pursuant to Article 13(2) of 
Council Regulation (EEC) No 3813/92. 
Proposal for a 
COUNCIL REGULATION (EC) 
amending Regulation (EEC) No 3813/92 on the unit of account and 
the conversion rates to be applied for the purposes of the 
common agricultural policy 
(presented by the Commission) 
- 1 -
REPORT TO THE COUNCIL OF THE EUROPEAN UNION 
ON THE AGRIMONETARY SYSTEM FOR THE SINGLE MARKET 
Period from 1 January 1993 to 30 June 1994 
This Commission report has been drawn up pursuant to Article 13(2) of 
Council Regulation (EEC) No 3813/92. 
/}<SL 
- 2 -
Contents 
A. Establishment of the agrimonetary system for the single market 
B. Changes made to the agrimonetary system 
1. Period of application of the original system 
2. Period of application of the special measures 
3. Period of application of the amended system 
4. Simulated variations of the agricultural conversion rates 
Summary 
C. Economic and financial consequences 
1. Effects on prices 
2. Effects on trade 
3. Compensatory measures 
4. Effects on the EAGGF Guarantee Section 
Summary 
D. Outlook for the agrimonetary system 
1. International and financial constraints 
2. Coherence of the system 
3. Stable agricultural conversion rates 
4. Compensation mechanisms 
General conclusions 
Abbreviations used in this report 
National currencies 
BLF Belgian francs and Luxembourg francs 
DKR Danish kroner 
DM German marks 
DRA Greek drachmas 
ESC Portuguese escudos 
FF French francs 
FMK Finnish markkaa 
HFL Dutch guilders 
IRL Irish pounds 
LIT Italian lire 
NKR Norwegian kroner 
OS Austrian schillings 
PTA Spanish,pesetas 
SKR Swedish kronor 
UKL Pounds sterling 
EAGGF: European Agricultural Guidance and Guarantee Fund 
CAP: Common agricultural policy 
EMS : European monetary system 
ACR: Agricultural conversion rate 
- 3 
REPORT TO THE COUNCIL OF THE EUROPEAN UNION 
ON THE AGRIMONETARY SYSTEM FOR THE SINGLE MARKET 
This Commission report to the Council has been drawn up pursuant to 
Article 13(2) of Council Regulation (EEC) No 3813/92. It analyses the 
functioning of the agrimonetary system over the period 1 January 1993 to 
30 June 1994. The results and conclusions it contains should be treated with 
caution in view of the relatively short period examined. 
A. ESTABLISHMENT OF THE AGRIMONETARY SYSTEM FOR THE SINGLE MARKET 
The new agrimonetary system on the basis of Council Regulation (EEC) 
No 3813/92 of 28 December 1992 on the unit of account and the conversion 
rates to be applied for the purposes of the common agricultural policy 
(OJ No L 387, 31.12.1992, p.l) entered into force on 1 January 1993, at the 
same time as the single market was completed. 
This abolished the previous system of monetary compensatory amounts which 
had been in existence for more than 20 years. The old system was based on 
agricultural conversion rates with a relatively fixed value, valid as a rule 
for one year. In trade in sensitive agricultural products between Member 
States or between them and non-member countries, amounts were levied or 
granted to compensate for the effect on prices of the difference between the 
agricultural conversion rate and the real exchange rate. The system of 
monetary compensatory amounts no longer applies in the single market since 
there are no longer any goods controls at intra-Community borders. 
The new system applies to all legislation based on Article 43 of the Treaty 
establishing the European Community and legislation relating to goods 
processed from agricultural products subject to specific trade arrangments, 
with the exception of the following: 
customs legislation; 
amounts fixed in ecus by the Commission under the structures policy 
in agriculture and fisheries; 
some amounts excluded by legislation based directly on Article 43 of 
the Treaty specifying the use of a particular conversion rate. 
The principles governing the agrimonetary arrangements introduced at the 
same time as the single market are as follows: 
The ecu'1' is used as the unit of account to fix prices and amounts, 
while payments are made in national currencies. 
The national currencies are divided into two categories: the "fixed" 
currencies are those which remain within a maximum fluctuation band of 
less than 2.25% within the EMS. All the other currencies are "floating" 
currencies. 
Amounts are converted from ecus into national currency using an 
agricultural conversion rate close to the real rate, i.e.: 
the central rate for the fixed currencies; 
a rate close to the average market rate for the floating currencies. 
Except in certain special cases, the agricultural conversion rates for 
all currencies are adjusted when monetary realignments take place withir 
the EMS. In the case of floating currencies, they may also be changed or 
the 1st, 11th or 21st day of each month. 
A special mechanism, known as the "switchover" mechanism, is to be 
applied until 31 December 1994. Using this mechanism, all conversion 
rates for the ecu are multiplied, directly or indirectly, by a 
correcting factor. In this way the correcting factor determines the 
level of the corrected ecu used temporarily in the CAP. When monetary 
realignments take place within the EMS, the switchover is increased to 
offset the highest revaluation of the fixed currencies. This means, 
therefore, that the conversion rates for the (corrected) ecu cannot be 
reduced for the fixed currencies. 
The agricultural conversion rate applicable to a given price or amount 
is that valid at the time the operative event takes place, i.e. the 
event whereby the economic objective of the operation concerned is 
attained. However, advance fixing is also possible, although the scope 
for this is limited. 
Prices and certain amounts fixed in (corrected) ecus are reduced when 
the correcting factor is increased. This reduction amounts to 25% of the 
effect on prices of the annual increase in the correcting factor. The 
main income losses due specifically to agrimonetary factors may be 
offset in the form of an increase in certain amounts fixed in 
(corrected) ecus or in the form of degressive aid. 
(1) This is the ecu as defined in Council Regulation (EEC) No 3180/78 
(OJ No L 379, 31.12.1978, p. 1.), converted into national currencies 
using the rates published in the C-series of the OJ. Where it is 
necessary to make a distinction, that ecu is referred to as the (budget) 
ecu in this report, in order to distinguish it from the ecu multiplied 
by the correcting factor inherent in the switch-over mechanism, which is 
referred to as the (corrected) ecu. 
- 5 
The period in which the new agrimonetary arrangements were introduced was 
very turbulent in monetary terms. After almost five years of remarkable 
monetary stability, except as regards the Greek drachma which had declined 
considerably in value, autumn 1992 was very eventful: 
The pound sterling and Italian lira were taken out of the exchange rate 
mechanism of the EMS in September 1992. Therefore, from an agrimonetary 
point of view, these currencies became floating currencies, the same as 
the Greek drachma. The other floating Community currencies on 1 January 
1993 were the Spanish peseta and the Portuguese escudo, which were in 
the exchange rate mechanism of the EMS with a fluctuation range of 6%. 
Three realignments which changed the central rates of the fixed 
currencies in the EMS led to an increase of 4.4% in the correcting 
factor for the ecu. On 1 January 1993 this factor was 1.195066. 
On 1 January 1993 the monetary gaps between the agricultural conversion 
rates and the representative market rates of the (corrected) ecu were as 
follows : 
- in the case of the fixed currencies, all had been zero since 
1 January 1991, 
in the case of the floating currencies, they were reduced to zero or 
close to zero'1). 
As for the floating currencies, given the monetary gaps which had 
existed previously, but above all the devaluations in autumn 1992, the 
agricultural conversion rates for the DRA, LIT, PTA and UKL had had to 
be increased sharply before 1993. 
(1) Monetary gaps of zero for the PTA and DRA; - 0.786 for the ESC; - 1.000 
for the LIT and - 2.000 for the UKL. 
6 -
B. CHANGES MADE TO THE AGRIMONETARY SYSTEM 
From the beginning of 1993, we can distinguish between three agrimonetary 
periods based on monetary events and changes in legislation, as follows: 
the original arrangements from January to July 1993 
the special measures from August to December 1993 
the revised arrangements from January to June 1994. 
Details of the changes in the agricultural conversion rates (ACRs) and the 
monetary gaps are given in Annexes 1, 2 and 3. The table below is a summary 
of developments, given in percentages: 
Changes in the agricultural conversion rates (%) 
Period from 
to 1.9.1992 
1.1.1993 1.1.1993 
1.8.1993 1.8.1993 
1.1.1994 1.1.1994 
30.6.1994 1.1.1993 
30.6.1993 
BLF 
DKR 
DM 
DRA 
ESC 
FF 
HFL 
IRL 
LIT 
PTA 
UKL 0 
0 
0 
+ 13, 0 
+ 3,0 
0 
0 
0 
+ 18,5 
+ 9,6 
+ 18,1 0 
0 
0 
+ 2,8 
+ 13,1 
0 
0 
+ 11,1 
+ 3,8 
+ 14,6 
- 1,9 + 1,5 
+ 4,1 
0 
+ 3,0 
0 
+ 1,1 
0 
0 
+ 2,6 
0 
0 0 
0 
0 
+ 4,5 
+ 1,0 
0 
0 
0 
+ 0,5 
+ 11, 0 
0 + 1,5 
+ 4,1 
0 
+ 11,7 
+ 14,2 
+ 1,1 
0 
+ 11,1 
+ 9,0 
+ 15,8 
- 1,9 
1. Period of application of the original system: January to July 1993 
(a) Main events and monetary movements 
In monetary terms the period is characterized by two realignments within th 
EMS. In relation to the other currencies in the exchange rate mechanism: 
on 3 0 January 1993 the Irish pound was devalued by 10% 
on 13 May 1993, the Spanish peseta and the Portuguese escudo were 
devalued by 8% and 6.5% respectively. 
For those currencies considered to be floating from>the agrimonetary point 
of view, the market conversion rates were as follows: 
7 -
for the UKL and LIT, they were devalued up to the end of February and 
beginning of April respectively (4% and 6.7%) before being revalued in 
relation to their levels at the beginning of 1993 (5.7% and 0.2%). 
for the DRA, there was an almost continuous, slight devaluation (2.4%) 
for the ESC and PTA, they were devalued sharply (11.9% and 13.6%), in 
particular during the last few days of July 1993, during which the 
devaluation previously registered increased considerably (7.4% and 9.1% 
on 20 July 1993). 
(b) The first detailed rules for applying the agrimonetary arrangements 
From 1 January 1993, Commission Regulation (EEC) No 3819/92 (OJ No L 387, 
31.12.1992, p.17) laid down the first detailed rules necessary for immediate 
application of the arrangements as follows: 
thé reference periods on the basis of which the representative market 
rates for the floating currencies are calculated are defined as being 
the (as a rule) ten-day periods beginning on the first, eleventh and 
twenty-first day of each month, 
the agricultural conversion rate (ACR) is adjusted at the beginning of a 
reference period when the difference between it and the new 
representative market rate exceeds the permitted thresholds : 
* at the beginning of the month, if the monetary gap for a given 
currency exceeds two points (unilateral threshold), the agricultural 
conversion rate (ACR) for that currency is adjusted so as to reduce 
the gap by half ; 
* at the beginning of each reference period, if the monetary gaps 
relating tô* two currencies produce an "aggregate" '-1-' greater than 
four points (bilateral threshold), the ACRs concerned are adjusted 
so as to reduce each of the gaps in question to two points ; 
- - a special adjustment rule was introduced to prevent very large monetary 
gaps from persisting for a long time during a reference period. Where 
the "aggregate" of the gaps relating to two currencies exceeds six 
points, on the basis of the market rates recorded over three consecutive 
quotation days for the ecu, the ACRs concerned are immediately adjusted 
so as to reduce each of the gaps in question to two points. 
(1) More precisely, this is the absolute value of the difference between the 
algebraic values of the two monetary gaps. 
- 8 -
the conditions for the advance fixing of the ACR are specified. In 
accordance with the provisions adopted by the Council, advance fixing i: 
limited to amounts fixed in ecus by tendering procedure or those which 
themselves can be fixed in advance in ecus. Such advance fixing is valix 
up to the end of the third month following the current month at the 
latest. In addition, in order to avoid the risk of major market 
distortion, the ACR fixed in advance is adjustable if it differs by mor« 
than 4% from that which would have been used if no advance fixing had 
taken place. 
In addition, as from 1 January 1993, Commission Regulation (EEC) 
No 3824/92 (OJ No L 387, 31.12.1992, p.29) determines the prices and 
amounts fixed in ecus to be amended as a result of monetary realignment. 
Commission Regulation (EEC) No 3820/92 (OJ No L 387, 31.12.1992, p.22) 
laid down measures for the transition from the old to the new 
agrimonetary arrangements, principally as regards the operative events 
for the ACRs. 
(c) Review of the operative events for the agricultural conversion rates 
The performance of operations eligible for the grant of a price or an amount 
under the CAP almost always takes a certain amount of time, during which the 
value of the agricultural conversion rate may change. By definition the 
"operative event" is the event which takes place on the date which 
determines the value of the ACR to be applied to the price or amount in 
question. 
The problem of choosing the operative events has existed since the 
agrimonetary system first came into being. As a general rule, Council 
provisions since 1985 indicate that the operative event is "the event 
whereby the economic objective of the operation is attained". Any more 
precise definition is to be laid down by the Commission as required and for 
each particular case. 
Under the new agrimonetary arrangements, the operative events have gained 
considerably in importance. Firstly, operative events are used much more 
frequently since, by the nature of the system, there are more changes in the 
ACRs. Secondly, the consequences of the operative events, which mainly 
affected the relative interests of operators in any one Member State, now 
have repercussions for trade throughout the single market: the gap between 
the market rate and the agricultural conversion rate used, by reference to 
the operative event, can no longer be offset by measures at the internal 
borders of the Community. 
Consequently, the Commission has undertaken, on the basis of criteria laid 
down by the Council ^ , a general review of all the operative events in 
force on 1 January 1993. 
(2) See Article 6(2) of Regulation (EEC) No 3813/92 
9 -
In order not to introduce differences in treatment during the marketing 
year, Commission Regulation (EEC) No 3820/92 specifically extended the 
period of validity of the operative events established under the former 
agrimonetary arrangements up to the end of the marketing years which ended 
in 1993. At the same time it announced a general review of the rules in 
question by the beginning of the following marketing years. 
In the analysis of the situation obtaining on 1 January 1993, the main 
problem encountered, except for certain special cases, was those operative 
events which have the effect of a long-term fixing of the value of the ACR. 
These operative events may entail the creation of very large monetary gaps, 
exceeding the thresholds laid down by the Council, between the conversion 
rate actually applied and the market rate in force at the time the operation 
is actually completed. In such cases the result would be distortion of the 
trade flows between the Member States for which gaps exist and those for 
which none exist. 
In practice, this type of operative event concerned mainly the following: 
dates set annually, such as the beginning of the marketing year, for 
prices or amounts linked to market organizations 
the closing dates for invitations to tender for prices or amounts, for 
operations to be completed within long deadlines 
the conclusion of contracts relating to future operations. 
The sectors most affected by these operative events were: 
wine, fruit and vegetables and fishery products, as regards fixed dates 
beef and milk and milk products, as regards invitations to tender and 
contracts. 
Therefore, in these sectors, the effective applicability of variations in 
the ACRs was hindered, to a greater or lesser extent-, up to the middle of 
1993 by the extension of the operative events existing in 1992. 
Commission Regulation (EEC) No 1068/93 of 30 April 1993 on detailed rules 
for determining and applying the agricultural conversion rates (OJ No L 108, 
1.5.1993, p.106) repealed Regulation (EEC) No 3819/92, but adopted the 
provisions it contained in improved form. In addition, it laid down the new 
operative events applicable from the beginning of the marketing years 
following. 
10 -
These operative events are directly applicable, subject to sectoral 
provisions laid down on the legal basis of Regulation (EEC) No 3813/92 whici 
define them more closely or derogate from them for reasons specific to a 
particular amount or market. 
The principle pursued was to establish operative events which are: 
close to the physical completion of the operation in cases where this ±i 
linked to markets 
determined by a date fixed annually for other operations. 
Therefore, for example, the operative events adopted were: 
acceptance of the customs declaration for amounts linked to trade with 
non-member countries 
the taking-over of products for buying-in and selling prices, and for 
marketing aid 
the beginning of the calendar year or marketing year for aid per hectare 
or livestock unit or for structural aid. 
(d) Consequences for the agricultural conversion rates and prices in ecus 
As a result of the monetary realignment at the beginning of 1993, the 
correcting factor for the ecu was increased by 1.04%. Its value on 1 January 
1993, i.e. 1.195066, increased to 1.205454, then 1.207509, and has remained 
unchanged since 14 May 1993. 
As a result of the switchover mechanism at the beginning of the various 
1993/94 marketing years, prices and amounts linked to the markets were 
reduced in ecus, and therefore for all Member States, by 25% of the increase 
in the correcting factor for the ecu registered over the twelve preceding 
months. 
For all products, the reduction'3' was 1.29%. It was made at one single 
time, as a rule on 1 July 1993, where all the monetary realignments in 1992 
and 1993 occurred over the twelve months preceding the date of the 
reduction. For some products, including sheepmeat, olive oil and some fruit 
and vegetables, prices were reduced in two stages, at the start of the 
1992/93, 1993/94 or 1994/95 marketing years, which begin during the months 
from October to May. 
As regards the floating currencies, between 1 January and 1 August 1993 the 
ACRs were changed twelve times for the LIT (five increases and seven 
decreases) and eleven times for the UKL (three increases and eight 
decreases). They were increased eight times for the PTA, seven times for the 
ESC and three times for the DRA. 
(3) The price reduction is not the same as 25% of the increase in the 
correcting factor, i.e. 1.36%, because that increase was made before and 
after the beginning of 1993. It was calculated according to the rules 
laid down under the agrimonetary arrangements prior to 1993. 
- 11 -
The ACR for the IRL was increased in two stages: the main increase, 8.9%, 
was made immediately after the monetary realignment in question, with a 
further 2% increase at the beginning of the main marketing years, on 1 July 
1993. 
The rule for the urgent adjustment of the ACRs had to be applied four times 
in order to prevent monetary gaps totalling more than six points between two 
currencies from lasting for more than three days. The currencies involved 
were, on the one hand, the UKL, accompanied once by the LIT, and on the 
other hand the LIT, PTA or ESC. 
2. Period of application of the special measures, August to December 1993 
a) Main events and monetary movements : 
On 2 August 1993 the fluctuation ranges of the exchange rate mechanism of 
the EMS were raised to 15%. . 
After these new rules had been introduced, the DM and HFL were revalued 
progressively, by 1.6% in two-and-a-half months, before regaining their 
original level. For the other currencies which until 1 August 1993 had been 
considered to be fixed currencies, a devaluation of 1% to 2.5% over one to 
three months was eventually totally offset in the case of the BLF and 
partially offset in the case of the DRK and FF, and even reversed in the 
case of the IRL. 
Of the previously floating currencies, the ESC and PTA were devalued 
particularly sharply by approximately 5% in the last few days of July 1993. 
Subsequently the ESC stabilized whereas the PTA strengthened slightly before 
reaching, at the end of the year, its level at the beginning of August 1993. 
The DRA and LIT were devalued fairly steadily (3.4% and 5.7%), whereas the 
UKL, following a, slight devaluation over two months, regained its August 
1993 level at the end of the year. 
(b) Special measures 
Following the decision on the EMS of 2 August 1993, pursuant to agrimonetary 
legislation(4^ and in spite of a bilateral agreement between Germany and 
the Netherlands to maintain their currencies within-a band of 2.25%, all 
Community currencies are considered to be floating. 
Under these circumstances, it is no longer possible to have a revaluation of 
the central rates for the fixed currencies and therefore changes to the 
correcting factor for the ecu. For this reason, all the ACRs, which are 
subject to the rules laid down for floating currencies, must be adjusted 
upwards or downwards ,in order to follow changes in the representative market 
rates. In August 1993, application of these rules led to two increases in 
the ACRs for the DKR and FF, and to one increase for the DRA. 
(4) Article Kb) of Regulation (EEC) No 3813/92 
12 
At the beginning of September 1993 the Commission noted that for the past 
month the market rates had been highly volatile. For example, the daily 
monetary gaps fluctuated as follows : 
Date 4 August 16 August 20 August 10 September 
BLF -0.5 -1.4 -0.6 -1.9 
DM +0.6 +2.1 +1.1 +1.9 
UKL +1.1 -0.2 +0.7 -1.0 
The rules in force could have triggered frequent adjustments of the ACRs. 
These adjustments could have had serious consequences for the agricultural 
markets, producers' incomes and Community finances, without being based on 
clear, confirmed trends on the money markets. 
Therefore, in order to obtain a longer observation period, Commission 
Regulation (EEC) No 2496/93 (OJ No L 229, 10.9.1993, p.17) provisionally 
amended, from 10 to 30 September 1993, the rules for applying the reference 
periods on which adjustments of the ACRs are based. 
Since the monetary circumstances and their possible agricultural 
consequences had not changed fundamentally, at the end of that observation 
period the Commission decided as a safeguard measure to suspend all the 
rules for the automatic adjustment of ACRs. At the same time it submitted to 
the Council a proposal for an amendment of the basic agrimonetary Regulation 
in order to adapt it to the new monetary variability made possible by the 
decision on the EMS of 2 August 1993. 
Initially intended to cover the period 1 to 20 October 1993, the safeguard 
measure had to be extended until 21 December 1993, the day before the entry 
into force of the Council amendment of the basic agrimonetary Regulation. 
(c) Consequences for the agricultural conversion rates 
In October 1993 the Commission had to adjust, on an ad.hoc basis, the ACRs 
for the BLF, the LIT and the DRA in order to avoid the risk of the 
deflection of trade flows as a result of the negative monetary gaps which 
had arisen for these currencies. The bilateral monetary gaps of 13 October 
1993 had reached a level of approximately six points between those 
currencies on the one hand and the DM, HFL and PTA on the other. Large 
bilateral gaps persisted for three reference periods between the PTA on the 
one hand and the LIT and DRA on the other. They appeared during one 
reference period between the BLF on the one hand and the HFL and DM on the 
other. 
- 13 
In the end, between September and December 1993 the monetary gaps for the 
ESC, FF, IRL and UKL remained smaller than two points. The positive monetary 
gaps of more than two points narrowed of their own accord for the DM, HFL 
and PTA after having reached almost three points. For the DKR they appeared 
at the end of the period, in December 1993. 
At the end of 1993, as a result of the agricultural conversion rate 
adjustments which had been made, there was one single monetary gap which 
still exceeded the unilateral threshold of two points: +2.393 for the DKR. 
3. Period of application of the amended system: January to June 1994 
(a) Main events and monetary movements 
Compared with previous movements, the first half of 1994 was a much quieter 
period 
The levels reached by the DKR, DM, FF and HFL in January 1994 remained 
virtually stable. The BLF rose steadily by just under 2%. The IRL was 
revalued by approximately 2% in January 1994, then, from the end of February 
onwards, its value fluctuated at around the level it had reached at the 
beginning of the year. 
The picture for the LIT and PTA varied, and no overall trend is discernible 
in the first half of 1994. 
For the other" currencies, the overall trend is towards devaluation, at least 
since February 1994 (about 2% for the ESC and 4% for the DRA and UKL) . 
(b) Amendment of the system 
At the end of December 1993, Council Regulation (EC) No 3528/93 
(OJ Nb L 320, 28.12.1993, p.32) amended the basic agrimonetary Regulation to 
take account of the risk of greater variablility in ACRs. 
The Regulation restricts the conditions for granting compensation for 
revaluations in cases where these occur before or after devaluations. 
The main amendments cover the rules for ACR adjustment, which it suspends 
and replaces by new rules up to 31 December 1994. 
The detailed rules for applying the arrangements were adjusted by Commission 
Regulation (EC) No 547/94 (OJ No L 69, 12.3.1994, p.l). Under the new rules, 
at the beginning of each reference period (1st, 11th and 21st of each 
month) , the ACR is adjusted so as to reduce, always by half, the gap between 
it and the representative market rate, if that gap exceeds the new 
thresholds. 
- 14 
The unilateral threshold which was previously fixed at two points is now 
restricted: 
in the case of positive gaps, to +3 points, which can be extended where 
necessary, i.e. if a larger gap exists, to a maximum of +5 points; 
in the case of negative gaps, to the level of the threshold applicable 
to positive gaps, less 5 points, i.e. as a rule -2 points, although it 
may be reduced to zero. 
If, after the gaps which exceed the unilateral threshold have been reduced 
by half, there are "aggregate" gaps greater than 5 points, the ACRs in 
question are immediately adjusted so as to reduce the gaps in question to 
the level of their respective thresholds. 
To summarize, the range of. the bilateral threshold which used to be 4 points 
has been increased to 5 points. This threshold is positioned asymmetrically 
between -2 and +3 and is movable up to an upper limit of +5. 
(c) Consequences for the agricultural conversion rates 
The ACRs for the DRA, ESC, LIT and PTA were adjusted in order to reduce 
their negative monetary gaps. 
The positive monetary gaps for the BLF and DKR stabilized at between +2 and 
+3 points. The gap for the IRL remained greater than +3 over a period of 
more than one month, its daily level even reaching between +4.0 and +4.3 
over 12 days. As a result, it triggered dismantling of the relatively small 
negative gaps for the DRA and LIT. Since the end of February the gap for the 
IRL has been fluctuating widely around +2 points. The positive gap greater 
than 2 points for the UKL which appeared at the end of January disappeared 
of its own accord in mid-February, and became a negative gap. 
4. Simulated variations in the agricultural conversion rates 
The ACRs which would have been fixed on the basis of various theoretical 
adjustment rules provide a comparison for analysing the impact of the rules 
and measures actually adopted in the monetary situation obtaining from 
January 1993 to June 1994. The overall results of these simulations are 
given in Part 1 of Annex 7. 
(a) Effects of the components of the original rules 
If there had been no switch-over mechanism and no thresholds for the average 
market rates for each reference period, the increases in the ACRs would have 
been considerably lower than those actually applied, except in the case of 
the DRA and ESC. The increases would have been at least 3% lower than those 
actually registered for the DKR and IRL. There would have been a fall of 
more than 2% for the BLF, DM and HFL, and the fall would even have exceeded 
3% in the case of the UKL. 
- 15 -
In contrast with the above theoretical situation, the introduction of the 
original threshold rules, between -2 and +2 points, without a switchover 
mechanism, would have considerably reduced the fall in the ACRs for the BLF, 
DM, HFL and UKL, and limited the increases for the DRA, ESC, IRL and PTA. 
Nevertheless the general level of ACR increases would have been 
significantly lower compared with the situation which actually occurred. 
(b) Interruption and amendment of the original rules 
If the rules originally adopted by the Council for the automatic adjustment 
of the ACRs had been applied without interruption, the correcting factor 
would have been frozen at its July 1993 level, resulting in a fall in the 
ACRs for the DM and HFL of less than 1%. The increases in the ACRs would 
have been approximately 1% less than those actually applied for the BLF, 
DKR, IRL and PTA. In the case of the other currencies, the situation would 
have differed little from that which actually occurred. 
During the period of application of the special measures, from August to 
December 1993, maintaining the original rules would have led to a fall in 
the ACRs for the DKR (lio%),'DM (0.5%), HFL (0.7%) and PTA (0.8%). The 
increases in the ACRs applied for the BLF, DRA and LIT would have been 
triggered in any case (0.1% lower for the BLF and 0.7% higher for the LIT) , 
and the stability of the other ACRs would not have been affected. 
Renewed application of the original rules from 1 January 1994 onwards would 
hâve produced no change in the ACRs for the DM, ESC, FF and HFL. The ACRs in 
force on 1 January 1994 would have been reduced for the BLF (1.2%), DKR 
(0.6%), IRL (2.1%), as well as the UKL (1.2%), which, however, would then 
have returned to its original level. The reduced ACRs would still have 
remained greater than the levels they were at on 31 December 1992. As 
regards the other 'Currencies, the increases in the.ACRs would have been less 
than those actually applied for the PTA (-0.1%) and LIT (-0.5%), but would 
have been higher for the DRA (+0.8%). 
(c). Other assumed situations • . • 
As part of the analysis of the situation in the past, an examination was 
also made of what would have happened to the ACRs on 3 0 June 1994 in the two 
following assumed scenarios: 
if, in addition to the original Council rules for adjusting the ACRs, a 
switchover mechanism for the floating currencies had been introduced 
from August 1993 onwards: if there was a risk that an ACR could fall 
below the ACR applicable on 31 December 1992, the correcting factor for 
the ecu would be increased to reduce the positive monetary gap in . 
question to +2 (assumption D in Annex 7); 
if the amended rules on the threshold, which became asymmetrical and 
movable from the end of December 1993 onwards, had been applied without 
a switchover mechanism from 1 January 1993 onwards (assumption E in 
Annex 7). 
- 16 -
In these two assumed cases, the changes in the ACRs would have been little 
different from those which actually occurred. Differences of more than 1% 
would have consisted of a slight reduction in the ACR for the UKL, and a 
slight increase in the ACRs for the IRL in the first case, and for the ESC 
and PTA in the second. 
The switchover mechanism linked to the floating currencies would have been 
triggered on two occasions to prevent a fall in the ACRs for the HFL and DI^ 
The correcting factor for the ecu would then have been fixed at 1.216238 
from the end of October 1993 onwards, i.e. an increase of 0.72%. 
****************** 
Summary of agrimonetary developments 
1. The agrimonetary situation from January 1993 to June 1994 was very turbulent with: 
the introduction of the new regime, in particular the review of the operative events for ACRs 
freezing of the switchover mechanism 
the disappearance, for all currencies, of the qualifications required for fixed-currency status 
the suspension, then amendment, of the original rules for ACR adjustment with the introduction of 
asymmetrical, movable bilateral threshold extended to five points. 
2. On the whole, a close link was maintained throughout this series of events and measures between the 
overall trend followed by market exchange rates and the ACRs. However, the ACRs were made relatively 
stable vis-à-vis erratic and minimal monetary movements. 
The special measures taken in the last few months of 1993 restricted ACR movements in response to 
fluctuations of the market rates which had become excessive, making both upward and downward correctic 
necessary. In particular, they prevented a fall in the ACRs for the DM, HFL and PTA, which, given 
monetary developments, would have proved to be useless two months later. Thus, the provisions initial I 
introduced, which would have led to the application of a fixed threshold of -2 to +2, with the 
switchover mechanism not being implemented after 2 August 1993, would have proved to have an 
unnecessarily destabilizing effect on the ACRs. 
Furthermore, considering market trends, the new provisions applied in 1994, based on an extended, 
asymmetrical and movable threshold, tend to overprotect positive monetary gaps. For example, positive 
monetary gaps, mostly between 2% and 3%, were maintained for more than four months for the BLF, DKR an 
IRL, thus preventing their preceding devaluations from being corrected. 
****************** 
17 -
C. ECONOMIC AND FINANCIAL CONSEQUENCES 
1. Effects on agricultural prices 
The relationship between ACRs and market prices in national currencies was 
examined from July 1992 onwards. The analysis covered a number of products 
chosen on the basis of their economic importance and the quality of the 
available data. A selection of the most significant results is given in. 
Annex 4. The trends and quantities indicated are only approximations. They 
may be invalidated by major events on the markets, such as changes in the 
marketing years. 
As could have been assumed, the relationship between the ACRs and market 
prices in national currency depends to a large extent on the nature of the 
common market organizations in question. The prices of products covered by 
an intervention mechanism are all linked to the ACRs in the short term, 
although the extent of these links varies. For the other products, the 
relationship between the two is either very general and discernible only in 
the medium to long term, or non-existent, at least in the short or medium 
term. 
(a) Products with an intervention price 
As regards cereals, normally market prices for common wheat and feed barley 
closely follow changes in intervention prices in national currency. The same 
applies to maize and durum wheat, with certain time lags at the beginning of 
the marketing year as a result of the dates of the actual harvests. 
Roughly speaking, a shift of 1% in the intervention price in national 
currency is reflected in a movement in the market price in the same 
direction, as a rule between 0.5% and 1.5%. 
However, to a certain degree prices are independent of monetary impact 
during the marketing year. As a rule, these independent variations are 
approximately + 2.5% at lea*st. As a result, the slight increase in the ACR 
for the BLF (1.5%) in October 1993 was not reflected in a clear rise in 
market prices. The effects of the increase in the-* ACR for the DKR (4.1%) in 
August 1993 were concealed by the price levelling at the beginning of the 
1993/94 marketing year. 
For sugar, although considerably influenced by major changes in ACRs, prices 
seem to be more independent of agrimonetary movements than is the case with 
cereals. 
- 18 -
Olive oil prices are also clearly influenced by the ACRs. However, although 
the general trends are the same, delays in price adjustments may exceed 
three months, and there are large independent variations. Compared with 
agrimonetary developments, these independent variations provoke significant 
overcompensation or undercompensation in relation to prices, often reaching 
10%. 
In the milk sector, the ACRs seem to have a very direct impact on market 
prices for butter. In those Member States in which the ACRs changed 
considerably, the.link between ACRs and the price of butter is practically 
automatic, for both upward and downward shifts: for the IRL, LIT, PTA and 
UKL, price rises reached 80% to 100% of the ACR increases. The extent to 
which prices change may be delayed by the effects of aid and export refunds 
As a rule, over the periods examined, butter prices did not fluctuate much 
apart from the monetary adjustments: + 2%. The fall of 4.25% in the 
intervention price at the beginning of the 1993/94 marketing year was 
reflected in market prices to a lesser extent and only after a delay, with 
possible compensation due to the increase in ACRs for the BLF, DKR, FF and 
IRL. 
In those currencies which were devalued sharply, milk powder (whole or 
skimmed) prices also closely follow the ACRs, both upwards and downwards, 
without major delays. However, there are wide variations within this 
tendency: price movements independent of the rates frequently exceed + 5%. 
In spite of the non-existent or slight influence of intervention prices, th« 
markets of those Member States involved in sharp devaluations have had to 
take account of prices charged on the main markets in terms of European 
production and consumption, expressed in currencies which have remained 
practically stable. 
In the case of cheese, the relationship between prices and ACRs is 
indiscernible in the short term (with the exception of Grana Padano in 
Italy). General price trends follow long-term monetary developments, but 
very rigidly and with few independent variations. 
In the beef/veal sector, ACR movements are also closely followed by price 
movements: an increase of 1% is reflected in a price increase of 0.5% to 
1.5%. 
However, price movements may not occur until after a delay of two to three 
months (United Kingdom, Greece). Furthermore, they may be distorted by very 
large variations independent of the monetary causes, as in Ireland. These 
variations can easily reach + 5% and totally cancelled out the effects of 
the increases of less than 1.5% in the ACRs for the BLF and FF. By contrast, 
the increase of 4.1% for the DKR in August 1993 was reflected in prices 
before being cancelled out by market developments. 
- 19 -
(b) Products with no intervention price 
Table wine prices did not follow the increases in the agricultural 
conversion rates for the PTA and LIT between July 1992 and August 1993. The 
contrary would have been surprising since the operative events for the ACRs 
applicable in this sector were all frozen at dates closely following the 
beginning of the 1992/93 wine year. Since 1 September 1993, after revision 
of the operative events, market prices have been catching up with the level 
reached by the ACRs. However, these price developments are gradual, and 
there are major variations. 
In the fresh fruit and vegetable sector, there are seasonal variations in 
apple prices and above all tomato prices, by a factor of 1 to more than 3, 
i.e. considerably greater than ACR variations. Only withdrawal prices are 
directly influenced by monetary developments since the reform of the 
operative events which took effect as from 1 July 1993. 
As regards livestock products, sheepmeat and pigmeat prices cannot be linked 
to the effects of the ACRs, at least in the medium term, because of the size 
of variations on the markets. 
(c) General consequences 
The main feature is that, for the majority of products, there are delays of 
several months in the effects of ACR movements on market prices. The effects 
make themselves felt earlier for those products subject to an intervention 
price system. Finally, whatever products are involved, the impact is 
significant only beyond a certain margin of independent variation in market 
prices. 
Obviously, the size of this margin depends on the products in question, but 
also on market conditions, and the time at which the monetary movement takes 
place. For example, market prices are sensitive to ACRs to a greater or 
lesser extent depending on whether intervention buying-in takes place, and 
the state of supply and demand. They are also influenced by the level of 
aid, intervention stocks and export refunds. In the case of those products 
for which there is no intervention, prices in some non-preponderant Member 
States may also be very closely linked to the ACRs", with markets being 
relatively fluid. 
- 20 
In general, the prices of the most sensitive products (for example cereals 
and butter) are influenced by shifts in the ACRs of more than 2%. For other 
prices there is a margin of the order of 5% (for example milk in some Membei 
States, beef/veal). The price of a large number of products changes by more 
than 10% without being influenced by the ACRs (for example olive oil and 
wine). Finally, the market prices of seasonal products appear to be 
unaffected by changes in ACRs, except as regards their floor prices. 
There are three major consequences of the above: 
As regards producer incomes, it is clear that there are wide differences 
in the impact of reductions in ACRs through prices. 
In addition, in the case of livestock products utilizing large 
quantities of cereals, the fact that prices for these are not very 
sensitive to a fall in ACRs should, in principle, produce an increase in 
incomes. 
Finally, in the case of Community aid granted directly to producers, ACR 
movements are passed on in full, but with a delay of up to twelve months 
as a result of the operative events. On the whole, whether income losses 
have agrimonetary causes or not must be examined case by case. 
From the point of view of the common agricultural policy, sharp 
devaluations have led to compensations received in national currencies 
developing in a way contradictory to the objectives of the reform. 
For example, for a producer who marketed his cereals at the beginning of 
the 1993/94 marketing year, a compensatory payment based on almost 30% 
of the fall in prices was granted. However, prices obtained in national 
currency were down on the preceding year by only 16% in LIT, 17% in PTA, 
18% in UKL and 20% in DRA. Therefore, for a large number of producers in 
these Member States, the reform of the CAP has led to a considerable 
increase in incomes, in particular as a result of the prices applied to 
the quantities marketed. 
The overall index of consumer price inflation is increased by about 0.3% 
in the short to medium term when the ACRs increase by 10%. 
This indicates the order of magnitude of the direct effects of 
agrimonetary variations in prices for basic agricultural products, 
without taking account of the greater or lesser extent to which their 
impact may be passed on to the level of consumer prices by the market. 
An idea of the scale of this impact for all Member States is given by 
the fact that 16% of household expenditure is allocated to food, and 
that 40% of the value of food depends on the value of agricultural 
production. 
21 -
In addition, as a result of the existence of the common market 
organizations concerned, the main agricultural products whose prices are 
influenced by ACRs in the short or medium term are: cereals and rice, 
sugar, milk and milk products, beef, some processed fruit and 
vegetables, olive oil, table wine and must. These products account for 
48% of the value of agricultural production. 
2. Effects on trade 
In general, and theoretically, prices affect trade when they do not undergo 
the same short-term shifts as the currencies in which they are expressed. In 
this way, devaluations stimulate exports and curb imports in the Member 
State whose currency is affected. Revaluations have the opposite effect. 
In the case of agricultural products, these phenomena, which apply to all 
sectors of the economy, are logically accentuated to the detriment of the 
Community budget if there are guaranteed prices which do not keep in step 
with monetary developments in all Member States. Under these circumstances, 
and in order to comply with the principles of the CAP in the single market, 
it is necessary that the ACRs should keep in step with changes in market 
rates, and that they should apply directly to the guaranteed prices, taking 
account of the operative events. 
However, changes in trade flows for monetary reasons can occur only if the 
price differential exceeds the costs, in particular the transport costs, 
generated by a change in the destination of the product. These costs depend 
in particular on the distances, means of transport and products concerned. 
Furthermore, unusual movements of goods occur only if there is sufficient 
probability of the price differences persisting over the period necessary to 
achieve the anticipated profit. 
Consequently, there is a margin of fluctuation of market exchange rates 
which does not make it necessary to adjust the ACRs, and thus justifies the 
introduction of thresholds. The optimum level of this ACR adjustment 
threshold is dependent on a very large number of factors which may be 
cyclical. To a certain extent this level must therefore be a standard level 
which could prove to be too high in certain circumstances and more 
restrictive than necessary in others. Practical experience indicates that a 
general level of 5 points should not be exceeded, since at that stage 
specific movements of goods between some Member States become clearly 
identifiable. 
22 
In cases where the range of the threshold is smaller than the margin of 
variation of those market prices which are independent of changes in 
conversion rates, it has hardly any impact on price developments. On the 
contrary, if it is higher than that margin of variation, it may provoke a 
delay in price adjustment. However, these delays concern price gaps which, 
by the definition of the threshold, are smaller than those which could lead 
to distortions of trade flows between Member States. Therefore, in theory, 
the ACR adjustment threshold has no distorting effects on trade other than 
those which are due to the fact that it is a flat-rate figure. 
From a practical point of view, the number, complexity and volatility of the 
factors which play a role in the effects of conversion rates on trade make 
it very difficult to analyse the causes of the movements observed. 
Furthermore, examination of the quantities of products which leave the 
territory of each Member State each month indicates that they are subject tc 
very wide variations which do not repeat each year. Examples of these 
variations are given in Annex 5. Under these circumstances, it is almost 
impossible to establish any average or precise statistical trend for monthly 
trade. Consequently, no statistical relationship can be identified in the 
short or medium term between these movements of goods and changes in ACRs or 
market prices. 
More generally, a comparison of the annual quantities exported to the rest 
of the European Union and non-member countries in 1992 and 1993 by those 
Member States whose currency was sharply devalued between those two years 
could have given some indication. Assuming that exports in 1992 were not 
exceptionally high, it is doubtful whether there was any monetary effect on 
those exports which did not expand notably in 1993. The results of this 
comparison are set out below in simplified form: 
Variations in exports to the European Union and non-member countries 
between 1992 and 1993 
+ or - = increase or decrease by more than 20% 
++ or -- = increase or decrease by more than 4 0% 
0 = variation of less than 20% 
UK IRL 
Wheat and barley + + -
Milk 0 - 0 ++ * 0 
Butter 0 -- -- 0 
Beef ++ - -- ++ 
Sheepmeat + -- -- ++ + 
Pigmeat ++ 0 ++ ++ + 
Wine + 0 + 0 ++ 
Fresh tomatoes -- ++ -- 0 
Apples -- + ++ ++ 
23 -
Exports of cereals from the United Kingdom increased, whereas cereals 
exports from Spain and Italy, which are smaller, fell. The effects of 
devaluations are far from obvious, in particular since in the United Kingdom 
market prices at the end of 1992 followed and even anticipated the increase 
in the ACR, which prevented the creation of competitive advantages of 
monetary origin. 
Trade in milk products did not increase significantly. In all those Member 
States which devalued their currency sharply, prices closely followed 
monetary developments, taking account of the conditions in and special 
characteristics of the market in question. 
Exports of beef from the United Kingdom increased considerably and a 
monetary influence cannot be excluded, since a delay in price adjustments in 
relation to ACR changes was observed at the end of 1992. Ireland does not 
seem to have benefited from the same movements, but on the one hand no delay 
in price adjustment of the same length was observed and, on the other, the 
UKL was devalued more than the IRL. 
As regards sheepmeat, there is an increase in exports from the United 
Kingdom and Spain, but this can hardly be explained by changes in the 
relationship between prices and the ACRs. 
Prices for pigmeat in those Member States with a relatively stable currency 
have been at a relatively low level since the beginning of 1993, with some 
major variations, in those Member States which devalued sharply, prices in 
national currency fell less sharply, although they did not compensate 
totally for the increase in the ACRs. Therefore, very broadly, there is a 
certain theoretical competitive advantage which in principle can be related 
to the increase in exports recorded. 
Exports of wine from Spain and Italy were encouraged by the fact that prices 
in national currency remained stable in PTA and even fell in LIT up to the 
end of the 1992/93 wine year. This downward trend is the result of a 
structural surplus of supply on the markets, in particular for the table 
wines marketed. Given the major devaluations of the LIT and PTA, the prices 
. of wine from Spain or Italy, expressed in a currency which did not change or 
changed only slightly, fell. 
Finally, movements of goods "for monetary reasons can, in agriculture as in 
the other sectors of the economy, be set off by price adjustments to changes 
in exchange rates which are neither complete nor immediate. 
24 -
In principle these distortions of trade flows are diminished in agriculture 
as a result of the guaranteed prices which speed up the rate at which the 
full effects of monetary movements are passed on. However, these distortions 
are not to be ruled out and, from a logical point of view, are even highly 
probable for a large number of products, although it would be difficult to 
demonstrate them statistically. Such distortions of trade are inherent in a 
system with large monetary movements in a single market without a single 
currency. 
3. Compensatory measures 
The only aid granted at least in part for monetary reasons has been national 
aid in some Member States. It is intended to offset the effects of major 
devaluations of the currencies of other Member States. 
A national aid scheme for small and medium-sized enterprises in Ireland was 
approved by the Commission in November 1992, for a period ending at the end 
of March 1993. The purpose, of this aid was to help businesses adapt to the 
market conditions which were suddenly created by the sharp devaluations in 
autumn 1992, in particular of the UKL. For food industries, or more 
precisely those which sell the products listed in Annex II to the Treaty, 
this aid was to be limited to training, market development or promotion 
measures. Certain investment subsidies and short-term loans were authorized 
under special conditions. 
Against the Commission's advice, the Council decided to recognize two French 
national aid measures as being compatible with the common market. The 
reasons given for these were, inter alia, monetary. The aid was granted for 
the 1993/94 marketing year in the sheepmeat sector and for the 1993/94 wine 
year. The justification for this aid was claimed to be the negative impact 
of devaluations of the currencies of other Member States in abnormally 
unfavourable market situations. 
No compensatory measures were introduced for revaluations, mainly because 
most of them fluctuated, but also because of legal constraints. 
The agrimonetary compensatory aid provided for in Articles 8 and 9 of 
Regulation (EEC) No 3813/92 was not triggered. 
The conditions laid down in Article 8 for nationally part-financed aid were 
never met. Since the beginning of the operation of the new agrimonetary 
arrangements, there has never been a 12-month period, for any floating 
currency during which the average ACR was lower than the average rate over 
the 12 months preceding that period. 
- 25 -
As regards the nationally financed aid referred to in Article 9 of 
Regulation (EEC) No 3813/92, it could have been justified in some Member 
States by the fall in prices in ecus of 1.29% which occurred as a result of 
the increase in the correcting factor for the ecu from September 1992 to May 
1993. . 
However, the grant of this aid is subject to conditions which the Council 
must lay down. Since the Council has not yet come to a decision, on the 
proposal submitted -by the Commission on 9 July 1993 for a Regulation on the 
grant of agrimonetary aid (COM(93) 297 final), it has not been possible to 
make provision for this aid. 
Article 7 of Regulation (EEC) No 3813/92 provides for the increase of 
certain amounts in ecus in cases where the equivalent amount in a national 
currency is reduced. 
The amounts concerned are aid granted per hectare or per livestock unit, 
together with aid of a structural or environmental nature. The ACRs 
applicable to these amounts, taking account of the operative events, are 
those at the beginning of the marketing year for aid per hectare (as a rule 
at the beginning of July) , and those at the beginning of January for other 
amounts. Thus, in principle, these amounts remain unchanged in national 
currency for a period of twelve months. 
The value of the increase in ecus is determined by the fall in the ACR 
applicable in a given year over the rate applicable in the preceding year. 
Since Regulation (EEC) No 3813/92 was amended by Regulation (EEC) 
No 3528/93, it is also conditional upon the rate being lower than the level 
in the year before the preceding year.. 
As regards the amounts financed by the EAGGF Guarantee Section, the 
conditions laid down in Article 7 of Regulation (EEC) No 3813/92 were never 
met by the ACRs- concerned. Only the ACR for the UKL applicable in 1994 fell 
below that in 1993, but it remains considerably higher than that in 1992. 
As regards the amounts financed by the EAGGF Guidance Section, the 
agricultural conversion rates are specified as being the same as those 
applicable for the entry into the accounts of expenditure under the general 
budget of the European Communities. These rates fell two years running for 
four Community currencies. The fall in 1994 over 1993 is 0.10% for the DKR, 
1.05% for the DM, 1.37% for the FF and 1.46% for the HFL. 
On 30 June 1994 reactions to requests for the application of Article 7 of 
Regulation (EEC) No 3813/92 were deferred in view of the proposal for a 
Council Regulation amending Regulations (EEC) No 2328/91 and (EEC) No 866/90 
to accelerate the adjustment of production, processing and marketing 
structures under the reform of the CAP. The Commission proposal comprises 
considerable increases in ecus of the amounts concerned and its adoption 
could make increases for agrimonetary reasons superfluous. 
- 26 -
4. Effects on the EAGGF Guarantee Section 
(a) Components of the real impact 
From an agrimonetary point of view, expenditure taken into account every 
month by the EAGGF Guarantee Section depends principally on the values of 
the following: 
the agricultural conversion rate used to establish the amounts to be 
paid in national currencies, i.e. the date of the operative event 
relating to the operation for which the expenditure was incurred, 
the rate applicable.for the entry into the accounts in ecus, i.e. the 
rate for the month in which the expenditure made in national currency is 
registered in the accounts; 
Furthermore, the switchover mechanism generates specific budgetary 
consequences. For example, any increase in the correcting factor leads to: 
a reduction in (corrected) ecus of prices and amounts linked to the 
market, at the beginning.of the following marketing year; 
an increase in the amounts in (corrected) ecus which are determined on 
the basis of the world market price in dollars. 
The agricultural conversion rates which influence expenditure in national 
currency are those applicable on the date of the operative event for the 
operation in question. It should be borne in mind here that the operative 
events were brought into line with the new agrimonetary arrangements as from 
the beginning of the 1993/94 marketing years, i.e. seldom before July 1993. 
51% of expenditure taken into account in 1993 relates to ACRs prior to 1993, 
established under the old agrimonetary arrangements. 
For 1994, forecast expenditure - which by its very nature corresponds to 
identifiable operative events - represents only 46% of expenditure in the 
budget. The operative events for the other expenditure may have taken place 
on several dates at some time in the past. For example, monthly export 
refund expenditure is an amalgam of advances on and balances of amounts due 
for exports which took place at least two months previously, but sometimes 
up to more than one year previously. 
Agrimonetary developments in the first half of 1994 will have a strong 
impact on the 1995 budget, especially the substantial proportion of it 
accounted for by aid per hectare. However, it will depend mainly on monetary 
developments as yet unknown on 30 June 1994. 
- 27 -
Under these circumstances, the effects of changes in ACRs on real 
expenditure from January 1993 to June 1994 can only be estimated very 
approximately. 
The fall in prices and certain amounts in ecus caused by the monetary 
realignments of 30 January and 13 May 1993 was 0.26% applicable from the 
beginning of the various 1993/94 marketing years. Therefore, it will almost 
exclusively affect budgets after 1993. 
Included in the supporting documents on the financial consequences of the 
proposals on prices and related measures for the 1994/95 marketing year 
(C0M(94) 10 final-Volume II) was a detailed analysis of the budgetary impact 
of the falls in prices in ecus due to all the monetary realignments from 
1992 to 1993. 
In general it is concluded that a 1% fall in ecus of the prices and amounts 
linked to the markets entails a reduction of 0.7% in EAGGF Guarantee Section 
expenditure for the 1994 financial year. This order of magnitude is 
confirmed by the work carried out on the basis of the preliminary draft 
budget for 1995. Thus, the fall in ecus in question brought about by the 
monetary realignments since 1 January 1993 produces a saving in Community 
expenditure of approximately ECU(B=budget) 67 million for 1994, and 
ECU(B) 70 million for 1995. 
World market prices expressed in dollars are not affected by'the switchover 
mechanism and therefore theoretically remain unchanged in dollars. On the 
other hand, any increase in the correcting factor for the ecu automatically 
leads to a fall in their equivalent value in (corrected) ecus. Therefore, 
world market prices expressed in (corrected) ecus fell by 0.87% from 
3 February 1993, then by 1.04% from 14 May 1993, in relation to the 
situation which would have occurred if the correcting factor for the ecu 
applicable on 1 January 1993 had not been changed. 
Export refunds fixed in (corrected) ecus felt the full impact of this 
increase in the correcting factor for the ecu in the cereals and sugar 
sectors. The amount of the refund for these products is established directly 
on the basis of world market prices in dollars converted into (corrected) 
ecus. For the other products, the level of export refunds is influenced by 
world market prices but the link is not as close. The effect of the 
correcting factor becomes less and less, at least in the short or medium 
term, in relation to other causes of variations. 
- 28 -
In addition, the amounts of the production refunds for starch and for sugar 
used by the chemical industry, and the aid for dried fodder and cotton, are 
adjusted rapidly and automatically on the basis of the variations in world 
prices expressed in dollars. 
The effects of the switchover mechanism on world market prices also have a 
direct impact on aid per hectare for oilseeds. However, the financial impact 
on the budget becomes apparent only from the budget year following the 
marketing year during which the monetary realignment in question took place. 
Finally, the budgetary impact of the effects of the switchover mechanism on 
the rates for converting the dollar into (corrected) ecus may be estimated 
for 1994 as indicated in Annex 6. According to these estimates, the increase 
in the correcting factor for the ecu implemented in 1993, i.e. 1.04%, led to 
additional expenditure of ECU(B) 78 million for the 1994 budget. This 
represents 1.04% of the expenditure concerned. 
The effects on the 1993 budget year are negligible and the effects on the 
1995 and subsequent budgets will depend on future dollar levels, world 
prices and the quantities concerned. 
(b) Estimate of the real impact 
In arriving at an approximation of the total real budgetary impact, the 
following were considered: 
expenditure taken into account for 1993, 
the estimate in January 1994 of appropriation requirements for 1994 (^, 
appropriation requirements in the preliminary draft 1995 budget. 
It is necessary to establish a reference situation^ which excludes almost 
all the effects of thresholds and the effects of the switchover mechanism. 
This situation is determined by the expenditure which would have been 
incurred if, since 1 January 1993, the ACRs had been equal to the 
representative market rates established on the basis of a correcting factor 
for the ecu frozen at its January 1993 level, i.e. 1.195066. 
(1) Supporting documents on the financial consequences of the proposals on 
prices and related measures for the 1994/95 marketing year 
(COM(94) 10 final - volume II). 
(2) The situation is called reference situation with regard to the assumed 
situations examined under point (c). 
- 29 -
For each of the financial years 1993 to 1995, expenditure was, firstly, 
broken down on a historical basis according to the national currency of 
payment and secondly, where possible, classified in accordance with the date 
of the operative event relating to the type of expenditure concerned. 
Expenditure relating to indiscernible operative events was spread out over 
the budget year. Thus, for each beginning of an agrimonetary reference 
period, the 1st, 11th and 21st of each month, there is a corresponding 
portion of annual expenditure, or forecast expenditure, which is influenced 
by the ACR applicable for that period, covering approximately ten days. 
The expenditure thus-broken down was adjusted to eliminate, in the case of 
the reference situation, the specific effects of the switch-over mechanism. 
Thus, for thé 1994 and 1995 financial years: 
expenditure which is affected by the agrimonetary reductions in prices 
and amounts in ecus, i.e. 58% and 48% of the budget respectively, was 
increased to cancel' out the 25% compensation for changes in the 
correcting factor in 1993; 
expenditure relating to amounts fixed directly on the basis of world 
prices was reduced by the effect on the conversion of the dollar of the 
increase in the correcting factor in 1993. 
It was necessary to replace the conversion rates used to establish the 
budget forecasts by the ACRs actually fixed for each agrimonetary reference 
period. In order to establish the reference situation, the rates used for 
the ACRs were the representative market rates, without application of the 
switch-over mechanism from 1 January 1993. 
A comparison of the results obtained in the two situations points to a cost 
due to the agrimonetary system of approximately: 
ECU(B) 107 million, i.e. 0.3% of expenditure, for 1993 
ECU(B) 456 million, i.e. 1.2% of appropriation requirements, for 1994 
ECU(B) 536 million, i.e. 1.4% of appropriation requirements, for 1995. 
(c) Comparison of monetary effects 
In order to analyse the agrimonetary costs in greater detail, in particular 
as regards the threshold and switch-over mechanisms, the budgetary effects 
of various assumed versions of the rules for adjusting the ACRs were 
simulated. 
30 -
Interpreting the results of these simulations is very difficult when the 
calculation has been made on the basis of budget years. For example, nearly 
half of 1993 expenditure does not depend on the ACRs in 1993, and, what is 
more, the value of the ACR on 30 June 1994, assumed to have "remained 
unchanged since then, has an exaggerated effect on expenditure for 1994 and 
1995. 
In order to avoid these difficulties, the simulations were carried out on 
the budget structure established in accordance with the criteria given under 
point (b) above, but using only that expenditure relating to operative 
events which took place from 1 January 1993 to 1 July 1994. 
Thus, the budget structure serving as a model represents 
ECU(B) 68 405 million, 32% of which is attributable to 1993, 45% to 1994 and 
23% to 1995. 
The results of the situation which actually occurred and of the following 
assumed situations were quantified, as compared with the reference 
situation: 
(a) Switch-over without threshold: ACRs equal to the representative market 
rates, multiplied by the values of the correcting factor for the ecu 
fixed in 1993 and 1994; 
(b) Fixed threshold, without switch-over: ACRs resulting from application of 
a fixed threshold of -2 to +2, but with no change in the value of the 
correcting factor for the ecu on 1 January 1993; 
(c) Continuation of the original rules: ACRs resulting from the rules 
originally laid down at the beginning of 1993: fixed threshold from -2 
to +2, correcting factor for the ecu linked only to the fixed 
currencies, at the level it was fixed at in 1993 and 1994; 
(d) Fixed threshold and switchover becoming floating: ACRs resulting from 
application of a fixed threshold of -2 to +2, but the correcting factor 
for the ecu as fixed until 1 August 1993 becomes linked to the floating 
currencies after that date, in order to prevent the agricultural 
conversion rates from falling below their level at 31 December 1992. 
(e) Asymmetrical and movable threshold since the beginning of 1993 : ACRs 
resulting from a threshold of (-2 to +3) movable up to a level of (0 to 
+5), applicable since 1 January 1993, with no change in the value of the 
correcting factor for the ecu on that date. 
The effects on Community expenditure of all these assumed situations were 
quantified on the basis of the same budget structure. Therefore, they can be 
compared with each other even if the intrinsic value of the results in 
millions of ecus is of little interest. It should be borne in mind that the 
resultant hierarchy of the various assumed situations reflects the monetary 
events actually recorded over the 18 months studied. 
31 
These effects, which are given in Part 1 of Annex 8, must be compared with 
the results given in Annex 7, as regards the changes in the ACRs, and may be 
summarized as follows : 
Almost 90% of the budgetary effects of the fixed ACRs is due to the 
switchover mechanism, and approximately 10% to the gaps between them and 
the representative market rates resulting from the thresholds and the 
special measures at the end of 1993. 
The fixed, symmetrical threshold from -2 to +2, without the switchover 
mechanism, would'have had a very minor budgetary effect, of 
approximately 13% of expenditure resulting from the fixed ACRs. 
The special measures taken at the end of 1993 and the changes to the 
system introduced in 1994 increased expenditure directly linked to ACRs 
by 18% compared to what would otherwise have occurred. 
The assumed situation of a switchover mechanism becoming linked to the 
floating currencies from August 1993 onwards would have increased 
agrimonetary costs by 19% in relation to the effects of the ACRs 
actually fixed. 
Application from 1 January 1993 onwards of the threshold mechanism 
adopted in 1994, without the switchover mechanism, would have reduced 
agrimonetary expenditure by 11% in relation to the expenditure resulting 
from fixed rates. 
In the case of assumed situations B and C in Annex 8, the results of which 
are given in the second and third indents above, the saving which would have 
resulted from application of the rules in question would have been 
accompanied by a significant fall in some ACRs and, in principle, would 
therefore have given rise to compensatory expenditure. The maximum costs of 
this compensation given in Annex 8 should be treated with particular caution 
in view of the approximations they contain. However, they do point to a 
considerable expenditure risk. '••_•• 
5e 
Summary of the economic and-f thânc-ial consequences 
1. In general, the effect of agricultural conversion rates on general price inflation is small for the 
European Union as a whole. Agricultural prices in national currencies follow shifts in the ACRs in the 
short or medium term only under special conditions. These conditions, which have the effect of 
strengthening the links between prices and ACRs, concern less than half of agricultural production, and 
this proportion is falling as a result of the reform of the CAP. Furthermore, the effect of ACRs on 
prices may occasionally be strengthened or diminished by the supply and demand situation, the grant of 
aid or export refunds, or stock levels. 
With the exception of a few rare occasions, there are always fluctuation ranges for the ACRs within 
which market prices do not show any specific reaction. These margins are very variable in size, but 
examination of the statistical data gathered over the period studied suggests that there is a minimum 
elasticity of prices in relation to the ACR of approximately 2%. 
2. For farm incomes, these ranges, the size of which must be assessed case by case according to the 
specific market situation, may cancel out any effect on prices of slight variations in the ACRs. By 
contrast, major shifts in the ACRs have a considerable and immediate effect in some product sectors. For 
example, in the case of cereals, the sharp devaluations at the end of 1992 and the beginning of 1993 ran 
counter to the objectives of the reform of the CAP in the Member States concerned. This means that 
compensation for income losses due to agrimonetary movements may be necessary, but not systematically. 
Consequently, whether and how much compensation should be paid must be examined in the light of actual 
circumstances. 
3. As regards trade, major devaluations logically create distortions of trade flows in the agricultural 
sector as in the other sectors of the economy, although they are difficult to quantify from a 
statistical point of view. This phenomenon is not due particularly to the agrimonetary system, but to 
the lack of a single currency, or at least strict monetary discipline, in the single market. 
For agricultural products, the existence of a buying-in mechanism at guaranteed common prices diminishes 
distortions, provided that the operative events for the ACRs applicable to those prices make it possible 
to pass on changes in the exchange rates directly and rapidly. 
However, a threshold for adjusting the ACRs to changes in market rates may bring some stability to 
agricultural prices without engendering specific movements of goods. The optimum level of this threshold 
depends on a large number of factors, some of which are highly dependent on the economic situation. It 
is therefore necessary to take a flat-rate level. The present level of five points must be considered to 
be the maximum possible, on average, for the European Union. 
4. Agrimonetary developments were given as part of the reasons for granting national aid in Ireland and 
France. The purpose of this aid was to diminish the effects of devaluations in other Member States. 
Not one of the compensatory mechanisms provided for in the event of revaluations was triggered on 
30 June 1994. The conditions for the floating currencies were not met as regards amounts covered by the 
EAGGF Guarantee Section. Furthermore, the Council rules necessary for granting most of the aid in the 
case of the fixed currencies have not been adopted. 
5. From the point of view of Community expenditure, the impact of the agrimonetary system results from the 
monetary gaps between the ACRs and the market rates for the (corrected) ecu, and from the switchover 
. mechanism. 
The monetary gaps were created either by the threshold mechanism or by the special measures freezing the 
ACRs at the end of 1993. The fixed, narrow threshold between -2 and +2 points has only a slight 
financial impact. The measures introduced from August 1993 onwards increased expenditure directly linked 
to the ACRs by 18% over that which would have been incurred had they not been introduced, but they 
avoided the need for compensatory measures. 
Apart from its impact on ACRs which it maintains or raises to a relatively high level, the switchover 
mechanism results in a fall in (corrected) ecus of prices and amounts linked to the market, as well as 
an increase in (corrected) ecus of the amounts fixed on the basis of world market prices in dollars. The 
overall cost of the switchover mechanism is approximately 90% of total expenditure due to agrimonetary 
developments from January 1993 to June 1994. 
In total, the cost of the agrimonetary system for the period under review is, very approximately, of the 
order of: 
ECU 107 million, i.e. 0.3% of expenditure taken into account for 1993 
ECU 456 million, i.e. 1.2% of appropriation requirements, in 1994 
ECU 536 million, i.e. 1.4X of appropriation requirements, in 1995. 
These costs would have been increased by about 19% if a switchover mechanism triggered by the floating 
currencies had been introduced in August 1993. They would have been reduced by 11% if the extended, 
asymmetrical and movable threshold applied since the beginning of 1994 had been implemented from January 
1993 onwards. 
^ 
- 33 
D. OUTLOOK FOR THE AGRIMONETARY SYSTEM 
In the longer term, an agrimonetary system laying down at least the 
agricultural conversion rate to be used will remain necessary for as long as 
CAP amounts in ecus have to be paid in the national .currency of any Member 
State of the European Union. The adoption of the ecu as a national currency 
by all or some Member States will require a revision of the basic 
agrimonetary Regulation and even its repeal Once the ecu becomes the single 
currency. That revision must apply from the beginning of the third stage of 
economic and monetary union, depending on the conditions prevailing. 
In the shorter term, on 1 January 1995 the agrimonetary system will undergo 
major changes: 
under Article 4a of Regulation (EEC) No 3813/92, the original rules for 
adjusting the ACRs will apply once more; 
under Article 13(2) of that Regulation, the switchover mechanism will no 
longer apply. 
In order to ensure that the effect of the elimination of the correcting 
factor for the ecu is financially neutral, the Commission may, pursuant to 
Article 13(1) of Regulation (EEC) No 3813/92, adjust the prices and amounts 
fixed in ecus before 1 January 1995. 
However, on the basis of this report and suitable proposals from the 
Commission, the Council may adjust the future agrimonetary policy in 
accordance with Article 13(2) of that Regulation. 
When the way the agrimonetary system for the single market has operated in 
the past and the development of the EMS are examined, the main issues 
arising fall under three headings: 
the way the system works^as a whole, 
stabilizing the ACRs, 
the need for compensation. 
However, the problems must be assessed within the framework of future rules 
required as a result of the GATT Agreements on the one hand and budgetary 
discipline on the other. 
For purposes of comparison, Annex 8 sets out the estimated costs of the 
various options for adjusting the agrimonetary system considered in this 
report. It should also be remembered that these results are based on the 
particular monetary developments observed from January 1993 to June 1994 and 
they could be profoundly affected by other developments. As regards the 
appraisal of the theoretical effect in the medium term, the conclusions 
suggested should be assessed with great caution. On the one hand, they are 
based on fairly imprecise approximations of the maximum compensation which 
may be granted while on the other hand they depend on the ACR at 30 June 
1994. The level of the ACR seems to be highly dependent on the economic 
cycle and could alter greatly if the date taken into account, i.e. the end 
of June, were changed by a few days. 
- 34 -
1. International and financial constraints 
(a) GATT Agreement 
As far as the application of an agrimonetary system is concerned, certain 
aspects of the agreement within GATT, applying from 1 July 1995 at the 
latest, should be reiterated: 
The customs tariffs agreed are expressed and must be observed in 
(budget) ecus. 
The commitments regarding domestic support are fulfilled where the Total 
Aggregate Measure of Support (Total AMS) remains below the level for 
1986-88 as reduced annually; the AMS depends in general, with the 
exception of negligible amounts, on the quantities produced and the 
institutional prices expressed in (budget) ecus. 
The commitments regarding export subsidies are to be observed, depending 
on the type of product, in terms of expenditure entered in the accounts 
in (budget) ecus. 
The provisions on due restraint are subject, for each type of product, 
to the limits decided during the 1992 marketing year: 
* on expenditure in (budget) ecus on certain aids, in particular most 
aids granted under the reform of the CAP, and 
* on domestic support as measured by the AMS. 
These international commitments conflict to a greater or lesser extent with 
the probable consequences of the various components of the present 
agrimonetary system. The 1986-88 level, which Total AMS must not exceed, and 
the maximum funds which may be allocated to export refunds are less binding 
than the 1992 level, to which the provisions on due restraint refer. 
The switchover mechanism reduces the Community preference since it raises 
the common prices expressed in (budget) ecus while the tariff protection at 
the frontier, agreed under GATT in (budget) ecus, remains unaltered. 
This mechanism increases the AMS and, to an even greater extent, refunds 
fixed on the basis of prices in dollars. However, in view of the level of 
the commitments in question, this risk of difficulties is fairly low at 
present. In the longer term, problems could arise. 
However, problems could arise very soon with the provisions on due 
restraint. Switchover brings about a simultaneous rise in the aids 
concerned, in particular those introduced under the reform of the CAP, and 
in total domestic, support. 
35 
In that case, assuming production remains constant, the effects of the 
switchover mechanism should be wiped out by decisions to reduce prices or 
aid. 
The threshold mechanism, which is not subject to the switchover, has no 
effect on the AMS since the latter is calculated in ecus on the basis of 
institutional prices, without using any exchange rate. 
However, as regards the commitments to be observed in terms of expenditure 
entered in the accounts, e.g. on export refunds and the aid referred to in 
the provisions on due restraint, the threshold mechanism plays a part during 
the double conversion carried out, firstly in the ACR and then in the rate 
applicable for entry in the accounts. 
As compared with the common levels fixed, the threshold mechanism results in 
a reduction in expenditure entered in the accounts in the case of currencies 
which are devalued and an increase in the case of currencies which are 
revalued. The symmetry in the way the threshold mechanism functions may 
involve systematic bias, and difficulties, albeit relatively limited, may 
arise with the provisions on due restraint. 
The compensation mechanisms which may be triggered in the case of 
revaluation involve the following possibilities: 
an increase in terms of ecus, i.e. for all Member States, in aid per 
hectare or per livestock unit and in amounts of a structural or 
environmental nature; 
the granting of compensatory aid for losses of income, falling 
progressively over three years and part-financed by the European 
Community to the extent of 75% or 50% depending on the region. 
As aid per hectare or per livestock unit is affected by the provisions on 
due restraint laid down in the GATT, an increase in the amounts in question 
should require reductions in the prices of the types of products concerned 
if the corresponding AMS for the same annual period and for subsequent 
periods does not fall spontaneously. 
Aid of a structural or environmental nature is in principle excluded from 
commitments on reduction and is therefore not subject to any constraint 
under GATT. Compensatory aid for agrimonetary losses of income could be 
classified in the same way if the amount is not tied to production, except 
in a previous reference period, and is not dependent on a particular crop. 
(b) Budgetary discipline 
Budgetary discipline, which was introduced by Council Decision 88/377/EEC 
(OJ No L 185, 15. 7,. 1,988,' p.29), requires that annual expenditure under the 
EAGGF Guarantee Section does not exceed the agricultural guideline. 
- 36 -
Following on the conclusions of the Edinburgh European Council of 11 and 
12 December 1992, the Commission proposed (OJ No C 68, 11.3.1993, p.6) that 
the Council replace Decision 88/377/EEC in order to maintain and strengthen 
budgetary discipline. 
As regards the switchover mechanism, certain possibilities of financing 
outside the agricultural guideline are provided for in Article 10 of the 
proposed Decision. In accordance with that European Council and having 
regard to the joint position adopted by the Council on 21 March 1994, those 
possibilities concern the direct consequences of an increase in the 
correcting factor for the ecu: 
maintenance or increase in the ACRs, 
increase in amounts fixed on the basis of world prices in dollars, 
reduction in prices and amounts in ecus to offset 25% of the increase 
due to the switchover mechanism. 
Under Article 10 of the proposed Decision, such expenditure incurred as a 
result of the monetary realignments within the EMS between 1 September 1992 
and 15 October 1997 may be financed from the monetary reserve. In the use 
use of the latter, financing this expenditure will compete with the 
financing of the consequences of the fluctuations in the dollar against the 
(budget) ecu. Where the reserve (ECU 500 million from 1995) is exhausted, 
suitable measures should be taken by the Council to replenish the EAGGF 
Guarantee Section funds. 
The exception regarding compliance with the agricultural guideline by the 
switchover mechanism does not apply beyond 1997. Accordingly, the total 
expenditure resulting each time the switchover mechanism is triggered should 
be financed within the guideline as from the 1998 financial year. 
Other agrimonetary expenditure should all be financed as of now within the 
agricultural guideline. 
The threshold mechanism may have a significant cost, as shown by the results 
in Annex 8, varying substantially depending on the rules adopted for 
adjusting the ACRs. Over the period of 18 months considered, only a system 
of narrow, fixed and symmetrical thresholds of between -2 and +2 could have 
limited expenditure to around 13% of that actually incurred (hypothesis B) 
while a system of wider, asymmetrical and movable thresholds (-2, +3) to (0, 
+5) would have left more than 90% of expenditure actually incurred 
(hypothesis B). 
An increase in ecus in aid per hectare or per livestock unit and in aid of a 
structural or environmental nature may result in considerable expenditure in 
view of the reform of the CAP. On the basis of appropriation requirements in 
the 1995 preliminary draft budget, a 1% increase in the aid in question 
would result in additional expenditure of almost ECU 210 million. 
- 37 -
The cost of aid to offset losses of income depends on the estimate of the 
actual loss suffered by the Member States concerned. As an indication of the 
magnitude of the financial risks incurred, the impact of a fall of 1%.in the 
ACR is close, as a general Community average, to 1.5% of the family farm 
income. 
Where the compensatory aid granted by the Member States were to make up a 
major proportion of farm income in the European Union the cost to the 
Community may prove very high despite national part-financing. 
2. Coherence of the system 
(a) * Abandonment of the switchover mechanism 
Linked to the agrimonetary concept of fixed currencies, the switchover 
system has not operated since August 1993 and will be abolished as from 
1 January 1995 pursuant to Regulation (EEC) No 3813/92. 
Despite the advantages it may have afforded as a guarantee for incomes of 
producers in certain Member States, an overall assessment of the switchover 
mechanism seems clearly negative. As a result of its effects on prices, its 
main drawback is the fact that it works counter to the objectives of 
controlling production laid down by the reform of the CAP; furthermore, it 
generates permanent, excessive Community expenditure by overcompensating 
across the board, in respect of all Member States and all products, losses 
of income of agrimonetary origin which have in fact been felt only in a few 
Member States and with regard to a few products. 
As to the future, a"~switchover system in a form adjusted to floating 
currencies which devalue only slightly would aggravate the difficulties 
experienced in the past and in particular its cost to the Community, as the 
results of hypothesis D in Annex 8 show. Furthermore, the mechanism in 
question would be incompatible with commitments under the GATT. In the 
longer term, as from 1998 observance of budgetary discipline could make it 
difficult for expenditure incurred by the switchover to be financed within 
the agricultural guideline. 
Where a- switchover mechanism in a degressive form is contemplated e.g. 
involving a gradual tailing-back of further increases in the correcting 
factor, the problems mentioned above would diminish or become temporary, 
even if lasting several years. However, in that case, the risks of serious 
difficulties in GATT would persist and politically sensitive price 
reductions in the national currencies of all the Member States would have to 
be accepted. 
Accordingly, the renewal of the switchover mechanism in any form can only be 
ruled out. 
38 -
(b) Conversion rate applicable to the common customs tariff 
The customs tariffs agreed under the GATT are expressed in (budget) ecus and 
replace the import levies on agricultural products fixed in (corrected) 
ecus. * 
The conversion rate provided for in the Customs Code (Article 18 of Council 
Regulation (EEC) No 2913/92, OJ No L 302, 19.10.1992, p.l) for the 
collection of customs tariffs in national currency is generally an annual 
rate. In view of the variations recorded in exchange rates, the CAP must 
apply a rate for the (budget) ecu which is closer to reality. By analogy 
with the application of the agrimonetary system to the common customs 
tariff, the agricultural conversion rates for the ecu could be used with no 
correcting factor. 
However, in so far as the need to adjust the conversion rate to the common 
customs tarrif is not specific to products listed in Annex II to the Treaty, 
it would be preferable to amend Article 18 of the Customs Code. 
(c) Conversion rate for structures 
Amounts covered by the EAGGF Guidance Section and fixed by the Commission 
are to be converted using the accounting rate^1' in accordance with the 
Structural Fund rules. The conversion rate applicable to amounts covered by 
the EAGGF Guidance Section and fixed by the Council is not determined by the 
Structural Fund rules. In accordance with Article 3(2) of Regulation (EEC) 
No 3813/92 and in order to ensure some measure of consistency with the 
amounts covered by the Structural Funds as a whole, conversion is carried 
out with a special ACR, specifically defined as equal to the accounting 
rate. -
Until the end of 1993, structure amounts for fisheries not covered by the 
Structural Funds were converted by means of the general ACR. Since 
1 January 1994, the FIFG (Financial Instrument for Fisheries Guidance) has 
been included among the Structural Funds. As a consequence, since that date 
FIFG amounts fixed by the Commission are to be converted using the 
accounting rate but those fixed by the Council are to be converted using the 
general ACR since there is no specific derogation covering that rate. As the 
situation regarding fisheries and agricultural structure amounts is 
analogous from the agrimonetary viewpoint, the same conversion rate should 
apply. Accordingly the derogation from the use of the general ACR introduced 
for the EAGGF Guidance Section could be extended to the FIFG. 
(1) The accounting rate is the rate for the (budget) ecu used to enter 
expenditure under the general budget for the European Union in the 
accounts. 
- 39 -
However, in the absence of a switchover mechanism, the difference between 
the accounting rate and the general ACR is not very great. In both cases, 
given the operative events which stabilize the conversion rates each year, 
there is divergence with the trend in the market rates. 
Accordingly, in view of the agrimonetary mechanisms to protect against falls 
in value affecting the amounts in question, it seems preferable to do away 
with the derogation relating to the general ACR which exists for 
agriculture. As a result, the ACR in force on 1 January each year would 
apply to amounts covered by the EAGGF Guidance Section and the FIFG which 
are fixed by the Council. 
(d) Period for which ACRs are fixed in advance 
The advance fixing of ACRs increases the risk of defection of trade flows 
since the gap between an ACR fixed in advance and an ACR in force may come 
on top of the differences with the market rates which the thresholds 
authorize. 
To limit such risks, Article 6 of Regulation (EEC) No 3813/92 only allows 
ACRs to be fixed in advance for certain types of amounts in ecus and for.a 
period of less than four months. 
Moreover, among the rules for determining and applying the ACR, Article 15 
of Commission Regulation (EEC) No 1068/93 provides for an adjustment of the 
ACR fixed in advance where the gap with the ACR in force exceeds 4%. 
Where the limit in the period for which the ACR is fixed in advance does not 
concern the whole duration of advance fixing of the amounts in ecus 
themselves, it may cause difficulties in trade. This constraint could be 
done away with without any significant increase in the risk of deflection of 
trade if the rule on the 4% threshold were to be strengthened by a Council 
provision. 
3. Stable agricultural conversion rates 
Stabilizing the ACRs evens out erratic or short-term movements in 
agricultural prices. It delays the adjustment of national agricultural 
prices to trends in currencies: As a consequence, it restricts any falls in 
farm income linked to revaluations and any increases in Community costs, 
linked to devaluations. 
Delaying adjustments to the real trends in currencies reduces changes in 
agricultural prices in anticipation of reductions in production costs due to 
revaluation or general inflation due to devaluation.. 
However, the stabilization of ACRs is limited by the risks of deflection of 
trade flows which it creates. In addition, in the case of strong currencies, 
deferred reductions in the ACR tend to increase Community expenditure. 
- 40 -
In certain monetary circumstances, the return to the original rules 
entailing a narrow, fixed threshold between -2 and +2 would certainly be one 
of the least costly possibilities. This would be the case, for example, if 
the DM and the HFL were the only strong currencies. However, this hypothesis 
would be less advantageous financially than others if the BLF and the FF 
were also strong currencies. Furthermore, at the end of 1993 such a fixed, 
narrow threshold was considered unsuitable in view of the risks of changes 
in ACRs as a result of the floating of currencies. A simulated trial of what 
would have happened if there had been no change in the threshold mechanism 
shows that the risk was quite real; however, the EMS has not evolved on this 
point. The results set out in Annex 8 for hypothesis B are highly influenced 
by the monetary trend concerned. The costs in question may explode in the 
case of a major revaluation, creating a conflict with GATT. 
The provisions on thresholds adopted in December 1993 have enhanced the 
stability of the ACR considerably and have allowed agrimonetary falls in 
prices to be avoided, which, in the case of certain currencies, would have 
been due to temporary strengthening. However, they have also prevented 
certain falls in ACRs which would simply have involved corrections to 
preceding increases, and have considerably increased certain risks of 
distortion of trade flows. 
The cost of the mechanism is limited by the fact that shifts in the 
threshold are limited to the magnitude and duration strictly necessary, but 
it is far from negligible (hypothesis E in Annex 8). 
Accordingly, the stability of the ACRs in 1994 should be preserved or 
strengthened with a concomitant fall in the risks incurred vis-à-vis 
Community costs and in some of the risks of a deflection of trade. 
(a) A symmetrically movable threshold 
Under the system applying in 1994, the asymmetry in the movability of the 
threshold between the level (-2, +3) and the level (0, +5) creates 
additional costs where there is an increase in the positive monetary gaps. 
In such cases, the fall in certain ACRs is slowed while the rise in other 
ACRs is speeded up. 
However, where the positive gaps fall below +3, the budget does not benefit 
from the savings which should be possible through slowing of increases in 
the ACRs for certain currencies where the negative gap falls below -2 
without exceeding the bilateral threshold of 5 points. 
- 41 -
For the threshold's movability to be symmetrical, the upper limit for the 
latter should be equal on a permanent basis to the highest possible gap. 
Thus, depending on the maximum positive gap," the threshold could fall 
between the minimum (-5, 0) and the maximum (0, +5) . Accordingly, there 
would be some compensation between excessive costs and savings on 
expenditure. 
One should not, however, expect such symmetry to bring about considerable 
reduction in expenditure as the threshold continues to be governed by the 
maximum positive gap and there is almost always one currency for which that 
gap is fairly high. A trial simulation of this rule along the lines set out 
in part C (4) (c) shows that with the monetary trend for the period January 
1993 to June 1994, there would have been no savings on expenditure. The 
results are given in Annex 8 in respect of hypotheses E and F. However, 
unnecessary expenditure should be avoided wherever possible. 
(b) Restricting the movability of the threshold 
Under the rules applicable in 1994, where the upper limit of the threshold 
approaches +5, the stability of the ACRs for weak currencies becomes 
critical as the possible margin of variation for negative gaps becomes very 
narrow. 
To avoid this difficulty, the movability of the threshold below its 
technical maximum of +5 should be limited. " ' 
The result would be a reduction in protection against falls in the ACRs. In 
cases of revaluations following earlier devaluations, which are fairly 
frequent, this permits savings without major difficulties. In other cases, 
an exceptional temporary overrun could be permitted to allow the situation 
to be examined and suitable solutions to be found, without creating the risk 
of disastrous deflection of trade. 
Overall, Annex 8 gives the .results of a trial simulation on such a rule of 
symmetrical movability, limited to between (-4, +1) and (-1, +4) (hypothesis 
H) . Over the eighteen-month period considered, that rule would have 
significantly reduced the agrimonetary cost without creating falls in ACRs 
below their June 1992 level. The limits which could have triggered falls 
have, however, been approached on several occasions and have thus almost 
triggered off costly compensation. 
(c) Reducing and varying the extent of the threshold 
The extent of the bilateral threshold, currently 5 points, was initially set 
at 4 points in early 1993. The actual extent is mainly limited by the risks 
of deflection of trade to which it gives rise. 
- 42 -
The optimum economic level for the threshold is not necessarily the same for 
all Community currencies taken in pairs or for all products or all periods 
of the year. It depends on the markets for the products in question and the 
cost of transporting such products between Member States. 
The five-point level adopted in late 1993 has always been considered the 
maximum average level as regards risks of deflection. 
It does not entail risks for trade in certain products, e.g. wine, between 
geographically distant Member States, like Ireland and Greece. However, it 
is likely to be too high for trade in important commodities like sugar or 
butter in the Benelux countries. Overall, to avoid all risks, it should be 
reduced. 
However, as the results of the trial simulation on hypothesis G as set out 
in Annex 8 show, the reduction to 4 points in the present bilateral 
threshold of 5 points destabilizes the ACR and increases Community costs. 
A reduction of the extent of the threshold between certain currencies, based 
on the proximity of the Member States concerned and therefore on the 
transport costs, could be envisaged. In spite of the complexity which this 
would introduce, each currency would maintain one single ACR under such a 
system. By contrast, variations in thresholds by type of product or type of 
amount should be ruled out totally from the technical and economic 
viewpoints. These hypotheses result in multiple ACRs for each currency and 
therefore lead inevitably to distortions between agricultural sectors and 
Member States. 
4. Compensation mechanisms 
As the switchover mechanism is ruled out, a reduction in the ACRs must be 
contemplated if they are to remain linked to monetary reality and if the CAP 
is to operate in the single market. 
The practical consequences of falls in the ACRs may be very different 
depending on the circumstances. Certain falls may be acceptable without too 
many problems. This is the case in particular of falls of slight magnitude 
or in the wake of recent increases, or in a context of rising prices, etc. 
No measure accompanying the fall in the ACRs then appears necessary. 
However, one cannot ignore the fact that the agricultural consequences of 
certain major revaluations occurring against a background of depressed 
markets may create considerable political, economic and social difficulties. 
In such cases, suitable measures to lessen the agrimonetary effects on 
incomes may be justified. 
- 43 -
However, given the implications they have, in particular financial 
implications, compensation mechanisms should not be triggered until the need 
for them has been confirmed, and they should be restricted to the most 
important cases. 
(a) Time limits for decisions 
The present rules compel the Commission to adjust the ACRs immediately once 
certain thresholds are attained. Having regard to the normal way the 
agrimonetary arrangements operate, this is necessary and economically 
justified. 
In the case of revaluations, the scale of their effects justifies the need 
for a reduction in ACRs to be confirmed by a clear monetary trend. 
Accordingly, the requirement that results triggering off reductions in ACRs 
should be confirmed over an additional reference period should be enshrined 
in the. rules. For several days there is a heightened risk of deflection of 
trade, but this is a controlled risk as a result of the possibility of 
shortening the reference period in question under the management committee 
procedure. 
In addition, for more sensitive cases, an additional period could be 
necessary where revaluations exceed a certain threshold to be established on 
the basis of the combined past devaluations and the periods for which they 
applied. 
This additional, temporary protection could be obtained by suspending, under 
the circumstances concerned, the reduction in the ACR concerned for a 
maximum of four consecutive reference periods. 
The introduction of this exceptional rule would involve all the less risk of 
deflection of trade because the extent and movability of the bilateral 
threshold will have been determined rigorously for the normal operation of 
the system, as proposed in point 2. Furthermore, this risk of deflection 
would in general be eliminated by the continuation of the adjustments to the 
other ACRs. In any case it could still be controlled by the introduction of 
protective measures. 
(b) Suitable measures . 
The financing of all agrimonetary compensatory measures by the EAGGF should 
be made within the annual level of the agricultural guideline, which may 
call for difficult choices. 
• 
Also, provision should be made for taking suitable compensatory measures, 
confined to "appreciable" revaluations with definite negative effects, 
i.e. those which exceed the preceding devaluations, taking the period they 
applied into account. 
- 44 -
The automatic measures currently provided for by Article 7 of Regulation 
(EEC) No 3813/92 may create difficulties with regard to commitments under 
the GATT or the EAGGF budget. As with the switch-over mechanism, this leads 
to a general increase in aid for all Member States and all the main product 
groups, although the potential>income losses are much smaller. From the 
viewpoint of GATT, the increase in "aid per hectare or livestock unit" 
should be offset by reductions in domestic support for each type of product 
concerned, either by taking advantage of low annual production or by 
reducing the guaranteed prices. 
Consequently, these provisions should continue to exist and apply 
automatically only in the case of amounts of a structual or environmental 
nature, which are often multiannual and granted on the basis of programmes. 
Elimination of the present rules on aid per hectare or livestock unit will 
make it neccesary to have national measures to protect the level of aid 
against falls of an agrimonetary origin. Therefore, in order to maintain the 
principles of the CAP, these measures can only be degressive and limited in 
time. 
The compensatory aid currently provided for in Article 8 of Regulation (EEC) 
No 3813/92 will continue to be compatible with GATT undertakings if they are 
determined on the basis of certain historical criteria. Their cost may 
remain limited, but there is a risk that they may get out of control if the 
Member States concerned account for a major part of agricultural incomes in 
the European Union. They can-only provide a solution after several months of 
difficulties, because a certain amount of time is needed to assess and 
confirm the impact of monetary developments on incomes. 
Therefore it may be necessary to adopt suitable measures in the very short 
term, having regard to the actual context of the fall in the ACR. These 
measures may be decided only if the actual prevailing conditions are known. 
Most factors affecting the decision are fairly short-term, namely the actual 
losses and direct compensation as a result of the trend in market prices, 
the general socio-political situation and the situation on the various 
markets, the funds available having regard to commitments under the GATT and 
budget resources. These measures should relate either to market support, 
including where applicable an increase in certain prices in ecus, or the 
granting or authorization of compensatory aids. 
- 45 -
In order not to relaunch the general debate on the agrimonetary system each 
time and to ensure that the rules laid down apply to operators for a certain 
period, changes to the rules regarding conversion rates should be excluded 
from measures which may be taken under the circumstances laid down here. 
The procedure for deciding on short-term compensatory measures in the case 
of an "appreciable" revaluation could be one of the procedures recommended 
by the Council*1' and already laid down for agrimontary protective 
measures. 
Under that procedure, the Commission would decide to apply any necessary 
market measures or additional aid measures. In the three working days 
following the communication of the Commission's decision, a Member State 
would be able to refer the decision to the Council, which would have one 
month to adopt a different decision where appropriate. 
(1) Article 3 of Council Decision 87/373/EEC laying down the procedures 
for the exercise of implementing powers conferred on the Commission 
(OJ NO L 197, 18.7.1987, p.33.). 
- 46 -
General conclusions 
1. Council Regulation (EEC) No 3813/92, which provides, as from 1 January 1995, for the discontinuation 
of the switchover system and a return to the original mechanism involving a fixed, narrow threshold 
between -2 and +2, may raise difficulties. 
The resulting arrangements would, in the current context of the EMS, involve significant instability 
in the ACRs as was feared at the end of 1993 when the Council decided to amend the rules originally 
laid down. Accordingly, relatively short-term monetary fluctuations could bring about disturbance on 
the market, falls in family farm incomes, and Community expenditure which is not strictly necessary. 
In the case of appreciable revaluations, the compensation mechanisms which should be triggered off 
at the request of the Member States concerned are highly likely to result automatically in major 
conflict with the provisions on due restraint agreed under the GATT and with the agricultural 
guideline imposed by budgetary discipline. In that case, harsh choices between the various levels of 
agricultural support would have to be made. The original 1993 system, although.not appearing very 
burdensome, thus entails serious risks of a surge in costs and of highly conflictual situations 
arising. 
2. Simply to carry over the agrimonetary rules existing at the end of 1994 does not appear a suitable 
solution either. It provides overprotection for certain positive monetary gaps and accelerates 
certain increases in ACRs at the expense of the Community budget. Furthermore, the enlarged five-
point threshold could create deflection in trade flows between certain neighbouring Member States. 
Furthermore, this situation maintains in principle the switchover mechanism, albeit rendered 
inoperable by the present rules of the EMS. That mechanism is incompatible with the reform of the 
CAP, the GATT Agreements and budgetary discipline in the medium term. Lastly, the mechanisms for 
compensation in the case of an appreciable revaluation are the same as those mentioned previously 
and thus entail the same drawbacks. 
3. As a consequence, in the light of experience and the changes in the background conditions, the 
agrimonetary system could apparently be improved by measures of three types: 
(a) Strengthening the way the system works as a whole 
Abandonment of the switchover mechanism, which is incompatible with the reform of the CAP, 
the GATT Agreements and budgetary discipline in the medium term. 
Technical adjustments relating to the conversion rates applicable for the common customs 
tariff and for structures, and detailed rules for advance fixing of the ACRs. 
(b) More stable ACRs 
Symmetrical threshold and limitation of its movability in order, under certain 
circumstances, to prevent unnecessary expenditure and reduce the frequency of devaluations 
induced by overprotection against falls in the ACRs; 
Possibility of reducing the extent of the threshold depending on the national currencies 
concerned, in order to avoid the risk of deflection of trade. 
(c) Revising the mechanisms for compensation 
Introduction of a short period for confirmation of movements in currencies before any 
reduction in ACRs. 
Introduction of a period suspending falls in ACR in the event of "appreciable" revaluations, 
i.e. those which go beyond preceding devaluations, taking account of the time they have 
applied. 
Limiting possibilities for triggering compensatory measures to cases of "appreciable" 
revaluations. 
Extension of the principle of the degressive, transitional compensatory aid mechanism to aid 
per hectare or livestock unit and the introduction of the possibility to take short-term 
measures. 
Annex 1 : AGRICULTURAL CONVERSION RATES 
( 1 ecu NC) 
Dates BLF DKR DM DRA ESC FF HFL IRL LIT PTA UKL 
N.B.: 
01/09/92 
31/12792 0) 48.5563 
48.5563 8.97989 
8.97989 2.35418 
2.35418 274.609 
292.133 203.418 
207.327 7.89563 
7.89563 2.65256 
2.65256 0.878786 
0.878776 1761,45 
1990.00 151.756 
161.262 0.795423 
0.897525 
01/01/93 
11/01/93 
01/02/93 
03/02/93 
01/03/93 
31/03/93 
01/04/93 
11/04/93 
21/04/93 
27/04/93 
01/05/93 
11/05/93 
18/05/93 
21/05/93 
28/05/93 
01/06/93 
21/06/93 
01/07/93 
21/07/93 
24/07/93 
30/07/93 
01/08/93 
11/08/93 
17/08/93 
21/08/93 
01/09/93 
14/10/93 
30/12/93 
01/01/94 
11/01/94 
21/01/94 
01/04/94 
21/05/94 
01/06/94 
21/06/94 
30/06/94 (2) 
(3) 
(4) 
(5) 
(6) 
(7) 48.5563 8.97989 2.35418 
49.3070 
49.3070 9.14292 
9.34812 
9.34812 2.35418 310.351 
314.412 
315.843 
319.060 
322.728 
328.567 
331.890 
334.226 
337.814 
342.048 
346.789 
346.789 209.523 
212.128 
214.525 
222.758 
223.071 
228.151 
233.112 
236.933 
239.331 
239.331 7.89563 2.65256 0.878776 
0.957268 
0.976426 
7.95622 
7.98191 
7.98191 2.65256 0.976426 2087 
2133 
2156.72 
2207.67 
2262.06 
2287.88 
2264.05 
2230.20 
2226.76 
2195.05 
2194.16 
2191.78 
2166.58 
2222.98 
2264.19 
2274.93 
2274.93 166.075 
166.261 
169.628 
176.247 
176.451 
179.488 
182.744 
186.835 
190.382 
192.319 
192.319 0.939052 
0.951031 
0.968391 
0.980715 
0.978559 
0.970726 
0.964017 
0.959111 
0.948645 
0.937041 
0.930787 
0.920969 
0.920969 
(1): Level before the monetary movements in automn 1992. Rate for the PTA applies to cereals. Correcting factor for the ecu 1.145109. 
(2): Beginning of monetary system for single market. Correcting factor for the ecu 1.195066. 
(3): Monetary realignement: 10% devaluation of the IRL. Correcting factor for the ecu 1.205454. 
(4): Monetary realignement: ESC devalued by 6.5% and PTA by 8%. Correcting factor for the ecu 1.207509. 
(5): On 02/08/93, fluctuation range of exchange rate mechanism of EMS extended to 15%. 
(6): From 10/09/93, suspension of original rules for adjusting the agricultural conversion rate. 
(7): From 22/12/93, amendment of basic agrimonetary Regulation. 
P 
Annex 2: MONETARY GAPS BY REFERENCE PERIOD 
Period 
01 - 1993 
1 
2 
3 
02 
1 
2 
3 
03 
1 
2 
3 
04 
i 
2 
3 
05 
1 
2 
3 
06 
1 
2 
3 
07 
1 
2 
3 
08 
1 
2 
3 
09 
1 
2 
3 
10 
1 
2 
3 
11 
1 
2 
3 
12 
1 
2 
3 
01 - 1994 
1 
2 
3 
02 
1 
2 
3 
03 
1 
2 
3 
04 
1 
2 
3 
05 
1 
2 
3 
06 
1 
2 
3 BLF 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
-1.320 
-1.245 
-1.317 
T-2.460 
-1.849 
-1.918 
-2.808 
-2.038 
-1.596 
-0.593 
-0.054 
0.309 
1.021 
1.283 
1.504 
1.252 
0.897 
1.397 
1.750 
2.195 
2.278 
2.248 
2.497 
2.641 
2.381 
2.419 
2.531 
2.671 
2.630 
2.742 
2.581 
2.786 DKR 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
-2.000 
-1.759 
-1.996 
-1.843 
-1.402 
-0.351 
0.175 
0.405 
0.504 
1.082 
1.341 
1.574 
2.054 
2.257 
2.393 
2.557 
2.714 
2.455 
2.398 
2.081 
2.134 
2.284 
2.503 
2.049 
2.117 
2.010 
1.949 
2.370 
2.342 
2.384 
2.233 
2.409 DM 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
1.176 
1.664 
1.493 
2.115 
1.770 
1.914 
2.135 
2.534 
1.914 
1.640 
1.506 
1.465 
1.146 
0.971 
0.795 
0.615 
0.372 
0.276 
0.255 
0.569 
0.594 
0.786 
0.923 
1.110 
0.785 
0.700 
0.833 
0.971 
0.907 
1.032 
0.878 
1.066 DRA 
0.000 
-0.479 
-0.979 
-0.666 
-1.122 
-1.181 
-1.627 
-1.874 
-2.121 
-1.327 
-1.576 
-1.928 
-1.808 
-1.930 
-1.575 
-1.764 
-1.988 
-2.000 
-1.029 
-1.104 
-0.819 
-1.170 
-1.718 
-1.665 
-1.164 
-1.628 
-2,987 
-2.865 
-3.334 
-1.888 
-1.163 
-0.845 
-1.047 
-1.296 
-1.550 
-1.741 
-1.023 
-1.380 
-0.709 
-0.812 
-1.028 
-1.250 
-1.348 
-1.366 
-1.647 
-1.085 
-1.483 
-1.373 
-1.419 
-1.576 
-1.269 
-1.165 
-1.848 
-1.406 ESC 
-0.787 
-0.134 
-0.540 
-0.567 
-1.375 
-1.974 
-1.260 
-1.532 
-2.035 
-1.144 
-1.232 
-1.512 
-1.808 
-1.873 
-1.102 
-0.977 
-1.062 
-0.928 
-0.878 
-1.139 
-2.000 
-1.166 
-0.277 
-0.068 
0.153 
0.040 
0.251 
0.003 
-0.348 
-0.320 
-0.670 
-0.310 
0.156 
-0.027 
-0.280 
-0.479 
-0.577 
-0.425 
0.087 
0.272 
0.379 
0.217 
-0.314 
-1.142 
-1.266 
-1.384 
-0.135 
-0.644 
-1.057 
-1.324 
-1.583 
-1.023 
-1.299 
-1.181 FF 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
-2.000 
-2.000 
-1.397 
-1.572 
-1.109 
-0.912 
-0.855 
-1.450 
-1.237 
-1.157 
-0.870 
-0.645 
-0.218 
0.194 
0.194 
0.334 
0.210 
0.111 
0.159 
0.232 
0.347 
0.447 
0.591 
0.291 
-0.102 
-0.275 
-0.342 
-0.078 
-0.128 
0.192 
0.250 
0.407 HFL 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
0.000 
1.311 
1.743 
1.730 
2.429 
2.083 
2.245 
2.414 
2.703 
2.206 
2.023 
1.091 
1.857 
1.685 
1.568 
1.383 
1.331 
0.988 
0.837 
0.820 
1.023 
0.964 
1.121 
1.175 
1.309 
1.159 
1.075 
1.101 
1.320 
1.296 
1.497 
1.375 
1.618 IRL 
0.000 
0.000 
0.000 
0.000 
-2.000 
-2.000 
-2.000 
-2.000 
-2.000 
-2.000 
-2.000 
-2.000 
-2.000 
-2.000 
-2.000 
-2.000 
-2.000 
-2.000 
0.000 
0.000 
0.000 
0.000 
0.261 
-1.148 
-1.246 
-1.662 
-1.708 
-1.330 
-0.430 
-0.274 
-0.371 
0.043 
0.445 
1.314 
1.546 
1.387 
1.710 
3.115 
4.062 
4.025 
3.380 
2.075 
2.225 
2.133 
1.550 
1.195 
1.157 
2.186 
2.165 
1.672 
2.523 
2.107 
2.468 
1.995 LIT 
-0.997 
-1.982 
-0.950 
-1.220 
-0.776 
-2.253 
-2.419 
-1.435 
-2.400 
-1.155 
-1.240 
1.308 
1.474 
2.000 
2.000 
1.727 
1.912 
2.000 
1.138 
0.588 
-0.409 
-1.321 
-1.067 
-1.205 
-1.870 
-2.843 
-2.647 
-3.483 
-4.291 
-1.129 
-0.504 
-1.266 
-2.153 
-3.390 
-3.661 
-3.543 
-1.776 
-1.059 
-0.477 
-0.600 
0.083 
0.123 
-0.371 
-1.404 
-1.326 
-0.597 
1.445 
1.938 
1.649 
1.491 
1.765 
0.949 
0.554 
-0.032 PTA 
0.000 
-0.134 
-0.157 
0.257 
-0.428 
-0.843 
-1.460 
-0.848 
-0.611 
-0.590 
-0.897 
-2.114 
-1.940 
-1.733 
-2.000 
-1.848 
-0.022 
1.038 
1.074 
1.081 
-0.530 
-1.936 
-0.467 
-0.289 
1.506 
1.650 
2.813 
2.508 
2.013 
2.467 
2.943 
2.553 
1.653 
0.863 
-0.251 
-0.399 
-0.757 
-1.028 
-0.284 
0.845 
1.070 
0.613 
0.933 
0.231 
0.410 
0.783 
1.726 
1.119 
1.037 
0.478 
-0.139 
0.193 
0.310 
0.021 UKL 
-2.000 
0.374 
0.411 
-1.293 
-2.089 
-2.590 
-1.290 
-0.027 
0.860 
1.656 
2.000 
2.000 
1.965 
1.400 
1.493 
1.383 
0.521 
1.229 
1.079 
2.438 
2.000 
1.044 
1.067 
0.374 
-0.218 
-0.879 
-1.444 
-1.859 
-1.522 
-1.864 
-1.015 
-0.419 
0.041 
0.585 
0.877 
0.536 
0.667 
1.503 
2.429 
2.351 
1.621 
0.489 
0.439 
0.452 
-0.368 
-1.079 
-1.018 
-0.590 
-0.672 
-1.549 
-1.201 
-1.881 
-1.012 
-1.660 
ANNEX 3-1 : CHANGE IN REPRESENTATIVE MARKET RATES (IN BLACK) AND AGRICULTURAL CONVERSION RATES (IN WHITE) FROM 
JANUARY 1993 TO JUNE 1994 
ANNEX 3-2 : CHANGE IN REPRESENTATIVE MARKET RATES (IN BLACK) AND AGRICULTURAL CONVERSION RATES (IN WHITE) FROM 
JANUARY 1993 TO JUNE 1994 
ANNEX 4-1 : MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 
CEREALS 
Intervention price (in black) and market price (in white) 
for common wheat (lozenge) and barley (triangle) 
180 
160 h 
140 h 
120 — 
100 L- *#^ 
80 
60 '—'-<-r^rtrért^^^A, 
'''' '''' I I l_l ''''' i_J I I I I I I I I I I l—J I L_ 0 
180 
160 
140 h 
120 \-
100 
80 h 
60 -J_J i i i I_J i i i i i i i i , i i i i i i i i—1_ ' ' i ' i i 
7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 789 10 11 12 1 2 34 56 78910 11 12 1 2 3 4 56 
BLF 
180 r-
160 \-
140 
120 h 
100 
80 
60 _l 1_J l_J l_l L-l I I I I I I I I I I L_ 180 
160 
140 
120 
100 
80 
30 I i i i i i i i i i L_J L. -*»••••-
i ; i i i i, i i i i 
7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 
ANNEX 4-2 : MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 
OLIVE OIL : 
Intervention price (in black) and 
market price for extra virgin oil (in white) SUGAR : 
Intervention price (in black) and 
market price for white sugar (in white) 
0 
140 
130 
120 
110 
100 
90 »• • ¥%^%^%**^Z~ .Hm^H^^^^^ 
7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 -J I I I I I 1_J I I I I I I I I I I I U-J I 1 I I I I I I I 11,1 1—1 I I II l__l I I I U-l l_ 
7 8 9 10 11 12 ^1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 
140 
130 
120 
110 
100 IËSP] 
90 i • ' • i i i i i i i_j i i i i i i i i i i i i i i i i i i i i i i i i i—i i i i i i i i i i i— 
7 8 9 10 11 12 1 2 3 4 5 Ê 7 8 9 10 11 12 1 2 3 4 5 6 90 E3 
140 
130 
120 
110 
100 h •••••oooo ^••••••••••••••••••••» 
o 
_l_l I I I.I I I 1—1 I I I_ 
7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 
ANNEX 4-3 : MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 
MILK PRODUCTS 
Agricultural conversion rate (in black) and market price (in white) 
for butter (lozenge) and whole milk (triangle) 
130 
120 
110 
100 
90 
80 *<^4?-S,J°S7-5?vvj«,LV 
_l l_J I I I I l_ 130 
120 
110 
100 
90 
7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 80 I—i i.i i i fêsp) 
4rf> <~rO O-Cr ••»•»»••••• 
V^V^S'^^WW 
7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 
130 
120 
110 
100 
90 
80 a 
•^??U%979V?^ 130 
120 
110 
100 
90 
80 -J I I I I L. a 
,»•••••••••»•••••»••••••• 
-l—I—l—l i_ 
7 8 9 10 11 12 1 23456789 10 11 12 1.2 3466 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 
ANNEX 4-4 : MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 
BEEF 
Intervention price (in black) and market price for carcases (in white) 
140 
130 
120 
110 
100 
90 ED 
\- *%+• • »r+> • • • 
••••••»•»••••••••••• 
-I I I I I L. 
7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 
140 
130 !-
120 
110 
100 
90 l**?tï 
_l I l__l I u -I I I I I I I I I I—I I—1—I—I—I—i-140 
130 
120 
110 
100 
90 I—i i i i i i i i i a 
• •••••••••••••••4 
7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 
ANNEX 4-5 : MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 
FRESH FRUIT AND VEGETABLES 
Agricultural conversion rate (in black) 
and market price (in white) for apples 
(lozenge) and tomatoes (triangle) TABLE WINES 
Agricultural conversion rate (in black) 
and market price for wines of type Rl 
(in white) 
400 
300 
S? 200 [ESP] 
100 h 
0 '—^-_l I I I L_! I I I I I I I I I I I I I I L_J I I I I I I I I L. •a 
140 
120 
80 
60 _l I I I I I I I I I I I I I I I I I I l_l L_J I I L_l I • 1 
789 10 11 12 1 23456789 10 11 12 1 23456 789 10 11 12 1 2 34 56 789 10 11 12 1 2 3 4 56 
400 
300 h 
200 h 
M/V 
100 h 
0 '—>-\PJ} 
<W##^^v^^^^^i' T 
' i I l_J u 
7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 140 
120 
100 
80 *+* /% ^***-»»»»»»»^r,r'r" +* ••••••••••• 
60 I—i • • ' i -I_J—i i i i i i i i i i i i i i i i '''' 
789 10 11 12 123456789 10 11 12 1 23456 
^ 
^ 
ANNEX 4-6 : MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 
PIG MEAT 
Agricultural conversion rate (in black) 
and market price for meat of class 1 
(in white) SHEEP MEAT 
Agricultural conversion rate (in black] 
and market price for lamb carcases 
(in white) 
140 
120 h S 
•••••»»••••••»•••••» 
60 i. i i.i i i i i i u. ' ' I__I i_i i i i i_i i i i i i i i i_ -J I I I I I I L. 
789 10 11 12 1 23456789 10 11 12 123456 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 
140 
120 
100 
80 
60 '—L-t-•»••••»•••••••••••••• 
i i l i i I I I I I l__l I I I I I I—I—I L_l—I—l_J—I—I—I—I—I I, I l_J—I—l_i_ 180 
160 
140 h 
120 
100 
80 I I I I I ! I I I ! I I I I I I I I I I I I I I I I—J L_l L_J I I ''''''I' 
789 10 11 12 1 23456789 10 11 12 1 23456 7 8 9 10 11 12 1 2- 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 
ANNEX 5: MONTHLY EXPORTS 
UNITED KINGDOM - MILK ('000 T) 
j i i i i_ 
OND J FMAMJ J A S OND J F MAM J J A S OND 
SPAIN - CEREALS fOOOT) 
-*—t OND J FMAMJ JASONDJ FMA A S O N D 
ITALY - WINE ÇOOO T) 
L_ I I I L_ ^J I I 1 1 1 
OND J F MA M J JsA SO N D J F MA M J J A S O N D 
S? 
(PUOH/EH/1551) 
A H N EX 6 
Impact on refunds and aid of the dollar 
effect of the ecu correcting factor 
Amount 
A 
Export refund 
Common wheat 
Barley 
Ualze 
Durum wheat 
Rye 
Rice 
Sugar 
Production 
refund 
Starch 
Sugar for the 
chemical Industry 
Aid 
Oilseeds 
Dried fodder 
Cotton 
T 0 1 A L mor Id price 
$/t 
B 
92 
12 
120 
192 
61 
350 
280 
192' 
(V 
265 
121 
416 
-Price effect 
of correcting 
factor 
ecu/t 
C 
0,69 
0,54 
0,90 
1,44 
0,46 
2,63 
2,10 
1,44 
(2) 
0,91 
3,12 
-Quantities 
concerned 
1 000 t 
D 
20 883 
8 778 
3 888 
1 016 
500 
120 
2 970 
1750 
4 541 
1 085 
-Impact on 1994 
expenditure 
ECU a 
(budget) 
E 
17,2 
5,7 
4,2 
1J 
0,3 
0,4 
7,5 
3,0 
0,4 
28,6 
4,9 
4,0 
77,9 
A: Amounts directly dependent on a world market price In $ 
B: Estimate of the prices or price percentages In $ directly linked to the amounts to be fixed and with an 
Impact on 1994 expenditure. 
C: Effect based on an average exchange rate of $1 = (budget) ECU 0.87 and an ecu correcting factor of 
1.195066 on 1.1.1993 and 1.207509 on 14.5.1994 
E: (C) X (D) X 1.195066 
(1) Same effect (0.5%) as for export refunds on sugar 
(2) 10% reduction In aid Instead of 11% 
*S 
ANNEX 7: CHANGES IN THE AGRICULTURAL CONVERSION RATES 
UNDER VARIOUS ADJUSTMENT RULES 
Rules for adjusting the 
agricultural conversion rates (ACRs) BLF DKR DM DRA ESC FF HFL IRL UT PTA UKL 
00 
01 Reference: ACR with no threshold, no "switch-over" 
Situation which actually occurred % 
N + 
N-
% 
N + 
0 -2.3 
11 
23 
1.6 
1 
0 0.6 
11 
23 
4.1 
2 
0 -2.1 
17 
17 
0 
0 
0 12.1 
42 
11 
11.7 
10 
0 13.5 
35 
18 
14.2 
6 
0 -0.4 
12 
22 
1.1 
2 
0 -2.6 
18 
16 
0 
0 
0 7.8 
17 
17 
11.1 
2 
0 6.9 
29 
24 
9 
7 
5 14.6 
27 
26 
15.8 
6 
0 -3.3 
22 
31 
-1.9 
3 
7 
PART ONE 
A 
B 
C 
D 
E ACR with no threshold, 
with "switch-over" for the fixed currencies 
ACR with fixed threshold (-2,-1-2). 
with no Iswitch-over" 
ACR with continuation of the original rules 
ACR with fixed threshold (-2,+2), with 
"switch-over" becoming floating as from august 1993 
ACR with asymmetrical threshold (-2,+3), 
movable to (0.+5), with no "switch-over" % 
N + 
N-
% 
N + 
N-
% 
N + 
N-
% 
N + 
N-
% 
N + 
N--1.3 
10 
22 
-0.8 
1 
2 
0.3 
3 
2 
1 
3 
2 
1.7 
2 
0 1.6 
11 
21 
2.3 
3 
4 
3 
2 
1 
4.1 
3 
2 
4 
3 
0 -1.1 
17 
15 
-1.6 
0 
4 
-0.5 
0 
2 
0 
0 
0 
0 
0 
0 13.3 
44 
9 
10 
14 
0 
11 
13 
0 
11.9 
15 
0 
11 
14 
0 14.7 
37 
16 
12.9 
6 
0 
14.2 
6 
0 
14.3 
6 
0 
13.2 
9 
0 0.7 
12 
20 
0.1 
1 
0 
1.1 
2 
0 
1.3 
4 
0 
0.9 
1 
0 -1.6 
19 
13 
-1.7 
0 
4 
-0.7 
0 
2 
0 
0 
0 
0 
0 
0 8.9 
18 
15 
7.7 
3 
2 
8.8 
2 
2 
9.6 
4 
1 
10.9 
5 
0 8 
30 
23 
7.3 
8 
5 
9.1 
9 
6 
9.9 
9 
6 
8.4 
9 
1 15.8 
28 
25 
13.5 
7 
2 
14.7 
7 
2 
15.5 
6 
1 
14.8 
6 
0 -2.3 
22 
31 
-2.3 
3 
9 
-2 
4 
8 
-0.5 
5 
8 
-0.6 
3 
2 
PART TWO 
F 
G 
H ACR with 5-point threshold, movable between (-5,0) 
and (0.+5), with no Iswitch-over" 
ACR with 4-point threshold, movable between (-4,0) 
and (0.+4), with no *switch-over" 
ACR with 5-point threshold, movable between (-4. + 1) 
and (-1.+4), with no "switch-over" % 
N + 
N-
% 
N + 
N-
% 
N + 
N-1.7 
2 
0 
0.1 
4 
1 
1.7 
2 
0 4 
3 
0 
2.3 
3 
1 
3.2 
2 
0 0 
0 
0 
0 
0 
0 
0 
0 
0 11.2 
15 
0 
10.8 
17 
0 
11.2 
12 
0 13.5 
7 
0 
13.5 
7 
0 
13.6 
7 
0 0.9 
1 
0 
1.5 
1 
0 
0.9 
1 
0 0 
0 
0 
0 
0 
0 
0 
0 
0 10.9 
5 
0 
8.8 
6 
1 
8.7 
4 
1 8.3 
5 
1 
9.1 
10 
1 
8.3 
6 
1 14.8 
5 
0 
15.7 
9 
1 
14.2 
4 
0 -0.6 
1 
1 
-2.4 
1 
2 
-1.7 
2 
2 
% = Changes from 01.01.1993 to 30.06.1994 N+ et N- = Numbers of increases (devaluations) and decreases (revaluations) 
ANNEX 8: COMPARISON OF THE COST OF VARIOUS RULES FOR ADJUSTING 
THE AGRICULTURAL CONVERSION RATES 
(Budget) ecu million 
Rules for adjusting the 
agricultural conversion rates (ACRs) Effects of changes 
in ACRs/1.5 years 
(1.1.93/1.7.94) 
0) |%c*(a). Theorical medium—term effects 1993/97 
ACR 
'3.5 years 
(?) Î Aid 
/4 years 
(3) 1 Incomes 
/3 years 
(4) TOTAL 
average / year 
(5) | % Main 
Observations 
00 
01 Reference: ACR with no threshold, no "switch-over" 
18-month budget: ecu 68405 m (a) 
Situation which actually occurred 0 
688 0 
+ 1.01 0 
1726 2184 
0 572 
0 551 
483 100 
(+14) 
-12 
(100) ACRs unstable. 
Cost of compensation very high. 
Incompatible with the GATT. 
Costly over protection 
of some positive gaps. 
Threshold sometimes too high. 
PART ONE 
A 
B 
C 
D 
E ACR with no threshold, 
with "switch -over" for the fixed currencies 
ACR with fixed threshold (-2,+2), 
with no "switch-over" 
ACR with continuation of the original rules 
ACR with fixed threshold (-2,+2), with 
"switch-over" becoming floating as from august 1993 
ACR with asymmetrical threshold (-2,+3), 
movable to (0.+5), with no "switch-over" 630 
89 
582 
817 
611 +0.92 
+0.13 
+0.85 
+ 1.19 
+0.89 1300 
-146 
1179 
1990 
1430 1344 
1428 
588 
0 
0 272 
316 
104 
0 
0 709 
337 
491 
561 
408 +29 
(+47) 
-39 
(-30) 
-11 
(+2) 
+2 
(+16) 
-26 
(-16) (For reference) 
Strong risk of high 
automatic compensation, and 
difficulties with the GATT (With 
different monetary changes). 
Compensation for 
conjunctural revaluation. 
General overprotection of 
the "switch - over". 
Incompatible with the GATT. 
Costly overprotection 
of some positive gaps. 
Threshold sometimes too high. 
PART TWO 
F 
G 
H ACR with 5-point threshold, movable between (-5,0) 
and (0.+5), with no "switch-over" 
ACR with 4-point threshold, movable between (-4,0) 
and (0.+4), with no "switch-over" 
ACR with 5-point threshold, movable between (-4.+ 1) 
and (-1.+4), with no "switch-over" 616 
674 
520 +0.90 
+0.99 
+0.78 1453 
1438 
1128 0 
0 
0 0 
0 
0 414 
422 
330 -25 
(-14) 
-23 
(-13) 
-40 
(-32) Little different from E 
according to monetary 
developments taken into account. 
Unstable result. 
Significant fall in ACRs, 
and compensation just missed. 
Result highly unstable. 
Significant fall in ACRs, and 
high compensation just missed. 
Threshold sometimes too high. 
(2) Effect of ACR as at 30.06.1994 on expenditure from jury 1994 to december 1997, taking account of the structure of the 1995 preliminary draft budget. 
(3) Effect over 4 years of compensation for the highest "perceptible" revaluation by increasing certain amounts in ecus. Ecu 210 million for every 1% of revaluation. 
Article 7 of Regulation (EEC) 3813/92. 
(4) Community financing over 3 years of the maximum compensatory aid for loss of income in the case of a "perceptible" revaluation. 1.5% of family agricultural income 
for every 1% of revaluation. Article 8 of Regulation (EEC) 3813/92. 
(5) Criterion for estimating the theoretical medium-term effect: [(1) + (2) + (3) + (4)] / 5 
Qb 
EXPLANATORY MEMORANDUM 
In accordance with Article 13(2) of Regulation (EEC) No 3813/92, the 
Commission has presented a report to the Council on the way the agrimonetary 
system introduced on 1 January 1993 has functioned. In view of the 
conclusions of the report, it is proposed that the basic agrimonetary 
Regulation be amended. 
As this is an area where the Community has exclusive competence, the 
measures must be taken at Community level. They amend an existing Council 
Regulation and have as their overall objective the uniform application of 
the CAP. More precisely, they seek to improve the overall consistency of the 
arrangements, to enhance the stability of the agricultural conversion rates 
and to revise the compensation mechanisms in the light of experience gained 
and economic developments. 
1. Regulation (EEC) No 3813/92, which provides, as from 1 January 1995, for 
the discontinuation of the switchover system and a return to the original 
mechanism involving a fixed, narrow threshold between -2 and +2, may 
raise difficulties. 
The resulting arrangements would, in the current context of the EMS, 
involve significant instability in the ACRs as was feared at the end of 
1993 when the Council decided to amend the rules originally laid down. 
Accordingly, relatively short-term monetary fluctuations could bring 
about disturbance on the market, falls in family farm incomes, and 
Community expenditure which is not strictly necessary. 
fit 
In the case of appreciable revaluations, there is a risk that the 
compensation mechanisms which should be triggered off at the request of 
the Member States concerned could cause major problems with the 
provisions on due restraint agreed under the GATT and with the 
agricultural guideline imposed by budgetary discipline. In that case, 
difficult choices between the various levels of agricultural support 
would have to be made. The original 1993 system, although not appearing 
very burdensome, thus entails serious risks of a surge in costs and of 
highly conflictual situations arising. 
2. Simply to carry over the agrimonetary rules existing at the end c*f 1994 
must also be excluded. It would maintain the principle of the switchover 
mechanism, albeit rendered inoperable by the present rules of the EMS. 
That mechanism is incompatible with the reform of the CAP, the GATT 
Agreements and budgetary discipline in the medium term. The mechanisms 
for compensation in the case of an appreciable revaluation are the same 
as those mentioned previously and thus entail the same drawbacks. 
Furthermore this solution overprotects certain positive monetary gaps and 
accelerates certain increases in ACRs at the expense of the Community 
budget. What is more, the enlarged five-point threshold is likely to 
create deflection in trade flows between certain neighbouring Member 
States. 
3. As a consequence, in the light of experience and the changes in the 
background conditions, it is proposed to improve the agrimonetary system 
by measures of three types : 
(a) Strengthening the way the system works as a whole 
Abandonment of the switchover mechanism, which is 
incompatible with the reform of the CAP, the GATT Agreements 
and budgetary discipline in the medium term. 
Ql 
Technical adjustments relating to the conversion rates 
applicable for the common customs tariff and for structures, 
and detailed rules for advance fixing of the. ACRs. 
(b) More stable ACRs 
-".'• Symmetrical threshold and limitation of its movability in 
order, under certain circumstances, to prevent unnecessary 
expenditure and reduce the frequency of devaluations induced 
by overprotection against falls in the ACRs; 
Possibility of reducing the extent of the threshold 
depending on the national currencies concerned, in order to 
avoid the risk of deflection of trade. 
(c) Revising the mechanisms for compensation 
Introduction of a short period for confirmation of movements 
in currencies before any reduction in ACRs. 
Introduction of a period suspending falls in ACR in the 
event of "appreciable" revaluations, i.e. those which"go 
beyond preceding devaluations, taking account of the time 
they have applied. 
Limiting possibilities for triggering compensatory measures 
to cases of "appreciable" revaluations. 
Extension of the principle of the degressive, transitional 
compensatory aid mechanism to aid per hectare or livestock, 
unit and the introduction of the possibility to take short-
term measures. 
Cil. 
COUNCIL REGULATION (EC) No /94 
of 
amending Regulation (EEC) No 3813/92 on the unit of account and 
the conversion rates to be applied for the purposes of the 
common agricultural policy 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing the European Community, and in 
particular Articles 42 and 43 thereof, 
Having regard to the proposal from the Commission^1', 
Having regard to the opinion of the European Parliament ^2^, 
Whereas Article 13(2) of Regulation (EEC) No 3813/92 (3), as amended by 
Regulation (EC) No 3528/93 *4', provides for an examination to be conducted 
by the Council, before 1 January 1995, of the agrimonetary arrangements 
introduced at the beginning of 1993; whereas measures must be taken at 
Community level for uniform application in all Member States to prevent 
distortion of monetary origin in the implementation of the common 
agricultural policy; 
(1) OJ No C 
(2) OC No C 
(3) OJ No L 387, 31.12.1992, p. 1. 
(4) OJ No L 320, 22.12.1993, p. 32. 
61, 
Whereas, as a consequence of the decision of 2 August 1993 raising the 
marginal intervention thresholds under the European Monetary System to 15%, 
the currencies of the Member States are all treated as floating currencies 
from the agrimonetary viewpoint ; whereas the correcting factor referred to 
in Article 1(c) of Regulation (EEC) No 3813/92 has remained at 1,207509; 
Whereas the correcting factor linked to the fixed currencies was abolished 
by Article 13(2) of Regulation (EEC) No 3813/92 and must not be reintroduced 
in view of its implications for the reform of the CAP, international 
agreements and the Community budget; whereas the prices and amounts fixed in 
ecus must be adjusted as a consequence in order to maintain their value in 
national currencies; 
Whereas the initial agricultural conversion rates for the currencies of the 
new Member States must be determined; 
Whereas, in view of the elimination of the correcting factor, a specific 
agricultural conversion rate as provided for in Article 3(2) of Regulation 
(EEC) No 3813/92 is not needed for the agricultural structure policy; 
Whereas until 31 December 1994 Council Regulation (EEC) No 3528/93 
temporarily replaces the threshold for adjusting the agricultural conversion 
rates, which was initially symmetrical, narrow and fixed at between -2 and 
+2 points, by a threshold which is not symmetrical, is wider and movable 
between -2 to +3 and 0 to +5 points; whereas the application of the initial 
threshold as from 1 January 1995 is likely, on account of the possibility of 
monetary fluctuations persisting within the Exchange Rate Mechanism of the 
European Monetary System, to create instability adversely affecting the 
agricultural conversion rates; 
£f 
Whereas, however, the rules in force' at the end of 1994 must be adjusted to 
reduce their cost to the Community; whereas, in order to avoid, firstly, 
some overprotection against fa^ls in agricultural conversion rates and, 
secondly, unnecessary Community expenditure, the movability of the threshold 
should be limited to below its technical maximum and it should be made 
symmetrical; 
Whereas, in view of the impact of falls in the agricultural conversion rates 
on farm incomes, the monetary trends which trigger them off must be 
confirmed; 
Whereas advance fixing of the agricultural conversion rates, provided for in 
certain cases in Article 6 of Regulation (EEC) No 3813/92, may be extended 
to the period of applicability of the amount in ecus concerned provided that 
the gap with the monetary trend-remains within a certain limit; 
Whereas the possibility of applying the compensatory measures provided for 
in Articles 7 and 8 of Regulation (EEC) No 3813/92 should be limited to 
cases of appreciable reductions in the agricultural conversion rates; 
whereas such appreciable-reductions must be defined in terms of the scale 
and the period that prior increases in agricultural conversion rates have 
applied; 
Whereas application of Article 7 of Regulation (EEC) No 3813/92 should be 
restricted to structural or environmental aid, in view of its particular 
nature, in order to avoid the risk of unnecessary Community expenditure and 
difficulties with international agreements; Whereas reductions in aid per 
hectare or per animal should be offset by a degressive, temporary aid 
supplement; 
Whereas, in the event of an appreciable reduction in the agricultural 
conversion rates, the need for and type and scale of the compensatory 
measures most suitable must be determined in the light of the actual 
circumstances surrounding the reduction; 
W 
Whereas this Regulation should apply from 1 January 1995, when the 
provisions on the correcting factor and the extension of the threshold 
expire, 
HAS ADOPTED THIS REGULATION: 
Article 1 
Regulation (EEC) No 3813/92 is hereby amended as follows: 
(1) Article 1(c) is replaced by the following: 
"(c) "representative market rate" shall mean: 
- in the case of a fixed currency, the central rate for the 
ecu for that currency, fixed within the framework of the 
European Monetary System, 
- in the case of a floating currency, the average exchange 
rate 'for the ecu with respect to that currency, recorded 
over a reference period of no more than one month, 
determined in accordance with the procedure laid down in 
Article 12 ; " 
(2) In Article 1, point (d) is deleted and points (e) and (f) become 
points (d) and (e) respectively: 
(3) In Article 1, the following point (f) is added: 
"(f) "appreciable reduction in the agricultural conversion rate" 
shall mean: 
a reduction in the last agricultural conversion rate 
applicable which is greater, in absolute value, than the 
difference between that rate and the lowest conversion rate 
applicable: 
Ù7 
in the last 12 months, and 
in the period between 24 months and over 12 months 
before, and 
in the period between 36 months and over 24 months 
before. 
Two thirds and one third respectively of the value of the 
differences in the second and third indents shall be taken 
into account." 
(4) The second subparagraph of Article 3(1) is replaced by the 
following: 
"The agricultural conversion rate applicable on 1 January 1995 shall 
be equal to that determined for that date in accordance with the 
rules in force on 31 December 1994, divided by 1,207509. 
The agricultural conversion rate for the national currency of a new 
Member State shall initially be equal to the representative market 
rate established in accordance with Article 1(c) for the last 
reference period ending before the date of first application of this 
Regulation to the currency in question." 
(5) In Article 3, paragraph 2 is deleted and the words "Taking into 
account the correcting factor" are deleted from paragraph 3. 
(6) Articles 4 and 4a are replaced by the following: 
"Article 4 
1. The agricultural rates for the fixed currencies shall be adjusted 
immediately, without prejudice to Article 9, so as to eliminate 
their monetary gaps in the case of a monetary realignment the effect 
of which is to change the central rates determined for those Member 
States with a fixed currency. 
a 
2. The agricultural conversion rate for a floating currency shall be 
adjusted where: 
(a) the absolute value of its monetary gap is greater than the 
threshold referred to in paragraph 5, less 0,5 points, or 
(b) in the case of a negative monetary gap, the absolute value 
of the difference between that gap and the gap for another 
currency is greater than that threshold. 
However, without prejudice to paragraphs, where the agricultural 
conversion rate for a particular currency should be reduced on the 
basis of a single reference period, the first subparagraph shall not 
apply to that currency or to those currencies which, with respect to 
it, are in the situation referred to in point (b) thereof. 
3. In the case referred to in paragraph 2, the new agricultural 
conversion rate shall be determined by reducing the absolute value 
of the monetary gap in question by half. 
4. Paragraph 2 shall apply iteratively in respect of the same reference 
period, where appropriate starting with a reduction in the positive 
monetary gaps, on the basis of the agricultural conversion rates 
calculated in accordance with paragraph 3. 
5. The threshold shall be 5 points. However, the threshold between two 
particular currencies may be reduced in accordance with the 
procedure laid down in Article 12 in order to avoid the. risk of 
trade distortion. 
6. Should paragraph 1 or 2 result in an appreciable fall in the 
agricultural conversion rate for a currency, the application of 
those provisions shall be suspended for the currency in question, as 
necessary and for no more than four consécutive reference periods." 
(7) In Article 5(2), the words "Without account being taken of the 
correcting factor" are deleted. 
61 
(8) The second subparagraph of Article 6(1) is deleted and the following 
paragraph is inserted: 
"2a. For amounts fixed in advance in ecus and amounts established in ecus 
under an invitation to tender, the agricultural conversion rate may 
be fixed in advance. 
In that case, the agricultural conversion rate shall be that in 
force, respectively, on the date on which it was fixed in advance or 
.the closing date for the submission of tenders. However, that rate 
shall be adjusted where it diverges by more than 4% from the 
agricultural conversion rate which would have applied had the rate 
not been fixed in advance. 
( The term of validity of agricultural conversion rates fixed in 
advance shall be equal to that for the advance fixing of the amount 
concerned or that of the award." 
(9) In Article 7, the last paragraph is deleted and the first paragraph 
is replaced by the following: 
"Should there be an appreciable fall in the agricultural conversion 
rate applicable to an amount of a structural or environmental 
nature, the aid or amounts concerned shall be increased in ecus in 
accordance with the procedure laid down in Article 12." 
(10) Article 8 is replaced by the following: 
"1. Member States may grant farmers compensatory aid for three 
years where: 
(a) the average agricultural conversion rate over the 
last 12 months falls appreciably against the average 
agricultural conversion rate over the previous 12 
months, or 
yo 
(b) where the agricultural conversion rate applicable 
to: 
flat-rate aid calculated per hectare or per 
livestock unit, or 
a compensatory premium per sheep or goat 
falls by an appreciable amount. 
Each successive annual instalment shall be reduced, in relation to the 
previous instalment, by at least one third of the amount granted in the 
first year. 
2. in the case referred to in paragraph 1(a): 
the periods taken into account for the granting of aid may not be 
taken into account for the granting of further aid; 
the definition of an appreciable fall in the average agricultural 
conversion rate shall be established in accordance with the 
procedure laid down in Article 12, by analogy with Article 1(f); 
the compensatory aid may not be granted in the form of an amount 
linked to production other than production during a fixed, previous 
period; it may not be granted for any specific output or be 
dependant on there being any output; 
the first annual instalment of the aid shall be determined on the 
basis of the reduction in the average farm income in the Member 
State concerned, due to the reduction in the agricultural conversion 
rate ; 
n/ 
where the average rate which triggered the granting of aid is, for 
twelve consecutive months, below the average agricultural conversion 
rate applied subsequently the annual instalments of aid beginning 
after the twelve months in question shall be cancelled or reduced 
in accordance with the procedure laid down in Article 12 ; 
the Council shall, acting by a qualified majority on a proposal from 
the Commission and subject to the attainment of minimum limits, 
establish the maximum amounts which can be granted for each 
instalment of aid. 
3. In the case referred to in paragraph 1(b): 
the aid shall be granted to farmers affected by the 
reduction of the amounts in question; 
the first annual instalment of aid shall be determined so as 
to neutralize the reduction in the amounts in question in 
national currency occasioned by the fall in the agricultural 
conversion rate; 
where the rate which triggered the granting of aid is below 
that applied subsequently to the amounts in question the 
annual instalments of aid beginning after the date on which 
the new rate is applied shall be cancelled or reduced in 
accordance with the procedure laid down in Article 12 ; 
the Commission, in accordance with the procedure laid down 
in Article 12, shall establish the maximum amounts which can 
be granted for each instalment of aid. 
4. The Community contribution to the financing of the compensatory aid 
shall amount to: 
72 
75% of the aid actually granted to farmers in regions 
covered by Objective 1 as referred to in Article 1 of 
Regulation (EEC) No 2052/88, 
50% of the amounts actually granted in other cases. 
For the purposes of the financing of the common agricultural policy, 
this contribution shall be deemed to be part of intervention 
intended to stabilize the agricultural markets." 
(11) Article 9 is replaced by the following: 
"In the case referred to in Article 4(6), the Commission shall 
decide in accordance with the procedure laid down in Article 11(1) 
which national measures to support certain markets or direct 
national compensation may be authorized for a period of not more 
than one year in order to prevent significant falls in farmers' 
incomes for agrimonetary reasons." 
(12) Article 13(2) is replaced by the following: 
"2. Prices and amounts in ecus whose value in national currency is 
subject on 31 December 1994 to the correcting factor 1,207509 shall 
be multiplied by that correcting factor on the first application, 
from 1 January 1995, of an agricultural conversion rate established 
in accordance with Article 3(1) and Article 4." 
Article 2 
This Regulation shall enter into force on 1 January 1995. 
This Regulation shall be binding in its entirety and directly applicable in 
all Member States. 
Done at Brussels, For the Council 
"?"> 
Financial Statement (MS/94/FF/001) 
Date 15.11.1994 
1. BUDGET HEADING : All budget headings covered APPROPRIATIONS: ECU 36 994 m (PDB 1995) 
by the EAGGF Guarantee Section 
(B1-1, B1-2, B1-3, B1-4, B1-5) ? 
2. TITLE : Proposal for a Council Regulation amanding Regulation (EEC) No 3813/92 on the unit of account and 
the conversion rates to be applied for the purposes of the common agricultural policy 
3. LEGAL BASIS : Articles 42 and 43 of the Treaty 
4. AIMS : Pursuant to Article 13(2) of Council Regulation (EEC) No 3813/92, to make appropriate proposals 
on the agrimonetary system from 1 January 1995, in particular as regards the abandonment of the 
switch-over mechanism 
5. FINANCIAL IMPLICATIONS 
5.0 EXPENDITURE 
- CHARGED TO THE EC BUDGET 
(REFUNDS/INTERVENT IONS) 
5.1 REVENUE 
- OWN RESOURCES OF THE EC 
(LEVIES/CUSTOMS DUTIES) PERIOD OF 12 MONTHS CURRENT FINANCIAL YEAR 
(1995) 
(1) FOLLOWING FINANCIAL YEAR 
(1996) 
(1) 
1997 
5.0.1 ESTIMATED EXPENDITURE 
5.1.1 ESTIMATED REVENUE (1) 1998 
(1) 1999 
(1) 2000 
(1) 
5.2 METHOD OF CALCULATION 
See "Report to the Council of the European Union on the agrimonetary system for the single market" 
6.0 CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE RELEVANT CHAPTER OF THE CURRENT BUDGET? 
6.1 CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF THE CURRENT BUDGET ? 
6.2 WILL A SUPPLEMENTARY BUDGET BE NECESSARY ? 
6.3 WILL FUTURE BUDGET APPROPRIATIONS BE NECESSARY ? 
COMMENTS : 
(1) At present it is impossible to calculate the financial impact of this proposal, since it depends on 
future currency developments. 
However, Annex 8 to the "Report to the Council of the European Union on the agrimonetary system for the 
single market", which retroactively compares the mechanisms proposed with the mechanisms actually 
applied over the period 1 January 1993 to 30 June 1994, points to a saving between ECU 72 and 168 
million. 
~X. 
ISSN 025+1475 
COM(94) 498 final 
DOCUMENTS 
EN 03 
Catalogue number : CB-CO-94-545-EN-C 
ISBN 92-77-82428-X 
Office for Official Publications of the European Communities 
L-2985 Luxembourg