[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 23.5.2006

COM(2006) 260 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

on EAGGF Guarantee Section expenditure Early warning system No 1–4/2006

TABLE OF CONTENTS

1. THE 2006 BUDGETARY PROCEDURE 3

2. COMMENTS ON THE IMPLEMENTATION OF THE 2006 BUDGET 4

3. CONCLUSIONS 6

1. THE 2006 BUDGETARY PROCEDURE

The 2006 budgetary procedure for heading 1 along with the corresponding amounts of appropriations involved at each stage of the procedure is presented in Annex 1.

The Commission adopted the preliminary draft budget (PDB) on 27 April 2005 involving commitment appropriations amounting to EUR 51 412.3 million and payment appropriations amounting to EUR 51 352.6 million for heading 1. The difference between commitment and payment appropriations amounting to EUR 59.7 million is due to the transitional instrument for the new Member States which is applied through differentiated appropriations as opposed to all other measures of the EAGGF-Guarantee. The amount of forecasted appropriations, included in the 2006 PDB for sub-heading 1a, were based on an evaluation of internal and external market conditions for the various products concerned as well as on the estimated requirements for the numerous other measures. The amount of forecasted appropriations, included in the 2006 PDB for sub-heading 1b were set at the ceiling for this sub-heading.

On 15 July 2005, the Ecofin-Budget Council adopted the Draft Budget (DB) by making an across-the-board reduction by an amount of EUR 150.0 million from the PDB appropriations of all budget lines of sub-heading 1a (agriculture) with appropriations greater than EUR 50.0 million, apart from the three lines related to the CAP reform. In contrast, the European Parliament, after its first reading of the PDB, increased the Commission’s requested appropriations as presented in its PDB by approximately EUR 38.1 million for the same sub-heading.

In October 2005, the Commission proposed the Amending Letter No 2/2006 to the 2006 PDB thereby requesting commitment appropriations amounting to EUR 51 050.7 million and payment appropriations amounting to EUR 50 991.0 million for heading 1. The Commission, on the basis of an evaluation of internal and external market conditions for the various products concerned, requested commitment appropriations amounting to EUR 43 279.7 million for heading 1a, thus, reducing its request by approximately EUR 361.6 million compared to the PDB’s level. The amounts for sub-heading 1b were left unchanged from the ones included in the 2006 PDB.

On 30 November 2005, the European Parliament, the Council and the Commission agreed on accepting the Amending Letter No 2/2006 concerning agricultural expenditure. The European Parliament adopted the 2006 budget on 15 December 2005.

The 2006 EAGGF-Guarantee budget’s commitment appropriations amounted to EUR 51 050.7 million and its payment appropriations amounted to EUR 50 991.0 million for heading 1. Specifically:

- for sub-heading 1a : commitment and payment appropriations amounted to EUR 43 279.7 million. These appropriations relate to all three Commission activities, namely: agriculture (policy area 05), fisheries (policy area 11) and health and consumer protection (policy area 17), included in this sub-heading;

- for sub-heading 1b : commitment appropriations amounted to EUR 7 771.0 million while payment appropriations amounted to EUR 7 711.3 million.

2. COMMENTS ON THE IMPLEMENTATION OF THE 2006 BUDGET

For the period 16 October 2005 to 28 February 2006, the budget’s actual implementation level compared to the expenditure profile pointed out by the indicator, 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], is presented in Annex 2. Hereafter, a brief commentary on the most significant divergences between the actual and the expected level of implementation for the various sectors of the 2006 budget follows.

2.1. 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 trend in 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 1 August 2005 to 28 February 2006 the average parity rate was approximately equal to EUR 1 = $ 1.20, i.e. approximately 1.6% below the rate used for the establishment of the 2006 budget.

2.2. Subheading 1a – Market factors

2.2.1. Sugar (+ EUR 154.6 million)

The Commission expects that this over-implementation will continue to the end of the budget year mainly because of the public storage of sugar. Specifically, the quantities of sugar entering public storage are higher while the currently expected volume of sugar sales is lower when compared to the levels retained in the 2006 budget. These two factors would also lead to higher than otherwise final stocks of sugar in public storage. The aforementioned stock movements will result to financial and technical costs which will be higher than the ones included in the 2006 budget.

2.2.2. Fruit and vegetables (– EUR 88.0 million)

This under-implementation is mainly due to the lower payments incurred for the aid paid for the processing of tomatoes because of the lower quantities entering the processing plants. Furthermore, it appears that the payments which Member States 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.

2.2.3. Wine (+ EUR 86.9 million)

The Commission considers that this over-implementation is temporary and that it is mainly due to the payments arising from the crisis distillations which were carried out earlier in the budget year.

2.2.4. Milk and milk products (– EUR 54.0 million)

The Commission agrees with the current under-execution shown in this sector by the indicator at this point in time and considers that this under-execution will probably continue to the end of the budget year if the current favourable internal and external market conditions persist in this sector. These favourable conditions have 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.

2.2.5. Pigmeat (– EUR 22.7 million)

At this point in time, the discontinuation in the payment of export refunds for fresh and frozen pigmeat would result to lower payments as already pointed out by the indicator. In the absence of other unforeseen factors, the Commission considers that this under-execution might continue to the end of the budget year.

2.2.6. Direct aids (– EUR 865.4 million)

Since the majority of these aids were firstly introduced with the 2006 budget, the Commission established the corresponding indicator on the basis of the payment forecasts forwarded by all Member States. However, the current under-execution reflects the fact that the Member States can not entirely respect the payments' rhythm established by themselves. Furthermore, certain Member States have encountered problems in establishing and liquidating the amounts of aid due. 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.

2.3. Sub-heading 1b – Rural Development (+ EUR 263.6 million)

The appropriations for rural development (EU-15) and for the transitional instrument for the new Member States were set at the ceiling for this sub-heading. The over-execution shown is due to the transitional instrument and it is temporary since the corresponding indicator was established on the basis of the hypothesis that all commitments for this instrument will take place in April 2006. However, the Commission’s services were able to start committing these appropriations before that time, thus leading to this temporary over-execution which is expected to be regularised in the following months.

3. CONCLUSIONS

For sub-heading 1a, the uptake of appropriations for the Member States' expenditure from 16 October 2005 to 28 February 2006 amounted to EUR 29 012.8 million, i.e. 67.0% of available appropriations. The overall under-spending of the budget’s appropriations when compared to the indicator amounted to approximately– EUR 883.8 million for the same period. This is totally attributable to the implementation of the measures for direct aids while the implementation for market measures was at the level pointed out by the corresponding indicator.

For sub-heading 1b, the uptake of appropriations for the Member States' expenditure from 16 October 2005 to 28 February 2006 amounted to EUR 1 299.3 million, i.e. 16.7% 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 1

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ANNEX 2 – 15/03/2006

BUDGET YEAR 2006 PROVISIONAL CONSUMPTION OF APPROPRIATIONS

AGAINST ORIGINAL APPROPRIATIONS OF EAGGF-GUARANTEE

Situation 28/02/2006 in EUR million

Original Appropriations Budget (**) | Commitments from November to February | Utilisation | Expenditures profile as at February | Gap between implementation and indicator |

EUR mio | % | % | EUR mio | % | EUR mio |

a | b | c=(b*100)/a | d | e=(d*a)/100 | f=c–d | g=b–e |

| Subheading 1a : CAP expenditure (not including rural development) | | | | | | | | |05 01 |ADMINISTRATIVE EXPENDITURE OF AGRICULTURE AND RURAL DEVELOPMENT POLICY

05010401, 05010406 and 05010407: Monitoring/prevention and pilot projects | |0,1 |1,4% |0,0% |0,0 |1,4% |0,1 | | | Total 05 01 Administrative expenditure of agriculture and rural development | 4,0 |0,1 |1,4% |0,0% |0,0 |1,4% |0,1 | |05 02 |INTERVENTIONS IN AGRICULTURAL MARKETS | | | | | | | | |05 02 01 |Cereals |700,0 |225,5 |32,2 % |30,3 % |211,8 |2,0 % |13,8 | |05 02 02 |Rice |4,0 |1,4 |35,9 % |30,2 % |1,2 |5,7 % |0,2 | |05 02 03 |Refunds on non-Annex 1 products |415,0 |112,5 |27,1 % |38,2 % |158,6 |–11,1 % |–46,2 | |05 02 04 |Food programmes |268,0 |27,3 |10,2 % |10,0 % |26,7 |0,2 % |0,6 | |05 02 05 |Sugar |1.376,0 |755,6 |54,9 % |43,7 % |601,0 |11,2 % |154,6 | |05 02 06 |Olive oil |35,0 |17,6 |50,4 % |71,2 % |24,9 |–20,8 % |–7,3 | |05 02 07 |Textile plants |969,0 |754,5 |77,9 % |77,5 % |751,4 |0,3 % |3,1 | |05 02 08 |Fruit and vegetables |1.544,0 |619,1 |40,1 % |45,8 % |707,1 |–5,7 % |–88,0 | |05 02 09 |Products of the wine-growing sector |1.494,0 |537,8 |36,0 % |30,2 % |450,9 |5,8 % |86,9 | |05 02 10 |Promotion |52,0 |10,0 |19,2 % |22,9 % |11,9 |–3,7 % |–1,9 | |05 02 11 |Other plant products/measures |297,6 |93,1 |31,3 % |40,8 % |121,3 |–9,5 % |–28,2 | |05 02 12 |Milk and milk products |858,0 |353,7 |41,2 % |47,5 % |407,7 |–6,3 % |–54,0 | |05 02 13 |Beef and veal |388,0 |136,3 |35,1 % |39,5 % |153,3 |–4,4 % |–17,0 | |05 02 14 |Sheepmeat and goatmeat |0,0 |0,0 |0,0 % | | | | | |05 02 15 |Pigmeat, eggs and poultry, bee-keeping and other animal products |164,0 |32,8 |20,0 % |33,8 % |55,5 |–13,9 % |–22,7 | |05 02 99 |Recoveries |–56,0 |–18,4 |32,8 % |46,8 % |–26,2 |–14,0 % |7,8 | | | Total 05 02 Interventions in agricultural markets | 8.508,6 |3.658,8 |43,0 % |43,0 % |3.657,0 |0,0 % |1,7 | |05 03 |DIRECT AIDS | | | | | | | | |05 03 01 |Decoupled direct aids |16.375,0 |11.047,8 |67,5 % |69,8 % |11.429,8 |–2,3 % |–382,0 | |05 03 02 |Other direct aids |18.105,9 |14.082,4 |77,8 % |80,3 % |14.539,0 |–2,5 % |–456,6 | |05 03 03 |Additional amounts of aid |347,0 |42,6 |12,3 % |14,5 % |50,3 |–2,2 % |–7,7 | |05 03 04 |Ancillary direct aids (reliquats, small producers, agrimonetary aids, etc.) |0,0 |–0,9 |0,0 % | | | | | |05 03 99 |Recoveries |–11,0 |–23,4 |212,4 % |46,7 % |–5,1 |165,7 % |–18,2 | | | Total 05 03 Direct aids | 34.816,9 |25.148,5 |72,2% |74,7% |26.014,0 |–2,5% |–865,4 | |05 07 |(1) AUDIT OF AGRICULTURAL EXPENDITURE |9,4 |0,3 |2,8 % |30,5 % |2,9 |–27,7 % |–2,6 | | |05070101, 05070102 and 050702: | | | | | | | | | |monitoring and preventive measures, settlement of disputes | | | | | | | | | | Total 05 07 Audit of agricultural expenditure | 9,4 |0,3 |2,8 % |30,5 % |2,9 |–27,7 % |–2,6 | |05 08 |(1) POLICY STRATEGY AND COORDINATION OF AGRICULTURE AND RURAL DEVELOPMENT POLICY |6,5 |0,1 |1,6 % |5,0 % |0,3 |–3,4 % |–0,2 | | |050806: enhancing public awareness of the CAP | | | | | | | | | | Total 05 08 Policy strategy and coordination of agriculture and rural development policy | 6,5 |0,1 |1,6 % |5,0 % |0,3 |–3,4 % |–0,2 | |11 02 |(2) FISHERIES MARKETS |33,2 |7,8 |23,5 % |25,4 % |8,4 |–1,9 % |–0,6 | | | Total 1102 Fisheries markets | 33,2 |7,8 |23,5 % |25,4 % |8,4 |–1,9 % |–0,6 | |17 01 |(1) (2) ADMINISTRATIVE EXPENDITURE OF POLICY AREA HEALTH AND CONSUMER PROTECTION |8,1 |0,0 |0,0 % |12,6 % |1,0 |–12,6 % |–1,0 | | |17010401, 17010404 and 17010405: Plant health meas. – Pilot study – Feed and food safety | | | | | | | | | | Total 17 01 Administrative expenditure of policy area Health and consumer protection | 8,1 |0,0 |0,0 % |12,6 % |1,0 |–12,6 % |–1,0 | | 17 03 |(1) (2) PUBLIC HEALTH | | | | | | | | |17 03 02 |Community tobacco fund – direct payments by the EU |14,6 |0,0 |0,0 % |61,6 % |9,0 |–61,6 % |–9,0 | | | Total 1703 Public health | 14,6 |0,0 |0,0 % |61,6 % |9,0 |–61,6 % |–9,0 | |17 04 |(1) (2) FOOD SAFETY, ANIMAL HEALTH, ANIMAL WELFARE AND PLANT HEATH |278,5 |195,0 |70,0 % |73,2 % |204,0 |–3,2 % |–9,0 | | |17 04 01 to 07 Veterinary, animal welfare, public health, plant health, feed and food and other measures | | | | | | | | | | Total 17 04 Food safety, animal health, animal welfare and plant health | 278,5 |195,0 |70,0 % |73,2 % |204,0 |–3,2 % |–9,0 | | | Total 1a (excluding clearance) | 43.679,7 |29.010,5 |66,4 % |68,4 % |29.896,6 |–2,0 % |–886,1 | |05 07 |(1) AUDIT OF AGRICULTURAL EXPENDITURE |–400,0 |2,3 |–0,6 % |0,0 % |0,0 |–0,6 % |2,3 | |05 07 01 06 |Accounting clearance of previous years' accounts and reduction/ suspension of advances for 1a |–70,0 |2,3 |3,3 % |0,0% |0,0 |–3,3 % |2,3 | |05 07 01 07 |Conformity clearance of previous years' accounts of shared management expenditure under 1b |–330,0 |0,0 |0,0 % |0,0 % |0,0 |0,0 % |0,0 | | | Total 05 07 Audit of agricultural expenditure | –400,0 |2,3 |–0,6 % |0,0 % |0,0 |–0,6 % |2,3 | | | Total 1a (including clearance) | 43.279,7 |29.012,8 |67,0 % |69,1 % |29.896,6 |–2,0 % |–883,8 | | | Subheading 1b : Rural development | | | | | | | | | 05 04 01 |Rural development in the EAGGF Guarantee Section – EUR-15 |5.675,0 |1.022,9 |18,0 % |18,3 % |1.036,1 |–0,2 % |–13,1 | |05 04 04 |Rural development in the EAGGF Guarantee Section – EUR-10 (3) |2.096,0 |276,7 |13,2 % |0,0 % |0,0 |13,2 % |276,7 | | | Total 0504 Rural development | 7.771,0 |1.299,6 |16,7 % |13,3 % |1.036,1 |3,4 % |263,6 | | | Total 1b (excluding clearance) | 7.771,0 |1.299,6 |16,7 % |13,3 % |1.036,1 |3,4 % |263,6 | |05 07 |(1) AUDIT OF AGRICULTURAL EXPENDITURE |0,0 |–0,3 |0,0 % | | | | | |05 07 01 08 |Accounting clearance of previous years' accounts and reduction/ suspension of advances 1b |0,0 |–0,3 |0,0 % | | | | | |05 07 01 09 |Conformity clearance of previous years' accounts of rural development under heading 1b |1 b0,0 |0,0 |0,0 % | | | | | | | Total 05 07 Audit of agricultural expenditure | 0,0 |–0,3 |0,0 % | | | | | | | Total 1b (including clearance) | 7.771,0 |1.299,3 |16,7 % |13,3 % |1.036,1 |3,4 % |263,3 | | | Subheadings 1a and 1b | | | | | | |1 | | | TOTAL budget EAGGF-Guarantee (excluding clearance) | 51.450,7 |30.310,1 |58,9 % |60,1 % |30.932,7 |–1,2 % |–622,6 | | | TOTAL budget EAGGF-Guarantee (including clearance) | 51.050,7 | 30.312,1 |59,4 % |60,6 % |30.932,7 |–1,2 % |–620,6 | | (*) Budget year = 16.10.2005 to 15.10.2006 but direct expenditure possible until 31.12.2006.

(**) Commitments.

(1) Chapter not exclusively EAGGF-G.

(2) Chapter outside title 05 but included in EAGGF-G.

(3) Differentiated appropriations – Chapter not exclusively EAGGF-G.

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