Proposal for a COUNCIL DECISION on transitional national compensation for farmers in Germany
Date: 1992-02-05
Institutions: European Commission
Subjects: Germany, State aid, VAT, farmers' income

COMMISSION OF THE EUROPEAN  COMMUNITIES 

C0M(91) 551 final 

Brussels, 5 February 1992 

Proposal  for a 

COUNCIL DECISION 

on  transitional  national  compensation  for farmers  In Germany 

(presented by the Commission) 

(Only the German  text  is authentic) 

T~*  ;  r^ 

-j 

y- 

,J  --rj- —fj~ 

EXPLANATORY  MEMORANDUM 

Wnen  in 1984  the Council  decided  to dismantle existing  positive MCAs  it 
also  decided  that  the  consequential  loss  of  income  for  the  farmers 
concerned  would  be offset  by  special  aid  measuresCD. 

As  ^ a r ds  farmers  In  Germany  the  aid  now  applied  in  the  wake  of  the 
1934 Council  decision  involves  two  components^2): 

-  om  based  on  VAT,  limited  to  3%  of  the  ex-VAT  price  paid  by  the 
purchaser  for  the  agricultural  product.  This  aid  is  valid  until 
31  December  1991.  (20th VAT  directive<3>) 

-  the other  based  on  a per  hectare  system,  the overall  volume  of  which 
is  limited  to an annual  amount  not  exceeding  that  granted  through  a 2 
percentage  point  reduction  in  VAT.  This  aid  is  valid  until 
31  December  1992.  (Council  Decision  No  88/402/EEC<4>). 

The  volume  of  aid  granted  annually  under  these measures  amounts  to some 
DM  2 300 million  via  the  VAT  system  (for  the  whole  of  Germany)  whereas 
some  DM  1 000 mi 11 ion  are  granted  under  the  hectare  system  (applied 
only  in the old  Bundeslander). 

Although  the  1984 Council  decision  concerning  dismantlement  of  positive 
MCAs  provides  for  income  compensation  which  is not  of  limited  duration, 
the  Council»  when  adopting  the  20th  VAT  directive,  noted  that  the 
income  consequences  of  dismantlement  of  monetary  compensatory  amounts 
are  temporary  and  degressive.  It  is  therefore  logical  that  any 
assistance  granted  in  the  context  of  such  dismantlement  reflects  these 
economic  real it les. 

Cessation  of  the  VAT-based  aid  from  the  end  of  1991,  as  currently 
provided  for  under  Community  rules,  would  nonetheless  have  a 
significant  negative  effect  upon  farm  incomes  in Germany  at  a  time  when 
these  have  fallen  sharply.  The  aid  granted  through  the  VAT  system  is 
equivalent  to some 7% of  the net  value  added  of  German  agriculture. 

(1) 0J  No L 90, 1.4.1984,  p.  1. 
(2) For  background  information: The  VAT  aid 

set  at  5% from 
1  July  1984  to 31  December  1988.  From  1 January  1989,  it has  been 
set  at 
was  introduced  from 
1 January  1989  following  a change  in the DM  green  rate  applied  from 
the beginning  of  the  1988/89 marketing  year. 

The  2%  per  hectare 

was 

3%. 

aid 

(3) 0J  No L  192, 24.7.1985, p. 18. 

3 -

Taking  particular  account  of  this  income  situation,  the  Commission 
considers  that  an  Income support  measure  should  be envisaged  for  1992 
on a national and transitional basis. 

The Commission feels however that the VAT system  for granting  aid must 
not  be  continued  as  this mechanism  links the  aid  too closely  to the 
level  of  production  of  each  individual  farmer.  Already  in  1987  the 
Council, when adjusting agricultural  conversion  rates  in Germany which 
entailed  a drop  in prices  in DM*5*, decided  that  compensatory  aid must 
not be  linked to production.  In the Commission's view, the technically 
most  appropriate  way  of  granting  the  aid  envisaged  in 1992 would  be 
through  soclo-structural  measures  as  set  out  in  its  proposal  of 
1989(°).  However,  no  Council  decision  has  yet  been  taken  on  that 
proposal.  Against  this  background,  and  In  view  of  the  need  for  any 
decision  to  be  taken  rapidly  In order  to  fulfil  its  objective,  the 
Commission  considers  that  the  aid  now  proposed  should  be  channelled 
through  a  mechanism  similar  to,  and  operate  In  parallel  with,  the 
existing  per  hectare  system  with  due  account  being  taken  of  the 
particular  farm  structures  in  the  Lander  of  the  former  German 
Democratic Republic. This  Is the purpose of the attached proposal. 

The Commission will  review the effects of this proposal  before  the end 
of  1992  having  regard  to  the  decisions  on  the  reform  of  the  Common 
Agricultural Policy and the need for coherence with these decisions. 

(5) Regulation 1890/87 of 2 July 1987 (0J No L 182, 3.7.1987,  p.1.) 

-  4 -

Proposal  for a 

COUNCIL DECISION 

on  transitional  national  compensation  for  farmers  in Germany 

THE COUNCIL OF THE  EUROPEAN  COMMUNITIES, 

Having  regard  to  the  Treaty  establishing  the  European  Economic 

Community,  and  in particular Articles 42 and  43  thereof, 

Having  regard  to the proposal  from  the  Commission^1), 

Having  regard  to the opinion of  the European  Par I lament<2), 

Having  regard  to the opinion of  the Economic  and  Social  Committee*3*, 

Whereas  to offset  the  income  losses  resulting  from  reductions  in prices 

expressed  in  national  currency  brought  about  in  Germany  by  the 

adaptation  of  agricultural  conversion  rates, the Council,  in Regulation 

(EEC)  No  855/84  of  31  March  1984  on  the  calculation  and  dismantlement 

of  the  monetary  compensatory  amounts  applying  to  certain  agricultural 
products*4*  deemed  that,  subject  to  certain  specified  conditions,  a 

special  aid  granted  through  the  VAT  system  was  to  be  compatible  with 

the  common  market;  whereas  the  aid  provisions  laid  down  in  that 

Regulation  are  without  time  limit;  whereas  in  Directive  85/361/EEC  of 

16  July  1985  on  the  harmonization  of  the  laws  of  the  Member  States 

relating  to  turnover  taxes  -  Common  system  of  value  added  tax: 

derogations  in  connection  with  the  special  aids  granted  to  certain 

farmers  to  compensate  for  the  dismantlement  of  monetary  compensatory 
amounts  applying  to  certain  agricultural  products*5*,  the  Council  laid 

down  the  conditions  under  which  the  VAT  system  could  be  used  for  the 

grant  of  this special  aid; 

(1) 

(2) 

(3) 

(4) OJ  No L 90, 1.4.1984,  p. 1. 

(5) OJ  No L  192, 24.7.1985, p. 18. 

-  5  -

Whereas  the Council, when  adopting  Directive 85/361/EEC,  noted  that  the 

consequences  of  the  dismantlement  of  monetary  compensatory  amounts  are 

temporary  and  degressive; whereas  farm  incomes  in Germany  have  recently 

developed  in  an  unsatisfactory  manner;  whereas  the  provisions  of 

Directive  85/361/EEC  expired  on  31  December  1991;  whereas  it  is 

therefore  appropriate  to  lay  down  provisions  concerning  an  income 

support  benefit  for  the  farm  sector  in  Germany  in 1992; 

Whereas  the  mechanism  for  the  grant  of  aid  provided  for  in  Directive 

85/361/EEC  is product ion-1 inked;  whereas  the  income  support  objectives 

now  sought  would  more  appropriately  be  fulfilled  in  1992  through  a 

scheme  linked  to  area; whereas  due  account  should  be  taken  of  the  farm 

structure  in  the  Lander  in  the  former  German  Democratic  Republic; 

whereas  the  aid  provided  for  in Council  Decision  88/402/EEC  of  30  June 
1988 on  aid  to  farmers  in  the  Federal  Republic  of  Germany*6*  should  be 

granted  notwithstanding  this  Decision, 

HAS ADOPTED  THIS  DECISION: 

Article 1 

Without  prejudice  to  the  provisions  of  Decision  88/402/EEC,  Germany  is 

hereby  authorized  to  grant,  from  1 January  1992  until  31  December 

1992,  special  national  aid  which  is  not  linked  to  prices  or  to 

production, under  the  following  conditions: 

1.  Individual  farmers  shall  qualify  for  aid  per  hectare  of  utilized 

agricultural  area  of  their  holdings;  however,  the  aid  per  holding 

shall  not  be  less  than  DM  1 500 and  shall  not  exceed  DM  16 000 per 

year. This  aid  shall  be paid  on  a one-off  basis. 

2.  In  principle,  only  farmers  who  are  members  of  the  German  farm 

retirement  pension  scheme  (GAL) may  qualify  for  this  scheme. 

(6) 0J  No L  195, 23.7.1988, p. 70. 

- 6 -

3.  Derogations  from  the  provisions  of  point  1  except  as  regards  the 

one-off  limitation  and  from  the  provisions  of  point  2  shall  be 

applied  to  the  extent  necessary  to  take  account  of  the  farm 

structure  in the  Lander  in the  former  German  Democratic  Republic. 

4.  Germany  shall  fix  the  unit  amount  referred  to  at  point  1,  the 

conditions  of  point  3, and  all  other  implementing  details  in such  a 

way  as  to  ensure  that  the  overall  volume  of  the  special  aid  does 

not  exceed  DM  2 200 mi 11 ion. 

Article  2 

1.  Germany  shall  notify  to  the  Commission  drafts  of  detailed 

provisions  and  of  any  further  amendments  relating  to  the 

implementation  of  the aid  scheme  referred  to  in Article  1. 

At  the  request  of  the Commission,  it shall  provide  further  guidance 

information. 

2.  Germany  may  not  implement  the  relevant  provisions  before  such  time 

as  the  Commission  has  ascertained  their  compatibility  with  the 

stipulations set  out  in Article  1. 

The  Commission  shall  decide  on  whether  to  approve  the  draft 

provisions  within  two months  from  the  date of  receiving  them. 

Article  3 

This  Decision  is addressed  to  the  Federal  Republic of  Germany. 

Done  at  Brussels, 

For  the Counci 

The  President 

ISSNQ254rl475 

GpM^91) 651  final 

DOCUMENTS 

EN 

03 

feGrtakan^  niinier :iC3-CO-91^17-EN^ 

ISBN" 92-77-79459-3 

• - , ; : • •• 
i 
Oil ice for Official Publiouicms of the European CbmmnxMcsi 
L-2985 Luxembourg 

• • > • • •! 

;  _ 

...;.. 

• 

-