Report from the Commission to the Council on the implementation of the transitional measures for the introduction of the euro in the common agricultural policy
Date: 2001-04-02
Institutions: European Commission
Subjects: EAGGF Guidance Section, agri-monetary policy, aid to agriculture, representative rate

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 02.04.2001
COM(2001) 180 final/2

CORRIGENDUM
Annule et remplace la page 4 du document
COM(2001) 180 final du 30.03.2001. L'adresse
internet change dans les 11 versions linguistiques.

REPORT FROM THE COMMISSION TO THE COUNCIL

on the implementation of the transitional measures for the introduction of the euro
in the common agricultural policy

REPORT FROM THE COMMISSION TO THE COUNCIL

on the implementation of the transitional measures for the introduction of the euro
in the common agricultural policy

TABLE OF CONTENTS

Introduction ........................................................................................................................... 3

1.

2.

3.

4.

4.1.

4.2.

4.3.

4.4.

5.

5.1.

5.2.

6.

Compensation in the event of an appreciable revaluation .......................................... 5

Compensation for reductions in the rate for direct aid ............................................... 6

Measures adopted by the Member States .................................................................. 7

Incomes.................................................................................................................. 10

Background ............................................................................................................ 10

Working hypotheses ............................................................................................... 12

General................................................................................................................... 13

Specific observations.............................................................................................. 13

Budget aspects........................................................................................................ 15

Agrimonetary compensatory aid ............................................................................. 15

Dual rate................................................................................................................. 15

Other aspects.......................................................................................................... 15

6.1.

Operative events..................................................................................................... 15

6.1.1. General................................................................................................................... 15

6.1.2. Change in the operative event for direct aid ............................................................ 17

6.2.

6.3.

Criteria applicable under Article 4(6) of Regulation (EC) No 2799/98.................... 17

Cases before the Court of Justice ............................................................................ 19

6.3.1. Case C – 100/99 ..................................................................................................... 19

6.3.2. Case C – 403/99 ..................................................................................................... 19

6.4.

Greek drachma ....................................................................................................... 19

7.

Conclusion ............................................................................................................. 19

2

INTRODUCTION

This report is submitted in accordance with Article 4 of Council Regulation (EC) No 2800/98
of 15 December 1998 on transitional measures to be applied under the common agricultural
policy with a view to the introduction of the euro1. Under that article a report on the execution
of the transitional measures is to be submitted by the Commission to the Council before
31 March 2001. In line with the Commission statement in the minutes of the Council meeting
of 15 December 19982, the report examines in particular the effect of the transitional measures
on farmers' incomes.

The transitional measures for the introduction of the euro in the common agricultural policy
are governed by Regulation (EC) No 2800/98, but also by Council Regulation No 2799/98 of
15 December 1998 establishing agrimonetary arrangements for the euro3, Commission
Regulation (EC) No 2808/98 of 22 December 1998 laying down detailed rules for the
application of the agrimonetary system for the euro in agriculture4 and Commission
Regulation (EC) No 2813/98, also of 22 December 1998, laying down detailed rules for
applying the transitional measures for the introduction of the euro to the common agricultural
policy5.

its
The report focuses first of all on the implementation of the transitional provisions,
structure mirroring that of the agrimonetary rules. A clear distinction is made between the
possible effects of the introduction of the euro on the one hand on prices and, on the other, on
direct aid. The report then deals with the measures adopted by Member States with a view to
granting various forms of agrimonetary compensation pursuant to the transitional measures.
Next to be covered are the effects of the measures on farmers' incomes and on the budget. The
following aspects are dealt with at the end of the report:

–

–

–

–

market situation criteria,

the definition of some operative events,

cases brought by Italy, and

Greece's participation in the euro from 1 January 2001.

The penultimate Commission report on the agrimonetary system for the single market6
included a detailed look at the possible economic effects of the agrimonetary arrangements, in
particular on trade and prices. It showed that, even at a time of fairly wide and long-lasting
monetary gaps7, the agrimonetary arrangements had not adversely affected markets.

A feature of the agrimonetary system for the euro is the total absence of agrimonetary
arrangements for participating currencies. For the remaining currencies the monetary gaps
referred to above are limited to the difference between two exchange rate fixings by the
European Central Bank (ECB). The difference is small: it exceeded one point in absolute
terms on only nine occasions in 1999.

1

2

3

4

5

6

7

OJ L 349, 24.12.1998, p. 8.
14.127/98 of the General Secretariat of the Council.
OJ L 349, 24.12.1998, p. 1.
OJ L 349, 24.12.1998, p. 36.
OJ L 349, 24.12.1998, p. 48.
COM(96) 636 final of 6.12.1996.
"Monetary gap" is defined in Regulation (EEC) No 3813/92 as: the percentage of the agricultural
conversion rate representing the difference between that rate and the representative market rate.

3

Since there is no evidence of any economic effect brought about by agrimonetary
arrangements when there were wide and long-lasting monetary gaps it may be concluded that
agrimonetary arrangements featuring no monetary gap whatsoever will produce no detectable
economic effect. Scrutiny of the number of animals and the areas under arable crops does not
suggest that the introduction of the euro has led to any abnormal changes.

Any change in trade patterns after the introduction of the euro would have been attributable to
non-agrimonetary factors, e.g. competitiveness, which is why this report does not cover
"trade".

The annexes to which this report refers are set out in a document available only at the
following website:

http://europa.eu.int/comm/agriculture/markets/euro/index_en.htm

4

1.

COMPENSATION IN THE EVENT OF AN APPRECIABLE REVALUATION

There is entitlement to compensatory aid where the conversion rate for the euro into national
currency units of any Member State or the exchange rate for the euro into the national
currency of any Member State at 1 January 1999 undergoes an appreciable revaluation
against the agricultural conversion rate in force on 31 December 1998 (first subparagraph of
Article 2 of Regulation (EC) No 2800/98).

Appreciable revaluation is defined as follows in (a) of Article 1 of Regulation (EC)
No 2800/98:

"a reduction in the conversion rate applicable on 1 January 1999 which is greater in absolute
value than the differences between that rate and the lowest levels of the conversion rates
applicable:

–

–

–

over the last 12 months, and

at any time more than 12 months but not more than 24 months previously, and

at any time more than 24 months but not more than 36 months previously.

Only two thirds and one third respectively of the differences covered by the second and third
indents shall be taken into account".

The Regulation also defines appreciable part: "the difference between, on the one hand, the
threshold between appreciable and non-appreciable revaluations and, on the other hand, the
conversion rate for the euro into national currency units or the exchange rate for the euro
into national currency on 1 January 1999.8 This difference is expressed as a percentage of the
said threshold".

The threshold rates and the "appreciable part" are shown, by currency, in Annex I and
Annex II respectively.

The rates applicable on 1 January 1999 can give rise to three different scenarios:

–

–

–

an increase in prices,

a non-appreciable reduction in prices,

an appreciable reduction in prices.

An increase in institutional prices resulting from the rates applicable on 1 January 1999 was
recorded in Sweden (+1.206%) and the United Kingdom (+3.226%), but it was not a lasting
one since the pound sterling and the Swedish krona rose by ten or so percentage points in
relation to the euro in 1999. The 1999 exchange rate movements for the four currencies
outside the euro are shown in Annex III.

A non-appreciable reduction in institutional prices resulting from the rates applicable on
1 January 1999 occurred in nine Member States, namely Germany, Austria, Belgium, Spain,
Greece, Ireland, Luxembourg, Netherlands and Portugal. Given that the rate applicable on

8

The exchange rate applicable on 1 January 1999 is that determined by the European Central Bank
on 4 January 1999 (see Article 9 of Regulation (EC) No 2813/98).

5

1 January 1999 was, for each of these currencies, higher than the threshold rate, no
agrimonetary compensation was payable. The reductions in prices range from 1.172% (Spain)
to 3.414% (Greece). Since eight of the nine Member States referred to above have a fixed
rate, the reduction in the rate is a lasting one. The difference in the exchange rate for the
Greek drachma in 1999 is so small in relation to the value recorded on 1 January 1999 that a
similar conclusion may be drawn.

An appreciable reduction in institutional prices as a result of the rates applicable on 1 January
1999 was recorded in the case of Denmark, Finland, France and Italy. The reduction ranges
from 1.386% (Finland) to 1.953% (France). Although the rate applicable on 1 January 1999 is
below the threshold rate, the appreciable part for each of these currencies remained below
the 2.6% neutral margin. By virtue of the margin no agrimonetary compensation was payable.

In a word,
the provisions of Regulation (EC) No 2800/98 dealing with appreciable
revaluations (Article 2) did not have to be put into effect. As a result, the new method of
funding compensatory aid (with the Community contributing 50% of the amount actually
paid) cannot be evaluated.

2.

COMPENSATION FOR REDUCTIONS IN THE RATE FOR DIRECT AID

There is entitlement to compensatory aid where the rate applicable on the day of the operative
event is lower than the rate applied previously (Article 3(1) of Regulation (EC) No 2800/98).
However, no agrimonetary compensation is granted if a rate lower than the new rate was
applicable during the 24 months immediately before the new rate took effect (Article 5(5) of
Regulation (EC) No 2799/98).

The direct aids covered by the agrimonetary legislation are listed in Annex IV. The dates of
the operative events concerned are as follows:

–

–

–

–

–

1 January 1999 in the case of premiums in the beef/veal sector and structural or
environmental measures,

3 January 1999 for premiums in the sheepmeat sector,

1 July 1999 in the case of aid for arable crops, grain legumes and hops,

1 August 1999 for aid for flax and hemp and

1 September 1999 for aid for rice and dried grapes.

The Member States for which agrimonetary compensation was set for measures with an
operative event on 1 or 3 January 1999 are: Belgium, Denmark, Finland, France, Ireland,
Italy, Luxembourg and the United Kingdom. The reduction ranges from 1.224% (BLEU) to
9.091% (United Kingdom).

The Member States for which agrimonetary compensation was set for measures with an
operative event on 1 July 1999 are those listed above, plus Sweden, which was added to the
list in the light of the revaluation of the Swedish krona from 1 January 1999 onwards. The
reduction ranges from 1.224% (BLEU) to 16.180% (United Kingdom).

The Member States for which agrimonetary compensation was set for measures with an
operative event on 1 August or 1 September 1999 are those referred to in the preceding
paragraph, plus Spain, which was added to the list because the threshold rate for the peseta is

6

not the same as that for other operative events. The reduction ranges from 1.172% (Spain) to
14.930% (United Kingdom).

Detailed figures for the percentage reductions are shown in Annex II.

The compensatory aids paid to producers were set in accordance with point 4 of the Annex to
Regulation (EC) No 2799/98. They are thus equal to the expenditure recorded during the
calendar year preceding the operative event, multiplied by the above-mentioned percentage
reduction.

While recording the expenditure did not pose any major problems, flat rates had to be used for
measures under Council Regulation (EC) No 950/97 of 20 May 1997 on improving the
efficiency of agricultural structures9. Member States' statements of expenditure on structural
measures in areas under Objectives 1 and 6 feature aggregate figures for each Objective: there
is no breakdown by measure. The share of expenditure in the said areas which comes under
Regulation (EC) No 950/97 is an estimate. The detailed calculations of 1998 expenditure in
respect of Regulation (EC) No 950/97 are shown in Annex V.

The maximum amounts of compensatory aid resulting from the rates applicable on 1 and
3 January, 1 July, 1 August and 1 September 1999 were set by Commission Regulations (EC)
No 755/199910, No 1639/199911, No 2200/199912 and No 2206/199913. For an overview of the
maximum amounts please see Annex VI.

3.

MEASURES ADOPTED BY THE MEMBER STATES

Member States must submit the request for authorisation to grant transitional aid before the
end of the third month following the appreciable revaluation or the reduction in direct aid.
The Commission evaluates the requests in accordance with the procedure laid down
in Article 88(3) of the Treaty and the agrimonetary provisions. The Commission has two
months to deliver an opinion on the requests submitted by Member States (the time limit may
be extended if the request is incomplete or incorrect).

The Commission has to examine the requests against four major criteria, namely:

–

–

–

–

the amount proposed by the Member State may not exceed the maximum allowed,

the compensatory aid must be in the form of supplementary payments to those
receiving direct aid,

Member States may not impose restrictions on the use of the aid,

the granting of the aid in a given sector may not affect competition to an extent
contrary to the common interest.

The Commission received and approved 22 proposals to grant transitional agrimonetary aid in
1999 (and the beginning of 2000). Although the quality and degree of detail varied
appreciably, all the Member States concerned (Belgium, Denmark, Spain, Finland, France,

9

10

11

12

13

OJ L 142, 2.6.1997, p. 1.
OJ L 98, 13.4.1999, p. 8.
OJ L 194, 27.7.1999, p. 33.
OJ L 268, 16.10.1999, p. 8.
OJ L 269, 19.10.1999, p. 3 + Corrigendum (OJ L 275, 26.10.1999, p. 34).

7

Ireland, Italy, Luxembourg, Sweden and the United Kingdom) submitted their proposals
within the time limits applicable.

Some Member States submitted a separate request for each type of measure (e.g. seven
proposals submitted by the United Kingdom), whereas others (e.g. France and Italy)
submitted a single plan covering every type of aid.

In most cases the plans submitted to the Commission raised no specific problems as regards
that Member States must award the aid in the form of
Community scrutiny. The fact
supplementary payments to recipients of direct aid under the CAP leaves them little room for
manoeuvre in deciding how the aid should be allocated. Nevertheless, two problems of a
general nature arose in the context of the scrutiny of the plans: aggregation and the treatment
of structural and environmental aid.

On aggregation, some Member States asked the Commission to verify at sector level and not
in respect of each individual scheme whether the ceiling on allocations had been complied
with. This would have meant the Commission verifying, for instance, whether the total
amount of aid to the beef/veal sector exceeded the ceiling, instead of carrying out separate
checks for the premium for suckler cows, the premium for suckler cows under Objective 1,
the premium for male bovine animals, the extensification premium and the deseasonalisation
premium. Given that these premiums are intended for different types of producers located in
different regions, and in order to safeguard the principle that agrimonetary aid must be neutral
in terms of competition,
the Commission generally rejected aggregation. Exceptionally,
however, it agreed to aggregate the 12 aids payable under the arable crops scheme, in order in
particular to cancel out the effects of the increase - from 5% in 1998 to 10% in 1999 - in the
rate of compulsory set-aside.

early

retirement

[(Regulation

(EEC) No 2079/92)14]

In the case of structural aid [compensatory aid and start-up aid for young farmers (Regulation
(EC) No 950/97)],
and
agri-environmental aid [(Regulation (EEC) No 2078/92)15], the difficulties (at Commission
and Member State level) consisted in identifying the measures for which transitional
agrimonetary aid was payable. Structural and environmental measures are approved by the
Commission on the basis of programmes (in some cases at local or regional level) containing
a significant set of schemes providing for the granting of aid on a wide range of terms.
Moreover, only schemes under which aid is set at the level of the Community ceiling are
eligible (Article 10(2) of Regulation No 2808/98). Since, in most of the Member States
concerned, structural and environmental aids are set at levels below the Community ceiling, a
sizeable proportion of the funds earmarked (EUR 96.29 million - calculated on the basis of
the total expenditure on the measure) could not be used.

The table in Annex VI shows that the maximum amount (first, second and third tranches
combined) available to the Member States concerned by transitional agrimonetary aid was
EUR 1 620.3 million, including a maximum Community contribution of EUR 1 215.2 million
and a maximum national contribution of EUR 405.1 million.

The Table in Annex VII shows that the total amount of transitional agrimonetary aid under
the 22 plans
it
balance
(EUR 1 125.9 million)

approved by the Commission was EUR 1 202.1 million, most of

contribution. The

corresponding

the EAGGF

to

14

15

OJ L 215, 30.7.1992, p. 91.
OJ L 215, 30.7.1992, p. 85.

8

(EUR 76.2 million) corresponded to the national contribution in respect of the second and
third tranches. In this connection, it should be pointed out that when plans were submitted,
only Italy and Luxembourg stated that they intended to pay the optional national contribution
in respect of the second and third tranches. Ireland decided to pay the national contribution by
amending the plans after they had been approved.

The difference between the maximum amounts allowed by the Commission and the amounts
actually granted is attributable mainly to the fact that most of the Member States decided not
to allocate national funds. Underutilisation of the funds available under structural and
agri-environmental measures also contributed - albeit to a lesser extent - to the difference
since, under Regulation (EC) No 2808/98 (second subparagraph of Article 10(2)), no
compensation may be granted if the amounts of a structural character actually awarded are
lower than the ceilings applicable under the legislation concerned.

Belgium

The Commission approved two Belgian plans: one for aids whose operative event fell on 1 or
3 January 1999 (premiums in the beef/veal and sheepmeat sectors) and one for aids whose
operative event fell on 1 July or 1 August 1999 (arable crops, hops, flax and hemp). The total
Community budget allocation to the Belgian programmes was EUR 5.06 million. Belgium did
not submit any plans in respect of structural/environmental measures since the aids concerned
are not awarded at the level of the Community ceiling.

Denmark

Denmark submitted two plans, for a total Community contribution of EUR 41.15 million: one
concerning aids whose operative event fell on 1 or 3 January 1999 (premiums in the beef/veal
and sheepmeat sectors, early retirement, afforestation and agri-environmental measures) and
one concerning aids whose operative event fell on 1 July 1999 (arable crops).

Spain

In the case of Spain, only aids with an operative event falling on 1 August 1999 (flax and
hemp) or 1 September 1999 (dried grapes and hectare aid for rice) are eligible. Spain's plan
provides for compensation for the four measures, for a total of EUR 1.04 million.

Finland

The Commission received three plans from the Finnish authorities: one concerning aids with
an operative event falling on 1 or 3 January 1999 (only premiums in the beef/veal and
sheepmeat sectors are eligible), a plan dealing with aids with an operative event falling on
1 July 1999 (arable crops) and a plan concerning aids with an operative event falling on
1 August 1999 (flax). The total amount allocated by the Community is EUR 5.55 million.
Finland did not submit a plan for structural/environmental measures since such aids are not
awarded at the level of the Community ceiling.

France

France submitted a single plan covering every sector, the total amount chargeable to the
Community budget being EUR 182.65 million. The plan covers all aid under the CAP whose
operative event fell on 1 or 3 January 1999 (livestock premiums, agri-environment, early
retirement, young farmers, grubbing-up of vines, and nuts), 1 July 1999 (arable crops and
hops), 1 August 1999 (flax and hemp) or 1 September 1999 (rice).

9

Ireland

Ireland submitted a plan for aids with an operative event falling on 1 or 3 January 1999. The
plan was, for administrative reasons, divided into two parts: one dealing with the approval of
aid in relation to premiums in the beef/veal and sheepmeat sectors and one covering the
approval of aid in respect of early retirement and agri-environmental measures (afforestation
is not eligible in Ireland). Ireland subsequently submitted a plan for aids with an operative
event falling on 1 July 1999 (arable crops). The total Community contribution to Ireland
is EUR 75.92 million. Ireland later decided to grant the national contribution in respect of the
second and third tranches, bringing the total amount of aid to EUR 101.2 million.

Italy

The plan submitted by Italy is similar to France's except that it does not provide for aid for
structural or environmental measures (except start-up aid for young farmers), which are not
eligible in Italy. The total amount provided for in Italy's plan is EUR 203.18 million:
EUR 152.39 million chargeable to the Community budget and EUR 50.8 million in the form
of a central government contribution.

Luxembourg

and

beef/veal

Luxembourg submitted a single plan covering every scheme. It provides for compensation in
the
of
and
structural/environmental measures, only the grubbing-up of vines is eligible. The total amount
provided for in the plan is EUR 368 800 (EUR 276 600 contributed by the Community
and EUR 92 200 contributed by central government).

sheepmeat

sectors

crops.

arable

case

the

for

In

Sweden

Sweden submitted a single proposal, for aids with an operative event falling on 1 July 1999
(arable crops), the only type of measure qualifying for transitional agrimonetary aid. The
amount chargeable to the Community budget is EUR 63.72 million.

United Kingdom

Unlike most of the Member States the United Kingdom submitted a separate proposal for
each type of measure. The Commission thus received from the United Kingdom seven
requests to grant agrimonetary aid. The total EAGGF contribution is EUR 598.11 million and
no national contribution is planned.

In the case of aid with an operative event falling on 1 or 3 January 1999 the United Kingdom
submitted two plans: one for the sheepmeat sector and one for all the measures in the
beef/veal sector. The only structural/environmental measures eligible for compensation are
afforestation and agri-environmental measures. The United Kingdom has submitted a plan
covering the bulk of the measures, plus a supplement dealing with part of the afforestation
measures.

The United Kingdom also transmitted separately a total of three dossiers: two concerning
agrimonetary compensation for aid with an operative event falling on 1 July 1999 (arable
crops and hops) and one concerning aid with an operative event falling on 1 August 1999
(flax and hemp).

10

4.

INCOMES

4.1.

Background

The most recent statistics for farm incomes are for 1999. The effects of the agrimonetary aid
on 1999 incomes are very difficult to determine since they depend in particular on the actual
incidence of the conversion rates on market prices, the operative events, the time allowed for
the settlement of purchases and sales and the payment of aid to farmers. Some of the effects
felt in 1999 were due to changes in the agricultural conversion rates in 1998, while the
consequences of some changes in the 1999 conversion rates will not be felt until 2000 or even
later.

Since it was introduced, towards the end of the 1960s, the agrimonetary system has been
closely linked to farm incomes. With time, the Council itself has introduced criteria for
evaluating the sensitivity of farm incomes to agrimonetary fluctuations.

In 1992 the Council introduced the concept of appreciable reduction in the agricultural
conversion rate for market measures16, by virtue of which a revaluation must exceed a certain
threshold before the compensation mechanism can be activated. This was supplemented, in
Council Regulation (EC) No 724/9717 determining measures and compensation relating to
appreciable revaluations that affect farm incomes, by the concept of a six-month observation
period,
is to be reduced or cancelled altogether
depending on changes in the agricultural conversion rate in the six months following an
appreciable revaluation.

the agrimonetary aid,

i.e. that

if any,

Council Regulation (EC) No 942/98,18 which amends the above-mentioned Regulation,
introduced the "2.6% neutral margin" criterion, i.e. that compensation resulting from an
appreciable revaluation is limited to the percentage revaluation exceeding a 2.6% appreciable
revaluation. The Council Regulation also introduced a market situation criterion whereby a
tranche of agrimonetary compensatory aid may be reduced or cancelled altogether in the light
of changes in market prices.

In 1995, in the case of agrimonetary compensation for reductions in direct aid brought about
by changes in the agricultural conversion rate,
introduced the "24-month
concept"19,
that no agrimonetary compensation is payable if a lower agricultural
conversion rate than the new rate was applied to the aids in question in the 24 months before
the new rate took effect.

the Council

i.e.

These evaluation criteria are preserved in the agrimonetary arrangements for the euro and the
transitional measures for the introduction of the euro in the common agricultural policy. They
must therefore be duly taken into account by the Commission when evaluating the impact of
the introduction of the euro on farm incomes.

16

17

18

19

Regulation (EEC) No 3813/92 (OJ L 387, 31.12.1992, p. 1).
OJ L 108, 25.4.1997, p. 9.
OJ L 132, 6.5.1998, p. 1.
Regulation (EC) No 150/95 (OJ L 22, 31.1.1995, p. 1).

11

4.2.

Working hypotheses

As in the case of the Commission report to the Council and the European Parliament on the
agrimonetary system for the single market20, a number of approximations and hypotheses
were needed in order to assess the scale of the effects the introduction of the euro on
1 January 1999 had on incomes over a 12-month period:

–

–

–

–

–

1999 incomes from, or linked to, the marketing of products are deemed to reflect
incomes from the 1999 value of products at producer price level (supplied by
Eurostat),

the incomes taken into consideration in the case of fruit and vegetables, starch
potatoes, wine, olive oil, tobacco, products processed from citrus fruit, and seeds are
those derived from the quantities to which a minimum price or aid per tonne of
products marketed is applicable,

the direct aids to producers match those granted in 1999. The agrimonetary
compensation matches the maximum amount of the first tranche, as published in the
various regulations, except in the case of the agrimonetary compensation in the field
of structural measures, the compensation for which is that specified in the national
plans. In addition, account is taken of the agrimonetary compensation resulting from
the appreciable revaluation of the pound sterling which occurred in 1999,

the intermediate inputs which are deemed affected are equal to half the value of the
feed in the Member States where the rate applicable in 1999 is regarded as having
had an impact on the price of cereals (B, L, D, EL, P, FIN, NL, IRL, A, E, S,
and UK),

the conversion rates which are deemed to apply to the various income components
taken into account are, for Member States participating in the euro, the fixed rates
and, for the non-participating Member States, the weighted average of the 1999
exchange rates (market measures) and the rate applicable on the date of the operative
event (direct aid).

On the basis of this notional model which gathers together over a 12-month period all the
effects of the rates in 1999, the annual effect of the agrimonetary system in 1999 was
measured by multiplying the said components by the gap between the rates applied in 1999
and the threshold rates recorded at the end of 1998. The approach chosen thus consisted in
making a comparison with the threshold rate in order to preserve the consistency with the
agrimonetary system as set out in the agrimonetary system for the euro.

This is why the calculation of the impact of the introduction of the euro does not take account,
in Article 4(6) of Regulation (EC)
either, of the sectors for which the criteria set out
No 2799/98 are found to have been fulfilled, namely the market situation (change in market
prices in a Member State where there has been an appreciable revaluation which is equal to or
more favourable than the average change in market prices in Member States where there has
not been an appreciable revaluation). Nor is account taken of the sectors for which it is found
that there is no link between the changes in market prices and the changes in intervention
prices and, by the same token, the changes in the conversion rate. In the milk sector, account

20

COM(1998) 20 def. of 22.1.1998.

12

was taken of the most representative prices: either the price of milk or the prices of
intervention products.

Although partly theoretical in nature, this model can measure the impact of the euro on
incomes and provides separate figures for each Member State. The detailed calculations are
set out in Annex VIII.

4.3.

General

results

The agrimonetary effect
in an increase in gross added value (GAV) of
EUR 311.7 million, i.e. 0.207%. This positive impact in essence applies to every Member
State bar three (Italy, Finland and France), in which a reduction - negligible in relation to the
GAV - was recorded. Given the limitations of the model chosen and the margin of error for
the data used, the introduction of the euro in 1999 can be regarded as having had no
significant adverse effects on EU farm incomes. This view is backed up by the latest Eurostat
figures, which suggest that farm incomes in the Community rose by 0.7% in 1999.

4.4.

Specific observations

In the light of the hypotheses described above, the following conclusions may be drawn in
respect of the various Member States:

Belgium

Together with compensation for direct aid, the non-appreciable reduction in the conversion
rate did not
in fact went up slightly,
by EUR 1.8 million (0.064%).

in a reduction in GAV. The latter

result

Denmark

The appreciable reduction in the exchange rate, combined with compensation for direct aid,
in a reduction in GAV. On the contrary, GAV increased slightly, by
did not result
EUR 0.7 million, i.e. by a mere 0.021%. In the light of the market situation recorded in 1999
the cereals, beef/veal and milk products sectors were not taken into account.

Germany

While the non-appreciable reduction in the conversion rate, coupled with a slight increase in
the rate applicable to direct aid, resulted in a slight increase (EUR 22.5 million) in GAV, this
amounts to only 0.127%.

Greece

In spite of a non-appreciable reduction in the exchange rate and a reduction in the conversion
rate applicable to direct aid, a considerable increase in GAV has been recorded:
EUR 169.8 million, i.e. 1.981%.

France

An uncompensated appreciable reduction in the conversion rate has,
together with
compensation for direct aid, resulted in a reduction of EUR 7.8 million (0.025%) in GAV.
The beef/veal, cereals and milk products sectors were not taken into account.

13

Spain

In spite of a non-appreciable reduction in the conversion rate, a slight reduction in most of the
direct aids and compensation for certain direct aids, GAV increased slightly, by
EUR 19.3 million (0.085%).

Coupled with compensation for direct aid, a non-appreciable reduction in the conversion rate
has resulted in a sizeable increase in GAV: EUR 105.8 million (close to 3.506%).

Ireland

Italy

The uncompensated appreciable reduction which occurred on 1 January 1999, plus
compensation for direct aid,
reduction in GAV:
-EUR 14.4 million (0.048%). The market situation made it possible to exclude the beef/veal,
milk products, cereals and olive oil sectors.

resulted in only a very slight

Luxembourg

The non-appreciable reduction in the conversion rate, combined with compensation for direct
aid, resulted in an increase of EUR 0.2 million (0.11%) in GAV.

A non-appreciable revaluation, combined with an increase in direct aid expressed in national
currency, resulted in a slight increase of EUR 12.8 million (0.15%) in GAV.

Netherlands

As a result of a non-appreciable revaluation, combined with an increase in direct aid
expressed in national currency, GAV increased slightly, by EUR 2.3 million (0.071%).

Austria

Portugal

In spite of a non-appreciable reduction in the conversion rate and a slight reduction in direct
aid, GAV increased slightly, by EUR 5.4 million (0.152%).

Finland

The uncompensated appreciable reduction in the Finnish markka,
combined with
compensation for direct aid, resulted in a slight reduction in GAV: EUR 2.9 million (0.129%).
The incomes were evaluated without taking the butter sector into account.

Sweden

The rise in the Swedish krona recorded in 1999 and the compensation for direct aid for arable
crops resulted in an increase of EUR 8.3 million (0.452%) in GAV. The market situation, in
particular for milk products and beef/veal, was taken into account.

United Kingdom

The pound sterling's compensated appreciable revaluation in 1999 and the compensations for
direct aid meant a slight reduction (EUR 10.9 million) in GAV, account being taken of the

14

market situation for beef/veal and skimmed milk powder. After factoring in the first tranche
the agrimonetary compensation linked to this appreciable revaluation in 1999
of
(EUR 55.21 million), the result is an increase of EUR 43.3 million (0.382%) in GAV.

5.

BUDGET ASPECTS

The introduction of the euro is expected to lead to major changes as regards the EU budget.
They centre on two aspects: agrimonetary compensatory aid and the effect of the dual rate.

5.1.

Agrimonetary compensatory aid

As shown in Annex VI the total cost of agrimonetary compensation in connection with the
introduction of the euro in 1999 is EUR 810.158 million for the first tranche. Leaving aside
any future changes in the maximum amounts for the second and third tranches for Denmark,
Sweden and the United Kingdom, this would leave a total of EUR 405.09 million chargeable
and
to the EU budget: EUR 270.06 million in respect of
EUR 135.03 million in respect of the third.

second tranche

the

Without prejudice to any new agrimonetary compensation resulting from changes in the
exchange rates of Member States not participating in the single currency, the amounts shown
above are no longer expected to feature in the EU budget.

5.2.

Dual rate

Since, for measures whose operative event occurs after 31 November 1998, the dual rate no
longer applies to currencies participating in the euro, the costs resulting from the dual rate are
automatically reduced. As shown in Annex IX the estimated cost to the budget is down from
ECU 780 million in 1998 to EUR 630 million in 1999 and EUR 225 million in 2000. The cost
of the dual rate in the 2001 budget year is put at EUR 77 million.

Put briefly, the introduction of the euro means considerable budget savings. The residual cost
depends on the exchange rates for the non-participating currencies.

6.

OTHER ASPECTS

6.1.

Operative events

6.1.1. General

The introduction of the euro on 1 January 1999 led on the one hand to major simplification
and on the other to a major change - in particular in non-participating Member States - for
farmers,
traders and the various national and European administrations as regards the
conversion rate applicable to a given transaction or measure.

the question as to which
A major simplification for the participating Member States:
conversion rate applies to a given measure simply no longer arises; except for measures with
an operative event occurring before 1 January 1999, it
is invariably the conversion rate
irrevocably fixed between the euro and the currencies of those Member States.

A major change for the non-participating Member States, in that they can no longer rely on a
stable agricultural conversion rate. They have to apply the exchange rate applicable on the

15

date of the operative event; i.e. the exchange rate most recently fixed by the ECB (Article 1
of Regulation (EC) No 2808/98).

Nevertheless, operators and national administrations in non-participating Member States have
thanks to the electronic means of
in particular
rapidly adapted to the new system,
communication available.

Seen from an economic perspective this daily change in the exchange rate is an improvement
on the earlier system, given that the artificial gap between the agricultural conversion rate and
the exchange rate is no more.

In addition, using a single rate [see Article 18(1) - relating to the customs rate - of Regulation
(EEC) No 2913/9221, as amended by Regulation (EC) No 82/97] for amounts in connection
with imports and import duties fixed in euros by a CAP-related instrument greatly simplifies
matters and has completely eliminated the confusion and mistakes that tended to occur in the
past regarding the rate to be used for those transactions.

In the period leading up to the introduction of the euro the representatives of some
non-participating Member States were, however, concerned about the possible adverse effects
on farm incomes of major fluctuations in their exchange rates.

That is why, when the Council Decision of 15 December 1998 was adopted, the Commission
stated that it was "willing to re-examine, in the relevant management committees, certain
operative events, in particular those which are linked to the measures provided for in Article 5
of the Regulation establishing the monetary system for the euro, a redefinition of which might
prove necessary owing to the transition to the new agrimonetary system".

The Commission has delivered on its undertaking to re-examine the definition of certain
operative events but, to prevent a new definition from leading to advance fixing of the
exchange rate, it adopted a reticent attitude towards the various requests submitted. The
Council ruled out advance fixing of the exchange rate (the agricultural conversion rate under
the preceding arrangements) when it adopted the agrimonetary arrangements for the euro. In
the light of that restriction the Commission could not introduce a redefinition of the operative
event which served to fix the exchange rate in advance.

Nevertheless, there have been some amendments to the definitions of the operative event. The
only one actually needed as a result of the introduction of the euro is the one relating to
veterinary fees; these fees expressed in euros must, in the case of Member States participating
in the euro, be converted into national currency at the rate fixed irrevocably22. The other
amendments stem from:

–

–

–

21

22

changes to the basic Regulation (bananas and peaches),

closer cohesion between the various operative events (fruit and vegetables) or

a change in the economic target achieved (butter for pastry-making).

OJ L 302, 19.10.1992, p. 1.
Commission Regulation (EC) No 807/1999 of 16 April 1999 providing for transitional measures for the
financing of
inspections and controls in accordance with Directive 85/73/EEC following the
introduction of the euro (OJ L 102, 17.4.1999, p. 68).

16

6.1.2. Change in the operative event for direct aid

On 29 June 1999, again as part of its undertaking, the Commission adopted Regulation (EC)
No 1410/1999 amending Regulation (EC) No 2808/98 laying down detailed rules for the
application of the agrimonetary system for the euro in agriculture and amending the definition
of certain operative events provided for in Regulation (EEC) No 3889/87, (EEC) No 3886/92,
(EEC) No 1793/93, (EEC) No 2700/93 and (EC) No 293/98.23

More specifically, the exchange rate for direct aid was amended. It had initially been decided
that the rate used should be that applicable: on the first day of the marketing year in the case
of sectoral aid; and on 1 January in the case of structural measures. By virtue of the
above-mentioned Regulation the rate applicable is the average, calculated pro rata temporis,
of the exchange rates applicable in the month preceding the operative event.

The grounds for the amendment are set out in the third recital of the Regulation:

"Whereas the exchange rate on the date of the operative event for the aids, premiums and
amounts referred to in Article 5 of Regulation (EC) No 2799/98 is defined as the rate on a
given date; whereas the rate applicable on the date of the operative event should be amended
to ensure in principle that such aids, premiums and amounts do not undergo any sharp
fluctuations on conversion into national currency due to the exchange rate on a single date;
whereas, to that end, the best solution appears to be an average of the exchange rates
applicable during the month preceding the operative event, calculated pro rata temporis;".

The Regulation has been applied to direct aid with an operative event from 1 July 1999. There
are, however, legitimate doubts as to the value of the Regulation, in the light of the fears
expressed during the period leading up to the introduction of the euro and the general call for
simplification.

At the time of submitting this report to the Council the Commission has already adopted eight
regulations fixing the conversion rate applicable to certain direct aids. In addition, it emerges
from a detailed analysis shown in Annex X to this report that the net income of producers
would not have been affected if the initial rate, namely the rate applicable on the first day of
the marketing year (sectoral aid) or the first day of the year (structural aid), had been applied.
The total difference in income from direct aid for the four Member States concerned
is EUR 11.5 million, i.e. 0.24% of total incomes. If agrimonetary compensation is taken into
account
the
consequences of an accidentally high or accidentally low rate are cancelled out by
agrimonetary compensation and, where applicable, by a low rate or a high rate the following
year.

the gap narrows to EUR 2.84 million (0.06%).

It should be noted that

6.2.

Criteria applicable under Article 4(6) of Regulation (EC) No 2799/98

Article 4 of Regulation (EC) No 2799/98 deals with appreciable revaluations and,
in
particular, how the maximum amount of one of the three tranches of agrimonetary aid should
be calculated and/or adjusted in the light of the market situation.

23

OJ L 164, 30.6.1999, p. 53.

17

The market situation is described in the second subparagraph of Article 4(6):

"The amount of one or more tranches in one or more sectors may be reduced when it
has been observed that:

(a)

or

(b)

over the year during which an appreciable revaluation occurs or over the
period between the beginning of the preceding tranche and the beginning of the
month preceding the first month of the tranche concerned, the market price for
the Member State concerned was on average equal to or higher than the
average market prices in the Member States whose currencies had not been
appreciably revalued during the same period. Market prices shall be compared
using an index of base 100 for market prices in national currency or in euro,

the relation between the dates of operative events in the sector concerned and
the date of the appreciable revaluation is such that there is no justification for
concluding that
the period
considered.

the revaluation had an impact

throughout

In cases where point (b) is applied, the reduction of at least one third referred to
in Article 4(5) shall be calculated on the basis of the amount of the first tranche that
would have been granted if point (b) had not been applied."

The last subparagraph states that: "These criteria may be amended, in the light of experience,
in accordance with the procedure laid down in Article 9".

The provisions on taking the market situation into account did not have to be applied when
the euro was introduced since there was no appreciable revaluation requiring the setting of a
maximum amount for the first tranche of compensatory aid.

The experience gained to date is limited to the appreciable revaluation of the pound sterling in
1999. In Regulation (EC) No 802/200024 fixing the maximum amount of compensatory aid
for the revaluation of the pound sterling in 1999 the Commission took account of the market
situation, namely point (a) above. This made it possible to cancel agrimonetary compensation
in the sugar and beef/veal sectors, the average market price index for which was above the
average market price index for the Member States whose currencies had not undergone an
appreciable revaluation in 1999.

Point (b) above did not have to be applied since the sugar sector, the only one in which it can
be taken into account, was ruled out on the basis of (a).

To date, the application of (a) has not given rise to any major problems. At this stage,
therefore,
the Commission has no reason to propose any amendments to the criteria
concerned.

24

OJ L 96, 18.4.2000, p. 36.

18

6.3.

Cases before the Court of Justice

6.3.1. Case C – 100/99

On 19 March 1999 the Italian Government brought a case against the Council and the
Commission, asking the Court of Justice to declare null and void the regulations impugned
(agrimonetary regulations) and more specifically the provisions impugned and to order the
Council and the Commission to pay the costs. Italy has challenged a number of aspects of the
agrimonetary
agrimonetary legislation:
compensation and the discrimination between participating and non-participating currencies.

the 2.6% neutral margin,

scope of

the

the

6.3.2. Case C – 403/99

Shortly afterwards the Italian Government brought a second case, asking the Court of Justice
to cancel Regulation (EC) No 1639/1999 fixing the maximum compensatory aid resulting
from the rates for the conversion of the euro into national currency units and the exchange
rates applicable on 1 July 199925. Italy is challenging in particular the way in which Article 6
(application of the maximum amount of a coefficient for direct aid with a frozen agricultural
conversion rate) of Regulation (EC) No 2813/199826 has been applied.

Case C – 100/99 was heard on 18 January 2001.

6.4.

Greek drachma

Council Regulation (EC) No 1478/2000 of 19 June 2000 amending Regulation (EC)
No 2866/98 on the conversion rates between the euro and the currencies of the Member States
adopting the euro27 reduces the number of non-participating Member States within the
meaning of (c) of Article 1 of Regulation (EC) No 2799/98 to three: Denmark, the United
Kingdom and Sweden. On 1 January 2001 Greece became a participating country within the
meaning of (b) of Article 1. The rate set is one euro to GRD 340.750.

This change does not call for any additional legislation: where necessary the provisions of
Regulation (EC) No 2799/98 will apply and from 1 January 2001 no rate other than the fixed
rate may be applied to measures and transactions with an operative event occurring after
31 December 2000.

7.

CONCLUSION

Subject to the judgments of the Court of Justice in the two cases brought by Italy the analysis
carried out shows that in the case of the common agricultural policy the changeover to the
euro has been smooth, with no major problems requiring rapid action on the part of the
authorities. On the contrary, the introduction of the euro in the common agricultural policy
has simplified matters, thanks above all to the existence of the euro itself and the way in
which it was introduced in the common agricultural policy. In addition, the incomes of
European farmers have not been affected by this radical move towards a more integrated
European Union.

25

26

27

OJ L 194, 27.7.1999, p. 33.
OJ L 349, 24.12.1998, p. 48.
OJ L 167, 7.7.2000, p. 1.

19