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DOCUMENTS "COM"
COM(76)600
Vol.1976/0185

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COMMISSION OFTHE:EUROPEAN COMMUNITIES
COM(76)600final.
Brussels.21October1976.
( ,
f
COMMUNICATION FROMTHECOMMISSION TOTHECOUNCIL
concerninglonger-term measuresto"be
takeninthefieldofmonetarycompensatory
amounts
COM(76)600final

Communication from the Commission tothe Council
concerning longer –term measures tobe
taken inthefield ofmonetary compensatory
amounts
1,Theaim ofthis communication isto
propose changes tothesystem ofmonetary compensatory amounts
(MCA),inorder to:
(a)reduoe ,asfaraspossible ,distortions ofcompetition inthe
agricultural sector ;
(b)reduce itscost J
(c)introduce apermanent system foradjusting theMCAsj
(d)take account ofstabilization policies being followed in
the Community .

-1- COM/76/600-ERev.2
2.Themonetarycompensatory amountshaveservedasa
transitional instrumentformaintainingthemachineryofthe
commonagricultural policyinoperation,firstlyduringthe
paritychangesin19^9and1971and.subsequently whilethe
international andintra-Community monetarysystemwaschangingfromfixedtofloatingexchangerates^•
TheCommissioncannotinfutureallowthemonetarycompensatory
amountstodisrupttheunityoftheagricultural marketand
generatedistortionsofcompetition.However,theymust
continuetoserveasinstrumentspreventingshort-term
fluctuations intheexchangeratesfromhavingimmediate
repercussions onagricultural pricesexpressedinnational
currencies ..
Toensurethatthemonetarycompensatory amountsfulfilthis
secondrolewithinacceptablelimits,especiallyasregards
financialconsiderations ,themachineryshouldbeadjusted
witheffectfrom1January1977*
3.Thefollowingexposécentresontwoessentialquestions:
(a)theintroductionofaceilingleadingtotheadjustment
ofthegreenratesbyasimplifiedprocedure;
(b)theproposalforapermanentsystemforadjustingthe
MCAs.
1 *I^«.. ... *SeeCommissionworkingdocumentof18October197"!"The
monetarycompensatory amounts(MCAs)withintheframework
ofthecommonagricultural policy".

-2- COM/76/600–ERev. 2
Introduction ofaoeiling
4.TheMCAs cause more distortions ofcompetition thegreater they
areandthelonger they areapplied .Toavoid theemergence of
unacceptable distortions within thecommon agricultural market ,
itisproposed tointroduce aceiling which theMCAs -positive
ornegative –maynotexceed .This ceiling could hefixed at
£xJpoints where theMCAisnegative andatalower rate where
itispositive ^when ,atagiven time ,thedifference between
themarket rate andthegreen rate foragiven currency exceeds this
ceiling ,thegreen rate would "beadjusted inaccordance with the
procedure laid down inArticle 6ofCouncil Regulation (EEC)
No974/7*1^tafter consultation with theMonetary Committee .
InthenewMember States this ceiling would notapply until
1July 1978 inview oftheeffects ofthenarrowing ofprioe
differentials .Uptothat date theabove limits would be
increased byagiven percentage .
Permanent system foradjusting theMCAs
5.Although thesystem ofMCAs wasintroduced asatemporary
measure tocompensate forrelatively infrequent currency
fluctuations ,experience shows that itisbecoming more and
more difficult ,inthepresent unstable monetary situation ,to
adapt thegreen rates applicable inagriculture tothereal
situation inother sectors oftheeconomy . Therefore itis
proposed that apermanent system foradjusting theMCAs be
introduced from 1January 1977 »toadapt thecommon
agricultural policy totherealities ofthefloating exchange
rate system .
6.Theproposed system fulfils thefollowing conditions :
-simplicity :
-flexibility ofoperation ?
-optimum transparency ,making itpossible atthe same time to
prevent currency speculation and speculation onagricultural
markets ;
-itcanbeapplied equally well topositive andnegative MCAs
while avoiding price reductions inthecourse ofthe
marketing yearj ,-
-itimplies that MCAs will progressively bereduced over time .
OJL106 ,12May1971# page 2.

-3- C0M/76/600-ERev.
7.Iheproposedsystemoperatesasfollows:
Everysixmonthstheaveragemarketrateofadepreciated
currencyiscalculatedfortheprevious18months;thisaverage
rate"becomesthegreenrateaftersixmonthsatthemost,on
conditionthattheformergreenratediffersbyaminimumof
f~a7%fromtheaveragemarketrate.
1.1.
19751.1.
19761.1.
1976
averagerate
over18monthsafter6monthsat
thelatestbecomesGreenrate
Inprinciple,theabovemethodcanalsobeappliedtoappreciated
currencies ;however,inthiscasethecomparisonwouldbemade
withouttakingaccountofthedifferenceofaJ^oreferredto
above.Inaddition,theadjustmentstothegreenratesarising
fromthesystemwouldbeappliedwhenfixingtheannualprices.
8.Cut-off.However,theapplicationoftheceiling
referredtoinparagraph4andthepermanentsystemdescribed
inparagraph7maynottogetherhavetheeffectofmodifyingagiven
greenratebymorethanforanappreciated currencyandTcj%foradepreciatedcurrencywithin(~dJmonthsfailinga
unanimouscontrarydecisionbytheCouncilonaproposalfromthe
Commission.