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.

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).

Annex 1 presents the budget’s actual implementation, for the period 16 October 2005 to 31 May 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.

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 1 August 2005 to 31 May 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.

2.2.Subheading 1a – CAP expenditure (excluding rural development)

2.2.1.Sugar (+ EUR 316.3 million), Fruit and vegetables (– EUR 118.4 million) and milk

(– EUR 114.8 million)

The reasons behind the implementation patterns for these sectors remain identical to the ones presented in the previous Early Warning System Report No 5-6/2006.

2.2.2.Refunds on Non-Annex I products (– EUR 84.2 million)

The general fall in the level of export refund rates as well as the smaller exported volume of processed agricultural products have led to lower refund payments by the Member States, thus, leading to the current under-implementation of this measure's appropriations which is expected to last to the end of the budget year.

2.2.3.Textile plants (– EUR 13.7 million)

The Commission has adopted its decision on the aid for cotton. The increase in the world price of cotton have led to a reduction of the rate of aid and a consequent reduction in the payments to be made having as result an under-spending of this measure's appropriations by the end of the budget year.

2.2.4.Pigmeat, eggs and poultry, bee-keeping (– EUR 43.6 million)

At this point in time, the discontinuation in the payment of export refunds for fresh and frozen pigmeat is expected to result to lower payments. This fact has already been captured by the indicator. However, when the cost of the exceptional support measures for the eggs and poultry sectors as a result of the bird flue epidemic is taken into consideration, and if Member States pay all the aids decided within the current budget year, then, the current under-spending is not expected to last to the end of the budget year.

2.2.5.Direct aids (– EUR 1 769.1 million)

The current under-execution of all the measures financed by this article is approximately 40% lower to the level observed at the end of April 2006. As regards decoupled direct aids, specifically: their under-implementation also decreased by approximately 66% compared to the same period. The Commission is closely monitoring the implementation situation on the basis of information provided by the Member States on a regular basis. At this point in time, the Commission can not exclude an under- implementation of the budget's appropriations for this measure.

3.Conclusions

For sub-heading 1a, the uptake of appropriations for the Member States' expenditure from 16 October 2005 to 31 May 2006 amounted to EUR 36 312.8 million, i.e. 83.9% of available appropriations. The overall under-spending of the budget’s appropriations when compared to the indicator amounted to approximately

– EUR 1 780.2 million for the same period, and concerns both market measures and direct aids.

The Commission is of the view that the under-implementation of the budget's appropriations will continue up to the end of the budget year. However, it is too early to estimate the final foreseeable amount.

For sub-heading 1b, the uptake of appropriations for the Member States' expenditure from 16 October 2005 to 31 May 2006 amounted to EUR 3 838.6 million, i.e. 49.4% 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.

ANNEX