Opinion of the Economic and Social Committee on:

- the 'Proposal for a Council Regulation (EC) establishing agrimonetary arrangements for the euro`, and - the 'Proposal for a Council Regulation (EC) on transitional measures to be applied under the common agricultural policy with a view to the introduction of the euro` (98/C 407/40)

On 3 July 1998 the Council decided to consult the Economic and Social Committee, under Articles 43 and 198 of the Treaty establishing the European Economic Community, on the above-mentioned proposals.

The Economic and Social Committee decided to appoint Mr Espuny Moyano as rapporteur-general to draw up its opinion.

At its 357th plenary session (meeting of 9 September) the Economic and Social Commttee adopted the following opinon by 59 votes to one, with eight abstentions.

1. Introduction

1.1. The Commission document is concerned with the fundamental revision of agrimonetary arrangements made necessary by the introduction of the euro into the common agricultural policy (CAP) from 1 January 1999. Under the present agrimonetary arrangements, conversion rates are fixed specifically for agriculture; these are the green rates. The widespread introduction of the euro as the unit of payment for CAP prices and amounts will make the use of green rates obsolete. For the present, however, some Member States will not be participating in the euro, which makes it impossible to dispense with an 'agrimonetary` scheme altogether. The Commission proposal is based on its experience with the current system, but taking into account the new scenario created by the transition to the euro and the guidelines laid down in Agenda 2000 for the reform of the CAP.

1.2. The first Commission proposal contains the agrimonetary arrangements to apply from 1 January 1999. The second sets out the transitional measures for switching from the current to the new arrangements.

1.3. The main points of these proposals are:

- major simplification by discontinuing the specific agricultural conversion rates for all Member States whether or not they are participating in the euro, and generalizing the use of the market exchange rate. This rate will be irrevocably fixed for the Member States participating in the euro and will be the rate obtaining on the date of the operative event for the other Member States;

- retention of a tapered and temporary system of aid to compensate farmers in non-participant Member States for loss of income due to revaluations; this is broadly in line with the present arrangements. The new scheme, which is optional for the Member States concerned and part-financed by the Community, makes a distinction between loss of income resulting from the fall in direct aid and loss of income from the impact of a revaluation on other CAP amounts. This is regarded as a transitional measure which will end on 1 January 2002;

- the dismantling, impelled by the introduction of the euro, of the various monetary differences between the green rates and market rates on 21 December 1998. This dismantling, which may be regarded as a final revaluation or devaluation of the green rate under the terms of the current scheme, provides for compensatory aid based on both the current scheme and that due to begin on 1 January 1999.

2. General comments

2.1. The Committee welcomes the general approach of the Commission proposals which involve a fundamental simplification of the current arrangements, the rules of which - while commensurate with the tasks required of them - are often seen by farmers, the processing industry and other operators as the most complicated and least transparent aspect of the CAP.

2.2. The Committee shares the Commission's view that the introduction of the euro and the development of the CAP make it possible to discontinue the specific agricultural conversion rates from 1 January 1999 and replace them with the market conversion rate for the euro, including for non-participant Member States. This approach will make for a scheme which is more flexible and closer to the reality of the economic situation under the CAP.

2.3. The benefits are numerous and substantial:

- the stability of institutional agricultural prices for producers and processors in the euro zone will remove a major source of misunderstanding and friction in commercial dealings between the various CAP players, from producers to distributors including all the different processing stages;

- simplifying the conversion of institutional prices into national currencies for non-participant Member States, through the replacement of the green rate by the market rate, will also make it possible to use financial market mechanisms to provide protection against exchange rate fluctuations;

- discontinuing the green rates for institutional agricultural prices will also lead indirectly to greater transparency in market prices;

- the new arrangements will eliminate artificial trade flows caused by the differences between green and market rates;

- in budget terms, the impact of the rise in agricultural expenditure resulting from the asymmetrical margins under the present agrimonetary arrangements will be eliminated.

3. Specific comments

3.1. The Committee realizes that, as in the past, the main problem will lie in compensating farmers for loss of revenue resulting from the reduction in CAP prices and aid following a revaluation. This issue, although relevant to the whole EU, mainly concerns the non-participating Member States and is more acute in the case of direct aid, bearing in mind the way the CAP is developing.

3.2. With regard to the present agrimonetary scheme, the Committee has followed the trends in compensation arrangements, which are affected by budgetary constraints, the development of the CAP and the EU's international commitments. On this basis it considers that the proposed new compensation arrangements are the logical outcome of past experience and the new situation created by the euro. It also endorses the transitional nature of these arrangements, but thinks that the situation should be reviewed before they are abolished on 1 January 2001.

3.3. The Committee would, however, draw the Commission's attention to the fact that the nature and method of financing of this compensatory aid are not such as to remove all discrimination between and within Member States. The Committee therefore urges that, for as long as compensatory aid is provided, it be applied without discrimination and to all parties concerned, including industry.

3.4. With regard to Article 8 of the proposal establishing agrimonetary arrangements for the euro (concerning direct payment in euros), the Committee notes that non-participating Member States may opt for payment of CAP amounts in euros instead of national currencies. In the interests of the neutrality of the new arrangements as between participating and non-participating countries, it is essential to ensure that this article is respected strictly so that the use of the euro by a non-participating member state does not give it an advantage over participating Member States.

4. Conclusions

4.1. The Committee broadly approves the new agrimonetary arrangements proposed by the Commission which are distinctly closer to the reality of the economic situation, simpler and less onerous on the budget.

4.2. It can only hope that the creation of the euro helps to stabilize the exchange market and hence render the agrimonetary arrangements less important. It further hopes that, at the end of the day, all Member States will come to participate in the common currency, thus resolving the agrimonetary question once and for all.

4.3. The Committee notes that the Commission's proposals do not take future Member States into account. It calls on the Commission to address this matter as soon as the details of the transitional arrangements for accession are known.

4.4. The Committee urges the Commission and Council to take into account the specific comments set out in this opinion.

Brussels, 9 September 1998.

The President of the Economic and Social Committee

Tom JENKINS

APPENDIX to the opinion of the Economic and Social Committee

The following amendment was defeated in the debate:

Point 3.4.

Replace by the following:

'3.4. In the Committee's view, the new Regulation must be framed and implemented so as to preserve neutrality between participating and non-participating Member States. This applies to the option, proposed in Article 8, whereby euros may be used instead of national currency for CAP payments. It also holds good for the transitional rules, under which compensation for direct aid is to be based on traditional production; the result could be a mismatch between aid and those who have suffered losses. The proposal for national co-financing can also give rise to problems.`

Reason

To be given orally.

Result of the vote

For: 14, against: 32, abstentions: 9.