Proposal for a COUNCIL REGULATION (EC) amending Regulation (EEC) No 3813/92 on the unit of account and the conversion rates to be applied for the purposes of the common agricultural policy
Date: 1994-11-16
Institutions: European Commission
Subjects: agri-monetary policy, agricultural product, common agricultural policy, monetary compensatory amount, representative rate

COMMISSION  OF  THE  EUROPEAN  COMMUNITIES 

COM(94) 498  final 

Brussels,  16.11.1994 

94/  0265(CNS) 

REPORT TO THE COUNCIL OF THE EUROPEAN UNION 
ON THE AGRIMONETARY SYSTEM FOR THE SINGLE MARKET 

Period from 1 January 1993 to 30 June 1994 

This Commission report has been drawn up pursuant  to Article 13(2) of 
Council Regulation  (EEC) No 3813/92. 

Proposal for a 

COUNCIL REGULATION  (EC) 

amending Regulation  (EEC) No 3813/92 on the unit of account and 

the conversion rates to be applied for the purposes of the 

common agricultural policy 

(presented by the Commission) 

- 1 -

REPORT TO THE COUNCIL OF THE EUROPEAN UNION 

ON THE AGRIMONETARY SYSTEM FOR THE SINGLE MARKET 

Period from 1 January 1993 to 30 June 1994 

This Commission report has been drawn up pursuant to Article 13(2) of 
Council Regulation  (EEC) No 3813/92. 

/}<SL 

- 2 -

Contents 

A.  Establishment of the agrimonetary system for the single market 

B.  Changes made to the agrimonetary system 

1.  Period of application of the original  system 
2.  Period of application of the special measures 
3.  Period of application of the amended system 
4.  Simulated variations of the agricultural  conversion rates 

Summary 

C.  Economic and financial  consequences 

1.  Effects on prices 
2.  Effects on trade 
3.  Compensatory measures 

4.  Effects on the EAGGF Guarantee Section 

Summary 

D.  Outlook  for the agrimonetary system 

1.  International and financial constraints 
2.  Coherence of the system 
3.  Stable agricultural conversion rates 
4.  Compensation mechanisms 

General  conclusions 

National  currencies 

Abbreviations used in this report 

Belgian  francs and Luxembourg  francs 
Danish kroner 
German marks 
Greek drachmas 
Portuguese  escudos 
French  francs 
Finnish markkaa 
Dutch guilders 
Irish pounds 
Italian lire 
Norwegian kroner 
Austrian  schillings 
Spanish,pesetas 
Swedish kronor 
Pounds  sterling 

BLF 
DKR 
DM 
DRA 
ESC 
FF 
FMK 
HFL 
IRL 
LIT 
NKR 
OS 
PTA 
SKR 
UKL 
EAGGF:  European Agricultural Guidance and Guarantee  Fund 
CAP: 
EMS : 
ACR: 

Common agricultural  policy 
European monetary system 
Agricultural  conversion rate 

- 3 

REPORT TO THE COUNCIL OF THE EUROPEAN UNION 
ON THE AGRIMONETARY SYSTEM FOR THE SINGLE MARKET 

This Commission report to the Council has been drawn up pursuant  to 
Article  13(2) of Council Regulation  (EEC) No 3813/92. It analyses  the 
functioning of the agrimonetary system over the period  1 January 1993 to 
30 June 1994. The results and conclusions  it contains  should be treated with 
caution in view of the relatively short period  examined. 

A.  ESTABLISHMENT OF THE AGRIMONETARY SYSTEM FOR THE SINGLE  MARKET 

The new agrimonetary system on the basis of Council Regulation  (EEC) 
No  3813/92 of 28 December 1992 on the unit of account and the  conversion 
rates to be applied for the purposes of the common agricultural policy 
(OJ No L 387, 31.12.1992, p.l) entered into force on 1 January 1993, at the 
same time as the single market was completed. 

This abolished the previous system of monetary compensatory amounts which 
had been in existence for more than 20 years. The old system was based on 
agricultural  conversion rates with a relatively fixed value, valid as a rule 
for one year. In trade in sensitive agricultural products between Member 
States or between them and non-member countries, amounts were levied or 
granted  to compensate  for the effect on prices of the difference between the 
agricultural  conversion rate and the real exchange rate. The system of 
monetary compensatory amounts no longer applies in the single market  since 
there are no longer any goods controls at intra-Community borders. 

The new system applies to all legislation based on Article  43 of the Treaty 
establishing  the European Community and legislation relating  to goods 
processed  from agricultural products subject to specific  trade arrangments, 
with the exception of the following: 

customs legislation; 
amounts  fixed in ecus by the Commission under the structures policy 
in agriculture and fisheries; 
some amounts excluded by legislation based directly on Article 43 of 
the Treaty specifying the use of a particular conversion rate. 

The principles governing the agrimonetary arrangements  introduced at the 
same time as the single market are as follows: 

The ecu'1' is used as the unit of account to fix prices and amounts, 
while payments are made in national currencies. 

The national currencies are divided into two categories: the "fixed" 
currencies are those which remain within a maximum fluctuation band of 
less than 2.25% within the EMS. All the other currencies are "floating" 
currencies. 

Amounts are converted from ecus into national currency using an 
agricultural conversion rate close to the real rate, i.e.: 

the central rate for the fixed currencies; 
a rate close to the average market rate for the floating currencies. 

Except in certain special cases, the agricultural conversion rates for 
all currencies are adjusted when monetary realignments take place withir 
the EMS. In the case of floating currencies, they may also be changed or 
the 1st, 11th or 21st day of each month. 

A special mechanism, known as the "switchover" mechanism, is to be 
applied until 31 December 1994. Using this mechanism, all conversion 
rates for the ecu are multiplied, directly or indirectly, by a 
correcting factor. In this way the correcting factor determines the 
level of the corrected ecu used temporarily in the CAP. When monetary 
realignments take place within the EMS, the switchover is increased to 
offset the highest revaluation of the fixed currencies. This means, 
therefore, that the conversion rates for the  (corrected) ecu cannot be 
reduced for the fixed currencies. 

The agricultural conversion rate applicable to a given price or amount 
is that valid at the time the operative event takes place, i.e. the 
event whereby the economic objective of the operation concerned is 
attained. However, advance fixing is also possible, although the scope 
for this is limited. 

Prices and certain amounts fixed in (corrected) ecus are reduced when 
the correcting factor is increased. This reduction amounts to 25% of the 
effect on prices of the annual increase in the correcting factor. The 
main income losses due specifically to agrimonetary factors may be 
offset in the form of an increase in certain amounts fixed in 
(corrected) ecus or in the form of degressive aid. 

(1) This is the ecu as defined in Council Regulation  (EEC) No 3180/78 

(OJ No L 379, 31.12.1978, p. 1.), converted into national currencies 
using the rates published in the C-series of the OJ. Where it is 
necessary to make a distinction, that ecu is referred to as the (budget) 
ecu in this report, in order to distinguish it from the ecu multiplied 
by the correcting factor inherent in the switch-over mechanism, which is 
referred to as the  (corrected) ecu. 

- 5 

The period in which the new agrimonetary arrangements were introduced was 
very turbulent in monetary terms. After almost five years of remarkable 
monetary stability, except as regards the Greek drachma which had declined 
considerably in value, autumn 1992 was very eventful: 

The pound sterling and Italian lira were taken out of the exchange rate 
mechanism of the EMS in September 1992. Therefore, from an agrimonetary 
point of view, these currencies became floating currencies, the same as 
the Greek drachma. The other floating Community  currencies on 1 January 
1993 were the Spanish peseta and the Portuguese escudo, which were in 
the exchange rate mechanism of the EMS with a fluctuation range of 6%. 

Three realignments which changed the central rates of the fixed 
currencies in the EMS led to an increase of 4.4% in the correcting 
factor for the ecu. On 1 January 1993 this factor was 1.195066. 

On 1 January 1993 the monetary gaps between the agricultural conversion 
rates and the representative market rates of the (corrected) ecu were as 
follows : 

-  in the case of the fixed currencies, all had been zero since 

1 January 1991, 

in the case of the floating currencies, they were reduced to zero or 
close to zero'1). 

As for the floating currencies, given the monetary gaps which had 
existed previously, but above all the devaluations in autumn 1992, the 
agricultural conversion rates for the DRA, LIT, PTA and UKL had had to 
be increased sharply before 1993. 

(1) Monetary gaps of zero for the PTA and DRA; - 0.786 for the ESC; - 1.000 

for the LIT and - 2.000 for the UKL. 

6  -

B.  CHANGES  MADE  TO  THE AGRIMONETARY  SYSTEM 

From  the  beginning  of  1993, we  can  distinguish  between  three  agrimonetary 
periods  based  on  monetary  events  and  changes  in  legislation,  as  follows: 

the  original  arrangements  from  J a n u a ry to  July  1993 
the  special  measures  from  August  to  December  1993 
the  revised  arrangements  from  January  to  June  1994. 

Details  of  the  changes  in  the  agricultural  conversion  rates  (ACRs)  and  the 
monetary  gaps  are  given  in Annexes  1,  2  and  3.  The  table  below  is  a  summary 
of  developments,  given  in  percentages: 

Changes  in  the  agricultural  conversion  rates  (%) 

Period  from 

to 

1.9.1992 
1.1.1993 

1.1.1993 
1.8.1993 

1.8.1993 
1.1.1994 

1.1.1994 
30.6.1994 

1.1.1993 
30.6.1993 

BLF 
DKR 
DM 
DRA 
ESC 
FF 
HFL 
IRL 
LIT 
PTA 
UKL 

0 
0 
0 
+ 13, 0 
+  3,0 
0 
0 
0 
+ 18,5 
+  9,6 
+ 18,1 

0 
0 
0 
+  2,8 
+ 13,1 
0 
0 
+ 11,1 
+  3,8 
+ 14,6 
- 1,9 

+  1,5 
+  4,1 
0 
+  3,0 
0 
+  1,1 
0 
0 
+  2,6 
0 
0 

0 
0 
0 
+  4,5 
+  1,0 
0 
0 
0 
+  0,5 
+ 11, 0 
0 

+  1,5 
+  4,1 
0 
+ 11,7 
+ 14,2 
+  1,1 
0 
+ 11,1 
+  9,0 
+ 15,8 
-  1,9 

1.  Period  of  application  of  the  original  system:  January  to  July  1993 

(a)  Main  events  and  monetary  movements 

In  monetary  terms  the  period  is  characterized  by  two  realignments  within  th 
EMS.  In  relation  to  the  other  currencies  in  the  exchange  rate  mechanism: 

on  3 0 January  1993  the  Irish  pound  was  devalued  by  1 0% 
on  13  May  1993,  the  Spanish  peseta  and  the  Portuguese  escudo  were 
devalued  by  8%  and  6.5%  respectively. 

For  those  currencies  considered  to be  floating  from>the  agrimonetary  point 
of  view,  the  market  conversion  rates  were  as  follows: 

7 -

for the UKL and LIT, they were devalued up to the end of February and 
beginning of April respectively  (4% and 6.7%)  before being revalued  in 
relation to their levels at the beginning of 1993  (5.7% and  0.2%). 
for the DRA, there was an almost continuous, slight devaluation  (2.4%) 
for the ESC and PTA, they were devalued  sharply  (11.9% and  13.6%), in 
particular during the last few days of July 1993, during which the 
devaluation previously registered  increased  considerably  (7.4% and  9.1% 
on 20 July  1993). 

(b) The first detailed rules for applying  the agrimonetary  arrangements 

From 1 January 1993, Commission Regulation  (EEC) No 3819/92  (OJ No L 387, 
31.12.1992, p.17) laid down the first detailed  rules necessary  for  immediate 
application of the arrangements as follows: 

thé reference periods on the basis of which the representative market 
rates for the floating currencies are calculated are defined as being 
the  (as a rule) ten-day periods beginning on the first, eleventh and 
twenty-first day of each month, 

the agricultural  conversion rate  (ACR) is adjusted at the beginning of a 
reference period when the difference between it and the new 
representative market rate exceeds the permitted  thresholds : 

* 

* 

at the beginning of the month, if the monetary gap for a given 
currency exceeds two points  (unilateral  threshold), the agricultural 
conversion rate  (ACR) for that currency is adjusted so as to reduce 
the gap by half ; 

at the beginning of each reference period,  if the monetary gaps 
relating tô* two currencies produce an  "aggregate" '-1-' greater than 
four points  (bilateral threshold),  the ACRs concerned are adjusted 
so as to reduce each of the gaps in question to two points ; 

- -  a special adjustment rule was introduced to prevent very large monetary 

gaps from persisting for a long time during a reference period. Where 
the  "aggregate" of the gaps relating to two currencies exceeds six 
points, on the basis of the market rates recorded over three  consecutive 
quotation days for the ecu, the ACRs concerned are immediately  adjusted 
so as to reduce each of the gaps in question to two points. 

(1) More precisely, this is the absolute value of the difference between  the 

algebraic values of the two monetary gaps. 

- 8 -

the conditions for the advance fixing of the ACR are specified. In 
accordance with the provisions adopted by the Council, advance fixing i: 
limited to amounts fixed in ecus by tendering procedure or those which 
themselves can be fixed in advance in ecus. Such advance fixing is valix 
up to the end of the third month following the current month at the 
latest. In addition, in order to avoid the risk of major market 
distortion, the ACR fixed in advance is adjustable if it differs by mor« 
than 4% from that which would have been used if no advance fixing had 
taken place. 

In addition, as from 1 January 1993, Commission Regulation (EEC) 
No 3824/92  (OJ No L 387, 31.12.1992, p.29) determines the prices and 
amounts fixed in ecus to be amended as a result of monetary realignment. 
Commission Regulation  (EEC) No 3820/92  (OJ No L 387, 31.12.1992, p.22) 
laid down measures for the transition from the old to the new 
agrimonetary arrangements, principally as regards the operative events 
for the ACRs. 

(c) Review of the operative events for the agricultural conversion rates 

The performance of operations eligible for the grant of a price or an amount 
under the CAP almost always takes a certain amount of time, during which the 
value of the agricultural conversion rate may change. By definition the 
"operative event" is the event which takes place on the date which 
determines the value of the ACR to be applied to the price or amount in 
question. 

The problem of choosing the operative events has existed since the 
agrimonetary system first came into being. As a general rule, Council 
provisions since 1985 indicate that the operative event is "the event 
whereby the economic objective of the operation is attained". Any more 
precise definition is to be laid down by the Commission as required and for 
each particular case. 

Under the new agrimonetary arrangements, the operative events have gained 
considerably in importance. Firstly, operative events are used much more 
frequently since, by the nature of the system, there are more changes in the 
ACRs. Secondly, the consequences of the operative events, which mainly 
affected the relative interests of operators in any one Member State, now 
have repercussions for trade throughout the single market: the gap between 
the market rate and the agricultural conversion rate used, by reference to 
the operative event, can no longer be offset by measures at the internal 
borders of the Community. 

Consequently, the Commission has undertaken, on the basis of criteria laid 
down by the Council ^ 
force on 1 January 1993. 

,  a general review of all the operative events in 

(2) See Article 6(2) of Regulation  (EEC) No 3813/92 

9 -

In order not to introduce differences  in treatment during  the marketing 
year, Commission Regulation  (EEC) No 3820/92 specifically extended the 
period of validity of the operative events established under the former 
agrimonetary arrangements up to the end of the marketing years which ended 
in 1993. At the same time it announced a general review of the rules in 
question by the beginning of the following marketing years. 

In the analysis of the situation obtaining on 1 January 1993, the main 
problem encountered, except for certain special cases, was those operative 
events which have the effect of a long-term fixing of the value of the ACR. 

These operative events may entail the creation of very large monetary gaps, 
exceeding  the thresholds laid down by the Council, between the conversion 
rate actually applied and the market rate in force at the time the operation 
is actually  completed.  In such cases the result would be distortion of the 
trade flows between the Member States for which gaps exist and those for 
which none exist. 

In practice, this type of operative event concerned mainly the following: 

dates set annually, such as the beginning of the marketing year, for 
prices or amounts linked to market  organizations 
the closing dates for invitations to tender for prices or amounts, for 
operations  to be completed within long deadlines 
the conclusion of contracts relating to future operations. 

The sectors most affected by these operative events were: 

wine, fruit and vegetables and fishery products, as regards fixed dates 
beef and milk and milk products, as regards invitations to tender and 
contracts. 

Therefore, in these sectors, the effective applicability of variations  in 
the ACRs was hindered, to a greater or lesser extent-, up to the middle of 
1993 by the extension of the operative events existing  in 1992. 

Commission Regulation  (EEC) No 1068/93 of 30 April 1993 on detailed  rules 
for determining  and applying the agricultural conversion rates  (OJ No L 108, 
1.5.1993, p.106) repealed Regulation  (EEC) No 3819/92, but adopted the 
provisions  it contained in improved form. In addition, it laid down the new 
operative events applicable from the beginning of the marketing years 
following. 

10 -

These operative events are directly applicable, subject to sectoral 
provisions  laid down on the legal basis of Regulation  (EEC) No 3813/92 whici 
define  them more closely or derogate from them for reasons specific  to a 
particular amount or market. 

The principle pursued was to establish operative events which are: 

close to the physical  completion of the operation  in cases where this  ±i 
linked  to markets 
determined by a date fixed annually for other operations. 

Therefore,  for example, the operative events adopted were: 

acceptance  of the customs declaration  for amounts linked  to trade with 
non-member  countries 
the taking-over of products for buying-in and selling prices, and for 
marketing  aid 
the beginning of the calendar year or marketing year for aid per hectare 
or livestock unit or for structural aid. 

(d) Consequences  for the agricultural  conversion rates and prices in ecus 

As a result of the monetary realignment at the beginning  of 1993, the 
correcting  factor for the ecu was increased by 1.04%.  Its value on 1 January 
1993,  i.e.  1.195066,  increased  to 1.205454, then 1.207509,  and has  remained 
unchanged  since  14 May 1993. 

As a result of the switchover mechanism at the beginning  of the various 
1993/94 marketing years, prices and amounts linked to the markets were 
reduced  in ecus, and therefore  for all Member States, by 25% of the  increase 
in the correcting  factor for the ecu registered over the twelve preceding 
months. 

For all products, the reduction'3' was 1.29%.  It was made at one single 
time, as a rule on 1 July 1993, where all the monetary realignments  in 1992 
and  1993 occurred over the twelve months preceding the date of the 
reduction. For some products, including sheepmeat, olive oil and some fruit 
and vegetables, prices were reduced in two stages, at the start of the 
1992/93,  1993/94 or 1994/95 marketing years, which begin during the months 
from October to May. 

As  regards  the floating  currencies, between 1 January and 1 August 1993 the 
ACRs were changed  twelve times for the LIT  (five increases and  seven 
decreases)  and eleven times for the UKL  (three increases and eight 
decreases).  They were increased eight times for the PTA, seven times for the 
ESC and three times for the DRA. 

(3) The price reduction is not the same as 25% of the increase in the 

correcting  factor, i.e. 1.36%, because that increase was made before and 
after the beginning of 1993. It was calculated according  to the rules 
laid down under the agrimonetary arrangements prior to 1993. 

- 11 -

The ACR for the IRL was increased in two stages: the main increase, 8.9%, 
was made immediately after the monetary realignment in question, with a 
further 2% increase at the beginning of the main marketing years, on 1 July 
1993. 

The rule for the urgent adjustment of the ACRs had to be applied four times 
in order to prevent monetary gaps totalling more than six points between two 
currencies from lasting for more than three days. The currencies involved 
were, on the one hand, the UKL, accompanied once by the LIT, and on the 
other hand the LIT, PTA or ESC. 

2.  Period of application of the special measures, August to December 1993 

a)  Main events and monetary movements : 

On 2 August 1993 the fluctuation ranges of the exchange rate mechanism of 
the EMS were raised to 15%. 

. 

After these new rules had been introduced, the DM and HFL were revalued 
progressively, by 1.6% in two-and-a-half months, before regaining their 
original level. For the other currencies which until 1 August 1993 had been 
considered to be fixed currencies, a devaluation of 1% to 2.5% over one to 
three months was eventually totally offset in the case of the BLF and 
partially offset in the case of the DRK and FF, and even reversed in the 
case of the IRL. 

Of the previously floating currencies, the ESC and PTA were devalued 
particularly sharply by approximately 5% in the last few days of July 1993. 
Subsequently the ESC stabilized whereas the PTA strengthened slightly before 
reaching, at the end of the year, its level at the beginning of August 1993. 
The DRA and LIT were devalued fairly steadily  (3.4% and 5.7%), whereas the 
UKL, following a, slight devaluation over two months, regained its August 
1993 level at the end of the year. 

(b) Special measures 

Following the decision on the EMS of 2 August 1993, pursuant to agrimonetary 
legislation(4^ and in spite of a bilateral agreement between Germany and 
the Netherlands to maintain their currencies within-a band of 2.25%, all 
Community currencies are considered to be floating. 

Under these circumstances, it is no longer possible to have a revaluation of 
the central rates for the fixed currencies and therefore changes to the 
correcting factor for the ecu. For this reason, all the ACRs, which are 
subject to the rules laid down for floating currencies, must be adjusted 
upwards or downwards ,in order to follow changes in the representative market 
rates. In August 1993, application of these rules led to two increases in 
the ACRs for the DKR and FF, and to one increase for the DRA. 

(4) Article K b) of Regulation  (EEC) No 3813/92 

12 

At  the beginning of September 1993 the Commission noted that for the past 
month the market rates had been highly volatile. For example, the daily 
monetary gaps fluctuated as follows : 

Date 

4 August 

16 August 

20 August 

10 September 

BLF 
DM 
UKL 

- 0 .5 
+ 0 .6 
+ 1 .1 

- 1 .4 
+ 2 .1 
- 0 .2 

- 0 .6 
+ 1 .1 
+ 0 .7 

- 1 .9 
+ 1 .9 
- 1 .0 

The rules  in force could have triggered  frequent adjustments of the ACRs. 
These adjustments could have had serious consequences  for the agricultural 
markets, producers' incomes and Community finances, without being based on 
clear, confirmed  trends on the money markets. 

Therefore, in order to obtain a longer observation period,  Commission 
Regulation  (EEC) No 2496/93  (OJ No L 229, 10.9.1993, p.17) provisionally 
amended,  from 10 to 30 September 1993, the rules for applying the reference 
periods on which adjustments of the ACRs are based. 

Since the monetary circumstances and their possible  agricultural 
consequences had not changed fundamentally, at the end of that  observation 
period the Commission decided as a safeguard measure to suspend all  the 
rules for the automatic adjustment of ACRs. At the same time it submitted to 
the Council a proposal  for an amendment of the basic agrimonetary  Regulation 
in order to adapt it to the new monetary variability made possible by the 
decision on the EMS of 2 August 1993. 

Initially intended  to cover the period 1 to 20 October  1993, the  safeguard 
measure had to be extended until 21 December 1993, the day before the entry 
into force of the Council amendment of the basic agrimonetary Regulation. 

(c) Consequences  for the agricultural conversion  rates 

In October  1993 the Commission had to adjust, on an ad.hoc basis, the ACRs 
for the BLF, the LIT and the DRA in order to avoid the risk of the 
deflection of trade flows as a result of the negative monetary gaps which 
had arisen  for these currencies. The bilateral monetary gaps of 13 October 
1993 had reached a level of approximately six points between  those 
currencies on the one hand and the DM, HFL and PTA on the other. Large 
bilateral gaps persisted  for three reference periods between the PTA on the 
one hand and the LIT and DRA on the other. They appeared during one 
reference period between the BLF on the one hand and the HFL and DM on the 
other. 

- 13 

In the end, between September and December 1993 the monetary gaps for the 
ESC,  FF,  IRL and UKL remained smaller than two points. The positive monetary 
gaps of more than two points narrowed of their own accord for the DM, HFL 
and PTA after having reached almost three points. For the DKR they appeared 
at the end of the period, in December 1993. 

At  the end of 1993, as a result of the agricultural  conversion rate 
adjustments which had been made, there was one single monetary gap which 
still exceeded  the unilateral  threshold of two points: +2.393  for the DKR. 

3.  Period of application of the amended system: January to June 1994 

(a) Main events and monetary movements 

Compared with previous movements, the first half of 1994 was a much quieter 
period 

The levels reached by the DKR, DM, FF and HFL in January  1994 remained 
virtually stable. The BLF rose steadily by just under 2%. The IRL was 
revalued by approximately 2% in January 1994, then, from the end of February 
onwards,  its value fluctuated at around the level it had reached at the 
beginning of  the year. 

The picture  for the LIT and PTA varied, and no overall trend is discernible 
in the first half of 1994. 

For the other" currencies, the overall trend is towards devaluation, at least 
since February 1994  (about 2% for the ESC and 4% for the DRA and UKL) . 

(b) Amendment of the system 

At the end of December  1993, Council Regulation  (EC) No  3528/93 
(OJ Nb L  320,  28.12.1993, p.32) amended the basic agrimonetary Regulation to 
take account  of the risk of greater variablility in ACRs. 

The Regulation restricts the conditions for granting compensation for 
revaluations  in cases where these occur before or after devaluations. 

The main amendments cover the rules for ACR adjustment, which it suspends 
and replaces by new rules up to 31 December 1994. 

The detailed rules for applying the arrangements were adjusted by Commission 
Regulation  (EC) No 547/94  (OJ No L 69, 12.3.1994, p.l).  Under the new rules, 
at the beginning of each reference period  (1st, 11th and 21st of each 
month) , the ACR  is adjusted so as to reduce, always by half, the gap between 
it and the representative market rate, if that gap exceeds the new 
thresholds. 

- 14 

The unilateral  threshold which was previously  fixed at two points  is now 
restricted: 

in the case of positive gaps,  to +3 points, which can be extended where 
necessary,  i.e.  if a larger gap exists, to a maximum of +5 points; 

in the case of negative gaps,  to the level of the threshold  applicable 
to positive gaps, less 5 points, i.e. as a rule  -2 points, although it 
may be reduced  to zero. 

If, after the gaps which exceed the unilateral  threshold have been reduced 
by half, there are  "aggregate" gaps greater than 5 points, the ACRs  in 
question are  immediately adjusted so as to reduce the gaps in question to 
the level of their respective thresholds. 

To summarize, the range of. the bilateral  threshold which used to be 4 points 
has been increased to 5 points. This threshold  is positioned  asymmetrically 
between  -2 and +3 and is movable up to an upper limit of +5. 

(c) Consequences  for the agricultural  conversion rates 

The ACRs  for the DRA, ESC, LIT and PTA were adjusted  in order to reduce 
their negative monetary gaps. 

The positive monetary gaps for the BLF and DKR stabilized at between +2 and 
+3 points. The gap for the IRL remained greater than +3 over a period of 
more than one month, its daily level even reaching between +4.0 and +4.3 
over 12 days. As a result, it triggered dismantling of the relatively  small 
negative gaps for the DRA and LIT. Since the end of February the gap for the 
IRL has been fluctuating widely around +2 points. The positive gap greater 
than 2 points  for the UKL which appeared at the end of January  disappeared 
of its own accord  in mid-February, and became a negative gap. 

4.  Simulated variations in the agricultural  conversion rates 

The ACRs which would have been fixed on the basis of various  theoretical 
adjustment  rules provide a comparison for analysing  the impact of the rules 
and measures actually adopted  in the monetary situation obtaining  from 
January 1993  to June 1994. The overall results of these  simulations  are 
given  in Part 1 of Annex 7. 

(a) Effects of the components of the original  rules 

If there had been no switch-over mechanism and no thresholds  for the average 
market  rates  for each reference period,  the increases  in the ACRs would have 
been considerably  lower than those actually applied, except  in the case of 
the DRA and ESC. The increases would have been at least 3% lower than those 
actually registered  for the DKR and IRL. There would have been a fall of 
more than 2% for the BLF, DM and HFL, and the fall would even have  exceeded 
3% in the case of the UKL. 

- 15 -

In contrast with the above theoretical  situation,  the introduction of the 
original  threshold rules, between  -2 and +2 points, without  a switchover 
mechanism, would have considerably reduced the fall  in the ACRs for the BLF, 
DM, HFL and UKL, and limited the increases  for the DRA, ESC, IRL and PTA. 
Nevertheless  the general level of ACR increases would have been 
significantly lower compared with the situation which actually occurred. 

(b) Interruption and amendment of the original rules 

If the rules originally adopted by the Council  for the automatic  adjustment 
of the ACRs had been applied without interruption, the correcting  factor 
would have been frozen at its July 1993 level, resulting  in a fall in the 
ACRs for the DM and HFL of less than 1%. The increases  in the ACRs would 
have been approximately  1% less than those actually applied  for the BLF, 
DKR,  IRL and PTA. In the case of the other currencies, the situation would 
have differed little from that which actually occurred. 

During the period of application of the special measures,  from August to 
December  1993, maintaining the original rules would have led to a fall in 
the ACRs for the DKR  (lio%),'DM  (0.5%),  HFL  (0.7%) and PTA  (0.8%).  The 
increases  in the ACRs applied for the BLF, DRA and LIT would have been 
triggered  in any case  (0.1% lower for the BLF and 0.7% higher for the LIT) , 
and the stability of the other ACRs would not have been affected. 

Renewed application of the original rules from 1 January 1994 onwards would 
hâve produced no change in the ACRs for the DM, ESC, FF and HFL. The ACRs in 
force on 1 January 1994 would have been reduced for the BLF  (1.2%),  DKR 
(0.6%),  IRL  (2.1%),  as well as the UKL  (1.2%), which, however, would  then 
have returned to its original level. The reduced ACRs would still have 
remained greater than the levels they were at on 31 December 1992. As 
regards the other 'Currencies, the increases  in the.ACRs would have been less 
than those actually applied for the PTA  (-0.1%) and LIT  (-0.5%), but would 
have been higher for the DRA  (+0.8%). 

(c). Other assumed situations 

• 

.  • 

As part of the analysis of the situation in the past, an examination was 
also made of what would have happened to the ACRs on 3 0 June 1994 in the two 
following assumed scenarios: 

if,  in addition to the original Council rules for adjusting the ACRs, a 
switchover mechanism for the floating currencies had been  introduced 
from August  1993 onwards: if there was a risk that an ACR could  fall 
below the ACR applicable on 31 December  1992, the correcting  factor for 
the ecu would be increased to reduce the positive monetary gap in . 
question to +2  (assumption D in Annex 7 ); 

if the amended rules on the threshold, which became asymmetrical  and 
movable  from the end of December 1993 onwards, had been applied without 
a  switchover mechanism  from 1 January 1993 onwards  (assumption E in 
Annex 7 ). 

- 16 -

In these  two assumed  cases, the changes  in the ACRs would have been  little 
different  from those which actually occurred. Differences of more than 1% 
would have  consisted  of a slight  reduction  in the ACR  for the UKL, and a 
slight  increase  in the ACRs  for the IRL in the first  case, and  for the ESC 
and  PTA  in the  second. 

The  switchover mechanism  linked to the floating  currencies would have been 
triggered  on two occasions  to prevent  a fall in the ACRs  for the HFL and DI^ 
The  correcting  factor for the ecu would then have been  fixed at  1.216238 
from  the end of October  1993 onwards,  i.e. an increase  of  0.72%. 

****************** 

Summary of agrimonetary developments 

1.  The agrimonetary  situation  from  January 1993 to June 1994 was very  turbulent  with: 

the  introduction of the new regime, in particular the review of the operative events for ACRs 
freezing of the switchover  mechanism 
the disappearance, for all currencies, of the qualifications required for fixed-currency status 
the suspension,  then amendment, of the original  rules for ACR adjustment  with the introduction of 
asymmetrical,  movable bilateral  threshold  extended to five points. 

2.  On the whole, a close  link was maintained  throughout  this series of events and measures between the 
overall  trend  followed by market  exchange  rates and the ACRs. However, the ACRs were made  relatively 
stable vis-à-vis  erratic and minimal  monetary movements. 

The special  measures  taken in the last few months of 1993 restricted ACR movements in response to 
fluctuations of the market  rates which had become excessive, making  both upward and downward  correctic 
necessary. In particular,  they prevented a fall in the ACRs for the DM, HFL and PTA, which, given 
monetary developments,  would have proved to be useless two months  later. Thus, the provisions  initial I 
introduced,  which  would  have led to the application of a fixed  threshold of -2 to +2, with the 
switchover  mechanism not being  implemented  after 2 August  1993, would  have proved to have an 
unnecessarily destabilizing effect on the ACRs. 

Furthermore,  considering  market  trends, the new provisions  applied in 1994, based on an extended, 
asymmetrical  and movable  threshold,  tend to overprotect  positive monetary gaps. For example,  positive 
monetary  gaps, mostly  between 2% and 3%, were maintained for more than four months for the BLF, DKR an 
IRL, thus preventing  their  preceding  devaluations  from being  corrected. 

****************** 

17 -

C.  ECONOMIC AND FINANCIAL CONSEQUENCES 

1.  Effects on agricultural prices 

The relationship between ACRs and market prices in national  currencies was 
examined  from July 1992 onwards. The analysis covered a number of products 
chosen on the basis of their economic  importance and the quality of the 
available data. A selection of the most significant results  is given in. 
Annex 4. The trends and quantities  indicated are only approximations. They 
may be invalidated by major events on the markets, such as changes  in the 
marketing  years. 

As could have been assumed, the relationship between the ACRs and market 
prices in national currency depends to a large extent on the nature of the 
common market organizations  in question. The prices of products covered by 
an intervention mechanism are all linked to the ACRs in the short  term, 
although the extent of these links varies. For the other products, the 
relationship between the two is either very general and discernible only in 
the medium to long term, or non-existent, at least in the short or medium 
term. 

(a) Products with an intervention price 

As regards cereals, normally market prices for common wheat and feed barley 
closely follow changes in intervention prices in national  currency. The same 
applies to maize and durum wheat, with certain time lags at the beginning of 
the marketing year as a result of the dates of the actual harvests. 

Roughly speaking, a shift of 1% in the intervention price  in national 
currency is reflected  in a movement  in the market price  in the same 
direction, as a rule between 0.5% and 1.5%. 

However, to a certain degree prices are independent of monetary  impact 
during the marketing year. As a rule, these independent variations are 
approximately  + 2.5% at lea*st. As a result, the slight  increase in the ACR 
for the BLF  (1.5%) in October 1993 was not reflected  in a clear rise in 
market prices. The effects of the increase in the-* ACR  for the DKR  (4.1%) in 
August  1993 were concealed by the price levelling at the beginning of the 
1993/94 marketing year. 

For sugar, although considerably  influenced by major changes  in ACRs, prices 
seem to be more independent of agrimonetary movements than is the case with 
cereals. 

- 18 -

Olive oil prices are also clearly influenced by the ACRs. However, although 
the general  trends are the same, delays in price adjustments may exceed 
three months, and there are large independent variations. Compared with 
agrimonetary developments, these independent variations provoke  significant 
overcompensation or undercompensation  in relation to prices, often reaching 
10%. 

In the milk  sector, the ACRs seem to have a very direct  impact on market 
prices  for butter. In those Member States in which the ACRs  changed 
considerably,  the.link between ACRs and the price of butter  is practically 
automatic, for both upward and downward  shifts: for the  IRL, LIT, PTA and 
UKL, price rises reached 80% to 100% of the ACR increases. The extent to 
which prices change may be delayed by the effects of aid and export  refunds 

As a rule, over the periods examined, butter prices did not  fluctuate much 
apart  from the monetary adjustments: + 2%. The fall of 4.25%  in the 
intervention price at the beginning of the 1993/94 marketing year was 
reflected  in market prices to a lesser extent and only after a delay, with 
possible compensation due to the increase in ACRs for the BLF, DKR, FF and 
IRL. 

In those currencies which were devalued  sharply, milk powder  (whole or 
skimmed) prices also closely follow the ACRs, both upwards and downwards, 
without major delays. However, there are wide variations within this 
tendency: price movements independent of the rates frequently exceed  + 5%. 
In spite of the non-existent or slight influence of intervention prices, th« 
markets of those Member States involved  in sharp devaluations have had to 
take account of prices charged on the main markets  in terms of  European 
production and consumption, expressed in currencies which have  remained 
practically  stable. 

In the case of cheese, the relationship between prices and ACRs is 
indiscernible  in the short term  (with the exception of Grana Padano in 
Italy). General price trends follow long-term monetary developments, but 
very rigidly and with few independent variations. 

In the beef/veal sector, ACR movements are also closely  followed by price 
movements: an increase of 1% is reflected  in a price  increase of  0.5% to 
1.5%. 

However, price movements may not occur until after a delay of two to three 
months  (United Kingdom, Greece). Furthermore, they may be distorted by very 
large variations  independent of the monetary causes, as in Ireland.  These 
variations  can easily reach + 5% and totally cancelled out  the effects of 
the increases of less than 1.5% in the ACRs  for the BLF and FF. By contrast, 
the increase of 4.1% for the DKR in August  1993 was reflected  in prices 
before being  cancelled out by market developments. 

- 19 -

(b)  Products  with  no  intervention  price 

Table  wine  prices  did not  follow  the  increases  in  the  agricultural 
conversion  rates  for  the  PTA  and  LIT  between  July  1992  and  August  1993.  The 
contrary would  have  been  surprising  since  the  operative  events  for  the  ACRs 
applicable  in  this  sector  were  all  frozen  at  dates  closely  following  the 
beginning  of  the  1992/93  wine  year.  Since  1  September  1993,  after  revision 
of  the  operative  events, market  prices  have  been  catching  up  with  the  level 
reached  by  the  ACRs.  However,  these  price  developments  are  gradual,  and 
there  are  major  variations. 

In  the  fresh  fruit  and vegetable  sector,  there  are  seasonal  variations  in 
apple  prices  and  above  all  tomato  prices,  by  a  factor  of  1  to  more  than  3, 
i.e.  considerably  greater  than ACR  variations.  Only  withdrawal  prices  are 
directly  influenced by  monetary  developments  since  the  reform  of  the 
operative  events  which  took  effect  as  from  1 July  1993. 

As  regards  livestock  products,  sheepmeat  and  pigmeat  prices  cannot  be  linked 
to  the  effects  of  the  ACRs,  at  least  in  the  medium  term,  because  of  the  size 
of  variations  on  the  markets. 

(c)  General  consequences 

The  main  feature  is  that,  for  the  majority  of  products,  there  are  delays  of 
several  months  in  the  effects  of ACR  movements  on market  prices.  The  effects 
make  themselves  felt  earlier  for  those  products  subject  to  an  intervention 
price  system.  Finally,  whatever  products  are  involved,  the  impact  is 
significant  only  beyond  a  certain  margin  of  independent  variation  in  market 
prices. 

Obviously,  the  size  of  this  margin  depends  on  the products  in  question,  but 
also  on  market  conditions,  and  the  time  at  which  the  monetary  movement  takes 
place.  For  example,  market  prices  are  sensitive  to ACRs  to  a  greater  or 
lesser  extent  depending  on whether  intervention  buying-in  takes  place,  and 
the  state  of  supply  and  demand.  They  are  also  influenced  by  the  level  of 
aid,  intervention  stocks  and  export  refunds.  In  the  case  of  those  products 
for  which  there  is no  intervention,  prices  in  some  non-preponderant  Member 
States  may  also  be  very  closely  linked  to  the ACRs", with  markets  being 
relatively  fluid. 

- 20 

In general, the prices of the most sensitive products  (for example  cereals 
and butter) are influenced by shifts in the ACRs of more than 2%. For other 
prices there is a margin of the order of 5%  (for example milk in some Membei 
States, beef/veal). The price of a large number of products  changes by more 
than 10% without being  influenced by the ACRs  (for example olive oil and 
wine).  Finally,  the market prices of seasonal products appear to be 
unaffected by changes  in ACRs, except as regards their floor prices. 

There are three major consequences of the above: 

As regards producer  incomes, it is clear that there are wide differences 
in the impact of reductions in ACRs through prices. 

In addition, in the case of livestock products utilizing  large 
quantities of cereals, the fact that prices for these are not very 
sensitive  to a fall in ACRs should, in principle, produce an increase in 
incomes. 

Finally,  in the case of Community aid granted directly to producers, ACR 
movements  are passed on in full, but with a delay of up to twelve months 
as a result of the operative events. On the whole, whether income  losses 
have agrimonetary causes or not must be examined case by case. 

From the point of view of the common agricultural policy, sharp 
devaluations have led to compensations received in national  currencies 
developing  in a way contradictory to the objectives of the reform. 

For example, for a producer who marketed his cereals at the beginning of 
the 1993/94 marketing year, a compensatory payment based on almost 30% 
of the fall  in prices was granted. However, prices obtained in national 
currency were down on the preceding year by only 16% in LIT, 17% in PTA, 
18%  in UKL and 20% in DRA. Therefore, for a large number of producers in 
these Member States, the reform of the CAP has led to a considerable 
increase  in incomes, in particular as a result of the prices applied to 
the quantities marketed. 

The overall  index of consumer price inflation is increased by about  0.3% 
in the short to medium term when the ACRs increase by 10%. 

This indicates  the order of magnitude of the direct effects of 
agrimonetary variations  in prices for basic agricultural products, 
without  taking account of the greater or lesser extent to which their 
impact may be passed on to the level of consumer prices by the market. 

An  idea of the scale of this impact  for all Member States is given by 
the fact  that 16% of household  expenditure  is allocated  to food, and 
that 40% of the value of food depends on the value of  agricultural 
production. 

21 -

In addition, as a result of the existence of the common market 
organizations concerned, the main agricultural products whose prices are 
influenced by ACRs in the short or medium term are: cereals and rice, 
sugar, milk and milk products, beef, some processed fruit and 
vegetables, olive oil, table wine and must. These products account for 
48% of the value of agricultural production. 

2.  Effects on trade 

In general, and theoretically, prices affect trade when they do not undergo 
the same short-term shifts as the currencies in which they are expressed. In 
this way, devaluations stimulate exports and curb imports in the Member 
State whose currency is affected. Revaluations have the opposite effect. 

In the case of agricultural products, these phenomena, which apply to all 
sectors of the economy, are logically accentuated to the detriment of the 
Community budget if there are guaranteed prices which do not keep in step 
with monetary developments in all Member States. Under these circumstances, 
and in order to comply with the principles of the CAP in the single market, 
it is necessary that the ACRs should keep in step with changes in market 
rates, and that they should apply directly to the guaranteed prices, taking 
account of the operative events. 

However, changes in trade flows for monetary reasons can occur only if the 
price differential exceeds the costs, in particular the transport costs, 
generated by a change in the destination of the product. These costs depend 
in particular on the distances, means of transport and products concerned. 
Furthermore, unusual movements of goods occur only if there is sufficient 
probability of the price differences persisting over the period necessary to 
achieve the anticipated profit. 

Consequently, there is a margin of fluctuation of market exchange rates 
which does not make it necessary to adjust the ACRs, and thus justifies the 
introduction of thresholds. The optimum level of this ACR adjustment 
threshold is dependent on a very large number of factors which may be 
cyclical. To a certain extent this level must therefore be a standard level 
which could prove to be too high in certain circumstances and more 
restrictive than necessary in others. Practical experience indicates that a 
general level of 5 points should not be exceeded, since at that stage 
specific movements of goods between some Member States become clearly 
identifiable. 

22 

In cases where the range of the threshold  is smaller than the margin of 
variation of those market prices which are independent of changes in 
conversion rates, it has hardly any impact on price developments. On the 
contrary,  if it is higher than that margin of variation, it may provoke a 
delay in price adjustment. However, these delays concern price gaps which, 
by the definition of the threshold, are smaller than those which could lead 
to distortions of trade flows between Member States. Therefore,  in theory, 
the ACR adjustment  threshold has no distorting effects on trade other than 
those which are due to the fact that it is a flat-rate figure. 

From a practical point of view, the number, complexity and volatility of the 
factors which play a role in the effects of conversion  rates on trade make 
it very difficult  to analyse the causes of the movements  observed. 

Furthermore, examination of the quantities of products which leave the 
territory of each Member State each month indicates that they are subject tc 
very wide variations which do not repeat each year. Examples of these 
variations  are given in Annex 5. Under these circumstances, it is almost 
impossible  to establish any average or precise statistical  trend  for monthly 
trade. Consequently, no statistical  relationship  can be identified  in the 
short or medium term between these movements of goods and changes in ACRs or 
market prices. 

More generally, a comparison of the annual quantities exported  to the rest 
of the European Union and non-member countries in 1992 and 1993 by those 
Member States whose currency was sharply devalued between those two years 
could have given some indication. Assuming that exports  in 1992 were not 
exceptionally high, it is doubtful whether there was any monetary effect on 
those exports which did not expand notably in 1993. The results of this 
comparison are set out below in simplified  form: 

Variations in exports to the European Union and non-member  countries 
between 1992 and 1993 

+ or  - 
++ or  -- 
0 

= 
increase or decrease by more than 20% 
=  increase or decrease by more than 4 0% 
=  variation of less than 20% 

UK 

IRL 

Wheat and barley 
Milk 
Butter 
Beef 
Sheepmeat 
Pigmeat 
Wine 
Fresh tomatoes 
Apples 

+ 
0 
0 
++ 
+ 
++ 
+ 
-- 
-- 

+ 
- 
-- 
- 
-- 
0 
0 

-
0 
-- 
-- 
-- 
++ 
+ 
++ 
+ 

++  *  0 
0 
++ 
++ 
++ 
0 
-- 
++ 

+ 
+ 
++ 
0 
++ 

23 -

Exports of cereals from the United Kingdom  increased, whereas  cereals 
exports  from Spain and Italy, which are smaller, fell. The effects of 
devaluations  are far from obvious, in particular since in the United  Kingdom 
market prices at the end of 1992 followed and even anticipated the  increase 
in the ACR, which prevented the creation of competitive advantages of 
monetary origin. 

Trade in milk products did not increase significantly.  In all those Member 
States which devalued  their currency sharply, prices closely  followed 
monetary developments, taking account of the conditions  in and special 
characteristics of the market in question. 

Exports of beef  from the United Kingdom  increased considerably and a 
monetary  influence cannot be excluded, since a delay in price adjustments  in 
relation to ACR changes was observed at the end of 1992. Ireland does not 
seem to have benefited  from the same movements, but on the one hand no delay 
in price adjustment of the same length was observed and, on the other, the 
UKL was devalued more than the IRL. 

As regards sheepmeat, there is an increase in exports from the United 
Kingdom and Spain, but this can hardly be explained by changes in the 
relationship between prices and the ACRs. 

Prices for pigmeat in those Member States with a relatively stable currency 
have been at a relatively low level since the beginning of 1993, with some 
major variations, in those Member States which devalued sharply, prices in 
national currency fell less sharply, although they did not compensate 
totally for the increase in the ACRs. Therefore, very broadly, there is a 
certain theoretical competitive advantage which in principle can be related 
to the increase  in exports recorded. 

Exports of wine from Spain and Italy were encouraged by the fact that prices 
in national  currency remained stable in PTA and even fell in LIT up to the 
end of the 1992/93 wine year. This downward trend is the result of a 
structural surplus of supply on the markets, in particular for the table 
wines marketed. Given the major devaluations of the LIT and PTA, the prices 
. of wine from Spain or Italy, expressed in a currency which did not change or 
changed only slightly, fell. 

Finally, movements of goods "for monetary reasons can, in agriculture as in 
the other sectors of the economy, be set off by price adjustments  to changes 
in exchange rates which are neither complete nor immediate. 

24 -

In principle  these distortions of trade flows are diminished  in agriculture 
as a result of the guaranteed prices which speed up the rate at which the 
full effects of monetary movements are passed on. However,  these distortions 
are not to be ruled out and, from a logical point of view, are even highly 
probable  for a large number of products, although it would be difficult  to 
demonstrate  them statistically.  Such distortions of trade are inherent  in a 
system with large monetary movements in a single market without a single 
currency. 

3.  Compensatory measures 

The only aid granted at least in part for monetary reasons has been national 
aid in some Member States. It is intended to offset the effects of major 
devaluations of the currencies of other Member  States. 

A national  aid scheme for small and medium-sized  enterprises  in Ireland was 
approved by the Commission in November 1992, for a period  ending at the end 
of March 1993. The purpose, of this aid was to help businesses adapt to the 
market  conditions which were suddenly created by the sharp devaluations  in 
autumn 1992, in particular of the UKL. For food industries, or more 
precisely  those which sell the products listed in Annex  II to the Treaty, 
this aid was to be limited to training, market development  or promotion 
measures.  Certain investment  subsidies and short-term  loans were authorized 
under special  conditions. 

Against  the Commission's advice, the Council decided to recognize two French 
national  aid measures as being compatible with the common market. The 
reasons given for these were, inter alia, monetary. The aid was granted  for 
the 1993/94 marketing year in the sheepmeat sector and for the 1993/94 wine 
year. The justification for this aid was claimed to be the negative  impact 
of devaluations  of the currencies of other Member States  in abnormally 
unfavourable market  situations. 

No compensatory measures were introduced  for revaluations, mainly because 
most of them fluctuated, but also because of legal constraints. 

The agrimonetary  compensatory aid provided  for in Articles  8 and 9 of 
Regulation  (EEC) No 3813/92 was not triggered. 

The conditions  laid down in Article 8 for nationally part-financed aid were 
never met. Since the beginning of the operation of the new  agrimonetary 
arrangements, there has never been a 12-month period, for any  floating 
currency during which the average ACR was lower than the average rate over 
the 12 months preceding  that period. 

- 25 -

As regards the nationally financed aid referred to in Article  9 of 
Regulation  (EEC) No 3813/92, it could have been justified in some Member 
States by the fall in prices in ecus of 1.29% which occurred as a result of 
the increase  in the correcting factor for the ecu from September  1992 to May 
1993.  . 

However, the grant of this aid is subject to conditions which the Council 
must  lay down. Since the Council has not yet come to a decision, on the 
proposal submitted -by the Commission on 9 July 1993  for a Regulation on the 
grant of agrimonetary aid  (COM(93) 297 final),  it has not been possible to 
make provision for this aid. 

Article  7 of Regulation  (EEC) No 3813/92 provides for the increase of 
certain amounts in ecus in cases where the equivalent amount  in a national 
currency is reduced. 

The amounts concerned are aid granted per hectare or per livestock unit, 
together with aid of a structural or environmental nature. The ACRs 
applicable  to these amounts, taking account of the operative events, are 
those at the beginning of the marketing year for aid per hectare  (as a rule 
at the beginning of July) , and those at the beginning of January for other 
amounts. Thus,  in principle, these amounts remain unchanged  in national 
currency for a period of twelve months. 

The value of the increase in ecus is determined by the fall in the ACR 
applicable  in a given year over the rate applicable  in the preceding year. 
Since Regulation  (EEC) No 3813/92 was amended by Regulation  (EEC) 
No 3528/93, it is also conditional upon the rate being  lower than the level 
in the year before the preceding year.. 

As regards the amounts financed by the EAGGF Guarantee Section, the 
conditions  laid down in Article  7 of Regulation  (EEC) No 3813/92 were never 
met by the ACRs- concerned. Only the ACR for the UKL applicable  in 1994 fell 
below that in 1993, but it remains considerably higher than that in 1992. 

As regards the amounts financed by the EAGGF Guidance Section, the 
agricultural  conversion rates are specified as being the same as those 
applicable  for the entry into the accounts of expenditure under the general 
budget of the European Communities. These rates fell two years running for 
four Community currencies. The fall in 1994 over 1993 is 0.10% for the DKR, 
1.05% for the DM, 1.37% for the FF and 1.46%  for the HFL. 

On 30 June 1994 reactions to requests for the application of Article  7 of 
Regulation  (EEC) No 3813/92 were deferred in view of the proposal  for a 
Council Regulation amending Regulations  (EEC) No 2328/91 and  (EEC) No 866/90 
to accelerate the adjustment of production, processing and marketing 
structures under the reform of the CAP. The Commission proposal  comprises 
considerable  increases in ecus of the amounts concerned and its adoption 
could make increases for agrimonetary reasons superfluous. 

- 26 -

4.  Effects on the EAGGF Guarantee Section 

(a) Components of the real impact 

From an agrimonetary point of view, expenditure taken into account  every 
month by the EAGGF Guarantee Section depends principally on the values of 
the  following: 

the agricultural  conversion rate used to establish the amounts to be 
paid  in national  currencies, i.e. the date of the operative  event 
relating  to the operation for which the expenditure was incurred, 
the rate applicable.for the entry into the accounts in ecus, i.e.  the 
rate  for the month in which the expenditure made in national currency is 
registered  in the accounts; 

Furthermore, the switchover mechanism generates specific budgetary 
consequences. For example, any increase in the correcting  factor leads to: 

a  reduction in  (corrected) ecus of prices and amounts linked to the 
market,  at the beginning.of the following marketing year; 
an increase  in the amounts in  (corrected) ecus which are determined on 
the basis of the world market price in dollars. 

The agricultural  conversion rates which influence expenditure  in national 
currency are those applicable on the date of the operative event for the 
operation  in question. It should be borne in mind here that the operative 
events were brought  into line with the new agrimonetary arrangements as from 
the beginning  of the 1993/94 marketing years, i.e. seldom before July 1993. 

51% of expenditure  taken into account in 1993 relates to ACRs prior to 1993, 
established under the old agrimonetary arrangements. 

For 1994, forecast expenditure  - which by its very nature corresponds  to 
identifiable  operative  events  - represents only 46% of expenditure  in the 
budget. The operative events for the other expenditure may have taken place 
on several dates at some time in the past. For example, monthly export 
refund expenditure  is an amalgam of advances on and balances of amounts due 
for exports which took place at least two months previously, but  sometimes 
up to more  than one year previously. 

Agrimonetary developments  in the first half of 1994 will have a strong 
impact on the 1995 budget, especially the substantial proportion of it 
accounted  for by aid per hectare. However, it will depend mainly on monetary 
developments  as yet unknown on 30 June 1994. 

- 27 -

Under these circumstances, the effects of changes in ACRs on real 
expenditure from January 1993 to June 1994 can only be estimated very 
approximately. 

The fall in prices and certain amounts in ecus caused by the monetary 
realignments of 30 January and 13 May 1993 was 0.26% applicable from the 
beginning of the various 1993/94 marketing years. Therefore, it will almost 
exclusively affect budgets after 1993. 

Included in the supporting documents on the financial consequences of the 
proposals on prices and related measures for the 1994/95 marketing year 
(C0M(94) 10 final-Volume II) was a detailed analysis of the budgetary impact 
of the falls in prices in ecus due to all the monetary realignments from 
1992 to 1993. 

In general it is concluded that a 1% fall in ecus of the prices and amounts 
linked to the markets entails a reduction of 0.7% in EAGGF Guarantee Section 
expenditure for the 1994 financial year. This order of magnitude is 
confirmed by the work carried out on the basis of the preliminary draft 
budget for 1995. Thus, the fall in ecus in question brought about by the 
monetary realignments since 1 January 1993 produces a saving in Community 
expenditure of approximately ECU(B=budget) 67 million for 1994, and 
ECU(B) 70 million for 1995. 

World market prices expressed in dollars are not affected by'the switchover 
mechanism and therefore theoretically remain unchanged in dollars. On the 
other hand, any increase in the correcting factor for the ecu automatically 
leads to a fall in their equivalent value in (corrected) ecus. Therefore, 
world market prices expressed in (corrected) ecus fell by 0.87% from 
3 February 1993, then by 1.04% from 14 May 1993, in relation to the 
situation which would have occurred if the correcting factor for the ecu 
applicable on 1 January 1993 had not been changed. 

Export refunds fixed in (corrected) ecus felt the full impact of this 
increase in the correcting factor for the ecu in the cereals and sugar 
sectors. The amount of the refund for these products is established directly 
on the basis of world market prices in dollars converted into (corrected) 
ecus. For the other products, the level of export refunds is influenced by 
world market prices but the link is not as close. The effect of the 
correcting factor becomes less and less, at least in the short or medium 
term, in relation to other causes of variations. 

- 28 -

In addition,  the amounts of the production refunds for starch and for sugar 
used by the chemical industry, and the aid for dried  fodder and cotton, are 
adjusted rapidly and automatically on the basis of the variations  in world 
prices expressed  in dollars. 

The effects of the switchover mechanism on world market prices also have a 
direct  impact on aid per hectare for oilseeds. However, the financial  impact 
on the budget becomes apparent only from the budget year following the 
marketing  year during which the monetary realignment  in question took place. 

Finally,  the budgetary impact of the effects of the switchover mechanism  on 
the rates  for converting the dollar into  (corrected) ecus may be  estimated 
for 1994 as  indicated in Annex 6. According  to these estimates, the  increase 
in the correcting  factor for the ecu implemented  in 1993, i.e.  1.04%, led to 
additional  expenditure of ECU(B) 78 million for the 1994 budget. This 
represents  1.04% of the expenditure  concerned. 

The effects on the 1993 budget year are negligible and  the effects on the 
1995 and subsequent budgets will depend on future dollar levels, world 
prices and the quantities  concerned. 

(b) Estimate of the real impact 

In arriving  at an approximation of the total real budgetary  impact, the 
following were  considered: 

expenditure  taken into account  for 1993, 
the estimate in January 1994 of appropriation  requirements  for 1994 (^, 
appropriation requirements in the preliminary draft  1995 budget. 

It is necessary to establish a reference s i t u a t i o n^  which excludes almost 
all the effects of thresholds and the effects of the switchover mechanism. 
This situation  is determined by the expenditure which would have been 
incurred  if, since 1 January 1993, the ACRs had been equal to the 
representative market rates established on the basis of a correcting  factor 
for the ecu frozen at its January 1993 level, i.e.  1.195066. 

(1)  Supporting  documents  on  the  financial  consequences  of  the  proposals  on 

prices  and  related  measures  for  the  1994/95  marketing  year 
(COM(94)  10  final  - volume I I ). 

(2)  The  situation  is  called  reference  situation  with  regard  to  the  assumed 

situations  examined  under  point  (c). 

- 29 -

For each of the financial years 1993 to 1995, expenditure was, firstly, 
broken down on a historical basis according to the national currency of 
payment and secondly, where possible, classified in accordance with the date 
of the operative event relating to the type of expenditure concerned. 
Expenditure relating to indiscernible operative events was spread out over 
the budget year. Thus, for each beginning of an agrimonetary reference 
period, the 1st, 11th and 21st of each month, there is a corresponding 
portion of annual expenditure, or forecast expenditure, which is influenced 
by the ACR applicable for that period, covering approximately ten days. 

The expenditure thus-broken down was adjusted to eliminate, in the case of 
the reference situation, the specific effects of the switch-over mechanism. 
Thus, for thé 1994 and 1995 financial years: 

expenditure which is affected by the agrimonetary reductions in prices 
and amounts in ecus, i.e. 58% and 48% of the budget respectively, was 
increased to cancel' out the 25% compensation for changes in the 
correcting factor in 1993; 

expenditure relating to amounts fixed directly on the basis of world 
prices was reduced by the effect on the conversion of the dollar of the 
increase in the correcting factor in 1993. 

It was necessary to replace the conversion rates used to establish the 
budget forecasts by the ACRs actually fixed for each agrimonetary reference 
period. In order to establish the reference situation, the rates used for 
the ACRs were the representative market rates, without application of the 
switch-over mechanism from 1 January 1993. 

A comparison of the results obtained in the two situations points to a cost 
due to the agrimonetary system of approximately: 

ECU(B) 107 million, i.e. 0.3% of expenditure, for 1993 
ECU(B) 456 million, i.e. 1.2% of appropriation requirements, for 1994 
ECU(B) 536 million, i.e. 1.4% of appropriation requirements, for 1995. 

(c) Comparison of monetary effects 

In order to analyse the agrimonetary costs in greater detail, in particular 
as regards the threshold and switch-over mechanisms, the budgetary effects 
of various assumed versions of the rules for adjusting the ACRs were 
simulated. 

30 -

Interpreting  the results of these simulations  is very difficult when the 
calculation has been made on the basis of budget years.  For example, nearly 
half of  1993 expenditure does not depend on the ACRs  in  1993, and, what  is 
more,  the value of the ACR on 30 June 1994, assumed  to have "remained 
unchanged  since then, has an exaggerated effect on expenditure  for 1994 and 
1995. 

In order to avoid these difficulties, the simulations were  carried out on 
the budget  structure established  in accordance with the criteria given under 
point  (b) above, but using only that expenditure  relating  to operative 
events which took place  from 1 January 1993 to 1 July 1994. 

Thus,  the budget  structure  serving as a model  represents 
ECU(B)  68 405 million, 32% of which is attributable  to  1993,  45% to 1994 and 
23%  to 1995. 

The results of the situation which actually occurred and of the following 
assumed  situations were quantified, as compared with the  reference 
situation: 

(a)  Switch-over  without  threshold:  ACRs  equal  to the representative  market 
rates,  multiplied  by the values  of the correcting  factor  for the ecu 
fixed  in 1993 and  1994; 

(b)  Fixed  threshold,  without  switch-over:  ACRs  resulting  from  application of 
a  fixed  threshold  of -2 to +2, but with no change  in the value  of the 
correcting  factor  for the ecu on 1 January 1993; 

(c)  Continuation  of the original  rules: ACRs  resulting  from  the rules 

originally  laid  down  at the beginning  of 1993: fixed  threshold  from -2 
to  + 2, correcting  factor  for the ecu linked  only  to the fixed 
currencies,  at the level  it was fixed at in 1993 and  1994; 

(d)  Fixed  threshold  and switchover  becoming  floating:  ACRs  resulting  from 

application  of a  fixed  threshold  of -2 to + 2, but the correcting  factor 
for  the ecu as fixed  until  1 August  1993 becomes  linked  to the floating 
currencies  after  that  date,  in order  to prevent  the  agricultural 
conversion  rates  from  falling  below  their  level  at 31 December 1992. 

(e) Asymmetrical  and movable  threshold  since  the beginning  of 1993 : ACRs 

resulting  from  a threshold  of  (-2  to +3) movable  up to a  level  of  (0 to 
+ 5 ),  applicable  since  1 January  1993, with no change  in the value  of the 
correcting  factor  for the ecu on that  date. 

The  effects  on Community  expenditure  of all these  assumed  situations  were 
quantified  on the basis  of the same  budget  structure.  Therefore,  they  can be 
compared  with  each  other  even  if the intrinsic  value  of the results  in 
millions  of ecus  is of little  interest.  It should be borne  in mind  that the 
resultant  hierarchy  of the various  assumed  situations  reflects  the monetary 
events  actually  recorded  over  the 18 months  studied. 

31 

These effects, which are given in Part 1 of Annex  8, must be compared with 
the results given in Annex 7, as regards the changes  in the ACRs, and may be 
summarized as follows : 

Almost  90% of the budgetary effects of the fixed ACRs is due to the 
switchover mechanism, and approximately  10% to the gaps between them and 
the representative market rates resulting  from the thresholds and the 
special measures at the end of  1993. 

The fixed, symmetrical threshold from  -2 to +2, without the switchover 
mechanism, would'have had a very minor budgetary effect, of 
approximately  13% of expenditure resulting  from the fixed ACRs. 

The special measures taken at the end of 1993 and the changes to the 
system introduced in 1994 increased expenditure directly linked to ACRs 
by 18% compared to what would otherwise have occurred. 

The assumed situation of a switchover mechanism becoming  linked to the 
floating currencies from August 1993 onwards would have  increased 
agrimonetary costs by 19% in relation to the effects of the ACRs 
actually  fixed. 

Application from 1 January 1993 onwards of the threshold mechanism 
adopted  in 1994, without the switchover mechanism, would have reduced 
agrimonetary expenditure by 11% in relation to the expenditure  resulting 
from fixed rates. 

In the case of assumed situations B and C in Annex 8, the results of which 
are given in the second and third indents above, the saving which would have 
resulted from application of the rules in question would have been 
accompanied by a significant fall in some ACRs and, in principle, would 
therefore have given rise to compensatory expenditure. The maximum costs of 
this compensation given in Annex 8 should be treated with particular  caution 
in view of the approximations they contain. However, they do point to a 
considerable expenditure risk. 

'••_•• 

5e 

Summary  of  the economic  and-f thânc-ial  consequences 

1. 

In general, the effect  of agricultural  conversion  rates on general  price  inflation  is small  for the 
European Union  as a whole. Agricultural  prices  in national  currencies  follow  shifts  in the ACRs  in the 
short  or medium  term  only under special  conditions. These conditions, which  have the effect of 
strengthening  the  links between  prices and ACRs, concern  less than half  of agricultural  production,  and 
this proportion  is falling  as a result  of the reform of the CAP. Furthermore,  the effect  of ACRs on 
prices may  occasionally  be strengthened  or diminished  by the supply and demand  situation,  the grant of 
aid  or export  refunds, or stock  levels. 

With  the exception  of  a few  rare occasions, there are always  fluctuation  ranges  for the ACRs within 
which  market  prices  do not  show any specific  reaction. These margins are very variable  in size, but 
examination  of  the statistical  data gathered over  the period  studied  suggests  that  there  is a minimum 
elasticity  of prices  in relation  to the ACR  of approximately 2%. 

2. 

For farm  incomes, these  ranges, the size of which must  be assessed  case by case according  to the 
specific  market  situation, may cancel  out any effect  on prices of slight  variations  in the ACRs. By 
contrast, major  shifts  in the ACRs have a considerable and  immediate  effect  in some product  sectors. For 
example,  in the case  of cereals, the sharp devaluations  at the end of  1992 and  the beginning  of  1993 ran 
counter  to the objectives  of the reform of the CAP  in the Member  States concerned. This means that 
compensation  for  income  losses due to agrimonetary movements may be necessary,  but not systematically. 
Consequently,  whether  and how much  compensation  should be paid must  be examined  in the light of actual 
circumstances. 

3. 

As  regards  trade, major  devaluations  logically create distortions of  trade  flows  in the agricultural 
sector  as  in the other  sectors of the economy, although  they are difficult  to quantify  from a 
statistical  point  of view. This phenomenon  is not due particularly  to the agrimonetary  system,  but to 
the  lack of a single  currency, or at  least strict monetary discipline,  in the single market. 

For agricultural  products, the existence of a buying-in mechanism  at guaranteed  common prices diminishes 
distortions,  provided  that  the operative events for the ACRs applicable  to those prices make  it possible 
to pass on changes  in  the exchange  rates directly and  rapidly. 

However,  a threshold  for  adjusting  the ACRs to changes  in market  rates may bring  some stability to 
agricultural  prices  without  engendering  specific movements of goods. The optimum  level of this  threshold 
depends  on a  large number  of  factors, some of which  are highly dependent  on the economic situation. It 
is therefore  necessary  to take a flat-rate  level. The present  level  of  five points must  be considered  to 
be the maximum  possible, on average, for the European Union. 

4. 

Agrimonetary  developments  were given as part  of the reasons  for granting  national  aid  in Ireland and 
France. The purpose  of  this aid was to diminish  the effects of devaluations  in other Member  States. 

Not  one of  the compensatory  mechanisms provided  for  in the event  of  revaluations was triggered  on 
30  June  1994. The conditions  for the floating  currencies  were not met  as regards amounts covered by the 
EAGGF  Guarantee Section.  Furthermore, the Council  rules necessary  for granting most of the aid  in the 
case of  the fixed  currencies  have not been  adopted. 

5. 

From  the point  of view  of Community  expenditure, the impact  of the agrimonetary  system  results  from the 
monetary  gaps between  the ACRs and the market  rates for the (corrected) ecu, and from the switchover 

.  mechanism. 

The monetary  gaps were  created  either by the threshold mechanism  or by the special  measures  freezing  the 
ACRs at  the end of  1993. The fixed, narrow  threshold between  -2 and +2 points has only a slight 
financial  impact. The measures  introduced  from August  1993 onwards  increased  expenditure directly  linked 
to the ACRs by  18% over  that  which  would have been  incurred had  they not been  introduced, but  they 
avoided  the need  for  compensatory  measures. 

Apart  from  its  impact  on ACRs which  it maintains or raises to a relatively  high  level, the switchover 
mechanism  results  in a fall  in (corrected) ecus of prices and amounts  linked  to the market, as well  as 
an  increase  in  (corrected) ecus of the amounts  fixed on the basis of world market  prices  in dollars. The 
overall  cost  of  the switchover mechanism  is approximately  90% of total  expenditure due to agrimonetary 
developments  from  January  1993 to June 1994. 

In total, the cost  of  the agrimonetary system  for the period under  review  is, very approximately, of the 
order  of: 

ECU  107 million,  i.e. 0.3% of expenditure  taken  into account  for  1993 
ECU 456 million,  i.e. 1.2% of appropriation  requirements,  in 1994 
ECU  536 million,  i.e.  1.4X  of appropriation  requirements,  in 1995. 

These costs  would  have been  increased  by about  19% if a switchover  mechanism  triggered  by the  floating 
currencies  had been  introduced  in August  1993. They would have been  reduced by 11% if the extended, 
asymmetrical  and movable  threshold  applied  since the beginning  of  1994 had been  implemented  from  January 
1993 onwards. 

^ 

- 33 

D.  OUTLOOK FOR THE AGRIMONETARY SYSTEM 

In the longer term, an agrimonetary system laying down at least the 
agricultural conversion rate to be used will remain necessary for as long as 
CAP amounts in ecus have to be paid in the national .currency of any Member 
State of the European Union. The adoption of the ecu as a national currency 
by all or some Member States will require a revision of the basic 
agrimonetary Regulation and even its repeal Once the ecu becomes the single 
currency. That revision must apply from the beginning of the third stage of 
economic and monetary union, depending on the conditions prevailing. 

In the shorter term, on 1 January 1995 the agrimonetary system will undergo 
major changes: 

under Article 4a of Regulation  (EEC) No 3813/92, the original rules for 
adjusting the ACRs will apply once more; 

under Article 13(2) of that Regulation, the switchover mechanism will no 
longer apply. 

In order to ensure that the effect of the elimination of the correcting 
factor for the ecu is financially neutral, the Commission may, pursuant to 
Article 13(1) of Regulation  (EEC) No 3813/92, adjust the prices and amounts 
fixed in ecus before 1 January 1995. 

However, on the basis of this report and suitable proposals from the 
Commission, the Council may adjust the future agrimonetary policy in 
accordance with Article 13(2) of that Regulation. 

When the way the agrimonetary system for the single market has operated in 
the past and the development of the EMS are examined, the main issues 
arising fall under three headings: 

the way the system works^as a whole, 
stabilizing the ACRs, 
the need for compensation. 

However, the problems must be assessed within the framework of future rules 
required as a result of the GATT Agreements on the one hand and budgetary 
discipline on the other. 

For purposes of comparison, Annex 8 sets out the estimated costs of the 
various options for adjusting the agrimonetary system considered in this 
report. It should also be remembered that these results are based on the 
particular monetary developments observed from January 1993 to June 1994 and 
they could be profoundly affected by other developments. As regards the 
appraisal of the theoretical effect in the medium term, the conclusions 
suggested should be assessed with great caution. On the one hand, they are 
based on fairly imprecise approximations of the maximum compensation which 
may be granted while on the other hand they depend on the ACR at 30 June 
1994. The level of the ACR seems to be highly dependent on the economic 
cycle and could alter greatly if the date taken into account, i.e. the end 
of June, were changed by a few days. 

- 34 -

1.  International and financial  constraints 

(a) GATT Agreement 

As  far as the application of an agrimonetary system is concerned,  certain 
aspects of the agreement within GATT, applying  from 1 July  1995 at the 
latest,  should be reiterated: 

The customs tariffs agreed are expressed and must be observed  in 
(budget) ecus. 
The commitments regarding domestic support are fulfilled where  the Total 
Aggregate Measure of Support  (Total AMS) remains below the level  for 
1986-88 as reduced annually; the AMS depends in general, with the 
exception of negligible amounts, on the quantities produced and the 
institutional prices expressed  in  (budget) ecus. 
The commitments regarding export subsidies are to be observed,  depending 
on the type of product, in terms of expenditure entered  in the accounts 
in  (budget) ecus. 
The provisions on due restraint are subject, for each type of product, 
to the limits decided during the 1992 marketing year: 

* 

* 

on expenditure  in  (budget) ecus on certain aids,  in particular most 
aids granted under the reform of the CAP, and 
on domestic support as measured by the AMS. 

These international  commitments conflict to a greater or lesser extent with 
the probable consequences of the various components of the present 
agrimonetary  system. The 1986-88 level, which Total AMS must not exceed, and 
the maximum  funds which may be allocated to export refunds are less binding 
than the 1992 level, to which the provisions on due restraint refer. 

The switchover mechanism reduces the Community preference  since  it raises 
the common prices expressed  in  (budget) ecus while the tariff protection at 
the frontier, agreed under GATT in  (budget) ecus, remains  unaltered. 

This mechanism  increases the AMS and, to an even greater extent, refunds 
fixed on the basis of prices in dollars. However, in view of the level of 
the commitments  in question, this risk of difficulties  is fairly low at 
present.  In the longer term, problems could arise. 

However, problems could arise very soon with the provisions on due 
restraint. Switchover brings about a simultaneous rise in the aids 
concerned,  in particular those introduced under the reform of the CAP, and 
in total domestic, support. 

35 

In that case, assuming production remains constant, the effects of the 
switchover mechanism should be wiped out by decisions to reduce prices or 
aid. 

The threshold mechanism, which is not subject to the switchover, has no 
effect on the AMS since the latter is calculated in ecus on the basis of 
institutional prices, without using any exchange rate. 

However, as regards the commitments to be observed in terms of expenditure 
entered in the accounts, e.g. on export refunds and the aid referred to in 
the provisions on due restraint, the threshold mechanism plays a part during 
the double conversion carried out, firstly in the ACR and then in the rate 
applicable for entry in the accounts. 

As compared with the common levels fixed, the threshold mechanism results in 
a reduction in expenditure entered in the accounts in the case of currencies 
which are devalued and an increase in the case of currencies which are 
revalued. The symmetry in the way the threshold mechanism functions may 
involve systematic bias, and difficulties, albeit relatively limited, may 
arise with the provisions on due restraint. 

The compensation mechanisms which may be triggered in the case of 
revaluation involve the following possibilities: 

an increase in terms of ecus, i.e. for all Member States, in aid per 
hectare or per livestock unit and in amounts of a structural or 
environmental nature; 
the granting of compensatory aid for losses of income, falling 
progressively over three years and part-financed by the European 
Community to the extent of 75% or 50% depending on the region. 

As aid per hectare or per livestock unit is affected by the provisions on 
due restraint laid down in the GATT, an increase in the amounts in question 
should require reductions in the prices of the types of products concerned 
if the corresponding AMS for the same annual period and for subsequent 
periods does not fall spontaneously. 

Aid of a structural or environmental nature is in principle excluded from 
commitments on reduction and is therefore not subject to any constraint 
under GATT. Compensatory aid for agrimonetary losses of income could be 
classified in the same way if the amount is not tied to production, except 
in a previous reference period, and is not dependent on a particular crop. 

(b) Budgetary discipline 

Budgetary discipline, which was introduced by Council Decision 88/377/EEC 
(OJ No L 185, 15. 7,. 1,988,' p.29), requires that annual expenditure under the 
EAGGF Guarantee Section does not exceed the agricultural guideline. 

- 36 -

Following on the conclusions of the Edinburgh European Council of 11 and 
12 December  1992, the Commission proposed  (OJ No C 68, 11.3.1993, p.6)  that 
the Council replace Decision 88/377/EEC in order to maintain and  strengthen 
budgetary discipline. 

As regards  the switchover mechanism,  certain possibilities of  financing 
outside the agricultural guideline are provided  for in Article  10 of the 
proposed Decision. In accordance with that European Council and having 
regard  to the joint position adopted by the Council on 21 March 1994,  those 
possibilities  concern the direct consequences of an increase  in the 
correcting  factor for the ecu: 

maintenance  or increase  in the ACRs, 
increase  in amounts fixed on the basis of world prices  in dollars, 
reduction in prices and amounts in ecus to offset  25% of the  increase 
due to the switchover mechanism. 

Under Article  10 of the proposed Decision, such expenditure  incurred as a 
result of the monetary realignments within the EMS between  1 September 1992 
and 15 October  1997 may be financed from the monetary reserve. In the use 
use of the latter, financing this expenditure will compete with the 
financing of the consequences of the fluctuations  in the dollar against  the 
(budget) ecu. Where the reserve  (ECU 500 million from 1995) is exhausted, 
suitable measures  should be taken by the Council  to replenish  the EAGGF 
Guarantee Section  funds. 

The exception regarding compliance with the agricultural  guideline by the 
switchover mechanism does not apply beyond 1997. Accordingly,  the total 
expenditure  resulting  each time the switchover mechanism  is triggered  should 
be financed within the guideline as from the 1998 financial year. 

Other agrimonetary expenditure  should all be financed as of now within the 
agricultural guideline. 

The threshold mechanism may have a significant  cost, as shown by the results 
in Annex  8, varying  substantially depending on the rules adopted  for 
adjusting  the ACRs. Over the period of 18 months considered, only a system 
of narrow, fixed and symmetrical  thresholds of between  -2 and +2 could have 
limited expenditure  to around 13% of that actually incurred  (hypothesis B) 
while a system of wider, asymmetrical  and movable thresholds  (-2, +3) to  (0, 
+5) would have left more than 90% of expenditure actually  incurred 
(hypothesis B ). 

An  increase  in ecus in aid per hectare or per livestock unit and in aid of a 
structural or environmental nature may result  in considerable expenditure  in 
view of the reform of the CAP. On the basis of appropriation  requirements  in 
the 1995 preliminary draft budget, a 1% increase in the aid in question 
would result  in additional expenditure of almost ECU 210 million. 

- 37 -

The cost of aid to offset losses of income depends on the estimate of the 
actual loss suffered by the Member States concerned. As an indication of the 
magnitude of the financial risks incurred, the impact of a fall of 1%.in the 
ACR  is close, as a general Community average, to 1.5% of the family  farm 
income. 

Where the compensatory aid granted by the Member States were to make up a 
major proportion of farm income in the European Union the cost to the 
Community may prove very high despite national part-financing. 

2. Coherence of the system 

(a)  *  Abandonment of the switchover mechanism 

Linked to the agrimonetary concept of fixed currencies, the  switchover 
system has not operated since August 1993 and will be abolished as  from 
1 January 1995 pursuant to Regulation  (EEC) No 3813/92. 

Despite the advantages it may have afforded as a guarantee  for incomes of 
producers  in certain Member States, an overall assessment of the  switchover 
mechanism seems clearly negative. As a result of its effects on prices, its 
main drawback  is the fact that it works counter to the objectives of 
controlling production laid down by the reform of the CAP; furthermore, it 
generates permanent, excessive Community expenditure by  overcompensating 
across the board, in respect of all Member States and all products, losses 
of income of agrimonetary origin which have in fact been felt only in a few 
Member States and with regard to a few products. 

As to the future, a"~switchover system in a form adjusted  to floating 
currencies which devalue only slightly would aggravate the difficulties 
experienced  in the past and in particular  its cost to the Community, as the 
results of hypothesis D in Annex 8 show. Furthermore, the mechanism  in 
question would be incompatible with commitments under the GATT. In the 
longer term, as from 1998 observance of budgetary discipline could make it 
difficult  for expenditure incurred by the switchover to be financed within 
the agricultural guideline. 

Where a- switchover mechanism in a degressive form is contemplated  e.g. 
involving a gradual tailing-back of further increases in the  correcting 
factor, the problems mentioned above would diminish or become  temporary, 
even if lasting several years. However, in that case, the risks of  serious 
difficulties in GATT would persist and politically sensitive price 
reductions  in the national currencies of all the Member States would have to 
be accepted. 

Accordingly,  the renewal of the switchover mechanism  in any form can only be 
ruled out. 

38 -

(b) 

Conversion  rate  applicable  to  the  common  customs  tariff 

The  customs  tariffs  agreed  under  the  GATT  are  expressed  in  (budget)  ecus  and 
replace  the  import  levies  on  agricultural  products  fixed  in  (corrected) 
ecus. 

* 

The  conversion  rate  provided  for  in  the  Customs  Code  (Article  18  of  Council 
Regulation  (EEC)  No  2913/92,  OJ  No  L  302,  19.10.1992, p.l)  for  the 
collection  of  customs  tariffs  in national  currency  is  generally  an  annual 
rate.  In  view  of  the  variations  recorded  in  exchange  rates,  the  CAP  must 
apply  a  rate  for  the  (budget)  ecu  which  is  closer  to  reality.  By  analogy 
with  the  application  of  the  agrimonetary  system  to  the  common  customs 
tariff,  the  agricultural  conversion  rates  for  the  ecu  could  be  used  with  no 
correcting  factor. 

However,  in  so  far  as  the  need  to  adjust  the  conversion  rate  to  the  common 
customs  tarrif  is  not  specific  to products  listed  in Annex  II  to  the  Treaty, 
it  would  be  preferable  to  amend  Article  18  of  the  Customs  Code. 

(c) 

Conversion  rate  for  structures 

Amounts  covered  by  the  EAGGF  Guidance  Section  and  fixed  by  the  Commission 
are  to  be  converted  using  the  accounting  rate^1'  in  accordance  with  the 
Structural  Fund  rules.  The  conversion  rate  applicable  to  amounts  covered  by 
the  EAGGF  Guidance  Section  and  fixed  by  the  Council  is  not  determined  by  the 
Structural  Fund  rules.  In  accordance  with Article  3(2)  of  Regulation  (EEC) 
No  3813/92  and  in  order  to  ensure  some  measure  of  consistency  with  the 
amounts  covered  by  the  Structural  Funds  as  a  whole,  conversion  is  carried 
out  with  a  special  ACR,  specifically  defined  as  equal  to  the  accounting 
rate. 

-

Until  the  end  of  1993,  structure  amounts  for  fisheries  not  covered  by  the 
Structural  Funds  were  converted  by  means  of  the  general  ACR.  Since 
1  January  1994,  the  FIFG  (Financial  Instrument  for  Fisheries  Guidance)  has 
been  included  among  the  Structural  Funds. As  a  consequence,  since  that  date 
FIFG  amounts  fixed  by  the  Commission  are  to be  converted  using  the 
accounting  rate  but  those  fixed  by  the  Council  are  to  be  converted  using  the 
general  ACR  since  there  is no  specific  derogation  covering  that  rate. As  the 
situation  regarding  fisheries  and  agricultural  structure  amounts  is 
analogous  from  the  agrimonetary  viewpoint,  the  same  conversion  rate  should 
apply.  Accordingly  the  derogation  from  the  use  of  the  general  ACR  introduced 
for  the  EAGGF  Guidance  Section  could  be  extended  to  the  FIFG. 

(1) 

The  accounting  rate  is  the  rate  for  the  (budget)  ecu  used  to  enter 
expenditure  under  the  general  budget  for  the  European  Union  in  the 
accounts. 

- 39 -

However, in the absence of a switchover mechanism, the difference between 
the accounting rate and the general ACR is not very great. In both cases, 
given the operative events which stabilize the conversion rates each year, 
there is divergence with the trend in the market rates. 

Accordingly, in view of the agrimonetary mechanisms to protect against falls 
in value affecting the amounts in question, it seems preferable to do away 
with the derogation relating to the general ACR which exists for 
agriculture. As a result, the ACR in force on 1 January each year would 
apply to amounts covered by the EAGGF Guidance Section and the FIFG which 
are fixed by the Council. 

(d) 

Period for which ACRs are fixed in advance 

The advance fixing of ACRs increases the risk of defection of trade flows 
since the gap between an ACR fixed in advance and an ACR in force may come 
on top of the differences with the market rates which the thresholds 
authorize. 

To limit such risks, Article 6 of Regulation (EEC) No 3813/92 only allows 
ACRs to be fixed in advance for certain types of amounts in ecus and for.a 
period of less than four months. 

Moreover, among the rules for determining and applying the ACR, Article 15 
of Commission Regulation  (EEC) No 1068/93 provides for an adjustment of the 
ACR fixed in advance where the gap with the ACR in force exceeds 4%. 

Where the limit in the period for which the ACR is fixed in advance does not 
concern the whole duration of advance fixing of the amounts in ecus 
themselves, it may cause difficulties in trade. This constraint could be 
done away with without any significant increase in the risk of deflection of 
trade if the rule on the 4% threshold were to be strengthened by a Council 
provision. 

3. Stable agricultural conversion rates 

Stabilizing the ACRs evens out erratic or short-term movements in 
agricultural prices. It delays the adjustment of national agricultural 
prices to trends in currencies: As a consequence, it restricts any falls in 
farm income linked to revaluations and any increases in Community costs, 
linked to devaluations. 

Delaying adjustments to the real trends in currencies reduces changes in 
agricultural prices in anticipation of reductions in production costs due to 
revaluation or general inflation due to devaluation.. 

However, the stabilization of ACRs is limited by the risks of deflection of 
trade flows which it creates. In addition, in the case of strong currencies, 
deferred reductions in the ACR tend to increase Community expenditure. 

- 40 -

In certain monetary circumstances, the return to the original rules 
entailing a narrow, fixed threshold between -2 and +2 would certainly be one 
of the least costly possibilities. This would be the case, for example, if 
the DM and the HFL were the only strong currencies. However, this hypothesis 
would be less advantageous financially than others if the BLF and the FF 
were also strong currencies. Furthermore, at the end of 1993 such a fixed, 
narrow threshold was considered unsuitable in view of the risks of changes 
in ACRs as a result of the floating of currencies. A simulated trial of what 
would have happened if there had been no change in the threshold mechanism 
shows that the risk was quite real; however, the EMS has not evolved on this 
point. The results set out in Annex 8 for hypothesis B are highly influenced 
by the monetary trend concerned. The costs in question may explode in the 
case of a major revaluation, creating a conflict with GATT. 

The provisions on thresholds adopted in December 1993 have enhanced the 
stability of the ACR considerably and have allowed agrimonetary falls in 
prices to be avoided, which, in the case of certain currencies, would have 
been due to temporary strengthening. However, they have also prevented 
certain falls in ACRs which would simply have involved corrections to 
preceding increases, and have considerably increased certain risks of 
distortion of trade flows. 
The cost of the mechanism is limited by the fact that shifts in the 
threshold are limited to the magnitude and duration strictly necessary, but 
it is far from negligible  (hypothesis E in Annex  8). 

Accordingly, the stability of the ACRs in 1994 should be preserved or 
strengthened with a concomitant fall in the risks incurred vis-à-vis 
Community costs and in some of the risks of a deflection of trade. 

(a) 

A symmetrically movable threshold 

Under the system applying in 1994, the asymmetry in the movability of the 
threshold between the level  (-2, +3) and the level  (0, +5) creates 
additional costs where there is an increase in the positive monetary gaps. 
In such cases, the fall in certain ACRs is slowed while the rise in other 
ACRs is speeded up. 

However, where the positive gaps fall below +3, the budget does not benefit 
from the savings which should be possible through slowing of increases in 
the ACRs for certain currencies where the negative gap falls below -2 
without exceeding the bilateral threshold of 5 points. 

- 41 -

For the threshold's movability to be symmetrical, the upper limit for the 
latter should be equal on a permanent basis to the highest possible gap. 
Thus, depending on the maximum positive gap," the threshold could fall 
between the minimum  (-5,  0) and the maximum  (0, +5) . Accordingly,  there 
would be some compensation between excessive costs and savings on 
expenditure. 

One should not, however, expect such symmetry to bring about  considerable 
reduction  in expenditure as the threshold continues to be governed by the 
maximum positive gap and there is almost always one currency for which that 
gap is fairly high. A trial simulation of this rule along the lines set out 
in part C  (4) (c) shows that with the monetary trend for the period January 
1993 to June 1994, there would have been no savings on expenditure. The 
results are given in Annex 8 in respect of hypotheses E and F. However, 
unnecessary expenditure  should be avoided wherever possible. 

(b) 

Restricting  the movability of the threshold 

Under the rules applicable  in 1994, where the upper limit of the threshold 
approaches  +5, the stability of the ACRs for weak currencies becomes 
critical as the possible margin of variation for negative gaps becomes very 
narrow. 

To avoid this difficulty, the movability of the threshold below its 
technical maximum of +5 should be limited. 

" 

' 

The result would be a reduction in protection against falls in the ACRs.  In 
cases of revaluations  following earlier devaluations, which are fairly 
frequent, this permits savings without major difficulties. In other cases, 
an exceptional  temporary overrun could be permitted to allow the situation 
to be examined and suitable solutions to be found, without creating the risk 
of disastrous deflection of trade. 

Overall, Annex  8 gives the .results of a trial simulation on such a rule of 
symmetrical movability, limited to between  (-4,  +1) and  (-1, +4)  (hypothesis 
H) . Over the eighteen-month period considered, that rule would have 
significantly reduced the agrimonetary cost without creating  falls in ACRs 
below their June 1992 level. The limits which could have triggered  falls 
have, however, been approached on several occasions and have thus almost 
triggered off costly compensation. 

(c) 

Reducing and varying the extent of the threshold 

The extent of the bilateral  threshold, currently 5 points, was initially set 
at 4 points  in early 1993. The actual extent is mainly limited by the risks 
of deflection of trade to which it gives rise. 

- 42 -

The optimum economic  level for the threshold  is not necessarily  the same for 
all Community  currencies taken in pairs or for all products or all periods 
of the year. It depends on the markets for the products  in question and the 
cost of transporting  such products between Member States. 

The five-point  level adopted in late 1993 has always been considered the 
maximum average  level as regards risks of deflection. 
It does not entail risks for trade in certain products, e.g. wine, between 
geographically  distant Member States, like Ireland and Greece. However, it 
is likely to be too high for trade in important  commodities  like sugar or 
butter  in the Benelux countries. Overall, to avoid all  risks, it should be 
reduced. 

However, as the results of the trial simulation on hypothesis G as set out 
in Annex 8 show, the reduction to 4 points  in the present bilateral 
threshold of  5 points destabilizes the ACR and increases Community costs. 

A  reduction of the extent of the threshold between certain  currencies, based 
on the proximity of the Member States concerned and therefore on the 
transport  costs, could be envisaged.  In spite of the complexity which this 
would  introduce, each currency would maintain one single ACR under such a 
system. By contrast, variations in thresholds by type of product or type of 
amount should be ruled out totally from the technical  and  economic 
viewpoints. These hypotheses result in multiple ACRs for each currency and 
therefore  lead  inevitably to distortions between agricultural  sectors and 
Member States. 

4. Compensation mechanisms 

As the switchover mechanism  is ruled out, a reduction  in the ACRs must be 
contemplated  if they are to remain linked to monetary reality and if the CAP 
is to operate  in the single market. 

The practical  consequences of falls in the ACRs may be very different 
depending on the circumstances. Certain falls may be acceptable without too 
many problems. This is the case in particular of falls of  slight magnitude 
or in the wake of recent increases, or in a context of rising prices, etc. 
No measure  accompanying  the fall in the ACRs then appears necessary. 

However, one cannot ignore the fact that the agricultural  consequences of 
certain major revaluations occurring against a background of depressed 
markets may create considerable political, economic and social difficulties. 
In such cases, suitable measures to lessen the agrimonetary effects on 
incomes may be  justified. 

- 43 -

However, given the implications they have, in particular  financial 
implications, compensation mechanisms should not be triggered until the need 
for them has been confirmed, and they should be restricted  to the most 
important  cases. 

(a) 

Time limits for decisions 

The present  rules compel the Commission to adjust the ACRs immediately once 
certain thresholds are attained. Having regard to the normal way the 
agrimonetary arrangements operate, this is necessary and  economically 
justified. 

In the case of revaluations, the scale of their effects justifies the need 
for a reduction in ACRs to be confirmed by a clear monetary trend. 

Accordingly,  the requirement that results triggering off reductions  in ACRs 
should be confirmed over an additional reference period should be enshrined 
in the. rules. For several days there is a heightened risk of deflection of 
trade, but this is a controlled risk as a result of the possibility of 
shortening  the reference period in question under the management  committee 
procedure. 

In addition, for more sensitive cases, an additional period could be 
necessary where revaluations exceed a certain threshold to be established on 
the basis of the combined past devaluations and the periods for which they 
applied. 
This additional, temporary protection could be obtained by suspending, under 
the circumstances  concerned, the reduction in the ACR concerned  for a 
maximum of four consecutive reference periods. 

The introduction of this exceptional rule would  involve all the less risk of 
deflection of trade because the extent and movability of the bilateral 
threshold will have been determined rigorously for the normal operation of 
the system, as proposed in point 2. Furthermore, this risk of  deflection 
would  in general be eliminated by the continuation of the adjustments to the 
other ACRs.  In any case it could still be controlled by the introduction of 
protective measures. 

(b) 

Suitable measures 

. 

The financing of all agrimonetary compensatory measures by the EAGGF  should 
be made within the annual level of the agricultural guideline, which may 
call for difficult choices. 

• 

Also, provision should be made for taking suitable compensatory measures, 
confined to  "appreciable" revaluations with definite negative effects, 
i.e. those which exceed the preceding devaluations, taking the period they 
applied  into account. 

- 44 -

The automatic measures currently provided  for by Article  7 of Regulation 
(EEC) No 3813/92 may create difficulties with regard to commitments under 
the GATT or the EAGGF budget. As with the switch-over mechanism,  this leads 
to a general  increase  in aid for all Member States and all the main product 
groups, although the potential>income losses are much smaller. From the 
viewpoint of GATT, the increase in  "aid per hectare or livestock unit" 
should be offset by reductions  in domestic  support  for each type of product 
concerned,  either by taking advantage of low annual production or by 
reducing  the guaranteed prices. 

Consequently,  these provisions  should continue to exist and apply 
automatically only in the case of amounts of a structual or environmental 
nature, which are often multiannual and granted on the basis of programmes. 

Elimination of the present rules on aid per hectare or livestock unit will 
make  it neccesary to have national measures to protect  the level of aid 
against  falls of an agrimonetary origin. Therefore, in order to maintain the 
principles of the CAP, these measures can only be degressive and limited in 
time. 

The compensatory aid currently provided for in Article  8 of Regulation  (EEC) 
No  3813/92 will  continue to be compatible with GATT undertakings  if they are 
determined  on the basis of certain historical  criteria. Their cost may 
remain limited, but there is a risk that they may get out of control if the 
Member States concerned account for a major part of agricultural  incomes in 
the European Union. They can-only provide a solution after several months of 
difficulties, because a certain amount of time is needed to assess and 
confirm the impact of monetary developments on incomes. 

Therefore  it may be necessary to adopt suitable measures  in the very short 
term, having regard to the actual context of the fall in the ACR. These 
measures may be decided only if the actual prevailing  conditions are known. 
Most  factors affecting  the decision are fairly short-term, namely the actual 
losses and direct  compensation as a result of the trend  in market prices, 
the general  socio-political  situation and the situation on the various 
markets,  the funds available having regard to commitments under the GATT and 
budget  resources. These measures should relate either to market support, 
including where applicable an increase in certain prices  in ecus, or the 
granting or authorization of compensatory aids. 

- 45 -

In order not to relaunch the general debate on the agrimonetary system each 
time and to ensure that the rules laid down apply to operators for a certain 
period, changes to the rules regarding conversion rates should be excluded 
from measures which may be taken under the circumstances laid down here. 

The procedure for deciding on short-term compensatory measures in the case 
of an "appreciable" revaluation could be one of the procedures recommended 
by the Council*1' and already laid down for agrimontary protective 
measures. 

Under that procedure, the Commission would decide to apply any necessary 
market measures or additional aid measures. In the three working days 
following the communication of the Commission's decision, a Member State 
would be able to refer the decision to the Council, which would have one 
month to adopt a different decision where appropriate. 

(1) 

Article 3 of Council Decision 87/373/EEC laying down the procedures 
for the exercise of implementing powers conferred on the Commission 
(OJ NO L 197, 18.7.1987, p.33.). 

- 46 -

General  conclusions 

1. 

Council  Regulation  (EEC) No 3813/92, which  provides, as from  1 January  1995, for the  discontinuation 
of  the switchover  system and a return to the original  mechanism  involving  a fixed,  narrow  threshold 
between  -2 and +2, may  raise difficulties. 

The  resulting  arrangements  would,  in the current  context  of  the EMS,  involve  significant  instability 
in the ACRs  as was  feared at  the end of  1993 when the Council  decided  to amend  the  rules  originally 
laid down. Accordingly,  relatively short-term monetary  fluctuations could  bring  about  disturbance  on 
the market,  falls  in family farm  incomes, and Community  expenditure  which  is not  strictly  necessary. 

In the case of  appreciable  revaluations,  the compensation  mechanisms  which  should be triggered  off 
at  the  request  of  the Member  States concerned  are highly  likely to result  automatically  in major 
conflict  with  the provisions  on due restraint  agreed under  the GATT  and  with  the  agricultural 
guideline  imposed  by budgetary discipline.  In that  case, harsh  choices  between  the various  levels of 
agricultural  support  would have to be made. The original  1993 system,  although.not appearing  very 
burdensome,  thus entails serious risks of a surge  in costs and of highly conflictual  situations 
arising. 

2. 

Simply  to carry over  the agrimonetary  rules existing  at  the end of  1994 does not  appear  a suitable 
solution  either.  It provides overprotection for certain positive monetary  gaps and  accelerates 
certain  increases  in ACRs at the expense of the Community budget. Furthermore,  the enlarged  five-
point  threshold  could  create deflection  in trade flows between certain neighbouring  Member  States. 

Furthermore,  this situation maintains  in principle the switchover  mechanism,  albeit  rendered 
inoperable  by the present  rules of the EMS. That mechanism  is incompatible  with  the reform of  the 
CAP, the GATT Agreements  and budgetary discipline  in the medium  term.  Lastly,  the mechanisms  for 
compensation  in the case of an appreciable  revaluation  are the same as those mentioned  previously 
and  thus entail  the same drawbacks. 

3. 

As  a consequence,  in the  light of experience  and the changes  in the background  conditions,  the 
agrimonetary  system  could apparently  be  improved  by measures of  three types: 

(a) Strengthening  the way the system  works as a whole 

Abandonment  of  the switchover  mechanism,  which  is incompatible  with  the  reform of the CAP, 
the GATT Agreements  and budgetary discipline  in the medium  term. 

Technical  adjustments  relating  to the conversion  rates applicable  for  the common  customs 
tariff  and  for structures, and detailed  rules for advance  fixing  of  the ACRs. 

(b) More  stable ACRs 

Symmetrical  threshold  and  limitation  of  its movability  in order, under  certain 
circumstances,  to prevent  unnecessary expenditure  and  reduce  the  frequency  of devaluations 
induced  by overprotection  against  falls  in the ACRs; 

Possibility of  reducing  the extent  of the threshold depending  on the national  currencies 
concerned,  in order to avoid  the risk of deflection  of trade. 

(c) Revising  the mechanisms  for  compensation 

Introduction  of a short period  for confirmation of movements  in currencies  before any 
reduction  in ACRs. 

Introduction  of a period  suspending  falls  in ACR  in the event  of  "appreciable"  revaluations, 
i.e. those which  go beyond  preceding  devaluations,  taking  account  of  the time they have 
applied. 

Limiting  possibilities for triggering  compensatory  measures  to cases of  "appreciable" 
revaluations. 

Extension  of  the principle of the degressive,  transitional  compensatory  aid mechanism  to aid 
per hectare  or  livestock unit and the  introduction  of the possibility  to take  short-term 
measures. 

Annex  1 : 

A G R I C U L T U R AL  C O N V E R S I ON  R A T ES 

(  1  ecu 

NC) 

Dates 

N . B .: 

B LF 

D KR 

DM 

DRA 

E SC 

FF 

H FL 

IRL 

LIT 

PTA 

U KL 

01/09/92 
31/12792 

0) 

48.5563 
48.5563 

8.97989 
8.97989 

2.35418 
2.35418 

274.609 
292.133 

203.418 
207.327 

7.89563 
7.89563 

2.65256 
2.65256 

0.878786 
0.878776 

1761,45 
1990.00 

151.756 
161.262 

0.795423 
0.897525 

48.5563 

8.97989 

2.35418 

310.351 

209.523 

7.89563 

2.65256 

0.878776 

2087 
2133 

166.075 

0.939052 

212.128 

314.412 

214.525 

(4) 

222.758 

01/01/93 
11/01/93 

(2) 

01/02/93 
03/02/93 

(3) 

01/03/93 
31/03/93 

01/04/93 
11/04/93 
21/04/93 
27/04/93 

01/05/93 
11/05/93 
18/05/93 
21/05/93 
28/05/93 

01/06/93 
21/06/93 

01/07/93 
21/07/93 
24/07/93 
30/07/93 

01/08/93 
11/08/93 
17/08/93 
21/08/93 

01/01/94 
11/01/94 
21/01/94 

01/04/94 

21/05/94 

01/06/94 
21/06/94 

30/06/94 

(5) 

9.14292 
9.34812 

01/09/93 

(6) 

14/10/93 

49.3070 

30/12/93 

(7) 

315.843 

319.060 

322.728 

328.567 

331.890 

334.226 

337.814 

342.048 

346.789 

223.071 
228.151 
233.112 

236.933 

7.95622 

7.98191 

239.331 

0.957268 

2156.72 

2207.67 
2262.06 

2287.88 

2264.05 

2230.20 
2226.76 
2195.05 
2194.16 

2191.78 

0.976426 

2166.58 

0.951031 
0.968391 

0.980715 

166.261 
169.628 

0.978559 
0.970726 
0.964017 

176.247 
176.451 
179.488 

182.744 

0.959111 

0.948645 
0.937041 
0.930787 

186.835 

190.382 

0.920969 

2222.98 

2264.19 

192.319 

2274.93 

49.3070 

9.34812 

2.35418 

346.789 

239.331 

7.98191 

2.65256 

0.976426 

2274.93 

192.319 

0.920969 

(1):  Level  before  the  monetary  movements  in  automn  1992.  Rate for  the  PTA  applies  to  cereals.  Correcting  factor  for the  ecu  1.145109. 
(2):  Beginning  of  monetary  system  for  single  market.  Correcting factor  for  the  e cu  1.195066. 
(3):  Monetary  realignement:  10% devaluation  of the  IRL. Correcting  factor  for  the  ecu  1.205454. 
(4):  Monetary  realignement:  ESC  devalued  by  6.5%  and  PTA  by 8%.  Correcting  factor  for  the  ecu  1.207509. 
(5):  On  02/08/93, fluctuation  range  of  exchange  rate  mechanism  of  EMS  extended  to  15%. 
(6):  From  10/09/93,  suspension  of  original  rules for  adjusting  the  agricultural  conversion  rate. 
(7):  From  22/12/93, amendment  of  basic  agrimonetary  Regulation. 

P 

Annex 2:  MONETARY  GAPS  BY  REFERENCE  PERIOD 

B LF 

D KR 

DM 

DRA 

E SC 

FF 

H FL 

I RL 

LIT 

PTA 

UKL 

0.000 
- 0 . 4 79 
- 0 . 9 79 

- 0 . 6 66 
- 1 . 1 22 
- 1 . 1 81 

- 0 . 7 87 
- 0 . 1 34 
- 0 . 5 40 

- 0 . 5 67 
- 1 . 3 75 
- 1 . 9 74 

- 1 . 6 27 
- 1 . 8 74 
- 2 . 1 21 

- 1 . 2 60 
- 1 . 5 32 
- 2 . 0 35 

Period 
01  -  1993 
1 
2 
3 

02 

03 

04 

05 

06 

07 

08 

09 

10 

11 

12 

1 
2 
3 

1 
2 
3 

i 
2 
3 

1 
2 
3 

1 
2 
3 

1 
2 
3 

1 
2 
3 

1 
2 
3 

1 
2 
3 

1 
2 
3 

1 
2 
3 
01  -  1994 
1 
2 
3 

02 

03 

04 

05 

06 

1 
2 
3 

1 
2 
3 

1 
2 
3 

1 
2 
3 

1 
2 
3 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
- 1 . 3 20 
- 1 . 2 45 

0.000 
- 2 . 0 00 
- 1 . 7 59 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
1.176 
1.664 

- 1 . 3 27 
- 1 . 5 76 
- 1 . 9 28 

- 1 . 8 08 
- 1 . 9 30 
- 1 . 5 75 

- 1 . 7 64 
- 1 . 9 88 
- 2 . 0 00 

- 1 . 0 29 
- 1 . 1 04 
- 0 . 8 19 

- 1 . 1 70 
- 1 . 7 18 
- 1 . 6 65 

- 1 . 3 17 
T-2.460 
- 1 . 8 49 

- 1 . 9 96 
- 1 . 8 43 
- 1 . 4 02 

1.493 
2 . 1 15 
1.770 

- 1 . 1 64 
- 1 . 6 28 
- 2 , 9 87 

- 1 . 9 18 
- 2 . 8 08 
- 2 . 0 38 

- 0 . 3 51 
0.175 
0.405 

1.914 
2 . 1 35 
2 . 5 34 

- 2 . 8 65 
- 3 . 3 34 
- 1 . 8 88 

- 1 . 5 96 
- 0 . 5 93 
- 0 . 0 54 

0.309 
1.021 
1.283 

1.504 
1.252 
0.897 

1.397 
1.750 
2 . 1 95 

2 . 2 78 
2 . 2 48 
2 . 4 97 

2 . 6 41 
2 . 3 81 
2 . 4 19 

2 . 5 31 
2 . 6 71 
2 . 6 30 

2 . 7 42 
2 . 5 81 
2 . 7 86 

0.504 
1.082 
1.341 

1.574 
2 . 0 54 
2 . 2 57 

2 . 3 93 
2 . 5 57 
2 . 7 14 

2 . 4 55 
2 . 3 98 
2 . 0 81 

2 . 1 34 
2 . 2 84 
2 . 5 03 

2 . 0 49 
2 . 1 17 
2 . 0 10 

1.949 
2 . 3 70 
2 . 3 42 

2 . 3 84 
2 . 2 33 
2 . 4 09 

1.914 
1.640 
1.506 

1.465 
1.146 
0.971 

0.795 
0.615 
0.372 

0.276 
0.255 
0.569 

0.594 
0.786 
0.923 

1.110 
0.785 
0.700 

0.833 
0.971 
0.907 

1.032 
0.878 
1.066 

- 1 . 1 63 
- 0 . 8 45 
- 1 . 0 47 

- 1 . 2 96 
- 1 . 5 50 
- 1 . 7 41 

- 1 . 0 23 
- 1 . 3 80 
- 0 . 7 09 

- 0 . 8 12 
- 1 . 0 28 
- 1 . 2 50 

- 1 . 3 48 
- 1 . 3 66 
- 1 . 6 47 

- 1 . 0 85 
- 1 . 4 83 
- 1 . 3 73 

- 1 . 4 19 
- 1 . 5 76 
- 1 . 2 69 

- 1 . 1 65 
- 1 . 8 48 
- 1 . 4 06 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
- 2 . 0 00 
- 2 . 0 00 

- 1 . 3 97 
- 1 . 5 72 
- 1 . 1 09 

- 0 . 9 12 
- 0 . 8 55 
- 1 . 4 50 

- 1 . 2 37 
- 1 . 1 57 
- 0 . 8 70 

- 0 . 6 45 
- 0 . 2 18 
0.194 

0.194 
0.334 
0.210 

0.111 
0.159 
0.232 

0.347 
0.447 
0.591 

0.291 
- 0 . 1 02 
- 0 . 2 75 

- 0 . 3 42 
- 0 . 0 78 
- 0 . 1 28 

0.192 
0.250 
0.407 

- 1 . 1 44 
- 1 . 2 32 
- 1 . 5 12 

- 1 . 8 08 
- 1 . 8 73 
- 1 . 1 02 

- 0 . 9 77 
- 1 . 0 62 
- 0 . 9 28 

- 0 . 8 78 
- 1 . 1 39 
- 2 . 0 00 

- 1 . 1 66 
- 0 . 2 77 
- 0 . 0 68 

0.153 
0.040 
0.251 

0.003 
- 0 . 3 48 
- 0 . 3 20 

- 0 . 6 70 
- 0 . 3 10 
0.156 

- 0 . 0 27 
- 0 . 2 80 
- 0 . 4 79 

- 0 . 5 77 
- 0 . 4 25 
0.087 

0.272 
0.379 
0.217 

- 0 . 3 14 
- 1 . 1 42 
- 1 . 2 66 

- 1 . 3 84 
- 0 . 1 35 
- 0 . 6 44 

- 1 . 0 57 
- 1 . 3 24 
- 1 . 5 83 

- 1 . 0 23 
- 1 . 2 99 
- 1 . 1 81 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

0.000 
0.000 
0.000 

- 0 . 9 97 
- 1 . 9 82 
- 0 . 9 50 

0.000 
- 2 . 0 00 
- 2 . 0 00 

- 1 . 2 20 
- 0 . 7 76 
- 2 . 2 53 

- 2 . 0 00 
- 2 . 0 00 
- 2 . 0 00 

- 2 . 4 19 
- 1 . 4 35 
- 2 . 4 00 

- 2 . 0 00 
- 2 . 0 00 
- 2 . 0 00 

- 1 . 1 55 
- 1 . 2 40 
1.308 

- 2 . 0 00 
- 2 . 0 00 
- 2 . 0 00 

- 2 . 0 00 
- 2 . 0 00 
- 2 . 0 00 

1.474 
2.000 
2.000 

1.727 
1.912 
2.000 

0.000 
0.000 
0.000 

1.138 
0.588 
- 0 . 4 09 

0.000 
1.311 
1.743 

0.000 
0.261 
- 1 . 1 48 

- 1 . 3 21 
- 1 . 0 67 
- 1 . 2 05 

- 1 . 2 46 
- 1 . 6 62 
- 1 . 7 08 

- 1 . 8 70 
- 2 . 8 43 
- 2 . 6 47 

- 1 . 3 30 
- 0 . 4 30 
- 0 . 2 74 

- 3 . 4 83 
- 4 . 2 91 
- 1 . 1 29 

- 0 . 3 71 
0.043 
0.445 

- 0 . 5 04 
- 1 . 2 66 
- 2 . 1 53 

0.000 
- 0 . 1 34 
- 0 . 1 57 

0.257 
- 0 . 4 28 
- 0 . 8 43 

- 1 . 4 60 
- 0 . 8 48 
- 0 . 6 11 

- 0 . 5 90 
- 0 . 8 97 
- 2 . 1 14 

- 1 . 9 40 
- 1 . 7 33 
- 2 . 0 00 

- 1 . 8 48 
- 0 . 0 22 
1.038 

1.074 
1.081 
- 0 . 5 30 

- 1 . 9 36 
- 0 . 4 67 
- 0 . 2 89 

1.506 
1.650 
2 . 8 13 

2 . 5 08 
2 . 0 13 
2 . 4 67 

2 . 9 43 
2 . 5 53 
1.653 

1.314 
1.546 
1.387 

- 3 . 3 90 
- 3 . 6 61 
- 3 . 5 43 

0.863 
- 0 . 2 51 
- 0 . 3 99 

1.710 
3 . 1 15 
4 . 0 62 

4 . 0 25 
3 . 3 80 
2 . 0 75 

2 . 2 25 
2 . 1 33 
1.550 

1.195 
1.157 
2 . 1 86 

2 . 1 65 
1.672 
2 . 5 23 

2 . 1 07 
2 . 4 68 
1.995 

- 1 . 7 76 
- 1 . 0 59 
- 0 . 4 77 

- 0 . 7 57 
- 1 . 0 28 
- 0 . 2 84 

- 0 . 6 00 
0.083 
0.123 

- 0 . 3 71 
- 1 . 4 04 
- 1 . 3 26 

- 0 . 5 97 
1.445 
1.938 

0.845 
1.070 
0.613 

0.933 
0.231 
0.410 

0.783 
1.726 
1.119 

1.649 
1.491 
1.765 

1.037 
0.478 
- 0 . 1 39 

0.949 
0.554 
- 0 . 0 32 

0.193 
0.310 
0.021 

1.730 
2 . 4 29 
2 . 0 83 

2 . 2 45 
2 . 4 14 
2 . 7 03 

2 . 2 06 
2 . 0 23 
1.091 

1.857 
1.685 
1.568 

1.383 
1.331 
0.988 

0.837 
0.820 
1.023 

0.964 
1.121 
1.175 

1.309 
1.159 
1.075 

1.101 
1.320 
1.296 

1.497 
1.375 
1.618 

- 2 . 0 00 
0.374 
0.411 

- 1 . 2 93 
- 2 . 0 89 
- 2 . 5 90 

- 1 . 2 90 
- 0 . 0 27 
0.860 

1.656 
2.000 
2.000 

1.965 
1.400 
1.493 

1.383 
0.521 
1.229 

1.079 
2 . 4 38 
2.000 

1.044 
1.067 
0.374 

- 0 . 2 18 
- 0 . 8 79 
- 1 . 4 44 

- 1 . 8 59 
- 1 . 5 22 
- 1 . 8 64 

- 1 . 0 15 
- 0 . 4 19 
0.041 

0.585 
0.877 
0.536 

0.667 
1.503 
2 . 4 29 

2 . 3 51 
1.621 
0.489 

0.439 
0.452 
- 0 . 3 68 

- 1 . 0 79 
- 1 . 0 18 
- 0 . 5 90 

- 0 . 6 72 
- 1 . 5 49 
- 1 . 2 01 

- 1 . 8 81 
- 1 . 0 12 
- 1 . 6 60 

ANNEX 3-1  :  CHANGE IN REPRESENTATIVE MARKET RATES  (IN BLACK) AND AGRICULTURAL CONVERSION RATES  (IN WHITE) FROM 

JANUARY 1993 TO JUNE 1994 

ANNEX 3-2  :  CHANGE IN REPRESENTATIVE MARKET RATES  (IN BLACK) AND AGRICULTURAL CONVERSION RATES  (IN WHITE) FROM 

JANUARY 1993 TO JUNE 1994 

ANNEX  4-1  : MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 

CEREALS 

Intervention price  (in black) and market price  (in white) 
for common wheat  (lozenge) and barley (triangle) 

0 

180 

160 h 

140 h 

120 — 

100 L- * #^ 

80 

60 '—'-<-

r^rtrért^^^A, 

' ' '' 

' ' '' 

I 

I  l _l  ' ' ' '' 

i _J  I 

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I  I 

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I  I 

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L_ 

180 

160 

140 h 

120  \-

100 

80 h 

60  - J _J 

i 

i  i  I _J  i  i  i 

i 

i 

i  i 

i  ,  i  i 

i 

i 

i 

i  i 

i — 1_ 

'  ' 

i  ' 

i 

i 

7  8  9  10 11  12  1  2  3  4  5  6  7  8  9  10 11  12  1  2  3  4  5  6 

7 89 

10  11  12  1  2  34 

56 

7 8 9 10 

11  12  1  2  3  4 

56 

180 r-

160  \-

140 

120 h 

100 

80 

60 

BLF 

_l 

1 _J 

l _J 

l _l 

L -l 

I 

I 

I 

I  I 

I 

I 

I  I 

I 

L_ 

180 

160 

140 

120 

100 

80 

30 

I 

7  8  9  10 11  12  1  2  3  4  5  6  7  8  9  10 11  12  1  2  3  4  5  6 

-*»••••-

i 

i 

i 

i 

i 
7  8  9  10 11  12  1  2  3  4  5  6  7  8  9  10  11  12  1  2  3  4  5  6 

L _J 

i  ; 

i 

i 

i 

L. 

i 

i, 

i 

i 

i 

i 

i 

i 

i 

ANNEX 4-2  :  MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 

OLIVE OIL : 
Intervention price  (in black) and 
market price for extra virgin oil  (in white) 

SUGAR : 
Intervention price  (in black) and 
market price for white sugar  (in white) 

140 

130 

120 

110 

100 

90 

140 

130 

120 

110 

0 

»• • ¥%^%^%**^Z~ 

. H m ^ H ^ ^ ^ ^^ 

-J 

I  I  I  I  I  1 _J 

I  I  I  I  I  I  I  I  I  I  I  U -J 

I  1  I  I  I  I  I  I  I  1 1 ,1 

1 —1 

I  I  II 

l__l 

I  I  I  U -l 

l_ 

7  8  9  10 11  12 ^1  2  3  4  5  6  7  8  9  10  11  12  1  2  3  4  5  6 

E3 

^ • • • • • • • • • • • • • • • • • • • •» 

o 

100 h •••••oooo 

7  8  9  10 11  12  1  2  3  4  5  6  7  8  9  10  11  12  1  2  3  4  5  6 

IËSP] 

140 

130 

120 

110 

100 

90 

i 

•  '  • 

i 

i 

i 

i 

i 

i 

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i 

i 

i 

i 

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i 

i 

i 

i 

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i 

i 

i 

i 

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i 

i 

i 

i 

i 

i 

i 

i 

i 

i— 

90 

_ l _l 

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I 

I .I 

I 

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1 —1 

I 

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7  8  9  10 11  12  1  2  3  4  5  Ê  7  8  9  10 11  12  1  2  3  4  5  6 

7  8  9  10 11  12  1  2  3  4  5  6  7  8  9  10  11  12  1  2  3  4  5  6 

ANNEX  4-3  : MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 

MILK PRODUCTS 

Agricultural conversion rate (in black) and market price (in white) 
for butter  (lozenge) and whole milk  (triangle) 

130 

120 

110 

100 

90 

80 

7  8  9  10 11 12 1  2  3  4  5  6  7  8  9  10 11 12 1  2  3  4  5  6 

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130 

120 

110 

100 

90 

80  I—i  i.i  i i 

7  8  9  10 11 12  1  2  3  4  5  6  7  8  9  10 11 12  1  2  3  4  5  6 

a 

a 

130 

120 

110 

100 

90 

80 

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- l — I — l —l 

i_ 

, » • • • • • • • • • » • • • • • » • • • • • •• 

• ^? ? U% 9 7 9 V ?^ 

7  8  9  10  11  12  1 

2

3

4

5

6

7

89 

10  11  12  1 .2 

3

4

66 

7  8  9  10  11  12  1  2  3  4  5  6  7  8  9  10  11  12  1  2  3  4  5  6 

130 

120 

110 

100 

90 

80 

ANNEX  4-4  : MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 

Intervention price  (in black) and market price for carcases  (in white) 

BEEF 

ED 

140 

130 

120 

110 

100 

\-  *%+•  •  » r +>  •  •  • 

7 

8 

9  10  11  12  1 

2 

3 

4 

5 

6 

7 

8 

9 

10  11  12  1 

2 

3 

4 

5 

6 

9  10  11  12  1 

2 

3 

4 

5 

6 

7 

8 

9  10  11  12  1 

2 

3 

4 

5 

6 

•

•

•

•

•

• » • » •

•

•

•

•

•

•

•

•

•• 

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90 

140 

130  !-

120 

110 

100 

l**?tï 

140 

130 

120 

110 

100 

a 

• 

• • • • • • • • • • • • • • •4 

90 

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I 

l__l 

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u 

-I 

I 

I 

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I 

I —I 

I — 1 — I — I — I —i-

7  8  9  10 11  12  1  2  3  4  5  6  7  8  9  10  11  12  1  2  3  4  5  6 

90  I—i 

i 

i 

i 

i  i 

i 

i  i 

7  8  9  10 11  12  1  2  3  4  5  6  7  8  9  10 11  12  1  2  3  4  5  6 

ANNEX 4-5  :  MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 

FRESH FRUIT AND VEGETABLES 
Agricultural conversion rate  (in black) 
and market price  (in white) for apples 
(lozenge) and tomatoes  (triangle) 

TABLE WINES 
Agricultural conversion rate  (in black) 
and market price for wines of type Rl 
(in white) 

[ESP] 

•a 

400 

300 

S?  200 

100  h 

0 

'—^-
7 89 

10  11  12  1  2 3 4 5 6 7 89 

10  11  12  1 

2 3 4 56 

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I 

I 

I  L_! 

I 

I 

I 

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140 

120 

80 

60 

140 

120 

100 

80 

7 89 

10  11  12  1  2  34 

56 

7 89 

10  11  12  1  2  3  4 

56 

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I 

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^***-»»»»»»»^r,r'r" 

+* • • • • • • • • • •• 

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M/V 

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8 

9  10  11  12  1 

2 

3 

4 

5 

6 

7 

8 

9  10  11  12  1 

2 

3 

4 

5 

7 89 

10  11  12  1

2

3

4

5

6

7

89 

10  11  12  1 

2

3

4

56 

' 

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I 

l_J 

u 

60  I—i  •  •  '  i 

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i 

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i 

i 

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i 

i 

'

'

'' 

400 

300  h 

200  h 

100  h 

0 

' — >-
7 

^ 
^ 

ANNEX 4-6 :  MONTHLY PRICE CHANGES IN NATIONAL CURRENCY BETWEEN JULY 1992 AND JUNE 1994 

PIG MEAT 
Agricultural conversion rate  (in black) 
and market price for meat of class 1 
(in white) 

SHEEP MEAT 
Agricultural conversion rate  (in black] 
and market price for lamb carcases 
(in white) 

S 

140 

120  h 

• • • • • » » • • • • • • » • • • • •» 

60 

i. 

i 

i .i 

i 

i 

i 

i 

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' 

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i _i 

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i_ 

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I 

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7 89 

10  11  12  1 

2

3

4

5

6

7

89 

10  11  12 

1

2

3

4

56 

7  8  9  10  11  12  1  2  3  4  5  6  7  8  9  10  11  12  1  2  3  4  5  6 

140 

120 

100 

80 

• » •

•

•

• » •

•

•

•

•

•

•

•

•

•

•

•

•• 

180 

160 

140  h 

120 

100 

60 

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l__l 

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80 

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7 89 

10  11  12  1 

2

3

4

5

6

7

89 

10  11  12  1 

2

3

4

56 

7  8  9  10  11  12  1  2-  3  4  5  6  7  8  9  10  11  12  1  2  3  4  5  6 

ANNEX  5:  MONTHLY  EXPORTS 

UNITED KINGDOM  -  MILK ('000 T) 

O

ND 

J 

F

M

A

MJ 

J 

A 

S 

O

ND 

J 

F 

M AM 

J 

J 

A 

S 

j 

O

i 
ND 

i 

i 

i_ 

SPAIN  -  CEREALS fOOOT) 

O

ND 

J 

F

M

A

MJ 

J

A

S

O

N

DJ 

F MA 

-*—t 

A 

S 

O 

N 

D 

ITALY  -  WINE ÇOOO T) 

O ND 

J 

F  MA 

M 

J 

J sA 

SO 

N 

D 

J 

L_ 

I 

I 

I 

L_ 
^J 
F  MA 

I 

M 

I 

J 

1 

J 

1 
A 

1 

S 

O 

N 

D 

S? 

(PUOH/EH/1551) 

A H N EX 

6 

Impact on refunds  and aid  of  the  dollar 

effect  of  the  ecu correcting 

factor 

Amount 

mor Id  price 
$/t 

Price 
of 

effect 
correcting 

Quantities 
concerned 
1  000  t 

Impact  on  1994 
expenditure 
ECU  a 
(budget) 

D 

E 

A 

B 

Export 

refund 
Common  wheat 
Barley 
Ualze 
Durum  wheat 
Rye 
Rice 
Sugar 

Production 
refund 

Starch 
Sugar  for 
chemical 

the 
Industry 

Aid 

Oilseeds 
Dried 
Cotton 

fodder 

T  0  1  A L 

92 
12 
120 
192 
61 
350 
280 

192' 

(V 

265 
121 
416 

-

factor 
ecu/t 

C 

0,69 
0,54 
0,90 
1,44 
0,46 
2,63 
2,10 

20  883 
8  778 
3  888 
1  016 
500 
120 
2  970 

1,44 

1750 

(2) 
0,91 
3,12 

-

4  541 
1  085 

-

17,2 
5,7 
4,2 
1J 
0,3 
0,4 
7,5 

3,0 

0,4 

28,6 
4,9 
4,0 

77,9 

A:  Amounts  directly  dependent  on a world  market price  In  $ 
B:  Estimate  of  the  prices  or  price  percentages In  $  directly 

Impact on  1994 expenditure. 

linked  to  the  amounts  to  be fixed  and with  an 

C:  Effect  based on an average exchange  rate  of  $1  =  (budget)  ECU  0.87  and an ecu correcting 

factor  of 

1.195066  on  1.1.1993 and 1.207509  on  14.5.1994 

E:  (C) X  (D)  X  1.195066 

(1) 
(2) 

Same  effect  (0.5%) as  for  export  refunds  on  sugar 
In  aid  Instead  of  11% 
10%  reduction 

*S 

ANNEX 7:  CHANGES IN THE AGRICULTURAL CONVERSION RATES 

UNDER VARIOUS ADJUSTMENT RULES 

Rules for adjusting the 

agricultural conversion rates (ACRs) 

BLF 

DKR 

DM 

DRA 

ESC 

FF 

HFL 

IRL 

UT 

PTA 

UKL 

00 

Reference:  ACR  with  no threshold, no  " s w i t c h - o v e r" 

01 

Situation which  actually  occurred 

PART ONE 

A 

ACR  with  no threshold, 

with " s w i t c h - o v e r"  for the  fixed  currencies 

B 

ACR  with fixed threshold  (-2,-1-2). 

with no  Iswitch-over" 

C 

ACR with continuation of the original rules 

D 

ACR  with fixed threshold  ( - 2 , + 2 ),  with 

"switch-over" becoming floating as from august  1993 

E 

ACR  with asymmetrical threshold  ( - 2 , + 3 ), 

movable to  ( 0 . + 5 ), with no  "switch-over" 

PART TWO 

F 

ACR  with  5 - p o i nt  threshold, movable  between  ( - 5 , 0) 

a nd  ( 0 . + 5 ), w i th no I s w i t c h - o v e r" 

G 

ACR  with  4 - p o i nt  threshold,  movable  between  ( - 4 , 0) 

and  ( 0 . + 4 ), with no  *switch-over" 

H 

ACR  with  5 - p o i nt  threshold, movable  between  ( - 4. + 1) 

and  ( - 1 . + 4 ),  with no  "switch-over" 

% 

N  + 

N-
% 

N + 

0 

- 2 .3 

0 .6 

- 2 .1 

1 2 .1 

1 3 .5 

- 0 .4 

- 2 .6 

7.8 

6 .9 

1 4 .6 

- 3 .3 

11 

23 

1.6 

1 

0 

11 

23 

4 .1 

2 

0 

17 

17 

0 

0 

0 

42 

11 

35 

18 

1 1 .7 

1 4 .2 

10 

0 

6 

0 

12 

22 

1.1 

2 

0 

18 

16 

0 

0 

0 

17 

17 

11.1 

2 

0 

29 

24 

9 

7 

5 

27 

26 

22 

31 

1 5 .8 

- 1 .9 

6 

0 

3 

7 

% 

- 1 .3 

1.6 

- 1 .1 

1 3 .3 

1 4 .7 

0 .7 

- 1 .6 

8 .9 

8 

1 5 .8 

- 2 .3 

37 

16 

12 

20 

19 

13 

12.9 

0.1 

- 1 .7 

6 

0 

1 

0 

0 

4 

18 

15 

7.7 

3 

2 

30 

23 

7.3 

8 

5 

28 

25 

22 

31 

1 3 .5 

- 2 .3 

7 

2 

3 

9 

1 4 .2 

1.1 

- 0 .7 

8.8 

9 .1 

1 4 .7 

-2 

N  + 

N-
% 

N + 

N-
% 

N  + 

N-
% 

N  + 

N-
% 

N  + 

N-

% 

N  + 

N-
% 

N  + 

N-
% 

N  + 

N-

10 

22 

11 

21 

17 

15 

- 0 .8 

2.3 

- 1 .6 

44 

9 

10 

14 

0 

11 

13 

0 

1 

2 

0 .3 

3 

2 

1 

3 

2 

1.7 

2 

0 

1.7 

2 

0 

3 

4 

3 

2 

1 

4 .1 

3 

2 

4 

3 

0 

4 

3 

0 

0.1 

2.3 

4 

1 

3 

1 

1.7 

3 .2 

2 

0 

2 

0 

0 

4 

- 0 .5 

0 

2 

0 

0 

0 

0 

0 

0 

6 

0 

2 

0 

1 1 .9 

1 4 .3 

1.3 

15 

0 

11 

14 

0 

6 

0 

4 

0 

1 3 .2 

0 .9 

9 

0 

1 

0 

0 

1 1 .2 

1 3 .5 

0 .9 

0 

0 

0 

0 

0 

0 

0 

0 

15 

0 

7 

0 

1 

0 

1 0 .8 

1 3 .5 

1.5 

17 

0 

7 

0 

1 

0 

1 1 .2 

1 3 .6 

0.9 

12 

0 

7 

0 

1 

0 

0 

2 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

0 

2 

2 

9 

6 

7 

2 

4 

8 

9.6 

9.9 

1 5 .5 

- 0 .5 

4 

1 

9 

6 

6 

1 

5 

8 

1 0 .9 

8 .4 

1 4 .8 

- 0 .6 

5 

0 

9 

1 

6 

0 

3 

2 

1 0 .9 

8 .3 

1 4 .8 

- 0 .6 

5 

0 

5 

1 

5 

0 

1 

1 

8.8 

9.1 

1 5 .7 

- 2 .4 

6 

1 

10 

1 

9 

1 

1 

2 

8.7 

8 .3 

1 4 .2 

- 1 .7 

4 

1 

6 

1 

4 

0 

2 

2 

%  =  Changes from 01.01.1993 to 30.06.1994 

N+  et N-  =  Numbers of increases (devaluations) and decreases (revaluations) 

Rules  for  adjusting  the 

agricultural  conversion  rates  (ACRs) 

ANNEX  8:  COMPARISON  OF  THE  C O ST  OF  VARIOUS  RULES  FOR  ADJUSTING 

THE  AGRICULTURAL  CONVERSION  RATES 

(Budget)  e cu  million 

Effects  of  changes 

Theorical  medium—term  effects  1993/97 

in ACRs/1.5  years 

ACR 

Î  Aid 

1  Incomes 

TOTAL 

(1.1.93/1.7.94) 

0) 

| % c * ( a ). 

'3.5  years 
(?) 

/4  years 

/3  years 

average  /  year 

(3) 

(4) 

(5) 

|  % 

Main 

Observations 

ACRs unstable. 

00 

Reference: ACR with no threshold, no "switch-over" 

0 

0 

0 

2184 

572 

551 

100 

Cost of compensation very high. 

18-month  budget: ecu 68405 m 

(a) 

Incompatible with the GATT. 

( + 1 4) 

01 

Situation which actually  occurred 

688 

+  1.01 

1726 

0 

0 

483 

- 12 

(100) 

Costly over protection 
of some positive gaps. 

Threshold sometimes too high. 

PART  ONE 

A 

ACR with no threshold, 

630 

+ 0 . 92 

1300 

1344 

272 

709 

+ 29 

(For reference) 

with "switch -over" for the fixed currencies 

B 

ACR with fixed threshold  (-2,+2), 

with no  "switch-over" 

89 

+ 0 . 13 

- 1 46 

1428 

316 

3 37 

- 39 

automatic compensation, and 

difficulties with the GATT (With 

( - 3 0) 

different monetary changes). 

(+47) 

Strong risk of high 

C 

ACR with continuation of the original rules 

582 

+ 0 . 85 

1179 

588 

104 

491 

- 11 

(+2) 

Compensation for 
conjunctural revaluation. 

General overprotection of 

D 

ACR with fixed threshold (-2,+2), with 

817 

+  1.19 

1990 

0 

0 

561 

+2 

the "switch  -  over". 

"switch-over" becoming floating as from august 1993 

Incompatible with the GATT. 

(+16) 

Costly overprotection 

E 

ACR with asymmetrical threshold  (-2,+3), 

611 

+ 0 . 89 

1430 

0 

0 

408 

- 26 

of some positive gaps. 

movable to  (0.+5), with no  "switch-over" 

PART  TWO 

Threshold sometimes too high. 

( - 1 6) 

Little different from E 

F 

ACR with 5-point threshold, movable between (-5,0) 

616 

+ 0 . 90 

1453 

0 

0 

414 

- 25 

according to monetary 

and (0.+5), with no  "switch-over" 

G 

ACR with 4-point threshold, movable between (-4,0) 
and (0.+4), with no "switch-over" 

developments taken into account. 

( - 1 4) 

Unstable result. 

674 

+ 0 . 99 

1438 

0 

0 

422 

- 23 

Significant fall in ACRs, 

and compensation just missed. 

( - 1 3) 

Result highly unstable. 

H 

ACR with 5-point threshold, movable between (-4.+ 1) 

520 

+ 0 . 78 

1128 

0 

0 

330 

- 40 

Significant fall in ACRs, and 

and (-1.+4), with no  "switch-over" 

high compensation just missed. 

( - 3 2) 

Threshold sometimes too high. 

(2)  Effect  of ACR  as at  30.06.1994  on expenditure  from jury  1994 to  december  1997, taking account  of the  structure  of the  1995  preliminary  draft  budget. 

(3)  Effect  over 4  years of compensation  for the  highest "perceptible" revaluation  by  increasing  certain amounts  in ecus.  Ecu 210  million for every  1%  of  revaluation. 

Article 7  of  Regulation  (EEC)  3813/92. 

(4)  Community  financing  over 3  years  of the  maximum  compensatory  aid  for  loss  of  income  in the  case  of a  "perceptible" revaluation.  1.5% of family agricultural  income 

for every  1% of revaluation. Article 8 of  Regulation  (EEC)  3813/92. 

(5)  Criterion for estimating  the  theoretical  medium-term  effect:  [(1)  +  (2)  +  (3)  +  (4)]  /  5 

Qb 

EXPLANATORY MEMORANDUM 

In accordance with Article 13(2) of Regulation  (EEC) No 3813/92, the 

Commission has presented a report to the Council on the way the agrimonetary 

system introduced on 1 January 1993 has functioned. In view of the 

conclusions of the report, it is proposed that the basic agrimonetary 

Regulation be amended. 

As this is an area where the Community has exclusive competence, the 

measures must be taken at Community level. They amend an existing Council 

Regulation and have as their overall objective the uniform application of 

the CAP. More precisely, they seek to improve the overall consistency of the 

arrangements, to enhance the stability of the agricultural conversion rates 

and to revise the compensation mechanisms in the light of experience gained 

and economic developments. 

1. Regulation  (EEC) No 3813/92, which provides, as from 1 January 1995, for 

the discontinuation of the switchover system and a return to the original 

mechanism involving a fixed, narrow threshold between -2 and +2, may 

raise difficulties. 

The resulting arrangements would, in the current context of the EMS, 

involve significant instability in the ACRs as was feared at the end of 

1993 when the Council decided to amend the rules originally laid down. 

Accordingly, relatively short-term monetary fluctuations could bring 

about disturbance on the market, falls in family farm incomes, and 

Community expenditure which is not strictly necessary. 

fit 

In the case of appreciable revaluations, there is a risk that the 

compensation mechanisms which should be triggered off at the request of 

the Member  States concerned  could cause major problems with the 

provisions on due restraint agreed under the GATT and with the 

agricultural guideline imposed by budgetary discipline. In that case, 

difficult  choices between the various levels of agricultural  support 

would have to be made. The original 1993 system, although not appearing 

very burdensome, thus entails serious risks of a surge in costs and of 

highly conflictual  situations arising. 

2. Simply to carry over the agrimonetary rules existing at the end c*f 1994 

must also be excluded. It would maintain the principle of the switchover 

mechanism,  albeit rendered  inoperable by the present  rules of the EMS. 

That mechanism  is incompatible with the reform of the CAP, the GATT 

Agreements  and budgetary discipline  in the medium term. The mechanisms 

for compensation  in the case of an appreciable revaluation are the same 

as those mentioned previously and thus entail the same drawbacks. 

Furthermore  this solution overprotects  certain positive monetary gaps and 

accelerates  certain increases in ACRs at the expense of the Community 

budget. What  is more, the enlarged five-point threshold  is likely to 

create deflection  in trade flows between certain neighbouring  Member 

States. 

3. As a consequence, in the light of experience and the changes in the 

background  conditions, it is proposed to improve the agrimonetary  system 

by measures of three types : 

(a)  Strengthening  the way the system works as a whole 

Abandonment of the switchover mechanism, which is 

incompatible with the reform of the CAP, the GATT Agreements 

and budgetary discipline in the medium term. 

Ql 

Technical adjustments relating to the conversion  rates 

applicable for the common customs tariff  and for structures, 

and detailed rules for advance fixing of the. ACRs. 

(b)  More stable ACRs 

-".'• 

Symmetrical  threshold and limitation of its movability in 

order, under certain circumstances, to prevent  unnecessary 

expenditure and reduce the frequency of devaluations  induced 

by overprotection against falls in the ACRs; 

Possibility of reducing the extent of the  threshold 

depending on the national currencies concerned,  in order to 

avoid the risk of deflection of trade. 

(c)  Revising  the mechanisms for compensation 

Introduction of a short period for confirmation of movements 

in currencies before any reduction in ACRs. 

Introduction of a period suspending falls  in ACR  in the 

event of  "appreciable" revaluations, i.e.  those which"go 

beyond preceding devaluations, taking account of the time 

they have applied. 

Limiting possibilities  for triggering  compensatory measures 

to cases of  "appreciable" revaluations. 

Extension of the principle of the degressive,  transitional 

compensatory aid mechanism to aid per hectare or livestock, 

unit and the introduction of the possibility  to take short-

term measures. 

Cil. 

COUNCIL REGULATION  (EC) No  /94 

of 

amending Regulation  (EEC) No 3813/92 on the unit of account  and 

the conversion rates to be applied  for the purposes of the 

common agricultural policy 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard  to the Treaty establishing the European 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 Parliament ^2^, 

Whereas Article 13(2) of Regulation  (EEC) No 3813/92 (3), as amended by 

Regulation  (EC) No 3528/93 *4', provides for an examination to be  conducted 

by the Council, before 1 January 1995, of the agrimonetary  arrangements 

introduced at the beginning of 1993; whereas measures must be taken at 

Community level for uniform application in all Member States to prevent 

distortion of monetary origin in the implementation of the common 

agricultural  policy; 

(1) 

(2) 

(3) 

(4) 

OJ No C 

OC No C 

OJ No L 387, 31.12.1992, p. 1. 

OJ No L 320, 22.12.1993, p. 32. 

61, 

Whereas, as a consequence of the decision of 2 August 1993 raising the 

marginal intervention thresholds under the European Monetary System to 15%, 

the currencies of the Member States are all treated as floating currencies 

from the agrimonetary viewpoint ; whereas the correcting factor referred to 

in Article 1(c) of Regulation  (EEC) No 3813/92 has remained at 1,207509; 

Whereas the correcting factor linked to the fixed currencies was abolished 

by Article 13(2) of Regulation  (EEC) No 3813/92 and must not be reintroduced 

in view of its implications for the reform of the CAP, international 

agreements and the Community budget; whereas the prices and amounts fixed in 

ecus must be adjusted as a consequence in order to maintain their value in 

national currencies; 

Whereas the initial agricultural conversion rates for the currencies of the 

new Member States must be determined; 

Whereas, in view of the elimination of the correcting factor, a specific 

agricultural conversion rate as provided for in Article 3(2) of Regulation 

(EEC) No 3813/92 is not needed for the agricultural structure policy; 

Whereas until 31 December 1994 Council Regulation  (EEC) No 3528/93 

temporarily replaces the threshold for adjusting the agricultural conversion 

rates, which was initially symmetrical, narrow and fixed at between -2 and 

+2 points, by a threshold which is not symmetrical, is wider and movable 

between -2 to +3 and 0 to +5 points; whereas the application of the initial 

threshold as from 1 January 1995 is likely, on account of the possibility of 

monetary fluctuations persisting within the Exchange Rate Mechanism of the 

European Monetary System, to create instability adversely affecting the 

agricultural conversion rates; 

£f 

Whereas, however, the rules in force' at the end of 1994 must be adjusted to 

reduce their cost to the Community; whereas, in order to avoid, firstly, 

some overprotection against fa^ls in agricultural conversion rates and, 

secondly, unnecessary Community expenditure, the movability of the threshold 

should be limited to below its technical maximum and it should be made 

symmetrical; 

Whereas, in view of the impact of falls in the agricultural conversion rates 

on farm incomes, the monetary trends which trigger them off must be 

confirmed; 

Whereas advance fixing of the agricultural conversion rates, provided for in 

certain cases in Article 6 of Regulation  (EEC) No 3813/92, may be extended 

to the period of applicability of the amount in ecus concerned provided that 

the gap with the monetary trend-remains within a certain limit; 

Whereas the possibility of applying the compensatory measures provided for 

in Articles 7 and 8 of Regulation  (EEC) No 3813/92 should be limited to 

cases of appreciable reductions in the agricultural conversion rates; 

whereas such appreciable-reductions must be defined in terms of the scale 

and the period that prior increases in agricultural conversion rates have 

applied; 

Whereas application of Article 7 of Regulation  (EEC) No 3813/92 should be 

restricted to structural or environmental aid, in view of its particular 

nature, in order to avoid the risk of unnecessary Community expenditure and 

difficulties with international agreements; Whereas reductions in aid per 

hectare or per animal should be offset by a degressive, temporary aid 

supplement; 

Whereas, in the event of an appreciable reduction in the agricultural 

conversion rates, the need for and type and scale of the compensatory 

measures most suitable must be determined in the light of the actual 

circumstances surrounding the reduction; 

W 

Whereas this Regulation should apply from 1 January 1995, when the 

provisions on the correcting factor and the extension of the  threshold 

expire, 

HAS ADOPTED THIS REGULATION: 

Article 1 

Regulation  (EEC) No 3813/92 is hereby amended as follows: 

(1) 

Article  1(c) is replaced by the following: 

"(c)  "representative market rate" shall mean: 

- 

in the case of a fixed currency, the central rate for the 

ecu for that currency, fixed within the framework of the 

European Monetary System, 

- 

in the case of a floating currency, the average  exchange 

rate 'for the ecu with respect to that currency,  recorded 

over a reference period of no more than one month, 

determined in accordance with the procedure  laid down in 

Article 12 ; " 

(2) 

In Article 1, point  (d) is deleted and points  (e) and  (f) become 

points  (d) and  (e) respectively: 

(3) 

In Article 1, the following point  (f) is added: 

"(f) 

"appreciable reduction in the agricultural  conversion rate" 

shall mean: 

a  reduction in the last agricultural conversion rate 

applicable which is greater, in absolute value, than the 

difference between that rate and the lowest conversion rate 

applicable: 

Ù7 

in the last 12 months, and 

in the period between 24 months and over 12 months 

before, and 

in the period between 36 months and over 24 months 

before. 

Two thirds and one third respectively of the value of the 

differences in the second and third indents shall be taken 

into account." 

(4) 

The second subparagraph of Article 3(1) is replaced by the 

following: 

"The agricultural  conversion rate applicable on 1 January 1995 shall 

be equal to that determined  for that date in accordance with the 

rules in force on 31 December 1994, divided by  1,207509. 

The agricultural conversion rate for the national currency of a new 

Member State shall initially be equal to the representative market 

rate established  in accordance with Article 1(c) for the last 

reference period ending before the date of first application of this 

Regulation to the currency in question." 

(5) 

In Article 3, paragraph 2 is deleted and the words  "Taking into 

account  the correcting factor" are deleted from paragraph 3. 

(6) 

Articles 4 and 4a are replaced by the following: 

"Article 4 

1. 

The agricultural rates for the fixed currencies  shall be adjusted 

immediately, without prejudice to Article 9, so as to eliminate 

their monetary gaps in the case of a monetary realignment the effect 

of which is to change the central rates determined for those Member 

States with a fixed currency. 

a 

2. 

The agricultural  conversion rate for a floating currency shall be 

adjusted where: 

(a) 

the absolute value of its monetary gap is greater than the 

threshold referred to in paragraph  5,  less 0,5 points, or 

(b) 

in the case of a negative monetary gap, the absolute value 

of the difference between that gap and the gap for another 

currency is greater than that threshold. 

However, without prejudice to paragraphs, where the agricultural 

conversion rate for a particular currency should be reduced on the 

basis of a single reference period, the first  subparagraph shall not 

apply to that currency or to those currencies which, with respect to 

it, are in the situation referred to in point  (b) thereof. 

3. 

In the case referred to in paragraph  2,  the new  agricultural 

conversion rate shall be determined by reducing  the absolute value 

of the monetary gap in question by half. 

4. 

Paragraph 2 shall apply iteratively in respect of the same reference 

period, where appropriate starting with a reduction in the positive 

monetary gaps, on the basis of the agricultural  conversion  rates 

calculated in accordance with paragraph 3. 

5. 

The threshold shall be 5 points. However, the threshold between two 

particular currencies may be reduced in accordance with the 

procedure laid down in Article 12 in order to avoid  the. risk of 

trade distortion. 

6.  Should paragraph 1 or 2 result in an appreciable  fall in the 

agricultural  conversion rate for a currency, the application of 

those provisions shall be suspended  for the currency in question, as 

necessary and for no more than four consécutive reference periods." 

(7) 

In Article  5(2), the words  "Without account being taken of the 

correcting  factor" are deleted. 

61 

(8) 

The second subparagraph of Article 6(1) is deleted and the  following 

paragraph is inserted: 

"2a. For amounts  fixed in advance in ecus and amounts established  in ecus 

under an invitation to tender, the agricultural  conversion rate may 

be fixed in advance. 

In that case, the agricultural conversion rate shall be that in 

force, respectively, on the date on which it was fixed in advance or 

.the closing date for the submission of tenders. However, that  rate 

shall be adjusted where it diverges by more than 4% from the 

agricultural conversion rate which would have applied had the rate 

not been fixed in advance. 

( The term of validity of agricultural conversion rates fixed  in 

advance shall be equal to that for the advance fixing of the amount 

concerned or that of the award." 

(9) 

In Article  7, the last paragraph is deleted and the first paragraph 

is replaced by the following: 

"Should there be an appreciable fall in the agricultural  conversion 

rate applicable to an amount of a structural or  environmental 

nature, the aid or amounts concerned shall be increased  in ecus in 

accordance with the procedure laid down in Article 12." 

(10) 

Article  8 is replaced by the following: 

"1. 

Member States may grant farmers compensatory aid for three 

years where: 

(a) 

the average agricultural  conversion rate over the 

last 12 months falls appreciably against the average 

agricultural conversion rate over the previous  12 

months, or 

yo 

(b) 

where the agricultural conversion rate applicable 

to: 

flat-rate aid calculated per hectare or per 

livestock unit, or 

a compensatory premium per sheep or goat 

falls by an appreciable amount. 

Each successive annual instalment shall be reduced, in relation to the 

previous instalment, by at least one third of the amount granted in the 

first year. 

2.  in the case referred to in paragraph 1(a): 

the periods taken into account for the granting of aid may not be 

taken into account for the granting of further aid; 

the definition of an appreciable fall in the average agricultural 

conversion rate shall be established in accordance with the 

procedure laid down in Article 12, by analogy with Article 1(f); 

the compensatory aid may not be granted in the form of an amount 

linked to production other than production during a fixed, previous 

period; it may not be granted for any specific output or be 

dependant on there being any output; 

the first annual instalment of the aid shall be determined on the 

basis of the reduction in the average farm income in the Member 

State concerned, due to the reduction in the agricultural conversion 

rate ; 

n/ 

where the average rate which triggered the granting of aid is, for 

twelve consecutive months, below the average agricultural conversion 

rate applied subsequently the annual instalments of aid beginning 

after the twelve months in question  shall be cancelled or reduced 

in accordance with the procedure laid down in Article 12 ; 

the Council shall, acting by a qualified majority on a proposal from 

the Commission and subject to the attainment of minimum limits, 

establish the maximum amounts which can be granted for each 

instalment of aid. 

3.  In the case referred to in paragraph 1(b): 

the aid shall be granted to farmers affected by the 

reduction of the amounts in question; 

the first annual instalment of aid shall be determined so as 

to neutralize the reduction in the amounts in question in 

national currency occasioned by the fall in the agricultural 

conversion rate; 

where the rate which triggered the granting of aid is below 

that applied subsequently to the amounts in question the 

annual instalments of aid beginning after the date on which 

the new rate is applied  shall be cancelled or reduced in 

accordance with the procedure laid down in Article 12 ; 

the Commission, in accordance with the procedure laid down 

in Article 12, shall establish the maximum amounts which can 

be granted for each instalment of aid. 

4.  The Community contribution to the financing of the compensatory aid 

shall amount to: 

72 

75% of the aid actually granted to farmers in regions 

covered by Objective 1 as referred to in Article 1 of 

Regulation  (EEC) No 2052/88, 

50% of the amounts actually granted in other cases. 

For the purposes of the financing of the common agricultural policy, 

this contribution shall be deemed to be part of intervention 

intended to stabilize the agricultural markets." 

(11) 

Article 9 is replaced by the following: 

"In the case referred to in Article 4(6), the Commission shall 

decide in accordance with the procedure laid down in Article 11(1) 

which national measures to support certain markets or direct 

national compensation may be authorized for a period of not more 

than one year in order to prevent significant falls in farmers' 

incomes for agrimonetary reasons." 

(12) 

Article 13(2) is replaced by the following: 

"2.  Prices and amounts in ecus whose value in national currency is 

subject on 31 December 1994 to the correcting factor 1,207509 shall 

be multiplied by that correcting factor on the first application, 

from 1 January 1995, of an agricultural conversion rate established 

in accordance with Article 3(1) and Article 4." 

Article 2 

This Regulation shall enter into force on 1 January 1995. 

This Regulation shall be binding in its entirety and directly applicable in 

all Member States. 

Done at Brussels, 

For the Council 

"?"> 

Financial  Statement 

(MS/94/FF/001) 

Date 

15.11.1994 

1. BUDGET  HEADING  : All  budget  headings  covered 

by the EAGGF  Guarantee  Section 
(B1-1, B1-2, B1-3, B1-4, B1-5)  ? 

APPROPRIATIONS: ECU 36 994 m  (PDB  1995) 

2. TITLE : Proposal  for a Council  Regulation  amanding  Regulation  (EEC) No 3813/92 on  the unit  of account  and 
the conversion  rates  to be applied  for  the purposes of  the common  agricultural  policy 

3. LEGAL  BASIS :  Articles  42 and 43 of  the Treaty 

4. AIMS : Pursuant  to Article  13(2) of Council  Regulation  (EEC) No 3813/92, to make appropriate proposals 
on  the agrimonetary  system  from  1 January  1995, in particular  as regards  the abandonment  of the 
switch-over  mechanism 

5. FINANCIAL  IMPLICATIONS 

5.0  EXPENDITURE 

- CHARGED  TO THE  EC BUDGET 
(REFUNDS/INTERVENT IONS) 

5.1  REVENUE 

- OWN  RESOURCES  OF  THE EC 
(LEVIES/CUSTOMS  DUTIES) 

5.0.1  ESTIMATED  EXPENDITURE 
5.1.1  ESTIMATED  REVENUE 

5.2  METHOD  OF  CALCULATION 

PERIOD  OF  12 MONTHS  CURRENT  FINANCIAL  YEAR 

(1995) 

FOLLOWING  FINANCIAL  YEAR 

(1996) 

(1) 

(1) 

1997 

1998 

(1) 

(1) 

1999 

(1) 

2000 

(1) 

See "Report  to the Council  of  the European Union  on the agrimonetary  system  for  the single market" 

6.0  CAN  THE  PROJECT  BE  FINANCED  FROM APPROPRIATIONS  ENTERED  IN THE RELEVANT  CHAPTER  OF THE CURRENT  BUDGET? 

6.1  CAN  THE  PROJECT  BE  FINANCED  BY TRANSFER  BETWEEN  CHAPTERS OF  THE CURRENT  BUDGET ? 

6.2  WILL A SUPPLEMENTARY  BUDGET  BE NECESSARY ? 

6.3 WILL  FUTURE  BUDGET  APPROPRIATIONS  BE NECESSARY ? 

COMMENTS : 
(1)  At  present it is  impossible  to calculate  the financial  impact  of  this proposal, since  it depends on 

future  currency  developments. 
However, Annex 8 to the "Report  to the Council  of the European Union on the agrimonetary  system  for the 
single market",  which  retroactively  compares  the mechanisms proposed  with  the mechanisms  actually 
applied  over  the period  1 January  1993 to 30 June 1994, points  to a saving  between  ECU 72 and  168 
million. 

~X. 

ISSN 025+1475 

COM(94) 498 final 

DOCUMENTS 

EN 

03 

Catalogue number : CB-CO-94-545-EN-C 

ISBN 92-77-82428-X 

Office for Official Publications of the European Communities 

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