COMMISSION REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on EAGGF Guarantee Section expenditure - Early warning system No 4/2001

CONTENTS

1. Overall outturn in monthly expenditure

2. Provisional utilisation of appropriations

3. Comments

4. Conclusions

1. Overall outturn in monthly expenditure

The following tables show the overall outturn in monthly expenditure in relation to the expenditure profile. This situation corresponds to expenditure incurred in the Member States between 16 October 2000 and 28 February 2001.

1.1. Subheading 1a: CAP (not including rural development)

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1.2. Subheading 1b: Rural development and accompanying measures

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2. Provisional utilisation of appropriations

The following table shows provisional utilisation of appropriations for the first four months of 2001.

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3. COMMENTS

3.1. The uptake of appropriations for April 2001

The uptake of appropriations under heading 1 of the budget for April 2001 (Member States' expenditure from 16 October 2000 to 28 February 2001) is EUR 27 143.3 million, i.e. 62.7% of appropriations. Expenditure is:

- EUR 869.5 million below the indicator for subheading 1a (CAP, not including rural development),

- EUR 453.9 million below 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 how the dollar rate moves.

In accordance with the Council Regulation on budgetary discipline (Regulation (EC) No 2040/2000 of 26 September 2000), the letter of amendment to the 2001 agriculture budget was drawn up on the basis of the average dollar rate for July to September 2000, i.e. EUR 1 = $ 0.91.

3.2.2. The impact of the dual rates

The cost of the dual rate to the EAGGF Guarantee Section is estimated at EUR 77 million.

3.3. Market factors

3.3.1. Subheading 1a

For subheading 1a, two-thirds of the unutilised amount in relation to the indicator (EUR 598.9 million) was due to animal products. A detailed chapter-by-chapter explanation is given below for the most significant divergences.

Chapter B1-11: Sugar // Divergence: -EUR 146 million (- 8.5%)

// (Expenditure: EUR 623 million)

(indicator: EUR 769 million)

The shortfall in implementation in relation to the indicator was due to the volume of sugar exports up to the end of February 2001, which amounted to only 80% of expected exports by that period of the year. Moreover, the average rate of refund granted since the beginning of the budget year stood at only 97% of the rate adopted in the assumptions on which the 2001 budget was based.

Chapter B1-12: Olive oil // Divergence: -EUR 122 million (- 4.9%)

// (Expenditure: EUR 1 969 million)

(indicator: EUR 2 091 million)

The profile for the year was based on the rate of payments observed in 2000. Underutilisation was due to delayed payment of advances on production aid in Greece, Spain and Portugal, despite Italy's having advanced virtually all the olive oil production aid for 1999/2000.

Chapter B1-14: Fibre plants and silkworms // Divergence: -EUR 156 million (- 18.3%)

// (Expenditure: EUR 500 million)

(indicator: EUR 656 million)

Underutilisation in relation to the indicator was due to delayed payments, since the volume of unginned cotton entitled to aid that had been taken into supervised storage up to February 2001 in Greece (the main cotton producer) was less than the indicator implied.

Chapter B1-15: Fruit and vegetables // Divergence: +EUR 31 million (+ 1.8%)

// (Expenditure: EUR 601 million)

(indicator: EUR 570 million)

The overrun of the indicator is due:

- for fresh fruit and vegetables: to amounts paid in aid for bananas in France and Spain, which were higher because of the increase in the rate of the advance paid in 2001,

- for processed fruit and vegetables: to a faster rate of payment of production aid for processed tomato products in Italy, and late payment of aid and intervention expenditure for dried grapes in Greece.

Chapter B1-16: Products of the vine-growing sector // Divergence: +EUR 63 million (+ 5.4%)

(Expenditure: EUR 273 million)

(indicator: EUR 210 million)

Overshooting of the indicator was due to the settlement of storage aid for wine and must for wine year 1999/2000 in Italy, Spain and Greece, and to payments for the distillation of wine for potable spirit in Spain, Italy, Greece and Germany.

Chapter B1-21: Beef/veal // Divergence: -EUR 560 million (- 9.3%)

// (Expenditure: EUR 2 388 million)

(indicator: EUR 2 948 million)

Owing to events in the sector, the indicator does not reflect the real situation:

- expenditure has declined, e.g. on export refunds with the closing of beef export markets,

- suckler cow premiums and special premiums are not being paid at a faster rate, since most of the Member States have not opted for an 80% advance payment on these premiums, or because in view of low prices and an unstable market, farmers have kept their animals on the farm for longer, which has led to under-implementation of slaughter premiums.

Moreover, the effects of some of the measures that have been adopted have not yet had any financial impact; for example, quantities of beef intended for transitional storage that have not yet been declared to the EAGGF, or exceptional measures related to BSE, for which Member States expect payments to increase after March 2001.

Following the adoption of the supplementary amending budget on 28 February 2001, which increased appropriations to the beef and veal sector, the EAGGF will be adjusting the indicator.

Chapter B1-30: Non-Annex I products // Divergence: +EUR 36 million (+ 8.7%)

// (Expenditure: EUR 191 million)

(indicator: EUR 155 million)

Overshooting of the indicator was due to settlement of export refunds for skimmed milk and other milk products, and for sugar and isoglucose. These were cases left over from the previous year at higher rates of refund than those now obtaining.

Chapter B1-32: POSEI programmes // Divergence: - EUR 19 million (- 7.7%)

// (Expenditure: EUR 75 million)

(indicator: EUR 94 million)

Under-implementation in relation to the indicator is due to the slow rate of payments for the "supply" measures and for direct payments for animal products under POSEIMA and POSEICAN.

Chapter B1-39: Other measures // Divergence: + EUR 38 million (+ 9.1%)

// (Expenditure: EUR 206 million)

(indicator: EUR 168 million)

The overrun of the indicator results from payment of the balance of the first tranche of agri-monetary aid in Sweden and the United Kingdom, and the second tranche in Denmark, France, Ireland and the United Kingdom.

3.3.2. Subheading 1b

Chapter B1-40: Rural Development // Divergence: - EUR 454 million (- 10.1%)

// (Expenditure: EUR 1 005 million)

(indicator: EUR 1 459 million)

2001 is the first year of implementation of the new rural development programmes for the 2000-06 programming period. Most of these programmes were approved in the second half of 2000. Consequently, the indicator was constructed on the assumption that expenditure would be evenly distributed over the year for most of the budget headings in this chapter. Owing to lack of experience of Member States' rates of payment for these measures, the indicator probably does not reflect reality.

It should be borne in mind that the Member States pay, among other things, for the former accompanying measures. Specifically, this expenditure mainly concerns early retirement, agri-environmental measures and afforestation under this chapter.

4. CONCLUSIONS

4.1. The uptake of appropriations by 30 April 2001 for subheading 1b

The uptake of appropriations by 30 April 2001 (Member States' expenditure from 16 October 2000 to 28 February 2001) is EUR 26 138.5 million, i.e. 67% of appropriations.

Expenditure is EUR 869 million below the indicator. The divergence between expenditure incurred and the indicator is therefore greater than last month. Divergence is due to the rate of payment by the Member States being different from that forecast for the indicator (especially for Chapters B1-12, B1-14, B1-21 and B1-32).

4.2. The uptake of appropriations by 30 April 2001 for subheading 1b

The uptake of appropriations by 30 April 2001 (Member States' expenditure from 16 October 2000 to 28 February 2001) is EUR 1 004.8 million, i.e. 22% of appropriations.

Expenditure is EUR 454 million below the indicator. The divergence between expenditure incurred and the indicator is therefore greater than last month. However, at this stage the Commission has no grounds for supposing that the negative divergence will persist until the end of the year.