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Brussels, 26.7.2006

SEC(2006) 1054 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

on EAGGF Guarantee Section expenditure Early warning system No 5–6/2006

TABLE OF CONTENTS

1. INTRODUCTION 3

2. COMMENTS ON THE IMPLEMENTATION OF THE 2006 BUDGET 3

3. CONCLUSIONS 4

INTRODUCTION

Annex 1 presents the budget’s actual implementation, for the period 16 October 2005 to 30 April 2006, compared to the expenditure profile determined by the indicator which was established on the basis of the dispositions of Article 7 of Council Regulation (EC) No 2040/2000 of 26 September 2000 on budgetary discipline[1].

COMMENTS ON THE IMPLEMENTATION OF THE 2006 BUDGET

Hereafter follows a brief commentary on the most significant divergences between the actual and the level of implementation pointed out by the indicator for the various sectors of the 2006 budget (NB: In parenthesis, the current level of over (+) or under (–) execution is presented).

Monetary factors

The dollar/euro rate

The expenditure incurred in the aforementioned period takes account of the movement in the dollar/euro rate. For 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 is influenced by the euro/dollar rate.

In accordance with Article 8(1) of Regulation (EC) No 2040/2000, the budget adopted by the Budgetary Authority was drawn up on the basis of the average parity rate for July–September 2005 of EUR 1 = $ 1.22. It should be noted that for the period from 1 August 2005 to 30 April 2006 the average parity rate was approximately equal to EUR 1 = $ 1.21, i.e. approximately 1% below the rate used for the establishment of the 2006 budget.

Subheading 1a – CAP expenditure (excluding rural development)

Sugar (+ EUR 296.9 million)

The quantities of sugar exported with refunds are much higher compared to the export volume retained in the 2006 budget. This factor would lead to higher than otherwise expenditure for export refunds despite the overall reduction of the level of export refund rates.

Fruit and vegetables (– EUR 109.2 million)

Member States have finished their payments of the aid for the processing of tomatoes. They have incurred lower expenditure because of the lower quantities of tomatoes entering the processing plants. Furthermore, it appears that the payments which they will make for the operational funds for producer organisations will be lower than the expenditure foreseen in the budget. At this point of time, the Commission expects that the implementation of this measure will result to budget savings in the fruit and vegetables sector.

Milk and milk products (– EUR 104.7 million)

The current favourable internal and external market conditions have, generally, allowed the Commission to reduce the overall level of export refund rates and internal market aids for the different products of this sector, thus, incurring lower than otherwise expenditure. The Commission expects that this under-execution will probably continue to the end of the budget year.

Direct aids (– EUR 3 036 .3 million)

The current under-execution involves primarily the decoupled direct aids. It reflects the fact that certain Member States encountered significant administrative difficulties in establishing and liquidating the amounts of aid due and, therefore, in keeping up with the rhythm of payments pointed out by the indicator. The Commission is closely following up and updating the implementation situation on the basis of information provided by the Member States on a regular basis. Despite the fact that it is too early to assess the final outcome, most of the difficulties should be overcome in the near future. However, at this point in time, the Commission can not exclude an under-implementation of the budget's appropriations for this measure.

CONCLUSIONS

For sub-heading 1a, the uptake of appropriations for the Member States' expenditure from 16 October 2005 to 30 April 2006 amounted to EUR 33 137.8 million, i.e. 76.6.0% of available appropriations. The overall under-spending of the budget’s appropriations when compared to the indicator amounted to approximately– EUR 3 107.5 million for the same period, mostly attributable to the implementation of the direct aids budget for the aforementioned period.

For sub-heading 1b, the uptake of appropriations for the Member States' expenditure from 16 October 2005 to 30 April 2006 amounted to EUR 3 625.1 million, i.e. 46.6% of available appropriations. At this point in time, the Commission expects that this sector’s appropriations will be executed as proposed in the 2006 budget.

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[1] OJ L 244, 29.9.2000, p. 27.