COMMISSION REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 2/2000

COMMISSION REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

on EAGGF Guarantee Section expenditure - Early warning system No 2/2000

TABLE OF CONTENTS

1. Overall outturn in monthly expenditure

2. Provisional utilisation of appropriations

3. Comments

4. Conclusions

1. Overall outturn in monthly expenditure

The following table shows the overall outturn in monthly expenditure in relation to the expenditure profile. This situation corresponds to expenditure incurred in the Member States from 16 October to 31 December 1999.

1.1. Subheading 1a: Traditional EAGGF Guarantee Section expenditure and veterinary expenditure

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1.2. Subheading 1b: Rural development and accompanying measures

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2. Provisional utilisation of appropriations

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(1) The indicators for the intermediate totals are given for information purposes.

3. Comments

3.1. The uptake of appropriations for February 2000

The uptake of appropriations under Subsection B1 of the budget for February 2000 (Member States' expenditure from 16 October 1999 to 31 December 1999) is EUR 21 207 million, i.e. 51.7 % of appropriations. Expenditure is

- almost exactly at the level of the indicator for Subheading 1a (traditional EAGGF Guarantee Section expenditure and veterinary expenditure). The Member States have thus made up the substantial slippage in the rate of payments found at the end of the previous month,

- EUR 60 million above the indicator for Subheading 1b (rural development and accompanying measures).

3.2. Monetary factors

3.2.1. The dollar/euro rate

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

In accordance with the Council Decision on budgetary discipline, the 2000 budget was drawn up on the basis of the average dollar rate for January, February and March 1999, i.e. EUR 1 = $ 1.12.

The real euro rates recorded in recent months were substantially lower than the budgetary parity [1].The average dollar rate for the period 1 August 1999 to 31 July 2000 (reference period for determining the impact of the dollar) is therefore highly likely to diverge from this budgetary parity. The amount of expenditure incurred by the Member States will probably be higher as a result of the movement in the dollar rate.

[1] The average dollar rate for the period 1 August 1999 to 3 February 2000 was EUR 1 = $ 1.04.

It should be recalled that savings exceeding the margin of EUR 200 million fixed under the rules of budgetary discipline will be transferred to the monetary reserve at the end of the financial year.

3.2.2. The impact of the dual rate

The movement in the dual rates will result in substantially lower expenditure than in previous years. Abolition of the green rates has eliminated the effect of dual rates in the countries participating in the euro and thus produced major savings. The cost of the dual rate to the EAGGF Guarantee Section at the time when the letter of amendment was prepared was estimated at EUR 119 million.

3.3. Market factors

3.3.1. Subheading 1a: Traditional EAGGF Guarantee Section expenditure and veterinary expenditure

Chapter B1-12: Olive oil // - EUR 205 million

(Expenditure: EUR 1 676 million)

(Indicator: EUR 1 881 million)

(Member States' forecasts: EUR 1 688 million)

The under-utilisation in relation to the indicator results from lower expenditure on olive oil production aid. Due to the change in the quota system, which now provides for national quotas, the overall amount of payments of the advance is lower than in previous years This situation will probably disappear when the balance is paid later in the financial year.

Chapter B1-14: Fibre plants and silkworms // + EUR 60 million

(Expenditure: EUR 667 million)

(Indicator: EUR 608 million)

(Member States' forecasts: EUR 633 million)

The overrun of the indicator is due to the increased pace of expenditure on aid for cotton. This is borne out by Member States' forecasts, which indicate a low level of expenditure over the next few months.

Chapter B1-15 : Fruit and vegetables // - EUR 122 million

(Expenditure: EUR 328 million)

(Indicator: EUR 451 million)

(Member States' forecasts: EUR 408 million)

The under-utilisation in relation to the indicator results from delays in the payment by Italy of production aid for products processed from tomatoes and of financial compensation to encourage the processing of citrus fruit.

Chapter B1-17: Tobacco // - EUR 76 million

(Expenditure: EUR 460 million)

(Indicator: EUR 536 million)

(Member States' forecasts: EUR 405 million)

The under-utilisation in relation to the indicator is due to a delay in payment of the premiums for the 1999 harvest.

Chapter B1-21: Beef and veal // + EUR 178 million

(Expenditure: EUR 1 292 million)

(Indicator: EUR 1 115 million)

(Member States' forecasts: EUR 1 425 million)

The overrun of the indicator is largely the result of early payments of premiums. Already in previous years it was found that the Member States pay such premiums irregularly, often producing substantial discrepancies between implementation and the indicator which only disappeared at the end of June (the deadline for payment of a large part of these premiums).

Moreover, a substantial overrun of the indicator results from lower than expected earnings on sales from public storage.

Chapter B1-22 : Sheepmeat and goatmeat // + EUR 86 million

(Expenditure: EUR 544 million)

(Indicator: EUR 458 million)

(Member States' forecasts: EUR 493 million)

The indicator was overrun as a result of the increased rate of payment of the second advance on ewe premiums in relation to previous years.

Chapter B1-39: Other measures // + EUR 57 million

(Expenditure: EUR 290 million)

(Indicator: EUR 234 million)

(Member States' forecasts: EUR 163 million)

The overrun of the indicator is largely caused by early agrimonetary aid payments (transitional arrangements) by the United Kingdom.

In addition, in December 1999 Italy paid the first instalment of the agri-monetary aid (arrangements in force before the introduction of the euro) for the implementation of the programmes adopted by the Commission in spring 1998. This instalment was entered in the 1999 budget and overruns the amount set aside for Italy in the 2000 budget. The Commission is therefore requesting that the Budget Authority carry over EUR 29 million from the previous to the current financial year. Once this carry-over is approved, EUR 29 million will be deducted from appropriations for the 2000 financial year and entered in the appropriations carried forward.

3.3.2. Subheading 1b: Rural development and accompanying measures

Chapter B1-40: Rural development // + EUR 60 million

(Expenditure: EUR 560 million)

(Indicator: EUR 500 million)

(Member States' forecasts: EUR 675 million)

The overrun of the indicator is due to slightly higher expenditure on the former three accompanying measures.

4. Conclusions

The uptake of appropriations under Subsection B1 of the budget for February 2000 (Member States' expenditure from 16 October 1999 to 31 December 1999) is EUR 21 207 million, i.e. 51.7 % of appropriations.

4.1. The uptake of appropriations for Subheading 1a

Expenditure for Subheading 1a (traditional EAGGF Guarantee Section expenditure and veterinary expenditure) is almost exactly at the level of the indicator. The Member States have thus made up the substantial slippage in the rate of payments found at the end of the previous month.

At chapter level, there is an overrun of the indicator in particular in the beef and veal, sheepmeat and goatmeat, fibre plants and agri-monetary aid sectors. By contrast, appropriations in the olive oil, fruit and vegetables and tobacco sectors are under-utilised.

Almost all the discrepancies between expenditure actually incurred and the indicator result from payments being made earlier or later than in previous years and can therefore be considered to be only temporary.

The Member States' forecasts for the next two months indicate that expenditure as a whole will follow the indicator.

4.2. The uptake of appropriations for Subheading 1b

Expenditure for Subheading 1b (rural development and accompanying measures) is EUR 60 million above the indicator. The overrun of the indicator is due to slightly higher expenditure on the former three accompanying measures.