COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 16.05.1995 
COM(95) 173 final 
Proposal for a 
COUNCIL REGULATION ŒC) 
regulating compensation for reductions in the agricultural conversion rates 
of certain national currencies 
(presented by the Commission) 
EXPLANATORY MEMORANDUM 
1. The monetary gaps between agricultural conversion rates and representative market 
rates have exceeded 5% since 24 February 1995 in the case of the 
Belgian/Luxembourg franc and since 16 March 1995 in the case of the German mark, 
the Dutch guilder and the Austrian schilling. 
Since 5 April 1995 the monetary gap for the Danish krone has also exceeded 5% 
compared with the average of the market rates for the 10 preceding days. 
In principle, this overrun of the threshold should entail an adjustment of the 
agricultural conversion rates so as to reduce the monetary gap by half. However, in 
the case of positive monetary gaps, and in accordance with Article 4 of Council 
Regulation (EEC) No 3813/92, delay periods to confirm the monetary situation have 
been introduced before the revaluation mechanism is actuated. The purpose of 
inserting a delay before the agricultural conversion rates are reduced is to prevent 
measures which would have multiannual effects from being triggered, on the basis 
of unstable monetary developments which on their own could reduce the positive 
monetary gaps to" back below the 5% threshold. Thus for the German mark and the 
Austrian schilling, market rates recorded during the reference period ending on 
24 April 1995 produced an average of less than 5%. By contrast, for the other 
currencies referred to above, large monetary gaps persisted, in some cases for up to 
more than three months. In the period from February to June 1995 the budgetary 
impact of this delay in Teducing the gaps for the currencies in question will be on the 
order of ECU 10 million to ECU 15 million per month. 
Over and above the consequences for the Community budget, difficulties have arisen 
for some economic operators as a result of changes in trade flows brought about by 
the maintenance of agricultural conversion rates at unchanged levels, and uncertainty 
as regards possible adjustments to the rates. These agrimonetary difficulties have 
come on top of the wider monetary problems created by changes in the value of the 
dollar and by tfoe sharp devaluation of some Community currencies. 
2. In accordance with the agrimonetary system currently in force, a reduction in 
agricultural conversion rates opens up the possibility for the Member States affected 
to introduce compensilery measures. If there is a significant fall in the agricultural 
conversion rate, .they.-'cai) r&<pest two pre-estafolished mechanisms to be operated; 
- Pursuant ':*o Article T of Heguiation (EEC) No 3813/92, aid payments per 
hectare or per livestock unit, and aid of a structural of environmental nature, 
can be increased m ecus so as to prevent any fall in their value in national 
currency. Since they are increased in ecus, they affect all Member States, even 
those whose currencies have been devalued. 
Pursuant to Article .8 of Regulation (EEC) No 3813/92, compensatory aid for 
income losses due to agrimonetary causes can be granted degressively over 
three years, with Community part-financing, which as a rule is 50%. in the cases 
at issue here. 
The cost to the Community of implementing these pre-established mechanisms could 
be of the order of ECU 1 000 million in 1996 and 1997, faïhVg gradually to produce 
permanent expenditure of approximately ECU 750 millier, per annum from 1999. 
Given the appropriation requirements of the EAGGF Guarantee Section for 1996, 
additional agrimonetary expenditure of the order of ECU 1 000 million is out of the 
question. 
3. In general, the high level of monetary gaps is based at present on a money market 
situation which has lasted for almost three months. As a result, if gaps of more than 
5% were to be confirmed, under the rules the agricultural conversion rates in question 
should be reduced so as to alleviate or eliminate their effects on trade flows. The 
destabilising effects on markets become more marked the longer the gaps are 
maintained. 
However, Articles 7 and 8 of Regulation (EEC) No 3813/92 cannot be applied as 
they stand, mainly for budgetary reasons. Article 9 provides the basis for a derogation 
from these two Articles by stipulating that in the event of a substantial revaluation, 
the Council, acting by a qualified majority on a proposal from the Commission, is to 
decide on all necessary measures. It also provides, primarily to comply with 
obligations arising out of the GATT Agreement and budgetary discipline, that such 
measures may involve derogations on aid and the amount by which the monetary 
gaps are dismantled, although these derogations must not result in the threshold being 
widened. 
4. If, for the reasons outlined above, unconditional use of Article 7 must be avoided, 
compensation on the lines of the system provided for in Article 8 appears to be the 
appropriate measure to alleviate the effects of a revaluation of the agricultural 
conversion rates in question. To implement such an approach, the Commission's 
proposal is based on the three following principles: 
the compensatory measures must to used to meet actual income losses in the 
light of price movements over the past few years; 
the compensatory measures must not increase resource requirements for the 
EAGGF beyond the possibilities laid down by budgetary discipline; 
the compensatory measures must not lead to overcompensation and, in general 
and mainly, must therefore be applied degressively and as a temporary 
measure. 
Thus, the overall amount of compensatory aid proposed for each Member State 
concerned has been established in accordance with agricultural income statistics for 
1994, on the basis of the following factors: 
(a) the reduction in agricultural conversion rates will be reflected directly in 
intervention prices and therefore in the value of cereals, sugar beet, beef/veal 
and milk products. For the other agricultural produce of the Member States in 
question, no intervention prices exist and the effect of the agrimonetary 
situation on market prices has been very slight or zero. 
In addition, the fall in the value of feed grains represents a fall in input costs 
in the livestock production sector. 
(b) Most aid granted to farmers is directly affected by the agrimonetary 
developments. 
However, the aids awarded as part of the reform of the common agricultural 
policy were determined on the basis of a fall in Community prices which has 
not been followed by market prices. In the particular case of oilseeds, the 
reduction in aid per hectare has been considerably smaller than the rise in 
market prices. 
Thus, in the case of cereals, oilseeds, protein plants, flax, beef/veal and the set-
aside scheme, the agrimonetary reduction in aid in national currency is not a 
real income loss. 
As a result, the aid to farmers which would be taken into account for estimating 
income losses consists of aids per hectare other than that referred to in the 
preceding paragraph, aids or premiums of a structural nature, and aid in the 
sheepmeat, tobacco and seeds sectors. 
The overall amount of compensatory aid thus calculated represents the impact on total 
agricultural income of the Member State in question for a 1% reduction in the 
agricultural conversion rate. 
However, since agrimonetary variations of less than 2% do not have any detectable 
significant impact on market prices, even if there is an intervention mechanism in 
operation, it is proposed not to award any compensatory aid for the first 
one percentage point of reduction in the agricultural conversion rate. 
In addition, in the case of the Belgian/Luxembourg franc and the Danish krone, the 
effects of the devaluations of those currencies in 1993 still persist. In accordance with 
Article 1(e) of Regulation (EEC) No 3813/92, reductions in agricultural conversion 
rates are substantive only in the case of rates less than BFR/LFR 40.4192 or 
DKR 7.53835. Consequently, the effects on incomes of a fall in agricultural 
conversion rates are considered to be compensated a priori by 1.015 percentage 
points in the case of Belgium and Luxembourg and 2.626 percentage points in the 
case of Denmark. 
5. In accordance with the principle laid down in Article 8 of Regulation (EEC) No 
3813/92, the compensatory aid is to be granted degressively over three years and the 
Community contribution to the financing thereof is to be adjusted in line with 
requirements and regional possibilities. 
In order to take account of the special importance of certain amounts affected by the 
reduction in the agricultural conversion rate, part of the income loss to be offset 
during the three years the aid is granted will be impossible to reduce and this is to 
be financed fully by the Community. 
Furthermore, should an examination of the situation indicate a continuing loss of 
agricultural income, the period during which the aid is granted could be extended. 
The supplement to be determined as and when the need arises would be limited to 
two additional annual tranches, the amount not exceeding that granted under the last 
tranche. 
6. The aid of a structural or environmental nature fixed by the Council and granted 
under the accompanying measures » of the CAP reform generally fall within 
multiannual programmes. In order to avoid calling into question programmes already 
agreed, it is proposed to extend the application of Article 6(3) of Regulation (EEC) 
No 3813/92 without reducing the financing of the annual tranches of the aid granted 
prior to 1996. 
On the basis of the principles set out above and the monetary situation on 25 April 1995, 
the financial impact of the proposal on the Community budget in relation to the 
preliminary draft budget for 1996 results in additional expenditure of ECU 11 million for 
1996, which is compatible with financial and international constraints. 
The measures to be taken necessarily involve the Community level since this is an area 
which is the exclusive responsibility of the Community. The approach is in line with the 
general objective of applying the common agricultural policy in a uniform manner and 
adapts the provisions already planned by the Council to take account af the current 
special situation. 
Proposal for a 
COUNCIL REGULATION (EC) No ..../.. 
of....... 
regulating compensation for reductions in the agricultural conversion rates 
of certain national currencies 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing the European Community, 
Having regard to the proposal from the Commission, 
Having regard to 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 , as last amended by Regulation (EC) No 150/95 , and in particular 
Article 9 thereof, 
Whereas there is a risk of substantial reductions in the agricultural conversion rates for 
the Belgian/Luxembourg franc, the Danish krone, the German mark, the Dutch guilder 
and the Austrian schilling; whereas monetary gaps greater than 5% have already been 
recorded for these currencies over several reference periods; whereas it is necessary to 
take steps at Community level to prevent distortions in the implementation of the 
common agricultural policy due to monetary causes; 
Whereas, in order to curtail the risk of distortions to trade flows caused by the monetary 
gaps of the said currencies, these gaps should be reduced if they prove to be still over 5% 
by the end of the reference periods introduced to confirm the monetary situation; 
1 OJNoL387, 31.12.1992, p. 1. 
2 OJNoL22, 31.1.1995, p. 1. 
6 
Whereas Article 9 of Regulation (EEC) No 3813/92 provides for a Council decision, in 
the event of an appreciable re-evaluation, primarily to comply with obligations under the 
GATT agreement and budgetary discipline, on all necessary measures, which may involve 
derogations from the provisions of the said Regulation concerning aid and the amount by 
which the monetary gaps are dismantled, without, however, resulting in the threshold 
being extended; whereas the measures provided for in Articles 7 and 8 of the said 
Regulation cannot be applied as they stand; whereas, however, compensation for losses 
of income caused by a reduction in agricultural conversion rates needs to be provided, 
while taking into account on a flat-rate basis the effects of the 1993 devaluations, the 
movements of prices in real terms for products qualifying for compensatory payments as 
part of the reform of the common agricultural policy, and the acknowledged sensitivity 
of market prices and incomes to agrimonetary adjustments; 
Whereas the Community financial assistance must be adjusted having regard to the 
situation in the Community regions covered by Objective 1 within the meaning of 
Council Regulation (EEC) No 2052/88 of 24 June 19883 and of the special importance 
of certain amounts affected by the reduction in the agricultural conversion rates; 
Whereas the multiannual aid granted under the accompanying measures for the reform 
of the common agricultural policy under Council Regulations (EEC) Nos 2078/92 , 
2079/925 and 2080/926 of 30 June 1992 may not decrease in terms of national currency 
without the programmes concerned being called in to question; 
Whereas there should be provision for extending the compensatory aid granted over three 
successive twelve-month periods should the duration of the effects of the reduction in the 
agricultural conversion rates in forthcoming years so require, 
HAS ADOPTED THIS REGULATION: 
3 OJNoL 185, 15.7.1988, p. 9. 
4 OJ No L 215, 30.7.1992, p. 85. 
5 OJ No L 215, 30.7.1992, p. 91. 
6 OJ No L 215, 30.7.1992, p. 96. 
* 
Article 1 
This Regulation shall apply in the event of reductions in agricultural conversion rates in 
accordance with Article 4 of Regulation (EEC) No 3813/92 introduced before 1 January 
1996. 
Article 2 
1. In the event of a reduction in agricultural conversion rates as referred to in Article 
1, the Member State affected may make compensatory payments to farmers in three 
successive tranches lasting 12 months each, starting with the month following the 
relevant reduction in the agricultural conversion rate. These compensatory payments 
shall not take the form of aid linked to production, other than production during a 
stipulated period prior to introduction of the compensation scheme; they shall not 
favour any particular type of production or be dependent on production subsequent 
to the period stipulated. 
2. The total compensatory aid in the first twelve-month tranche shall not be more than: 
ECU 19.9 million in the case of Belgium, 
ECU 21.7 million in the case of Denmark, 
ECU 136.1 million in the case of Germany, 
ECU 1.5 million in the case of Luxembourg, 
ECU 40.6 million in the case of the Netherlands, 
ECU 21.5 million in the case of Austria, 
to be multiplied by the reduction in the agricultural conversion rate referred to in 
Article 1 expressed as a percentage, less 2.015 percentage points in respect of the 
Belgian/Luxembourg franc, 3.626 percentage points in respect of the Danish krone 
and 1.000 percentage points in respect of the currencies of all other Member States. 
3. The amounts paid out in the second and third tranches shall not exceed the amount 
paid out in the previous tranche in each case, less at least a third of the amount paid 
out in the first. 
Ô 
However, total compensatory aid under each tranche may always be granted up to: 
ECU 1.9 million in the case of Belgium, 
ECU 6.4 million in the case of Denmark, 
ECU 40.7 million in the case of Germany, 
ECU 0.1 million in the case of Luxembourg, 
ECU 2.1 million in the case of the Netherlands, 
ECU 4.7 million in the case of Austria, 
to be multiplied by the reduction in the relevant agricultural conversion rate. 
4. The Community contribution to financing these compensatory payments shall be: 
75% of the amounts actually paid out to farmers in Objective 1 regions within 
the meaning of Article 1 of Regulation (EEC) No 2052/88; 
50% of the amounts actually paid out in all other cases. 
However, the Community shall finance 100% of the total compenattory aid referred 
to in the second subparagraph of paragraph 3. 
For the purposes of the financing of the common agricultural policy, this contribution 
shall be considered to form part of the assistance designed to regularize agricultural 
markets. 
5. The Commission shall adopt detailed rules for applying this Article in accordance 
with the procedure provided for in Article 12 of Regulation (EEC) No 3813/92. 
Article 3 
1. Article 6(3) of Regulation (EEC) No 3813/92 shall apply to aid granted before 
1 January 1996 under Regulations (EEC) Nos 2078/92, 2079/92 and 2080/92. 
2. Articles 7 and 8 of Regulation (EEC) No 3813/92 shall not apply to the reductions 
in agricultural conversion rates referred to in Article 1 of this Regulation. 
Article 4 
Before the end of the third period during which the compensatory aid is granted, the 
Commission shall examine the effects on agricultural income of the reductions in 
agricultural conversion rates as referred to in Article 1. 
Where it is established tint income losses are likely to continue, the Commission may, 
in accordance with the procedure laid down m Article 12 of Regulation (EEC) No 
3813/92, extend the possibility of granting compensatory aid as provided for in Article 
2 by a maximum of two additional twelve-month tranches, the maximum amount per 
tranche being equal to that granted in the third tranche. 
Article 5 
This Regulation shall enter into force on 3 June 1995. 
This Regulation shall be binding in its entirety and directly applicable in all Member 
States. 
Done at , For the Council 
/ o 
FINANCIAL STATEMENT 
1. BUDGET HEADING : 322 (390 in 1996) and virtually all lines of the EAGGF Guarantee 
APPROPRIATIONS : p.m. (article 322) 
2. TITLE 
Council Regulation fixing compensation relating to reductions in the agricultural conversion rates for certain currencies 
LEGAL BASIS : Article 9 of Regulation (EEC) No 3813/92 
AIMS : 
Fixing of a degressive aid, cofinanccd by the Community budget, compensating the income loss of producers following the 
reduction of agricultural conversion rates 
5. FINANCIAL IMPLICATIONS PERIOD OF 
12 MONTHS 
Mio ECU CURRENT 
FINANCIAL 
YEAR (95) 
Mio ECU FOLLOWING 
FINANCIAL YEAR 
(96) 
Mio ECU 
5.0 EXPENDITURE CHARGED TO 
- THE EC BUDGET 
(REFUNDS/INTERVENTIONS) 
- NATIONAL ADMINISTRATION 
-OTHER 
5 1 REVENUE 
- OWN RESOURCES OF THE EC 
(LEVIES/CUSTOMS DUTIES) 
- NATIONAL p.m. + 11 
+ 109 
5.2 METHOD OF CALCULATION : 
6.0 CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE RELEVANT 
CHAPTER OF THE CURRENT BUDGET ? YES /-NO 
6.1 CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF THE 
CURRENT BUDGET ? YES / NO 
6.2 WILL A SUPPLEMENTARY BUDGET BE NECESSARY ? YES / NO 
6.3 WILL FUTURE BUDGET APPROPRIATIONS BE NECESSARY ? YES/NO 
OBSERVATIONS : 
In the present situation, assumptions must be made in order to estimate the financial impact of this proposal. 
The calculations are based on the monetary gaps of 25 April 1995, in relation to the representative market rates of the preceding 10 
days and arc 6.899 for the BLF, 5.984 for the DKR, 5.818 for the HFL, 5.214 for the DM, 5.221 for the Os. 
On the basis of the monetary gaps referred to above and taking account of the franchises, the cost to the budget for these 6 Member 
Slates would be 253 Mio ECU for 1996. 
The cost of the non-reduction in the agricultural conversion rates for the accompanying measures may be estimated at a maximum 
of 7 Mio ECU for 1996. This amount should be considered as maximum since for certain measures and certain programmes, the 
amounts fixed remain below the ceilings. 
It sould be noted that the reduction in the ACR for the Member States concerned also leads to a saving under the DR which, for all 
of the chapters of the EAGGF Guarantee, may be estimated at about 249 Mio ECU compared to the PDB 96. 
This measure therefore leads to a saving estimated at 11 Mio ECU in 1996. 
I) 
ISSN 0254-1475 
COM(95) 173 final 
DOCUMENTS 
EN «3 
Catalogue number : CB-CO-95-216-EN-C 
ISBN 92-77-89000-2 
Office for Officiti Publications of the European Communities 
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