WRITTEN QUESTION E-1933/97 by Giulio Fantuzzi (PSE) to the Commission (4 June 1997)

Subject: Compensatory aid for arable crops

During the discussions on the 1997/98 farm prices package at the Agriculture Council of 21-22 April 1997, Commissioner Fischler stated that the proposal to produce compensatory aid for arable crops, which would, as is well known, mean spending cuts of ECU 1.4 billion in the 1998 budget, was not an integral part of the prices package.

The proposal, the Commissioner said, would be motivated by the problem of the principle of over-compensation in the cereals sector rather than by the need to cover expenditure in the other farm sectors.

In view of the above, will the Commission say:

1. how this statement can be reconciled with the content of the proposal on farm prices itself, in which the Commission insists that the proposal to reduce compensatory payments for cereals will be adopted to ensure that the 1998 budget is balanced (see Volume I, page 12 of the report) and maintains that this is an integral part of the current prices package?

2. Whether it condemns the ease with which Commissioner Fischler has contradicted what he said when he publicly presented and explained the prices package to the European Parliament as recently as 5 March 1997?

3. Whether any new factors have emerged and, if so, what they are, as a result of which the cut in compensatory payments is no longer essential in order to meet the 1998 budget constraints?

4. Whether it agrees that the possible problem of the principle of over-compensation for cereals, mentioned by Commissioner Fischler, should be tackled with measures to reform the present organization of the market, which would be much more lasting and more targeted than a simple linear, non-differentiated cut?

Joint answer to Written Questions E-1845/97 and E-1933/97 given by Mr Fischler on behalf of the Commission (15 July 1997)

The budgetary authority had decided in 1996 to maintain the 1997 appropriations for the European Agricultural Guidance and Guarantee Fund (EAGGF), Guarantee Section, at their 1996 level, thus committing itself to adopting, during performance of the budget, a supplementary and amending budget if the budget provision proved likely to be exceeded during the course of the year.

It should be noted that the EAGGF Guarantee Section appropriations are estimated appropriations based on economic forecasts made up to 18 months before performance of the corresponding expenditure. The monitoring of agricultural expenditure for the 1997 financial year (the early warning system) indicates that from June on there will be an under-utilisation of about ECU 1.3 billion in relation to the 1997 budget appropriations, thus showing that there is no risk of exceeding the initial appropriations. This under-utilisation is particularly due to the good performance of certain markets (cereals, sugar, sheepmeat), a slowing-down in expenditure in the beef and veal sector and the imposition of the additional milk levy on producers who exceeded their allotted quota.

Agricultural producers did not therefore suffer any loss of income owing to the ECU 1 billion reduction in appropriations by the budgetary authority.

On the contrary, that reduction made it possible to reduce the need to use own resources by an equivalent amount and thus helped to meet the objective of limiting the budget deficit to 3% in Member States in 1997, since they did not have to mobilise unnecessarily one billion ecu that year.

For the 1998 financial year, the Commission has presented to the budgetary authority a preliminary draft budget which, with regard to the Guarantee Section, respects the objective of 0.50% growth in relation to the 1997 budget appropriations, while covering, as in the past, the entire budgetary requirements of the agricultural sector.

The Commission, in its proposal for agricultural product prices for the 1997/1998 marketing year, presented to the Council a proposal to reduce the compensatory payments in the arable crops sector from the 1997/98 marketing year on by ECU 1 353 million overall, representing an average drop of 6%.

This proposal, which the preliminary draft budget had already taken into account and which had already been forwarded to the Council and to Parliament in July 1996 before being included in the prices package, was brought forward in order to finance additional expenditure in the beef and veal sector following the BSE crisis, within the difficult budgetary framework anticipated for 1998.

However, the proposal also fits into the general economic context of the sector. The Commission notes that the compensatory payments had been adopted in 1992, as compensation for a drop in cereal prices on the assumption that they would mirror the planned decrease in institutional prices. In fact, the decrease was only partial, because the cereal sector had been experiencing high prices, on both the world and internal markets, for several years. As a result, the compensation to producers was for only a partial decrease in prices.

The Commission notes its intention, as described in its 1997 programme, to present, after the conclusions of the intergovernmental conference, a communication on the financial framework of the Community from the year 2000, accompanied by a very thorough reflection on the future of Community policies, more particularly the common agricultural policy and structural policies.

It is for this purpose that the Commission published on 22 April 1997 a working paper on the long-term prospects for the cereal, milk and beef and veal markets.

It should be stressed that the proposed reduction in no way foreshadows a possible reform of the arable crops sector - its aim is to correct the obvious over-compensation in the sector. With regard to the Phare and Meda programmes, the budgetary authority has respected the commitments entered into with regard to the countries concerned at the Cannes European Council in June 1995.