Proposal for a COUNCIL REGULATION (EC) regulating compensation for appreciable reductions in the agricultural conversion rates before 1 July 1996
Date: 1995-12-05
Institutions: European Commission
Subjects: agri-monetary policy, aid to agriculture, representative rate, terms for aid

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

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Brussels,  05.12 1995 
COM(«)5X>37  filial 

Proposal  for  a 

COUNCIL  REGULATION  (EC) 

regulating  compensation  for  appreciable  reductions  in the 
agricultural  conversion  rates before  1 July  1996 

(presented  by the  Commission) 

EXPLANATORY  MEMORANDUM 

Regulation  (EC) No  1527/95 lays down, for  certain currencies and until  1 January  1996, 
the  measures  to  be  adopted  in  the  event  of  appreciable  revaluations,  in  particular  to 
prevent the application  of Article 7 of Regulation (EEC) No 3813//92 running counter to 
compliance  with  the  obligations  deriving  from  the  GATT  agreement  and  budgetary 
discipline. The fundamental  reasons behind the adoption of Regulation (EC) No  1527/95 
remain  valid  and  probably  will  do  so for  several  months to come. 

Because of their  rise  in  value, the  Finnish  markka  and  the  Swedish  krona  have recently 
been  at  risk  of  an  appreciable  revaluation  which  could  occur  after  1 January  1996.  In 
accordance with Article  1(e) of Regulation (EEC) No 3813/92, any fall in the agricultural 
conversion rate for these currencies resulting from the halving of a monetary gap of  more 
than  5  points  should  be  regarded  as  appreciable  because  it  would  be  greater  than  the 
effects  of  previous devaluations. 

In order  to  afford  the  Finnish  markka  and  the  Swedish  krona the  same treatment  as the 
other  currencies which  found  themselves  in similar  situations in  1995, it is necessary  to 
take  measures  similar  to  those  in  Regulation  (EC)  No  1527/95. The  overall  amount  of 
compensation  which  Finland  or  Sweden  can  grant  will  be  determined  according  to  the 
same criteria  as those  previously  used. 

The measures to be taken  will of necessity be at Community level, because this is an area 
in which the Community  has exclusive competence.  They pursue the general objective of 
uniform  application  of the common  agricultural  policy  and adapt provisions already  laid 
down  by the Council  to take account  of  the particular  situation  arising. 

PROPOSAL  FOR 
COUNCIL  REGULATION  (EC)  No  ..../95 
of 
regulating  compensation  for  appreciable  reductions  in  the  agricultural 
conversion  rates  before  1 July  1996 

THE  COUNCIL  OF  THE  EUROPEAN  UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community, 

Having  regard  to  the  proposal  from  the  Commission, 

Having  regard  to  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  policy1,  as  last  amended  by  Regulation  (EC)  No  150/952,  and  in  particular 

Article  9  thereof, 

Whereas  Council  Regulation  (EC)  No  1527/95  of  29  June  1995  regulating 

compensation  for  reductions  in  the  agricultural  conversion  rates  of  certain  national 

currencies3  lays  down  special  rules  applicable  between  23  June  1995  and  1 January 

1996  to  currencies  which  experience  during  that  period  an  appreciable  reduction  in 

ihcJL  ^ L u l l m al  'wOnversion  rate;  whci'eas  the  risk  of  an  apprceiahl:  redaction  in  the 

agrlwu'lLua! ecveisioii  rates  has  arisen  in  the  case  of  the  Hiiiiish  n;:.:hh::  :^.t  the 

Swedish  krona  since  monetary  gaps  of  more  than  5%  have  occurred  for  those 

currencies;  whereas  this  situation  could  lead  to  an  appreciable  reduction  in  the 

agricultural  conversion  rates  after  the  period  referred  to  in  Regulation  (EC)  No 

1527/95; 

Whereas  Articled  of  Regulation  (EEC)  No  3813/92  provides  for  the  Council  to  take 

all  necessary  measures  in  the  event  of  an  appreciable  revaluation,  which,  primarily  to 

1 
2 
3 

O J N o L 3 8 7,  31.12.1992,  p. 1. 
O J N o L 2 2 , 3 1.  1.1995,  p. 1 
O J N oL  148,30.  6.1995,  p.  1. 

comply  with  obligations  under  the  GATT  agreement  and  budgetary  discipline,  may 

involve  derogations  from  the provisions  of  the  said  Regulation  concerning  aid  and the 

amount  by which  the  monetary  gaps are  dismantled,  without,  however,  resulting  in the 

threshold  being  extended;  whereas the  measures  provided  for  in Articles  7 and  8 of the 

said  Regulation  cannot  be applied  as they  stand;  whereas  it is necessary  to take  steps 

at  Community  level  to prevent  distortions  of  monetary  origin  affecting  the 

implementation  of  the  common  agricultural  policy; 

Whereas  on the basis of  the  information  available  it  is impossible  to know what the 

situation  will  be after  30 June  1996; whereas  application  of the rules  laid  down in 

Regulation  (EC) No  1527/95 would  be justified  in  similar  cases up to that time; 

whereas the  amounts of  the aid  provided  for  in  Regulation  (EC) No  1527/95 must be 

determined  using  the criteria  employed  when  that  Regulation  was adopted,  and in 

particular  by  reference  to the  most  recent  data available; whereas  in order  to reflect  the 

most  recent  data available  the amount  of  the aid  must  be fixed  for  those  Member 

States,  such  as Finland  and  Sweden  at present,  for  which  there  is a risk of an 

appreciable  reduction  in the agricultural  conversion  rate, 

HAS ADOPTED THIS REGULATION: 

Article I 

This  Regulation  shall  apply  in the event  of  significant  reductions in agricultural 

conversion  rates  in accordance  with  Article 4 of  Regulation  (EEC) No  3813/92  before 

30 June  1996. 

i 

Article 2 

1. 

Provided  an  amount  is fixed for  the purpose  in paragraph  2, in the event  of a 

reduction  in an  agricultural  conversion  rate  as referred  to  in Article  1, the 

Member  State  affected  may  make compensatory  payments to farmers  in three 

successive  tranches  lasting  twelve  months each,  starting  with  the month 

following  the  relevant  reduction  in the agricultural  conversion  rate. These 

compensatory  payments shall  not  take  the  form  of aid  linked  to  production, 

other  than  production  during  a stipulated  period  prior  to introduction  of the 

compensation  scheme; they  shall  not  favour  any  particular  type  of  production 

or be  dependent  on production  subsequent  to the period  stipulated. 

2. 

In the case of  Sweden  the overall  amount  of compensation  allocated  for  the 

first  12-month  tranche  may  not exceed  ECU  10,8 million  multiplied  by the  fall 

in the  agricultural  conversion  rate referred  to  in Article  1 expressed  as a 

percentage  and  reduced,  in the case of the first appreciable  reduction,  by  1,564 

points  if the reduction  occurs before  13 January  1996 or by  1,043 points  if it 

occurs  thereafter. 

In the case of  Finland  the overall  amount  of compensation  allocated  for  the 

first  12-month tranche  may  not exceed  ECU  14,6 million  multiplied  by the  fall 

in the agricultural  conversion  rate referred  to  in Article  1 expressed  as a 

percentage  and  reduced,  in the case of the first appreciable  reduction,  by  1,119 

points  if the  reduction  occurs  before  21 January  1996 or by  0,746  points  if it 

occurs  thereafter. 

The  amounts  paid  out  under  the  second  and  third  tranches  shall  not  exceed  the 

amount  paid  out  in the previous tranche  in each case, less at  least a third  of the 

amount  paid  out  in the first tranche. 

3. 

The  Community  contribution  to financing these compensatory  payments shall 

be  50 % of  the amounts  that  may  be paid  out. 

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

contribution  shall  be considered  to  form  part  of the assistance  designed  to 

regularize  agricultural  markets. The  Member  State  may  withdraw  from  national 

participation  in financing the aid. 

4. 

The  Commission  shall,  in accordance  with  the procedure  laid  down  in Article 

12 of  Regulation  (EEC) No  3813/92, adopt  detailed  rules  for  applying  this 

Article and  in particular,  in cases where the  Member  State does not  participate 

in financing the aid,  lay down  the conditions  for  paying that  aid. 

Article 3 

1. 

In cases as referred  to  in Article  1, the agricultural  conversion  rates applicable, 

on the date of  the appreciable  reduction,  to the amounts referred  to  in Article 7 

of  Regulation  (EEC) No 3813/92  shall  remain  unchanged  until  1 January  1999. 

2. 

Articles  7 and  8 of  Regulation  (EEC)  No 3813/92 shall  not apply  to the 

reductions  in agricultural  conversion  rates referred  to  in Article  1 of this 

Regulation. 

Article 4 

Before  the end  of the third  period  during  which  the compensation  is granted, the 

Commission  shall  examine  the effects  on  agricultural  income of the reductions  in 

agricultural  conversion  rates as referred  to  in Article  1. 

Where  it  is established  that  income  losses are  likely  to continue, the  Commission  may, 

in accordance  with  the  procedure  laid  down  in  Article  12 of  Regulation  (EEC) No 

3813/92, extend  the possibility  of granting  compensation  as provided  for  in Article 2 

by a maximum  of two  additional  12-month  tranches, the maximum  amount  per  tranche 

being  equal  to that  granted  in the third  tranche. 

Article 5 

This  Regulation  shall  enter  into  force  on  the day  of  its publication  in the  Official 

Journal  of the  European  Communities. 

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

States. 

Done at  Brussels, 

For the  Council 

BUDGET  HEADING:  390 and  practically  all  EAGGF Guarantee  items 

APPROPRIATIONS:  ECU  194m 

(Item  390) 

TITLE:  Proposal  for  a Council  Regulation  regulating  compensation  for  appreciable  reductions  in the  agricultural 
conversion  rates  before  1 July  1996 

LEGAL  BASIS: Regulation  3813/92  - Article 9 

AIMS OF  PROJECT: 
Fixing  degressive  aid  financed  by the Community  budget  to  compensate  farmers  for  loss of income  as a result of 
reductions  in  agricultural  conversion  rates 

FINANCIAL  IMPLICATIONS 

PERIOD  OF 12 
MONTHS 

CURRENT 
FINANCIAL 
YEAR  (96) 

FOLLOWING 
FINANCIAL 
YEAR  (97) 

EXPENDITURE 
-  CHARGED  TO THE  EC  BUDGET 
INTERVENTION 
-  NATIONAL  ADMINISTRATION 

METHOD OF  CALCULATION: 

+  19,- Mio ECU 
p.m. 

+  8,- Mio ECU 
p.m. 

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

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

IS A SUPPLEMENTARY  BUDGET  NECESSARY? 

WILL  FUTURE  BUDGET  APPROPRIATIONS  BE  NECESSARY? 

NO 

NO 

YES 

2. 

3. 

4. 

m 

5.2. 

6.0. 

6.1. 

6.2. 

6.3. 

OBSERVATIONS: 
At present  it  is necessary  to  make  assumptions  in order  to estimate  the  proposal's  financial  impact. The  calculations  are based on 
monetary  gaps  at  20.11.1995 of  6 points  for  the  SKR  and  5 points  for  the  FMK  and  appreciable  revaluations  up to  11.1.1996 for 
the  SKR  and  up to  21.1.1996  for  the  FMK. 
The  measure  proposed  avoids  the  possible  application  of Articles  7 and  8 of  Regulation  3813/92 which  could  have  a  financial 
impact  in  1997 of  around  ECU  750m  for  EUR  15. 
Updating  the  DR  for  the  96 budget  gives expenditure  of ECU  79m  for  Sweden  and  ECU  18m  for  Finland  compared  with  the 
assumptions  in  the  96 draft  budget. 
The  DR effects  are  based  on  that  updating. 
Cost of the  measure  : 
-  Cost  for  compensatory  aid 

1997 

1996 

-  Sweden 
.  Finland 

Total  compensatory  aid 
-  DR  savings : 

-  Sweden 
-  Finland 

Total  DR 
GENERAL  TOTAL 

9  Mio  ECU 
14 Mio  ECU 
23  Mio  ECU 

- 2  Mio  ECU 
- 2  Mio  ECU 
- 4  Mio  ECU 
19  Mio  ECU 

6 Mio ECU 
9  Mio ECU 
15 Mio  ECU 

- 3 Mio ECU 
- 4 Mio  ECU 
- 7 Mio ECU 
8  Mio  ECU 

The Commission  will  make  proposals  for  mobilizing  any budget  resources necessary  for this proposal  in compliance  with the 
decision  on  budget  discipline  of  31  October  1994 and  the  Financial  Regulation. 

£ 

ISSN 0254-1475 

COM(95) 637 final 

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