32nd Financial Statement concerning the European agricultural Guidance and Guarantee fund - EAGGF, Guarantee Section - Financial year 2002
Date: 2003-11-12
Institutions: European Commission
Subjects: EAGGF Guarantee Section, balance sheet, financial year

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 12.11.2003
COM(2003) 680 final

32nd FINANCIAL STATEMENT

concerning

THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND

EAGGF, GUARANTEE SECTION

– FINANCIAL YEAR 2002 –

(presented by the Commission)

32nd FINANCIAL STATEMENT

concerning

THE EUROPEAN AGRICULTURAL GUIDANCE AND GUARANTEE FUND

EAGGF, GUARANTEE SECTION

– FINANCIAL YEAR 2002 –

TABLE OF CONTENTS

1.

1.1.

1.2.

1.3.

1.4.

1.5.

2.

A.

2.1.

2.2.

2.3.

2.4.

2.5.

2.6.

B.

2.7.

2.8.

3.

A.

3.1.

3.2.

3.3.

3.4.

BUDGET PROCEDURE .......................................................................................... 5

Berlin agreement and budgetary discipline.................................................................. 5

The preliminary draft budget (PDB) ............................................................................ 6

The draft budget (DB).................................................................................................. 6

The letter of amendment .............................................................................................. 6

Adoption of the 2002 budget ....................................................................................... 6

CASH POSITION AND MANAGEMENT OF APPROPRIATIONS.................. 7

MANAGEMENT OF APPROPRIATIONS........................................................................... 7

Appropriations available for the 2002 financial year................................................... 7

Utilisation of appropriations available for the 2002 financial year.............................. 7

Automatic carryovers from 2001 to 2002 .................................................................... 8

Non-automatic carryover of appropriations from the 2001 financial year .................. 8

Transfers of appropriations within the EAGGF Guarantee Section ............................ 9

Transfers to or from the monetary reserve................................................................... 9

THE SYSTEM OF ADVANCES AND DIRECT PAYMENTS.................................................. 9

Advances to Member States......................................................................................... 9

Direct payments ......................................................................................................... 11

IMPLEMENTATION OF THE BUDGET............................................................ 12

INTODUCTION ............................................................................................................ 12

The implementation of the budget ............................................................................. 12

Impact of euro/dollar rate movements ....................................................................... 12

Dual rates ................................................................................................................... 13

Agrimonetary decisions ............................................................................................. 13

2

B.

3.5.

3.6.

3.7.

3.8.

3.9.

ANALYSIS OF THE IMPLEMENTATION OF THE BUDGET BY CHAPTER ....................... 13

Introduction................................................................................................................ 13

TITLE B1-1 – Plant products..................................................................................... 14

TITLE B1-2 –Animal products.................................................................................. 23

TITLE B1-3 – Ancillary expenditure......................................................................... 28

B1-40 TITLE – Rural development ........................................................................... 33

3.10.

Breakdown by type of expenditure ............................................................................ 34

C.

SPECIFIC ACTIVITIES ................................................................................................. 36

3.11.

Supply of food from intervention stocks for the benefit of the needy in the
Community................................................................................................................. 36

3.12.

Chapter B1-33 – Veterinary and plant-health measures ............................................ 37

3.13.

Fisheries ..................................................................................................................... 39

3.14.

Information measures................................................................................................. 40

3.15.

Promotional measures ................................................................................................ 41

4.

4.1.

4.2.

4.3.

4.4.

4.5.

5.

5.1.

5.2.

5.3.

5.4.

6.

6.1.

6.2.

CONTROL MEASURES ........................................................................................ 41

Integrated Administration and Control System (IACS)............................................. 41

Compatibility with IACS ........................................................................................... 42

Olive oil control agencies........................................................................................... 42

Part-financing to encourage tighter controls .............................................................. 44

Application of Regulation (EC) No 4045/89 (ex-post controls) ................................ 46

CLEARANCE OF ACCOUNTS ............................................................................ 47

General ....................................................................................................................... 47

Clearance of accounts under the new procedure........................................................ 48

Clearance of accounts for the 2001 financial year ..................................................... 48

Cases brought before the Court of Justice against clearance decisions ..................... 50

RELATIONS WITH PARLIAMENT AND THE EUROPEAN COURT OF
AUDITORS............................................................................................................... 52

Relations with Parliament .......................................................................................... 52

Relations with the European Court of Auditors......................................................... 52

3

7.

7.1.

7.2.

7.3.

7.4.

BASIC RULES GOVERNING THE EAGGF GUARANTEE SECTION AND
AMENDMENTS MADE IN 2002........................................................................... 55

General/System of advances ...................................................................................... 55

Checks ........................................................................................................................ 55

Clearance of accounts ................................................................................................ 56

Public storage ............................................................................................................. 57

The French version of the Annexes to the 32nd Report can be obtained in paper form from the
Directorate-General for Agriculture or downloaded from its website.

4

1.

BUDGET PROCEDURE

1.1.

Berlin agreement and budgetary discipline

The European Council held in Berlin on 24 and 25 March  1999  reached  an overall
agreement  on  Agenda  2000.  The  Regulation  on  budgetary  discipline  was  also
adopted in 2000, entering into force on 1 October 2000.

It will be recalled that the Berlin European Council, as stated in its conclusions, kept
the  guideline  proposed  by  the  Commission  (incorporating  rural  development
measures,  veterinary  measures,  the  Special  Accession  Programme  for  Agriculture
and  Rural  Development  (Sapard)  and  the  amount  available  under  agriculture  for
accessions) but introduced ceilings on expenditure within the guideline.

There  are  two  annual  sub-ceilings  for  the  period  2000  to  2006,  one  for  traditional
market  expenditure  (subheading  1a)  and  one  for  rural  development  expenditure
(subheading  1b).  These  ceilings  were  set  at  a  level  equivalent  to  the  estimate  of
expenditure that would result from the adoption of the Agenda 2000 proposals. This
means  that  the  new  ceilings  represent  estimated  expenditure,  with  no  margin  for
unforeseeable  situations  that  may  arise,  which  has  often  been  the  case  in  the  past.
These ceilings are shown in the following table:

Financial perspectives for EU 15 (€ million at current prices)

Total CAP
Agenda 2000

(a) markets2

(subceiling 1a)

(b) rural development
(subceiling 1b)

2000

2001

2002

2003

2004

20051

20061

Total

41 738

44 530

46 587

47 378

47 211

46 294

45 996

319 734

37 352

40 035

41 992

42 680

42 408

41 480

41 171

287 118

4 386

4 495

4 595

4 698

4 803

4 814

4 825

32 616

The conclusions of the Berlin Summit were followed by the adoption by Parliament
and the Council of the following:

– 

– 

a  new  Interinstitutional  Agreement  on  budgetary  discipline  and 
the
improvement  of  the  budgetary  procedure,  the  financial  perspective  (ceilings)
and  the  budgetary  procedure  incorporating  these  conclusions  and  formally
providing for the Commission to be allowed to present a letter of amendment
to the preliminary draft budget (PDB) in the autumn for the following year so
that the budget estimates reflect the most recent developments;
a  new  Regulation  on  budgetary  discipline  [Council  Regulation  (EC)
No 2040/2000 of 26 September 2000, OJ L 244, 29.9.2000, p. 27], which lays
down  in  particular  that  all  legislative  measures  decided  under  the  common
agricultural  policy  must  remain  within  subceilings  1a  and  1b  in  the  financial
perspective and that appropriations must be within these ceilings; that, with a
view  to  ensuring  that  the  amounts  set  for  subheading  1a  (traditional  EAGGF
Guarantee  expenditure)  are  complied  with,  the  Council  may  decide  to  adjust

1

2

At 2004 prices.
Including veterinary and plant health measures and excluding accompanying measures.

5

                                                
the  level  of  the  support  measures  applicable  from  the  start  of  the  following
marketing  year  in  each  of  the  sectors  concerned;  that  the  Commission  is  to
present,  together  with  the  preliminary  draft  budget,  an  analysis  of  the
differences  between  initial  forecasts  and  actual  expenditure  for  previous
financial  years  and  to  examine  the  medium-term  situation;  that,  for  the
purposes of calculating budget estimates when it draws up the budget, a letter
of  amendment  or  a  supplementary  and  amending  budget  (SAB),  the
Commission  is  generally  to  use  the  average  rate  of  the  dollar  over  the  most
recent three-month period; and, lastly, that the monetary reserve is to be cut to
€250 million in 2002 and abolished with e ffect from the 2003 financial year.

1.2.

The preliminary draft budget (PDB)

The  2002  PDB  was  drawn  up  by  the  Commission  and  proposed  to  the  budgetary
authority  in  May  2001.  Total  appropriations  proposed  for  the  EAGGF  Guarantee
Section  amounted 
€41 626.8  million  for
subheading 1a  (which  left  a  margin  of  €365.2  million  under  the  ceiling  of  €41 992
million) and €4 595 million for subheading 1b (at the ceiling).

€46  221.8  million, 

including 

to 

1.3.

The draft budget (DB)

The  Council  adopted  the  2002  DB  in  July  2001.  It  reduced  the  appropriations  in
subheading 1a by €200 million across-the-board and eliminated the proposed special
reserve  of  €1 000  million  intended  for  s upplementary  market  and  veterinary
measures linked to BSE and FMD. Total EAGGF Guarantee Section appropriations,
thus,  amounted  to  €45 021.8  million;  this  amount  comprised  €40 426.8  million  for
subheading 1a and €4 5950.0 million for subheading 1b.

1.4.

The letter of amendment

At  the  end  of  October  2001,  the  Commission  adopted  the  letter  of  amendment
No 2/2002 to the PDB. It took account of the developments of the agricultural market
situation,  of  the  developments  in  relation  to  the  beef  market  and  the  eradication  of
BSE/FMD and also of recent agricultural legislation. These considerations generated
a  requirement  for  €44 250.8  million,  resultin g  in  a  reduction  in  requirements
amounting to €1 971 million by comparison to the PDB requirements, and involving
an amount of €39 655.8 million in subheading 1a which was below the ceiling, and
of €4 595.0 million in subheading 1b which was equal to the ceiling.

1.5.

Adoption of the 2002 budget

Following conciliation between the three institutions, the 2002 budget is as follows:

– 

– 

for  subheading  1a,  in  relation  to  the  requirements  in  the  letter  of  amendment
No  2/2002,  an  increase  of  €4.5  million  was  decided  comprising  €2.5  million
for specific aid for bee-keeping and €2 million for enhancing public awareness
of  the  CAP.  Appropriations  amount  to 
€39 660.08  million,  which  is
€2 331.9 million beneath the sub-ceiling fixed in Berlin,
for  subheading  1b,  the  appropriations  of  €4 595.0  million  requested  by  the
Commission were granted; these appropriations are equal to the ceiling.

Appropriations of €250 million were  also entered in the monetary reserve, which can
be  used  only  where  there  is  a  variation  in  the  euro/dollar  rate  as  defined  in
Article 9(1) of Council Regulation (EC) No 2040/2000 on budgetary discipline.

6

2.

A.

CASH POSITION AND MANAGEMENT OF APPROPRIATIONS

MANAGEMENT OF APPROPRIATIONS

2.1.

Appropriations available for the 2002 financial year

The appropriations finally available for the financial year totalled €44 255.08 million
(excluding the monetary reserve of €250  million). The budgetary authority approved
a  non-automatic  appropriation  carryover  of 
(see 2.2.3).

€99 million  from 2001 

to 2002

2.2.

Utilisation of appropriations available for the 2002 financial year

2.2.1.

Budget operations

The table below details the budget operations over the 2002 financial year:

1. Available appropriations
– normal appropriations
– non-automatic carryovers of appropriations

2. Details of commitments

– for Member States' expenditure against normal
appropriations
– for Member States' expenditure against non-automatic
carryovers of appropriations
– for direct payments
Total commitments

3. Amounts charged

– for Member States' expenditure against normal
appropriations
– for Member States' expenditure against non-automatic
carryovers of appropriations
– for direct payments
Total charged

4. Automatic carryovers

– for Member States' expenditure against normal
appropriations
– for Member States' expenditure against non-automatic
carryovers of appropriations
– for direct payments
Total automatic carryovers

5. Non-automatic carryovers

6. Appropriations lapsing

(= 1 – 2 – 5)

2.2.2.

Automatic carryovers

44 255 080 000.00
99 000 000.00

42 858 918 892.28

99 000 000.00

259 039 299.12
43 216 958 191.40

42 858 918 892.28

99 000 000

27 863 255 39
42 985 782 147.67

0.00

0.00

231 176 043.73
231 176 043.73

83 892 329.00

1 053 229 479.60

Automatic  carryovers  represent  the  difference  between  commitments  and  amounts
actually charged. In this financial year they amount to €231.176 million and are the
appropriations committed by the Commission for expenditure to be incurred directly
by itself but not yet paid at the end of the financial year.

7

€
2.2.3. Non-automatic carryovers

In  accordance  with  Articles  9  and  149  of  the  Financial  Regulation  (Council
Regulation  No 1605/2002  of 25  June  2002),  the  Commission  has  decided  on  a
non-automatic 
totalling
€83.89 million comprising:

appropriations 

to 2003,  of 

from 2002 

carryover, 

– 

– 
– 
– 

– 

€34.576 million for item B01-332 "Emergency fund for veterinary complaints
and other animal contaminations which are a risk to public health",
€4.571 million for item B01-400 "Investments in agricultural holdings";
€32.256 million for item B01-4050 "Agri-e nvironment (new system)";
€6.49 million  for item B01-4080 "Promoting the  adaptation  and  development
of rural areas – Main agriculture-related measures";
€5.999 million for item B01-4081 "Promoting the adaptation and development
of rural areas – Other measures".

2.3.

Automatic carryovers from 2001 to 2002

The table below  gives  an  overview of  the utilisation of these carryovers during  the
2002 financial year:

1. Commitments carried over

– for Member States' expenditure
– for direct payments
Total commitments

2. Decommitments from carryover
– for Member States' expenditure
– for direct payments
Total decommitments

3.

4.

Payments
– for Member States' expenditure
– for direct payments
Total charged

Lapsing appropriations (= 1 + 2 – 3)
– for Member States' expenditure
– for direct payments
Total carryovers cancelled

–
585 917 004.50
585 917 004.50

–
(3 095 719.78)
(3 095 719.78)

–
534 771 970.15
534 771 970.15

–
48 049 314.57
48 049 314.57

2.4.

Non-automatic carryover of appropriations from the 2001 financial year

In  accordance  with  Article  7(3)  of  the  Financial  Regulation  of  21  December  1977,
the Commission asked the budget authority to allow the non-automatic carryover of a
total  of  €99 million  from 2001  to 2002.  This  breaks  down  as  €82 million  for  item
B01-4050  "Agri-environment  (new  system)"  and  €17 million  for  item  B01-4070
"Forestry  (new  system,  Article  31)".  These  appropriations  were  fully  committed
in 2002.

8

€
2.5.

Transfers of appropriations within the EAGGF Guarantee Section

In 2002 the budgetary authority approved chapter-to-chapter transfer No 56/02:

– 

– 

from  chapters  B01-12  Olive  oil  (–€25.0 million),  B01-14  Fibre  plants  and
silkworms  (–€120.0 million),  B01-15  Fru it  and  vegetables  (–€80.0 million),
B01-21  Beef/veal  (–€960.0 million),  B01-22  Sheepmeat  and  goatmeat
(–€100.0 million), B01-23 Pigmeat, eggs, pou ltry and other animal product aid
measures  (–€35.0 million),  B01-31 
B01-39 Other measures (–€100.0 million),
to  chapters  B01-10 Arable crops  (+€700.0 million),  B01-13  Dried  fodder  and
grain  legumes  (+€7.0 million),  B01-18  Ot her  plant  sectors  or  products
(+€5.0 million),  B1-20  Milk  and  milk  products  (+€472.0 million),  B1-37
Clearance  of  previous  years'  accounts  and  reduction/suspension  of  advances
under Chapters B1-10 chapters to B1-39 (+€278.0 million).

Food  programmes  (–€42.0 million),

2.6.

Transfers to or from the monetary reserve

The average dollar rate over the financial year was lower than the rate assumed for
the 2002 budget and this resulted in additional expenditure estimated at €33 million
charged to the EAGGF Guarantee Section for 2002. Since that additional expenditure
was  less  than  the  €100 million  neutral  margin   referred  to  in  Article  11(2)  of
Regulation (EC) No 2040/2000, no transfer was made from the monetary reserve. In
any  case,  the  additional  expenditure  can be met from  the  budget  appropriations  for
Titles 1 to 3 of the EAGGF Guarantee Section for 2002.

B.

THE SYSTEM OF ADVANCES AND DIRECT PAYMENTS

2.7.

Advances to Member States

2.7.1.

The system of monthly advances

Article  7  of  Council  Regulation  (EC)  No  1258/1999  of  17  May  1999  on  the
financing  of  the  common  agricultural  policy3  lays  down  that  the  Commission  is  to
“decide  on  monthly  advances  on  the  provision  for  expenditure  effected  by  the
accredited  paying  agencies”.  The  advances  are  paid  to  the  Member  States  at  the
beginning of the second month following that in which the paying agencies effect the
expenditure.

These  are  not  strictly  speaking  advances  but  rather  reimbursements  of  expenditure
already  incurred  by  Member  States.  Use  of  the  term  “advance”  stresses  the
provisional nature of the payments: the advances are determined on the basis of the
monthly expenditure declarations forwarded by the Member States; the expenditure
will be booked definitively once it has been verified  on the spot during subsequent
financial years (see Title 4: Clearance of accounts).

The  system  of  advances  applies  to  payments  effected  by  Member  States  from
16 October  2001  to  15  October  2002.  Over  99%  is  expenditure  charged  to  the
EAGGF Guarantee Section. The remainder consists of a limited number of measures
for which the Commission makes direct payments.

3

OJ L 160, 26.6.1999, p. 103.

9

                                                
2.7.2. Decisions on advances for the 2002 financial year

The  Commission  adopted 12  decisions  on monthly advances for  the  2002  financial
year (Annex 4 to the Financial Statement).

An  additional  advance,  adjusting  those  for  all  the  eligible  expenditure  for  the
financial year, was adopted in December 2002.

2.7.3.

Reduction and suspension of advances

In  2002  a  correction  of –€53.1 million  was  ma de  on  advances  paid  to  the  Member
States. The various categories of correction are given in the following points.

(a) Reduction of advances for non-compliance with payment time limits

In application of Article 14 of Council Regulation (EC) No 2040/2000 on budgetary
discipline4,  EAGGF  staff  established  that  some  Member  States  did  not  always
comply with the time limits laid down in the relevant Community rules for payment
of aid to beneficiaries.

Payment  deadlines  were  introduced  to  ensure  equal  treatment  of  recipients  in  all
Member States and to avoid situations in which delays in payment resulted in the aid
no longer having the desired economic effect. Moreover, leaving it to the individual
paying agencies to make payments at their administrative convenience would prevent
the proper application of budgetary discipline.

The Commission’s decisions on monthly advances on three occasions provided for a
reduction for late payment; the total reduction came to –€52.34 million.

(b) Reduction  of  advances  on  account  of  failure  to  charge  the  additional  milk

levy for 2001/02

When  the  expenditure  declared  for  the  2002  financial  year  was  scrutinised,  it  was
concluded that two Member States had not charged the full amount of the additional
levy  for  the  2000/01  marketing  year  in  accordance  with  Article  5(2)  of  Regulation
(EEC) No 536/93.

Pursuant to Article 14 of Regulation (EC) No 2040/2000 the Commission decided to
reduce the advances for the Member States concerned by –€0.733 million.

(c) Corrections for public storage

The introduction in 2002 of the new e-Faudit application considerably improved the
calculation,  declaration  and  verification  of  expenditure  on  public  storage  by  the
Member  States.  Consequently,  no  correction  was  necessary  in  2002  under  these
arrangements.

4

OJ L 244, 26.9.2000, p. 27.

10

                                                
2.8.

Direct payments

In  some  cases,  the  Commission  makes  direct  payments  to  operators.  These  are
payments  for  veterinary  and  plant  health  measures  (Chapter  33)  and  for  certain
measures which do not come under traditional market management but are designed
to  expand  outlets  for  products,  particularly  olive  oil  and  fibre  flax,  and  anti-fraud
measures, quality promotion and research connected with tobacco.

Annex 5 gives a breakdown of direct payments.

11

3.

A.

IMPLEMENTATION OF THE BUDGET

INTRODUCTION

3.1.

The implementation of the budget

The  uptake  of  EAGGF  Guarantee  Section  appropriations  for  the  budget  year  2002
was  €43  216.8  million,  i.e.  97.4%  of  the  budge t  appropriations  under  heading  B1.
Expenditure  was  approximately  €1 137.3  million  below  the  budget  appropriations.
The  annexed  Table  6  presents  the  situation  for  the  utilisation  of  the  2002  budget
appropriations by chapter.

For sub-heading 1a, the budget appropriations  amounted  to  €39 660.1 million while
its execution amounted to €38 867.4 million, i.e. 98.0% of the budget's appropriations
under this sub-heading. With the exception of the plant products section of the budget
which was over-implemented, the sections concerning animal products and ancillary
expenditure were under-implemented. For sub-heading 1b, the budget appropriations
amounted to €4 694.0 million while its execution amounted to €4 349.4 million, i.e.
92.70% of the budget appropriations under this sub-heading.

3.2.

Impact of euro/dollar rate movements

Budget appropriations are in many cases – export refunds for agricultural products, in
particular  cereals,  rice  and  sugar,  and  some  internal  aids  such  as  production  aid  for
starch, aid for sugar used by the chemical industry and aid for cotton – based on the
difference  between  Community  prices  in  euros  and  anticipated  world  prices,
generally expressed in dollars.

When the preliminary draft budget was drawn up in April 2001, the rate initially used
for the budget estimates for 2002 was, in accordance with Article 8(1) of Regulation
(EC)  No 2040/2000,  €1 = $0.92  (average  parity  for  January,  February  and  March
2001).  When,  at  the  end  of  October  2001,  the  Commission  adopted  a  letter  of
amendment  to  the  preliminary  draft  budget  concerning  agricultural  expenditure,  the
rate  was  only  €1 = $0.89  (average  for  July ,  August  and  September  2001).  This  rate
(€1 = $0.89)  became  the  definitive  budgetary  rate  used  for  drawing  up  the  budget
estimates for 2002.

In the first nine months of the reference period for the determination of the impact of
the  dollar  (August  2001  to  April  2002),  the  average  monthly  rate  did  not  vary  by
more  than 2.5%  in  relation  to  the  definitive  rate  used  for  establishing  the  budget
estimates for 2002. After April, however, the dollar depreciated considerably, the July
2002  rate  reaching  an  average  of  €1 = $0.99,  thus  exceeding  the  budgetary  rate  by
about 11%.

Thus, the estimated additional EAGGF Guarantee expenditure for 2002 attributable to
the fall of the dollar in relation to the budget rate is €33 million. Since this is below
in  Article 11(2)  of  Regulation  (EC)
the  €100 million  neutral  margin  referred  to 
No 2040/2000,  no  transfer  may  be  made  from  the  monetary  reserve.  The  additional
expenditure can at all events be covered by the budget appropriations in Titles 1 to 3
of the EAGGF Guarantee Section for 2002.

12

3.3.

Dual rates

The  dual  rates  made  expenditure  substantially  lower  than  in  previous  years.
Abolishing  the  green  rates  eliminated  the  dual-rate  effect  in  the  countries
participating in the euro. For Member States not participating in the euro the impact
of the dual rate was an estimated saving of the order of €30 million for 2002.

3.4.

Agrimonetary decisions

Since  Council  Regulation  (EC)  No 2799/98  provides  for  compensation  only  for
revaluations  prior  to 1 January  2002  for  currencies  not  participating  in  the  euro,  no
new  agrimonetary  aid  was  fixed  in  2002.  The  agrimonetary  arrangements  have
expired.

The  payments  made  under the  agrimonetary  arrangements (Chapter  39)  concern  aid
fixed previously.

B.

ANALYSIS OF THE IMPLEMENTATION OF THE BUDGET BY CHAPTER

3.5.

Introduction

During the 2002 financial  year the Agenda  2000  agricultural  reform  measures  were
implemented for the various CAP products.

Arable crops account for a large part of total EAGGF Guarantee Section expenditure.
Since  the  1992  reform,  direct  aid  for  producers  has  come  to  predominate.  After  an
initial period when expenditure increased from 1994 with the gradual introduction of
the reform, it was relatively stable between 1997 and 1999.

Since then arable crops have undergone another stage in the reform process with the
adoption of the agriculture chapter of  the  Agenda 2000 package. Under the Agenda
2000  decisions,  the  intervention  prices  for  cereals  were  severely  cut  to  bring  them
more  into  line  with  world  prices.  The  resulting  loss  of  income  suffered  by  the
producer is offset by an area payment. Oilseeds, protein crops and non-fibre linseed
and, from 2001, fibre flax and hemp are also part of this direct aid system with, for a
transitional period, a different rate of aid according to product type.

There are four categories of aid:
– 
– 
– 
– 

aid for small-scale producers without compulsory set-aside,
aid for commercial producers subject to compulsory set-aside,
additional aid for durum wheat producers,
set-aside (compulsory or voluntary).

Put  briefly,  the  Agenda  2000  reform  of  the  arable  sector  for  2001/02  involved  the
following:

– 

– 

– 
– 

for cereals the intervention  price  was  progressively cut (€101.31/tonne  for the
2001/02  marketing  year)  concomitantly  with  the  increase  in  direct  area
payments;
for oilseeds the basic amount for the direct area payment was gradually cut to
the level of that for cereals and set-aside;
for durum wheat the fixed-rate additional aid per hectare was unchanged;
for protein crops the payment per tonne of yield was reduced;

13

– 

– 
– 

– 
– 

in  the  regions  where  no  maize  is  grown,  areas  sown  to  grass  for  silage  also
qualified for the area payment;
the minimum price per tonne of potato starch was reduced;
for  Finland  and  certain  areas  of  Sweden  an  additional  flat-rate  premium  was
paid for oilseeds and cereals;
area payments for flax and hemp were aligned on those for linseed;
compulsory  set-aside  was  set  at 10%,  resulting  in  a  cereal  harvest  of
about 198 million tonnes.

The milk and milk products sector is the third largest in terms of EAGGF Guarantee
Section  expenditure.  It  is  one  of  the  sectors  which  the  Berlin  European  Council
(March 1999) decided to make the subject of a reform. The main change is a 15% cut
in intervention prices over three marketing years starting in 2005/06, accompanied by
the introduction of compensatory aid paid direct to producers from the 2005 calendar
year onwards. This reform had no budgetary impact on the 2002 financial year.

In 2002 expenditure on beef and veal, the second largest in budget terms, accounted
for 16.4%  of  the  Guarantee  Section's  total  spending.  The  Agenda  2000  reform
increased or introduced direct aid to offset the cut in institutional prices.

In the sections which follow, an analysis of EAGGF Guarantee expenditure incurred
is presented and compared to the 2002 budget year's appropriations.

3.6.

TITLE B1-1 – Plant products

Introduction

The  appropriations  for  this  title  of  the  budget  amounted  to  €27 349.0  million  while
payments amounted to approximately €27  686.3 million, i.e. an implementation rate
of  101.2%  of  the  budget  appropriations.  This  over-implementation  was  primarily
attributable to the payments for arable crops (chapter B1-10 of the budget) while all
other chapters were under-implemented (see annexed Table 6 for details).

CHAPTER B1-10 – ARABLE CROPS

Article

B1-100
B1-101
B1-102
B1-104

B1-105

B1-106
B1-109

Heading

Refunds on cereals
Intervention storage of cereals
Intervention, other than storage, of cereals
Per  hectare  aid  for  arable  crops  (small
producers)
Per hectare aid for arable crops (large scale
producers)
Set-aside
Other

Appropriation
budget
(a)

80.0
283.0
292.0
3 927.0

Expenditure

(b)

99.3
219.2
240.7
3 964.6

€ million

Over -/under-
implementation
(a) – (b)

+ 19.3
–63.8
–51.3
+ 37.6

11 683.0

12 173.2

+ 490.2

1 661.0
–10.0

1 902.0
–9.0

+ 241.0
+ 1.0

+ 674.1

TOTAL
CHAPTER B1-10

ARABLE CROPS

17 916.0

18 590.1

14

The sector's balance sheet

the  marketing  year  2001/02  amounted 

Total  production  of  cereals  for 
to
approximately  198  million  tonnes  versus  213  million  tonnes  in  the  previous
marketing year. In the budget year 2002, domestic utilisation of cereals was estimated
at  approximately  189  million  tonnes,  i.e.  an  increase  of  3  million  tonnes  when
compared to the previous year's level. However, exports fell in the course of the year
at approximately 17.5 million tonnes versus 28.6 million tonnes in the previous year
while stocks in public storage were higher at approximately 7.9 million tonnes.

Intervention

On  the  whole,  intervention  stocks  increased  in  the  course  of  the  2002  budget  year,
from around 6.7 million tonnes at the start of the year to around 7.9 million tonnes by
the end of the year. Underlying this, however, were quite wide variations in changes
in the stock levels for individual cereals. While wheat stocks were further run down
to  around  0.43  million  tonnes  by  the  end  of  the  year  from  a  level  of  0.66  million
tonnes at the start of the year, over the same period stocks of barley increased from
2.2  to  2.4  million  tonnes,  and  stocks  of  rye  continued  the  rise  of  previous  years,
increasing  from  3.8  to  5.0  million  tonnes.  The  quantities  in  stock  for  maize  and
sorghum were insignificant.

Purchases into intervention amounted to approximately 4.4 million tonnes while sales
amounted to 2.7 million tonnes versus the initial 2002 budget estimates of 8.0 million
tonnes and 6.4 million tonnes respectively.

As  a  consequence,  lower  payments  for  technical  costs  for  the  public  storage  of
cereals  accounted  for  the  under-spending  of  the  2002  budget  appropriations  by
–€64.0 million.

International markets

Developments  in  international  agricultural  markets  were  somewhat  mixed  in  2002.
international prices for most cereals recovered noticeably during the early part of the
year  but  they  weakened  towards  the  end  of  the  year,  as  several  countries  not
traditionally known as exporters took advantage of their recent good harvests and the
drop in exportable supplies from traditional exporting countries to make more of their
production surpluses available for export.

EU  cereals  exports  fell  heavily  in  2002.  Exports  of  soft  wheat  were  estimated  at
around 8.0 million tonnes versus 15.0 million tonnes in the 2002 budget, exports of
barley amounted to 6.0 million tonnes versus 8.5 million tonnes in the 2002 budget
and,  finally,  exports  for  other  cereals  amounted  to  2.5  million  tonnes  versus
2.6 million  tonnes  in  the  budget.  These  falls  in  volume  were  due  to  the  impact  of
increased competition from exports by third countries and especially the republics of
the  former  Soviet  Union  whose  overall  effect  was  not  only  that  EU  cereals  exports
fell but EU imports of cereals almost doubled compared to the same period in 2001.

These  restraining  effects  on  the  volume  of  EU  exports  were  further  accentuated  by
the rise of the euro against the US dollar. Following on from 2001's historically weak
levels against the US dollar, the euro strengthened somewhat over the course of the
year  and on  average  for  the  year it stood at a parity of €1 = $0.91 compared to  the
level of €1 = $0.89 used in the establishment of the 2002 budget. While in the 2002
budget no export refunds were foreseen for soft wheat by the end of the budget year
such refunds were introduced,  albeit at low  levels. At the same time, the refunds in

15

the 2002 budget for barley were increased from €19.3/t to €26.7/t while the ones for
oats were increased from €26.0/t to €34.7/t.

As  a  consequence,  payments  for  export  refunds  over-spent  the  2002  budget
appropriations by €19.0 million.

Arable crops and weather conditions

In  terms  of  weather,  the  2002  agricultural  year  got  off  to  a  good  start  with  autumn
2001 field preparation and sowing of winter cereals occurring under conditions which
were almost optimal and generally much more favourable than for the previous year.
While  the  autumn  period  ended  with  unseasonably  cold  weeks  across  Europe  in
December  2001  and  in  January  2002,  raising  some  concern  for  frost  damage,  the
subsequent  conditions  during  the  winter  season  were  generally  favourable,  with
mainly  higher  than  average  temperatures  and  a  favourable  spell  for  spring  crop
sowing preparations.

During  the  spring  of  2002  the  climatic  conditions  were  as  a  whole  satisfactory  for
crop growth and farming operations. The Iberian Peninsula, the South of Italy (with
the  exception  of  the  Mezzogiorno,  Sicily  and  Sardinia)  and  Greece  received  good
levels  of  rainfall,  allowing  partial  replenishment  of  water  reserves  and  with  a
resulting  potential  impact  on  durum  wheat  production.  Higher  than  seasonal
temperatures  at  the  end  of  April  and  May  boosted  crop  development  especially  in
central and northern countries.

However,  in  the  Mediterranean  areas  a  wave  of  peak  temperatures  in  June  boosted
summer  crop  growth  but  led  to  severe  drought  in  Southern  Italy.  Furthermore,  the
situation generally worsened in July and August with excessive rain in many central
European  Member  States,  especially  in  Germany  and  Austria.  This  resulted  in
saturated soils and flooding, hampering straw cereals harvesting operations or causing
local damage in many areas and leading to loss of harvest and grazing land.

In order to alleviate the plight of farmers in these areas, the Commission decided in
late August, via the Commission Regulations (EC) Nos 1519/2002 and 1535/2002, to
advance 50% of the area and set-aside payments for arable crops (for the marketing
year  2002/03),  in  certain  regions  of  Germany  and  Italy,  to  the  2002  budget  year
instead of having them paid in the 2003 budget year. This expenditure, which was not
foreseen in the 2002 budget, amounted to approximately €847.0 million.

As a consequence, payments for area aids and set-aside amounted to €18.040 million,
thus over-spending the budget appropriation by €769 million.

Intervention, other than storage, of cereals

The  quantities  for  which  compensatory  and  premiums  for  potato  starch,  production
refunds  paid  for  starch  as  well  as  the  aid  to  Portuguese  producers  of  cereals  were
lower than the ones which had been retained in the 2002 budget.

As  a  consequence,  payments  for  these  interventions  under-spent  the  budget
appropriations by –€51 million.

This  chapter's  overall  appropriations  were  over-implemented  by  approximately
€674.0 million.

16

CHAPTER B1-11 – SUGAR

Article

Heading

B1-110
B1-111
B1-119

Refunds on sugar and isoglucose
Intervention for sugar
Other

TOTAL
CHAPTER B1-11

SUGAR

Budget
appropriations
(a)

1 190.0
211.0
0.0

1 401.0

Expenditure

(b)

1 168.2
227.3
0.4

1 395.9

€million

Over -/under-
implementation
(a) – (b)

–21.8
+ 16.3
+ 0.4

–5.1

The  quantities  of  sugar  exported  with  refunds  at  approximately  2.5  million  tonnes
were slightly lower when compared to the level of 2.7 million tonnes retained in the
2002 budget for the marketing year 2001/02.

As  a  consequence,  payments  for  export  refunds  under-spent  the  2002  budget
appropriations by –€22.0 million.

However, the quantities for which refunds for the sugar used by the chemical industry
were higher at approximately 0.36 million tonnes for the marketing year 2001/02 as
compared to the level of 0.33 million tonnes in the establishment of the 2002 budget.

As a consequence, payments for refunds for the sugar used by the chemical industry
over-spent the 2002 budget appropriations by €18.0 million.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately –€5.0 million.

CHAPTER B1-12 – OLIVE OIL

Article

Heading

Budget
appropriations
(a)

B1-120
B1-121

B1-123
BI-124
BI-129

schemes

Refunds on olive oil
Production  aid  and 
related to production of olive oil
Storage measures for olive oil
Other intervention for olive oil
Other

0.0
2 330.0

14.0
24.0
–2.0

Expenditure

(b)

0.0
2 295.8

9.4
26.6
–2.6

TOTAL
CHAPTER B1-12

OLIVE OIL

2 366.0

2 329.3

€million

Over -/under-
implementation
(a) – (b)

0.0
–34.2

–4.6
+ 2.6
–0.6

–36.7

With  regard  to  the  production  aid  for  olive  oil,  Member  States  paid  approximately
€56.0 million for outstanding balances for pr evious marketing years which were not
foreseen in the 2002 budget. At the same time, Member States did not pay the totality
of the aids due for the marketing year 2000/01 involving an amount of approximately
€89.0 million.

As  a  consequence,  payments  for  production  aid  for  olive  oil  under-spent  the  2002
budget appropriations by –€34.0 million.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately –€37.0 million.

17

CHAPTER B1-13 – DRIED FODDER AND GRAIN LEGUMES

Article

B1-130
B1-131
B1-139

Heading

Production aid for dried fodder
Production aid for grain legumes
Other

TOTAL
CHAPTER B1-13

DRIED FODDER AND GRAIN
LEGUMES

Budget
appropriations
(a)

313.0
72.0
0.0

385.0

Expenditure

(b)

317.2
72.9
–1,8

388.3

€million

Over -/under-
implementation
(a) – (b)

+ 4.2
+ 0.9
–1.8

+ 3.3

In order to limit budgetary expenditure, production aid for dried fodder is subject to a
stabiliser  system.  The  eligible  quantities  for  the  aid  are  subject  to  a  maximum
guaranteed quantity  of  4 412  million  tonnes  both  for  heat-dried  fodder  and  for  sun-
dried  fodder.  Where  this  maximum  guaranteed  quantity,  is  exceeded,  the  aid  is
correspondingly reduced. The 2002 budget was established on the hypothesis that the
quantities  to  be  produced  in  the  marketing  year  2001/02  would  amount  to
4 700 million  tonnes  involving  a  6.2%  abatement  of  the  rate  of  aid.  However,  the
quantities produced in this marketing year were lower at approximately 4 421 million
tonnes, thus, lowering the abatement to 0.3% versus the 6.2% in the 2002 budget.

Therefore, the rate of aid paid for the quantities produced in this marketing year was
higher than the one in the 2002  budget and, consequently, total  expenditure  for this
scheme was higher by €4.0 million.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  over-implemented  by
approximately €3.0 million.

this  chapter, 

CHAPTER B1-14 – FIBRE PLANTS AND SILKWORMS

Article

B1-140
B1-141
B1-142
B1-149

Heading

Fibre flax and hemp
Aid for cotton
Silkworms
Other

TOTAL
CHAPTER B1-14

FIBRE PLANTS AND SILKWORMS

Budget
appropriations
(a)

21.0
934.0
1.0
0.0

956.0

Expenditure

(b)

12.2
804.0
0.6
–0.4

816.4

€million

Over -/under-
implementation
(a) – (b)

–8.8
–130.0
–0.4
–0.4

–139.6

In  order  to  limit  the  increase  in  production  and  the  resulting  expenditure,  aid  for
cotton is subject  to a stabiliser system. Where the  maximum  guaranteed quantity of
1 031 000 t, fixed at 782 000 t for EL and at 249 000 t for E, is exceeded, the aid is
reduced in the country responsible for the over-run.

Overall  production  for  the  marketing  year  2001/02  at  about  1.6  million  tonnes  was
higher than the level on which the 2002 budget was drawn up (1.4 million tonnes). In
Spain, actual production of  approximately  0.34 million tonnes was slightly over the
level of 0.31 million tonnes taken into account when the 2002 budget was drawn up.
In Greece, actual production of approximately 1.25 million tonnes  was significantly
above the level of 1.09 million tonnes taken into account when the 2002 budget was
drawn up. These higher production figures led to a more than proportionate increase
in  the  stabiliser  abatements  applied  to  the  rate  of  aid.  As  a  result  of  the  stabiliser

18

system,  the  overrun  of  the  maximum  guaranteed  quantity  did  not  give  rise  to  any
additional expenditure.

The  level  of  aid  for  cotton  is  also  determined  by  the  difference  between  the  guide
price  of  cotton  (€1 063/t)  and  the  actual   world  market  price  (around  €185/t)  which
turned out to be lower than the level allowed for when the 2002 budget was drawn up
(around €204/t).

These factors  led to fixing  the rate of  aid  for Greece at a  level lower  than  the  level
retained when the 2002 budget was drawn up. Consequently, the expenditure incurred
for the cotton sector in Greece was lower as compared to the appropriations foreseen
in the budget.

As  a  consequence,  payments  for  aid  for  cotton  amounted  to  €804.0  million,  thus
under-spending the budget by –€130.0 million.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
its  overall  appropriations  were  under-implemented  by
this  chapter, 
under 
approximately –€140.0 million.

CHAPTER B1-15 – FRUITS AND VEGETABLES

Article

B1-150
B1-151
B1-159

TOTAL
CHAPTER B1-15

Heading

Fresh fruits and vegetables
Processed fruits and vegetables
Other

Budget
appropriations
(a)

917.0
734.0
–1.0

Expenditure

(b)

804.0
757.9
–10.4

FRUITS AND VEGETABLES

1 650.0

1 551.4

€million

Over -/under-
implementation
(a) – (b)

+ 113.0
–23.9
–9.4

–98.6

Fresh fruits and vegetables

Early  estimates  indicate  a  very  marginal  increase  in  fruit  production  for  2002  (up
0.6% on 2001), while production of vegetables remained essentially unchanged from
the  levels  of  the  previous  year.  As  regards  crop  prices,  increases  were  recorded  for
vegetables (vegetables up 8.5%) and for fruit (up 7.0%).

Due  to  this  favourable  market  situation,  market  withdrawals  of  fruit  and  vegetables
were  substantially  reduced  by  comparison  to  the  quantities  used  when  the  2002
budget was established.

As  a  consequence,  payments  for  financial  compensation  for  the  quantities  of  fruits
and  vegetables  withdrawn  from  the  market  amounted  to  €61.0  million, thus,  under-
spending the budget appropriations by –€82.0 million.

With  regard  to  bananas,  the  quantities  produced  in  2001  were  approximately  5%
lower  than  the  level  retained  when  the  2002  budget  was  established.  Equally,
production for 2002 is forecast to be approximately 7% lower than the level retained
when  the  2002  budget  was  established.  The  resulting  high  market  prices  led  to  a
lower rate of aid (–21%) for bananas in 2001 when compared to the rate in the 2002
budget.

As  a  consequence,  payments  for  aid  for  bananas  amounted  to  €212.0  million,  thus
under-spending the budget appropriations by –€90.0 million.

19

With regard to nuts, aid is paid for quality improvement plans. The Council, in view
of  adoption  of  new  rules  for  this  sector,  decided  to  extend  expiring  plans  by  one
further year.

As  a  consequence,  aid  payments  for  nuts  amounted  to  €97.0  million,  thus,  over-
spending the budget appropriations by €52.0 million.

Processed fruits and vegetables

With  regard  to  dried  grapes,  the  aid  was  paid  for  lower  areas  than  the  ones  in  the
2002 budget.

As  a  consequence,  aid  payments  for  dried  grapes  amounted  to  €113.0  million,  thus
under-spending the budget appropriations by –€14.0 million.

With  regard  to  processed  citrus  fruits,  the  processing  aid  was  paid  for  higher
quantities  of  oranges  and  clementines  of  the  current  marketing  year  2001/02  as
compared  to  the  quantities  retained  in  the  2002  budget.  Furthermore,  this  budget
foresaw  that  €50.0  million  would  be  paid  as   balances  for  the  processing  aid  of
previous marketing years. Eventually, such payments amounted to €63.0 million.

As  a  consequence,  processing  aid  payments  for  citrus  fruit  amounted 
€265.0 million, thus over-spending the bud get appropriations by €34.0 million.

to

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
its  overall  appropriations  were  under-implemented  by
this  chapter, 
under 
approximately –€99.0 million.

CHAPTER B1-16 – PRODUCTS OF THE WINE-GROWING SECTOR

Article

B1-160

B1-161

B1-162

B1-163
B1-164

B1-165
B1-169

Heading

Budget
appropriations
(a)

Refunds  on  products  of  the  vine-growing
sector
Intervention  for  products  of  the  vine-
growing sector
Taking-over  of  alcohol  from  compulsory
distillation
Aid the for use of must
Permanent  abandonment  premiums 
respect of areas under wines
Restructuring and conversion of vineyards
Other

in

25.0

493.0

284.0

153.0
16.0

422.0
–1.0

Expenditure

(b)

23.8

489.2

261.2

141.2
14.0

424.2
–4.9

TOTAL
CHAPTER B1-16

PRODUCTS OF THE WINE-GROWING
SECTOR

1 392.0

1 348.7

€million

Over -/under-
implementation
(a) – (b)

–1.2

–3.8

–22.8

–11.8
–2.0

+ 2.2
–3.9

–43.3

The sector's balance sheet

Total production of wine for the marketing year 2001/02 amounted to approximately
158.0 million hl versus 176.0 million hl in the previous marketing year. In the budget
year  2002,  domestic  consumption  of  wines  stood  at  approximately  125.0  million  hl
versus  the  level  of  127.0  million  hl  in  the  2002  budget.  Exports  amounted  to
11.6 million hl, i.e. at approximately the level of 12.0 million hl in the 2002 budget.
Industrial, distillations and other uses amounted to 35.0 million hl versus the level of
37.7 million hl in the 2002 budget. Alcohol stocks in public storage at 3.6 million hl

20

were  much  higher  than  the  level  of  approximately  2.2  million  hl  presumed  in  the
2002 budget.

Distillations

The  reduction  in  wine  production  led  to  decreasing  the  quantity  for  potable  alcohol
distillations  to  12.0  million  hl  instead  of  13.0  million  hl  in  the  2002  budget.  The
quantity subject to crisis distillation set at 8.0 million hl corresponds to the quantity
foreseen in the 2002 budget. However, delays in implementing the crisis distillations,
notably  in  France,  led  to  an  under-implementation  of  the  budget  foreseen  for  this
measure by –€16.0 million and the subsequent  displacement of expenditure from the
2002  to  the  2003  budget.  On  the  other  hand,  expenditure  for  the  compulsory
distillation  of  by-products  of  wine-making  was  slightly  higher  due  to  payments  of
approximately €7.0 million for 
the marketing year 2000/01 which were not foreseen
when  the  2002  budget  was  established.  Finally,  the  quantity  (approximately
15.0 million  hl)  of  wine  and  grape  must  under  private  storage  was  higher  than  the
initial quantity foreseen in the 2002 budget (13.5 million hl), thus resulting in higher
expenditure for intervention storage of wine and grape must of €5.5 million.

In total, payments for intervention for products of the vine-growing sector amounted
to €489.0 million, thus under-spending the  budget appropriations by –€3.8 million.

Intervention

The reduced volume of distillations led to lower quantities of alcohol entering public
storage during the current financial year. For the budget year 2002, opening alcohol
stocks amounted to approximately 2.2 million hectolitres while final stocks stood at
approximately  3.6  million  hectolitres.  Purchases  and  sales  for  the  year  were
approximately  2.1  and  0.4  million  hl  respectively  and  they  were  lower  than  the
quantities in the 2002 budget. Finally, aids for private storage of alcohol were slightly
lower by –€2.7 million because the quantities of  alcohol involved were slightly lower
at  approximately  0.98  million  hl  versus  the  quantity  of  1.04  million  hl  in  the  2002
budget.

As a consequence, payments for storage of alcohol amounted to €261.0 million, thus
under-spending the budget appropriations by –€23.0 million.

Use of must

The  quantities  of  must  used  were  lower  than  the  quantities  retained  in  the  2002
budget.

As a consequence,  aid payments  for  uses of must  amounted to €141.0  million, thus
under-spending the budget appropriations by –€12.0 million.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately –€43.0 million.

21

CHAPTER B1-17 – TOBACCO

Article

B1-170
B1-175

B1-179

Heading

Premiums for tobacco
Community 
information
Other

funds 

for 

research  and

TOTAL
CHAPTER B1-17

TOBACCO

Budget
appropriations
(a)

970.0
15.0

–2.0

983.0

Expenditure

(b)

951.8
11.9

–0.5

963.2

€million

Over -/under-
implementation
(a) – (b)

–18.2
–3.1

+ 1.5

–19.8

In  order  to  bring  production  under  control,  the  common  organisation  of  the  market
limits  the  amount  of  the  premium  by  means  of  a  system  of  quotas,  established
separately by variety and by Member State. For the 2001 harvest, the adjusted quota
ceiling was approximately 0.344 million tonnes of raw tobacco. The payments of the
tobacco premium for the 2001 harvest  are made in the  2002  budget  year.  The 2002
budget was under-implemented by approximately -€18.0 million because EL, B and P
did not pay all the estimated tobacco premiums due by the end of the budget year.

The  2002  budget  included  appropriations  of  €15.0  million  for  the  Community  fund
for  research  and  information  for  which  expenditure  amounted  to  approximately
€12.0 million, thus, resulting in an under-spending of –€3.0 million.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately –€20.0 million.

CHAPTER B1-18 – OTHER PLANT SECTORS OR PRODUCTS

Heading

Article

B1-180
B1-181
B1-182
B1-189

Seeds
Hops
Rice
Other

TOTAL
CHAPTER B1-18

OTHER PLANT SECTORS OR
PRODUCTS

Seeds

Budget
appropriation
(a)

110.0
12.0
178.0
0.0

300.0

Expenditure

(b)

99.0
12.5
191.6
–0,1

303.0

€million

Over -/under-
implementation
(a) – (b)

–11.0
+ 0.5
+ 13.6
–0.1

+ 3.0

The 2002 budget for seeds was under-implemented by approximately –€11.0 million
because DK and FR did not pay all the estimated aids due by the end of the budget
year.

Rice

The 2002 budget for export refunds for rice appears to be over-implemented because
certain Member States had erroneously declared export refunds for food aid involving
rice in this budget chapter instead of declaring it correctly in budget Chapter 32.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  over-implemented  by
approximately €3.0 million.

this  chapter, 

22

3.7.

TITLE B1-2 – Animal products

Introduction

The  appropriations  for  this  title  of  the  budget  amounted  to  €10 859.6  million  while
payments amounted to approximately €10  118.7 million, i.e. an implementation rate
of  93.2%  of  the  budget  appropriations.  This  under-implementation  was  primarily
attributable  to  the  payments  for  beef  and  veal  and  sheep-meat  (chapters  B1-21  and
B1-22  of  the  budget)  while  chapter  B1-20  for  milk  was  over-implemented  (see
annexed Table 6 for details).

CHAPTER B1-20 – MILK AND MILK PRODUCTS

Article

B1-200
B1-201

B1-202
B1-203
B1-204
B1-205
B1-207
B1-209

Heading

Budget
appropriations
(a)

Refunds on milk and milk products
Intervention  storage  of  skimmed-milk
powder
Aid for skimmed milk
Intervention storage of butter and cream
Other measures relating to butterfat
Intervention for other milk products
Financial contribution by milk producers
Other measures

977.0
0.0

451.0
3.0
450.0
74.0
–36,0
–7.0

Expenditure

(b)

1 159.6
85.8

446.0
300.0
458.9
68.5
–150.3
–8.3

TOTAL
CHAPTER B1-20

MILK AND MILK PRODUCTS

1 912.0

2 360.0

€million

Over -/under-
implementation
(a) – (b)

+ 182.6
+ 85.8

–5.0
+ 297.0
+ 8.9
–5.5
–114.3
–1.3

+ 448.0

The sector's balance sheet

Total  production  of  butter  in  2002  amounted  to  approximately  1.93  million  tonnes
versus  1.86  million  tonnes  in  the  previous  marketing  year.  In  2002,  domestic
utilisation  of  butter  was  estimated  at  approximately  1.72  million  tonnes,  i.e.  at  the
level in the 2002 budget, out of which exports amounted to approximately 0.2 million
tonnes equally at approximately the level in the 2002 budget. Butter stocks in public
storage  at  0.17  million  tonnes  were  much  higher  than  the  level  of  approximately
0.03 million tonnes presumed in the 2002 budget.

On  the  other  hand,  total  production  of  skimmed  milk  powder  (SMP)  in  2002
amounted  to  approximately  1.04  million  tonnes  versus  0.95  million  tonnes  in  the
previous  marketing  year.  In  2002,  domestic  utilisation  of  SMP  was  estimated  at
approximately 0.86 million tonnes, i.e. at the level retained in the 2002 budget, out of
which exports amounted to approximately 0.09 million tonnes, which is much lower
than the level of 0.21 million tonnes in the 2002 budget. At 0.15 million tonnes SMP
stocks  in  public  storage  were  much  higher  than  the  level  of  approximately
0.01 million tonnes in the 2002 budget.

In  the  course  of  2002,  both  the  internal  and  external  dairy  markets  deteriorated
significantly when compared to the more favourable assumptions used in drawing up
the  2002  budget.  Following  the  noticeable  drop  in  prices  over  the  second  half  of
2001,  average  EU  butter  prices  stayed  relatively  depressed  throughout  2002,
remaining at levels close to 90–92% of the intervention price throughout the year and
well  below  the  price  levels  of  recent  years.  Average  EU  prices  for  skimmed  milk
powder began the year at just above the intervention price. However, the fall in prices
experienced at the end of 2001 continued into 2002 in view of the significant rise in

23

production, with average prices only bottoming out at the end of May at around 2.4%
below  the  intervention  price.  Prices  only  showed  a  sustained  improvement  from
September  onwards,  with  average  prices  generally  moving  above  the  intervention
price over the latter part of the year as external demand for EU milk powder increased
in reaction to the low, drought-affected production in Australia.

International market

International  prices  for  dairy  products  fell  for  most  of  the  year  but  recovered
somewhat  in  the  latter  part  of  2002.  Milk  powder  prices  showed  the  greatest  rise
while butter and cheese prices rose less  noticeably. Nevertheless, prices of  all dairy
products remained well below those twelve months earlier.

As  a  consequence,  export  refund  rates  for  dairy  products  had  to  be  increased
substantially (with the exception of the ones for cheese) by comparison to the levels,
which had been retained in the 2002 budget. This increase offset the downward level
of dairy products' export volumes where the ones for skimmed milk powder, cheese
and other exports fell while the ones for butter and butter-oil remained more or less
stable when compared to the hypotheses in the 2002 budget.

As a consequence, payments for export refunds amounted to €1 160.0 million, thus,
over-spending the budget by €183.0 million.

Intervention

Important increases  in  intervention  stocks  for  both  SMP  and  butter  occurred  during
2002.

Intervention stocks of skimmed milk powder, which had been completely run down
by October 2000 and remained so during 2001, started up again in March 2002 and
increased sharply from then onwards to reach a level of just under 0.15 million tonnes
by the end of September 2002. This level of purchases had not been  foreseen in the
2002 budget.

As a consequence, payments for public storage of skimmed milk powder amounted to
€86.0 million. No appropriations we re foreseen in the 2002 budget for this measure.

Intervention  purchases  of  butter  also  increased  substantially  in  2002  by  about
0.16 million  tonnes  versus  a  volume  of  0.02  million  tonnes  foreseen  in  the  2002
budget.  Intervention  sales  remained  at  the  level  foreseen  in  the  2002  budget,  i.e.  at
approximately  0.03  million  tonnes.  Consequently,  intervention  stocks  of  butter  rose
from  just  under  0.03  million  tonnes  at  the  start  of  the  year  to  reach  a  level  of
0.17 million tonnes by the end of the 2002 budget year.

As a consequence, payments for public storage of butter amounted to €300.0 million,
thus over-spending the budget appropriations for this scheme by €297.0 million.

The  super-levy  was  collected  for  a  volume  of  milk  amounting  to  approximately
0.42 million tonnes versus the volume of 0.1 million tonnes in the 2002 budget.

As  a  consequence,  receipts  under  the  milk  super-levy  amounted  to –€150.0  million
versus the amount of –€36.0 million in the  2002 budget. The difference between these
two amounts is equivalent to a decrease in expenditure of –€114.0 million.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  over-implemented  by
this  chapter, 
approximately €448.0 million.

24

CHAPTER B1-21 – BEEF AND VEAL

Article

B1-210
B1-211
B1-212
B1-219

Heading

Budget
appropriations
(a)

Refunds on beef/veal
Intervention storage of beef/veal
Intervention other than storage of beef/veal
Other

488.0
522.0
7 093.0
–8.0

Expenditure

(b)

386.7
104.1
6 610.5
–29.3

€million

Over -/under-
implementation
(a) – (b)

–101.3
–417.9
–482.5
–21.3

TOTAL
CHAPTER B1- 21

BEEF/VEAL

The sector's balance sheet

8 095.0

7 071.9

–1 023.1

The 2002 agricultural year was mainly characterised by a noticeable recovery in the
cattle sector from the recent BSE and foot and mouth disease crises, with a significant
improvement in beef and veal consumption, and with prices in the sector increasing
by more than 6% on average.

Beef and veal production in 2002 remained strongly influenced by the disturbances
of recent  years.  The low prices which  became a feature of the market  from  autumn
2000 onwards and which persisted for most of 2001, together with an atmosphere of
uncertainty  linked  to  weak  and  volatile  demand,  seem  to  have  led  to  a  subsequent
reduction in production capacity. On top of this, the special measures decided on in
June 2001 to stabilise the market had further reduced incentives for production. As a
consequence,  beef  and  veal  production  in  2002  is  expected  to  reach  7.6  million
tonnes, an increase of only 2.9% on last year's level and still some 3% down on levels
in 1999. In 2002, beef consumption recovered strongly with total domestic utilisation
of  beef  estimated  at  approximately  7.3  million  tonnes,  i.e.  at  a  level  slightly  higher
than  the  7.0  million  tonnes  hypothesis  in  the  2002  budget.  Exports  amounted  to
approximately  0.56  million  tonnes  compared  to  0.62  million  tonnes  retained  in  the
2002  budget.  Beef  stocks  in  public  storage  at  0.22  million  tonnes  in  carcass
equivalent  weight  were  much  lower  than  the  level  of  approximately  0.54 million
tonnes in the 2002 budget.

International market

In the international meat markets, overall prices fell in 2002 as a result of rising levels
of  supply.  A  very  positive  development  was  the  recovery  in  meat  exports  from  the
crisis-hit levels of the year before when trade restrictions due to the BSE and foot and
mouth disease crises virtually stopped EU exports of meat products.

Against this international background export refund rates were raised. However, the
actual quantities exported amounted to approximately 0.56 million tonnes versus the
quantity of 0.62 million tonnes in the 2002 budget.

As  a  consequence,  payments  for  export  refunds  amounted  to  €387.0  million,  thus,
under-spending the budget appropriations by –€101.0 million.

Intervention

The  2002  budget  assumed  that  production  of  beef  for  the  year  would  amount  to
7.72 million tonnes while the actual level was approximately 7.6 million tonnes. This
factor  combined  with  the  recovery  in  consumption  led  to  lower  volumes  of  beef
destined  for  public  storage.  While  opening  stocks  of  beef  stood  at  approximately

25

0.23 million  tonnes  in  carcass  equivalent  weight,  i.e.  approximately  at  the  level
foreseen  in  the  2002  budget,  purchases  of  beef  into  intervention  amounted  to  only
0.020 million tonnes instead of 0.32 million tonnes foreseen in the budget. Sales from
intervention  were  slightly  higher  at  0.025  million  instead  of  the  0.018  million
foreseen in the budget. Therefore, closing stocks stood at approximately 0.22 million
tonnes  in  carcass  equivalent  weight,  which  was  much  lower  than  the  level  of
0.54 million  tonnes  foreseen  in  the  2002  budget.  As  a  consequence  technical  and
financial  costs  for  public  storage,  and  in  particular  depreciation  costs,  were  much
lower when compared to the level used in the 2002 budget.

As  a  consequence,  payments  for  public  storage  amounted  to  €100.0  million,  thus
under-spending the budget appropriations by –€420.0 million.

Premium schemes

The  numbers  of  animals  eligible  for  premium  payments  in  the  2002  budget  were
based on the actual reduced numbers of animals for which the premium was paid in
2001. Therefore, a lower number of animals for the over 30 months scheme in the UK
led  to  an  under-implementation  of  the  2002  budget  by –€148.0  million  while
payments  under  the  purchase  for  destruction  and  special  purchase  schemes  were
under-implemented  by  approximately –€136.0  million.  Furthermore,  the  premium
payable  on  slaughtered  adult  animals  involved  payments  for  only  17  million  cattle
(about 72% of the ceiling) instead of 20.1 million head used in the 2002 budget, thus
leading to an under-implementation of €159.0 million. On the other hand, the reduced
number  of  primable  animals  led  to  an  increase  in  payments  for  the  extensification
premium because of an increase in the numbers of animals qualifying for the highest
rate of premium. As a consequence, payments for the extension  premium amounted
to €943.0 million versus the amount of €891.0 million retained in the budget.

As a consequence, all premium payments amounted to €6 611.0 million, thus under-
spending the budget appropriations by –€482.0 million.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately –€1 023.0 million.

CHAPTER B1-22 – SHEEPMEAT AND GOATMEAT

Article

B1-221

B1-222

B1-229

Heading

Intervention  in  the  form  of  storage  of
sheepmeat and goatmeat
Intervention  other 
sheepmeat and goatmeat
Other measures

storage  of

than 

TOTAL
CHAPTER B1- 22

SHEEPMEAT AND GOATMEAT

Private storage for sheepmeat

Budget
appropriations
(a)

8.0

665.0

–1.0

672.0

Expenditure

(b)

0.2

553.8

–1.5

552.5

€million

Over -/under-
implementation
(a) – (b)

–7.8

–111.2

–0.5

–119.5

The budget assumed that approximately 5 000 tonnes of sheepmeat would be entering
private  storage  in  the  course  of  2002.  Eventually  the  quantity  involved  was
approximately 140 tonnes.

26

As  a  consequence,  payments  for  private  storage  for  sheep-meat  amounted  to
€0.2 million, thus under-spending the bud get appropriations by –€7.8 million.

Ewe and goat premiums

The  ewe  premium  paid  to  producers  covers  the  difference  between  the  institutional
price and the arithmetic mean of market prices recorded over the marketing year. For
the 2001 marketing year, the actual average market price was €4 116.8/t as against the
amount of €4 000/t used when the 2002 budget was established. This led to fixing a
lower than otherwise level of premium at €8.949/sheep and €7.159/goat as compared
to  the  rates  of  €10.779/sheep  and  €8.623/goat  respectively  in  the  2002  budget.
Furthermore, the numbers of ewes and goats eligible for the premium were subject to
a slight downward revision to 70.7 million heads as compared to 72.7 million heads
in  the  2002  budget.  The  fixed  flat-rate  ewe  and  goat  premium  in  less-favoured  and
mountain areas was fixed at €6.641/sheep  and at €6.977/goat for the 2001 marketing
year.  The  numbers  of  ewes  and  goats  eligible  for  the  fixed  flat  rate  premium  were
equally revised downward to 56.4 million heads as compared to 57.3 million heads in
the 2002 budget.

As  a  consequence,  payments  for  the  ewe  and  goat  premiums  amounted  to
€554.0 million, thus under-spending the bud get appropriations by –€111.0 million.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately –€120.0 million.

CHAPTER B1-23 – PIGMEAT, EGGS, POULTRY AND
OTHER ANIMAL PRODUCT AID MEASURES

Article

B1-230
B1-231
B1-232
B1-239

Heading

Pigmeat
Eggs and poultrymeat
Other animal product aid measures
Other

Budget
appropriations
(a)

70.0
78.0
16.5
–1.0

Expenditure

(b)

30.1
77.0
14.3
–2.3

TOTAL
CHAPTER B1-23

PIGMEAT, EGGS, POULTRY AND OTHER
ANIMAL PRODUCT AID MEASURES

163.5

119.2

€million

Over -/under-
implementation
(a) – (b)

–39.9
–1.0
–2.2
+ 1.3

–44.3

Export refunds for pigmeat

The  2002  budget  had  initially  foreseen  an  export  of  approximately  0.27  million
tonnes of fresh or frozen pigmeat carcasses or cuts at an average refund rate of €100/t.
Market conditions led to setting the refund rate at zero during the 2002 budget year.
Furthermore, as regards sausages and conserves, the quantities actually exported with
refunds  were  approximately  0.07  million  tonnes  compared  with  0.17 million  tonnes
when  the  2002  budget  was  established.  The  corresponding  average  refund  rate  was
set at €268/t as compared with the rate of €250/t in the 2002 budget.

As  a  consequence,  payments  for  export  refunds  for  pigmeat  amounted  to
€27.0 million, thus under-spending the bud get appropriations by –€43.0 million.

27

Export refunds for eggs and poultry-meat

Exports of eggs were smaller at approximately 0.08 million tonnes versus the quantity
of 1.0 million tonnes retained in the 2002 budget. The level of the export refund rates
for egg products was lower than the corresponding level in the 2002 budget. Equally,
exports  of  chicken  were  smaller  at  approximately  0.23  million  tonnes  versus  the
quantity of 0.29 million tonnes in the 2002 budget. The level of the export refund rate
for  the  other  chicken  category  of  products  set  at  approximately  €260/t  was  higher
than the corresponding rate of €245/t in the 2002 budget.

As a consequence, payments for export refunds for eggs and poultrymeat amounted to
€77.0 million, thus under-spending the bud get appropriations by –€1.0 million.

Specific aid for bee-keeping

Payments  for  the  financing  of  improvement  programmes  for  the  production  and
commercialisation  of  honey  amounted  to  €14.3  million  versus  the  amount  of
€16.5 million foreseen in the 2002 budget.

As  a  consequence, 
–€2.0 million.

the  budget  appropriations  were  under-implemented  by

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately -€44.0 million.

CHAPTER B1-26 – EUROPEAN FISHERIES GUARANTEE FUNDS

Article

B1-260
B1-269

Heading

Intervention for fishery products
Other measures

TOTAL
CHAPTER B1-26

EUROPEAN FISHERIES GUARANTEE
FUNDS

Budget
appropriations
(a)

17.1
0.0

17.1

Expenditure

(b)

15.5
0.1

15.4

€million

Over -/under-
implementation
(a) – (b)

–1.6
–0.1

–1.7

See also comments on the implementation of this chapter in point 3.13.

3.8.

TITLE B1-3 – Ancillary expenditure

Introduction

The appropriations for this title of the budget amounted to €1 426.6 million while its
implementation resulted to payments amounting to €1 062.4 million, i.e. there was an
under-utilisation  amounting  to –€364.2  milli on.  This  under-utilisation  was  mostly
attributable to chapter B1-33 on veterinary and plant-health measures.

28

CHAPTER B1-30 – REFUNDS ON CERTAIN GOODS OBTAINED
BY PROCESSING AGRICULTURAL PRODUCTS

Article

B1-300

B1-301

B1-309

Heading

Refunds  on  cereals  exported  in  the  form
of certain spirit drinks
Refunds  on  certain  goods  obtained  by
processing agricultural products
Other

TOTAL
CHAPTER B1- 30

REFUNDS ON CERTAIN GOODS
OBTAINED BY PROCESSING
AGRICULTURAL PRODUCTS

Recovery of unduly paid amounts

Budget
appropriations
(a)

1.0

414.0

0.0

415.0

Expenditure

(b)

0.2

413.5

–4.1

409.6

€million

Over -/under-
implementation
(a) – (b)

–0.8

–0.5

–4.1

–5.4

The  2002  budget  did  not  foresee  any  amount  in  Article  B1-309  for  recoveries  of
amounts  unduly  paid.  However,  actual  collections  from  these  items  amounted  to
–€4.1 million.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately –€5.0 million.

CHAPTER B1-31 – FOOD PROGRAMMES

Article

B1-310

B1-311
B1-312
B1-314
B1-319

Heading

Budget
appropriations
(a)

Distribution  of  agricultural  products  to
deprived persons in the Community
Refunds in connection with food aid
School milk
Free distribution of fruits and vegetables
Other

200.0

16.0
81.0
9.0
0.0

Expenditure

(b)

155.7

5.6
73.7
8.0
–0.3

TOTAL
CHAPTER B1-10

FOOD PROGRAMMES

306.0

242.8

€million

Over -/under-
implementation
(a) – (b)

–44.3

–10.4
–10.4
–1.0
–0.3

–63.2

This  chapter's  appropriations  have  been  under-implemented  for  all  the  schemes
involved.

With  regard  to  the  distribution  of  agricultural  products  to  deprived  persons  in  the
Community, the under-run was due to the fact that certain Member States, like EL, P
and  FIN,  did  not  distribute  all  the  quantities  of  agricultural  products  as  per  the
approved plan for 2002. For details with regard to the free distribution of agricultural
products, see point 3.11.

With regard to refunds in connection with food aid, the under-run was due to under-
spending for rice where exports amounted to approximately 0.002 million tonnes of
rice as food aid versus the quantity of 0.06 million t in the 2002 budget. Furthermore,
the refunds for food aid exports of rice from IT were erroneously declared in budget
item B1-1850.

29

With  regard  to  school  milk,  the  under-run  was  due  to  the  fact  that  approximately
0.32 million t of milk were distributed in schools versus the quantity of 0.35 million t
in the 2002 budget.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
its  overall  appropriations  were  under-implemented  by
this  chapter, 
under 
approximately –€63.0 million.

CHAPTER B1-32 – PROGRAMMES FOR THE OUTERMOST REGIONS
AND THE AEGEAN ISLANDS

Article

B1-320
B1-321
B1-322
B1-323
B1-324

B1-325
B1-329

Heading

POSEIDOM
POSEIMA
POSEICAN
Aegean Islands
Fisheries programme for outermost regions

Subsidies for the supply of rice to Réunion
Other

TOTAL
CHAPTER B1-32

PROGRAMMES FOR THE
OUTERMOST REGIONS AND THE
AEGEAN ISLANDS

Budget
appropriations
(a)

45.0
40.0
116.0
26.0
Token
entry.
12.0
0.0

Expenditure

(b)

10.2
32.2
88.8
26.0
10.7

12.7
–0.5

239.0

210.1

€million

Over -/under-
implementation
(a) – (b)

–4.8
–7.8
–27.2
0.0
+ 10.7

+ 0.7
–0.5

–28.9

All  the  programmes  in  favour  of  the  outermost  regions  were,  in  varying  degrees,
under-implemented as compared to the appropriations in the 2002 budget.

For  the  "Fisheries"  programme  for  the  outermost  regions,  the  budgetary  authority
entered appropriations of €14.9 million in the "provisions" chapter B0-40 of the 2002
budget because the governing Council Regulation (EC) No 1587/98 was due to expire
on 31 December 2001. The Commission had, in the meantime, lodged a proposal to
extend  this  scheme  for  one  year.  The  Council  adopted  this  proposal  on  25 March
2002 under Regulation (EC) No 579/2002. When expenditure was incurred under this
programme,  and  considering  the  under-implementation  of  the  other  programmes  in
this  chapter,  it  was  decided  not  to  finance  it  by  transferring  the  appropriations  of
chapter  B0-40  to  the  budget  article  B1-324.  Therefore,  the  expenditure  incurred  by
the Member States under this scheme,  amounting to €10.7 million, was financed  by
transferring the requisite appropriations from other articles of this chapter. This is the
reason why this article shows an over-implementation which, however, is not a  real
one.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately –€29.0 million.

30

CHAPTER B1-33 – VETERINARY AND PLANT-HEALTH MEASURES

Article

B1-330

B1-331

B1-332

B1-333
B1-339

Heading

Animal  disease  eradication  and  monitoring
programmes  and  monitoring  of  the  physical
conditions  of  animals  that  could  pose  a
public-health risk linked to an external factor
Other  measures  in  the  veterinary,  animal
welfare and public-health field
Emergency  funds  for  veterinary  complaints
and other animal contaminations which are a
risk to public health
Plant-health measures
Other measures

Budget
appropriations
(a)

155.0

Expenditure

(b)

161.0

€million

Over -/under-
implementation
(a) – (b)

+ 6.0

10.5

400.0

4.0
0.0

7.9

50.9

3.7
0.0

–2.6

–349.1

–0.3
0.0

TOTAL
CHAPTER B1-33

VETERINARY AND PLANT-HEALTH
MEASURES

569.5

223.5

–346.0

See also comments on the implementation of this chapter in point 3.12.

CHAPTER B1-36 – MONITORING AND PREVENTATIVE MEASURES
CONCERNING THE EAGGF GUARANTEE SECTION

Article

B1-360

B1-361

TOTAL
CHAPTER B1-36

Heading

Monitoring  and  preventive  measures  –
Payments by the Member States
Monitoring  and  preventative  measures:
direct payments by the European Community

MONITORING AND PREVENTATIVE
MEASURES CONCERNING THE
EAGGF GUARANTEE SECTION

Budget
appropriations
(a)

45.2

12.1

Expenditure

(b)

27.5

5.2

€million

Over -/under-
implementation
(a) – (b)

–17.7

–6.9

57.3

32.7

–24.6

This chapter includes  the  measures  taken in  order to  reinforce  the  means of  on-the-
spot  controls  and  to  improve  the  systems  of  verification  so  as  to  limit  the  risk  of
frauds and irregularities in detriment of the Community budget. All schemes  in this
chapter were under-implemented.

With  regard  to  payments  for  these  monitoring  and  preventative  measures,  the
Member  States (with  the exception  of  the  vineyard  register  for  which  the  payments
were  made  by  the  Commission)  concerned  incurred  expenditure  amounting  to
approximately €27.5 million.

As  a  consequence,  Member  States  payments  for  monitoring  and  preventative
measures under-spent the 2002 budget appropriations by –€18.0 million.

With  regard  to  direct  payments  by  the  European  Community  for  monitoring  and
preventative measures, the Commission directly financed measures to the tune of €5.2
million versus the amount of €12.1 million in the 2002 budget.

As a consequence, direct payments for monitoring and preventative measures under-
spent the 2002 budget appropriations by -€7.0 million.

31

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
its  overall  appropriations  were  under-implemented  by
this  chapter, 
under 
approximately -€26.0 million.

See also point 4.

B1-37 – CLEARANCE OF PREVIOUS YEAR'S ACCOUNTS AND
REDUCTION/SUSPENSION OF ADVANCES UNDER CHAPTERS

Article

B1-370

TOTAL
CHAPTER B1-37

Heading

Clearance  of  previous  years'  accounts  and
reduction/suspension  of  advances  under
Chapters B1-10 to B1-39

CLEARANCE OF PREVIOUS YEAR'S
ACCOUNTS AND
REDUCTION/SUSPENSION OF
ADVANCES UNDER CHAPTERS

Budget
appropriations
(a)

–500.0

Expenditure

(b)

–235.1

€million

Over -/under-
implementation
(a) – (b)

+ 264.9

–500.0

–235.1

+ 264.9

This chapter includes the amounts credited to the EAGGF-Guarantee budget through
the clearance of accounts corrections and the reduction/suspension of advances.

With regard to the clearance of previous years' accounts, the amounts with which the
Member States have credited the EAGGF-Guarantee section budget corresponded to
the  financial  corrections  included  in  the  4  clearance  decisions  adopted  by  the
Commission  in  2002,  namely:  Commission  decisions  2002/144/EC,  2002/523/EC,
2002/461/EC  and  2002/524/EC.  The  overall  amount  of  corrections  was  equal  to
–€182.0 million versus the estimated amount  of –€400.0 million retained in the 2002
budget,  i.e.  approximately  €218.0  million  under 
the  appropriations  foreseen  in  the
budget.

With regard to the reduction/suspension of advances, the amount initially used in the
2002 budget under this item was –€100.0 million. Howe ver, in the course of the year,
an amount of –€53.0 million was taken away from the Member States advances, i.e.
approximately €47.0 million under the credit a ppropriations foreseen in the budget.

The  budgetary  appropriations  of 
approximately –€265.0 million.

See also point 5.

this  chapter  were  under-implemented  by

CHAPTER B1-38 – PROMOTION MEASURES

Heading

Budget
appropriations
(a)

Article

B1-380
B1-381

B1-382

B1-389

Promotion measures
Promotion  measures  –  direct  payments  by
the European Community
Enhancing  public  awareness  of 
common agricultural policy
Other

the

TOTAL
CHAPTER B1-38

PROMOTION MEASURES

32

Expenditure

(b)

11.8
5.1

3.5

–0.2

20,2

€million

Over -/under-
implementation
(a) – (b)

–49.2
–4.2

–5.0

–0.2

–58.6

61.0
9.3

8.5

0.0

78.8

All  of  the  promotion  measures  concerned  under  this  chapter  were  under-
implemented.

With  regard  to  promotion  measures  paid  by  the  Member  States,  payments
incurred  amounted  to  approximately  €12.0  million  versus  the  €61.0  million  in  the
2002 budget. This is the result of the fact that, late in 2002, only one new programme
was approved under the new rules, thus having only a limited financial impact on the
budget.  The  expenditure  incurred  involved  mainly  the  old  programmes  and  the
transitional programme for beef, which are currently close to expiry.

With  regard  to promotion  measures paid  directly  by the  European  Community,
the  Commission  directly financed promotion  measures to the tune of  approximately
€5.1 million versus the amount of €14.3 million in the 2002 budget.

With  regard  to  enhancing  public  awareness  of  the  common  agricultural  policy,
the  expenditure  incurred  with  regard  to  these  information  measures  on  the  CAP
amounted  to  approximately  €3.5  million  ve rsus  the  amount  of  €8.5  million  in  the
2002 budget.

Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately –€58.5 million.

CHAPTER B1-39 – OTHER MEASURES

Article

B1-390
B1-391
B1-392
B1-399

Heading

Agrimonetary aids
Direct aid scheme for small producers
Genetic resources
Other

TOTAL
CHAPTER B1-39

OTHER MEASURES

Agri-monetary aids

Budget
appropriation
(a)

271.0
0.0
0.0
–10,0

261.0

Expenditure

(b)

165.9
0.0
0.0
–7.2

158.6

€million

Over -/under-
implementation
(a) – (b)

–105.2
0.0
0.0
+ 2.8

–102.4

Agri-monetary  aids  were  under-implemented  by –€105.2  million  due  to  the  UK's
decision  not  to  fully  utilise  its  possibilities  to  grant  agri-monetary  aid,  notably  in
respect of the second and third instalments of aid to beef, sheep and milk producers.
Taking  into  consideration  the  budgetary  implementation  of  the  rest  of  the  schemes
under 
its  overall  appropriations  were  under-implemented  by
this  chapter, 
approximately –€102.0 million.

3.9.

B1-40 TITLE – Rural development

The  EAGGF  Guarantee  Section,  using  appropriations  from  subheading  1b,
part-finances (under Regulation (EC) No 1257/1999) rural development programmes,
four measures of which (early retirement, compensatory payments, afforestation and
agri-environment)  cover  the  entire  EU,  while  six  (farm  investment,  young  farmers,
training,  forestry,  processing  and  marketing,  and  adjustment  and  diversification  of
rural areas) apply outside the Objective 1 regions, where measures are financed by the
EAGGF Guidance Section.

33

For  2000–06  subheading  1b  has  been  given  €32 907 million.  This  sum  has  been
allocated  to  the  Member  States  which  were  to  establish  programmes  to  implement
rural development policy.

Of  the  total  of  89  rural  development  programmes  drawn  up  by  the  Member  States,
52 were  adopted  by  decision  of  the  Commission  in  2000,  35  in  2001  and  the
remaining two in 2002.

The  allocation  to  the  2002  budget  by  the  budgetary  authority  was  €4 595 million,
equivalent  to  the  2002  ceiling  for  subheading  1b  in  the  financial  perspective  for
2000–06.

The  amount  concerned  was  increased  by  carrying  over  €99 million  from  2001  to
2002, making the total available €4 694 million.

Outturn  in  2002  was  €4 418.9 million,  comprising  all  expenditure  actually  incurred
under the 89 programmes in force, i.e. 94.1% of the amount available. Accordingly,
contrary  to  the  forecasts  communicated  by  the  Member  States  as  at  30  September
2001,  which  suggested  an  overspend  of  €195 million,  there  was  an  underspend  of
€275.1 million in relation to the appropr iations available (€4 694 million).

Scrutiny  of  the  outturn  in  2002  by  budget  heading  shows  that  there  was
underutilisation  of  the  appropriations  available,  mainly  in  connection  with  the  new
system of supporting measures, in particular afforestation and agri-environment and,
to  a  lesser  extent,  the  processing  and  marketing  of  agricultural  products,  start-up
assistance  for  new  entrants  to  farming,  training,  investment  in  farms,  and  the
promotion of rural development.

In  contrast,  the  measures  which  greatly  exceeded  their  initial  allocation  were  the
former  schemes  for  accompanying  measures  and,  to  a  lesser  extent,  compensatory
payments.  As  a  result,  transfers  within  the  Chapter  for  adjustment  purposes  were
needed to re-balance budget resources to real implementation needs.

It was accordingly not possible in 2002 to achieve the level of implementation which
would have absorbed all the funds available.

In  the  context  of  the  carryover  of  unutilised  appropriations  from  2002  to  2003,
€49.3 million  was  carried  over  by  Commission  Decision  in  accordance  with
Article 149(3) of the new Financial Regulation.

3.10.

Breakdown by type of expenditure

There are two main categories of EAGGF Guarantee expenditure: that connected with
refunds,  and  "intervention"  expenditure, 
i.e. in  essence  direct  aid,  storage,
withdrawals  and  the  like,  and  other  expenditure.  Rural  development  expenditure,
however,  does  not  fall  into  either  category.  The  various  types  of  expenditure  are
described in detail in Annexes 14 to 16.

3.10.1. Refunds

Expenditure  in  connection  with  refunds  totalled  €3 432.3 million,  i.e. 7.9%  of
EAGGF Guarantee expenditure in 2002, a figure almost identical to the one recorded
the previous financial year.

34

3.10.2. Direct aid

Expenditure  relating  to  "direct  aid"  totalled  €28 800.8 million,  i.e. 84%  of  the
€34 275.2 million spent on intervention and 67%  of total EAGGF Guarantee Section
expenditure.  Expenditure  under  the  heading  direct  aid  is  defined  in  the  Annex
to Regulation (EC) No 1259/1999 of 17 May 1999 (OJ L 160, p. 113). This includes
area aid, set-aside for field-scale crops, aid for the production of olive oil, area aid for
flax and hemp, dried pulses, rice, raisins, premiums for tobacco, suckler cows, male
bovine animals, ewes and goats, and agrimonetary aid.

3.10.3. Storage

Expenditure on storage totalled €1 163.1 million,  i.e. 3% of intervention expenditure.
Between 1 October 2001 and 30 September 2002, the date of closure of the accounts
for public storage, the quantities and book value of the products in public intervention
storage moved as follows. The book value of stocks went up from €984.08 million at
the end of 2001 to €1 419.94 million at the end of 2002.

Stocks  of  cereals  and  rice  rose  from 7.3 to 8.4 million t,  those  of  olive  oil  fell  to
nothing,  those  of  skimmed  milk  powder  went  from  nil  to 0.15 million t,  whereas
those of butter went up from 0.03 to 0.17 million t.

Beef and veal stocks showed little change (from 0.23 to 0.22 million t), while those of
alcohol rose from 2.2 to 3.5 million hl in 2002.

The breakdown of the book value of stocks shows that the share of cereals and rice is
continuing to fall, these two products now accounting for about 52% of the total value
of  the  products  in  storage,  as  against 85%  in 2000  and 67%  in 2001.  The
remaining 48%  is  accounted  for  by  milk  products  (30%),  beef  and  veal  (15%)  and
alcohol (3%).

As  they  have  done  every  year  since 1988,  the  Commission  departments  concerned
have carried out a depreciation of the products in public intervention. They did this in
two stages: when the products were bought in, by at least 70% of the total foreseeable
loss  of  value.  At  the  end  of  the  financial  year  the  stocks  are  evaluated  and,  where
necessary, are the subject of a supplementary depreciation to bring the book value of
the  products  into  line  with  the  foreseeable  selling  price.  In  2002  the  depreciation
when  the  products  were  bought  in  totalled  €239.924 million  and  the  supplementary
depreciation at the end of the financial year was €436.329 million.

3.10.4. Set-aside and income support

Expenditure on set-aside and income support totalled €831.9 million, i.e. 2.4% of the
intervention total.

3.10.5. Others

Other  intervention-related  expenditure  totalled  €3 479.4 million,  i.e. 10.2%  of  the
total  for  intervention.  This  includes  mainly  expenditure  which  does  not  fall  in  the
categories  referred  to  above,  i.e. intervention  other  than  storage  costs  for  sugar,
production  aid  for  dried  fodder,  aid  for  cotton,  the  operational  funds  of  producers'
organisations,  production  aid  and  financial  compensation  for  encouraging  the
processing of citrus in the case of fruit and vegetables, aid for the use of musts in the
case of viticulture, aid for the use of skimmed milk powder and measures concerning
butterfats.

35

C.

3.11.

SPECIFIC ACTIVITIES

Supply  of  food  from  intervention  stocks  for  the  benefit  of  the  needy  in  the
Community

In the particularly harsh winter of 1986–87 the Community organised an emergency
programme  for  the  supply,  free  of  charge,  of  foodstuffs  to  the  worst-off  in  the
Community for a limited period.

When this emergency programme ended, the Community received many calls for this
type of measure to be applied on a permanent basis. The Commission put a proposal
to  the  Council,  which  adopted  it  as  Regulation  (EEC)  No  3730/87  laying  down
general  rules  for  the  supply  of  food  from  intervention  stocks  to  designated
organisations  for  distribution  to  the  most  deprived  persons  in  the  Community5.  The
Commission adopted an implementing regulation (Regulation (EEC) No 3149/926, as
last amended by Regulation (EC) No 1921/20027).

Since then the Commission has adopted a distribution plan each  year specifying the
budget resources and quantities of products allocated to the Member States involved
in the scheme.

Ten  Member  States  wished  to  take  part  in  2002.  The  appropriations  were  shared
among them according to the number of needy they had. The allocation also reflected
a substantial underspend in the previous three years.

The annual plan is established in consultation with the charities  on the ground.  It is
administered at national level by the  authorities  of  the  participating  Member  States.
Each  Member  State  designates  the  organisations  that  are  to  distribute  food  to  the
needy.

This  measure  also  allows  each  participating  Member  State  to  obtain  supplies  of
products from another Member State where it has no intervention stocks itself of one
of the products it is to distribute under the scheme.

Under  the  2002  plan  (Decision  2001/772/EC8)  the  participating  Member  States
shared €196 million as described in the tables below.

5

6

7

8

OJ L 352, 15.12.1987, p. 1.
OJ L 313, 30.10.1992, p. 50.
OJ L 293, 29.10.2002, p. 9.
OJ L 290, 7.11.2001, p. 5.

36

                                                
Member State

Ceiling in €

Rate on 1.10.  2001

Ceiling in
national currency

B

DK

EL

ES

F

IRL

I

L

P

FIN

Total allocated

Transfers

Total for 2002 plan

3 489 000

633 000

14 723 000

54 938 000

43 403 000

2 737 000

56 568 000

44 000

16 581 000

2 884 000

196 000 000

4 000 000

200 000 000

–

–

7.436700

4 707 431.10

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

Distribution of the quantities of products by Member State (2002 plan)

Member State

Cereals

Belgium
Denmark
Greece
Spain
France
Ireland
Italy
Portugal
Finland

3 500

20 000
65 000
15 815

75 000
10 000
15 000

Rice

500

15 000
25 000
2 051

15 000
7 500

Butter

Beef and veal

400

1 031
7 300
7 542
60
8 259
3 024
374

500
200
1 373
5 000
4 769

800
5 000
700

Total

209 315

65 051

27 990

18 342

3.12.

Chapter B1-33 – Veterinary and plant-health measures

Background

The  uptake  of  appropriations  available  under  the  2002  budget  was  only  39.24%;
€345 998 799 out of a total of €569 500 000  was not committed. If the appropriations
carried over for the emergency fund are taken into account, however, the uptake rises
to 45.31% or €258 077 530.

To  finance  the  extra  costs  incurred  as  a  result  of  the  foot-and-mouth  epidemic
recorded  in 2001,  mainly  in  the  United  Kingdom,  the  emergency  fund  budget
(heading B1-3320) was set at €400 million. Beca use of the poor reliability of the data
on compensation for the operational costs of eradicating the disease, the Commission
has been unable to adopt a decision on Community funding for the compensation.

In addition, a transfer within Chapter 33 (for details see below) was made during the
first half of 2002 to strengthen budget heading B1-330 covering the eradication and
monitoring programmes.

37

Details

Heading B1-330 – Eradication and monitoring programmes

As  indicated  above,  the  initial  appropriations  under  this  heading  were  increased  by
€6 556 000 to meet additional requirements ar ising from the opinion delivered at the
Scientific  Committee  meeting  held  on  18  and  19  October  2001.  The  Committee
agreed  on  the  need  to  introduce  monitoring  of  TSEs  (transmissible  spongiform
encephalopathies) in the case of small ruminants. Moreover, following the discovery
of TSE in Finland and in Austria, the waiving of tests for healthy animals in these two
countries  was  discontinued.  The  two  changes  cost  €4 146 000  and  €2 410 000.  The
appropriations concerned came from heading B1-332 (Emergency fund).

The  appropriations  available  under 
€155 000 000  to  €161 556 000.  All  told,  €161 006 000  was  committed,  including
€120 556 000 for TSE monitoring and €40 450 000 for the eradication programmes.

the  heading  concerned  went  up  from

The latest estimates available put the number of tests part-financed by the European
Community in 2002 at about 8 million.

"Programmed"  expenditure  was  increased  by  transferring  the  amount  referred  to  in
the first paragraph.

Implementation 
of 
(2001 appropriations).

the 

payment 

appropriations 

totalled 

 97 384 658

Heading B1-331 – Other measures in the veterinary field

Altogether, 3/4 of the initial appropriations (€7 946 687 out  of a total of €10 500 000)
was committed in 2002.

Implementation  of  the  payment  appropriations  totalled  €3 901 369,  of  which
€1 657 176 concerned the appropriations for 2001.

Heading B1-332 – Emergency fund

The  initial  appropriation,  €400 000 000,  wa s  aimed  at  covering  compensation
payments  in  connection  with  the  eradication  of  foot-and-mouth  disease  in  the
Netherlands, Ireland, France and the United Kingdom in 2001.

By  2001  more  than  €400 million  had  been  committed  for  part-financing  of  FMD
compensation payments; it was paid in 2002 in the form of advances and covered the
compulsory  slaughter  of  the  animals.  In  the  case  of  the  United  Kingdom  only
compulsory  slaughter  up  to 30 June 2001  was  covered  by  the  Decision  on  the
Community contribution.

In  2002,  only  the  Decision  on  the  part-financing  of  compulsory  slaughter  in  the
United Kingdom in the second half of the year was adopted.

Decisions on part-financing the operational costs (disinfection, cleaning, destruction
of the carcasses, etc.) incurred in the Netherlands, France and Ireland were presented
to  the  Standing  Committee  on  the  Food  Chain  and  Public  Health  at  the  end
of December 2002. Administrative reasons prevented the Commission from adopting
them.  A  carryover  of  appropriations  to 2003  was  obtained  for  the  appropriations  in
question (€34 756 329).

A decision on part-financing the operational costs incurred in the United Kingdom is
expected in 2003.

38

€
Thus,  only  €50 854 668  of  the  €400 milli
on  initially  available  was  committed
in 2002. In addition, €6 556 000 was transferred  to heading B1-330 to meet additional
requirements in connection with TSE monitoring of small ruminants.

Implementation  of  the  payment  appropriations  totalled  €420 642 846,  of  which
€6 564 871 concerned the appropriations for 2001.

Heading  B1-333A  –  Plant-health  measures  –  expenditure  on  administrative
management

The  initial  appropriation  was  €1 million.  Commitments  totalled  €965 163,  leaving
€34 837 which could not be committed in 2002.

Implementation  of  the  payment  appropriations  totalled  €832 100.2,  of  which
€815 950.2 concerned the appropriations for 2001.

Heading B1-333 – Plant-health measures – operational expenditure

The  initial  appropriation  was  €3 million.  Commitments  totalled  €2 728 682,  leaving
€271 318 which could not be committed in 2002.

The payment appropriations totalled €1  456 606, of which €1 423 902 concerned the
appropriations for 2001.

Summary table – Chapter B1-33

Line

2001 BUDGET

B1-3300 Animal 

disease 

eradication 

and
monitoring  programmes  and  monitoring
of the physical conditions of animals that
could pose a public-health risk linked to
an external factor

Initial
appropriations

Final
appropriations
after transfer

Committed
before
31.12.2001

155 000 000

161 556 000

161 006 000

Balance
commitments –
final
appropriations
550 000

B1-3310 Other measures in the veterinary, animal
welfare and public-health field

10 500 000

10 500 000

7 946 687

2 553 313

B1-3320 Emergency 

for 

fund 

veterinary
complaints  and  other  diseases  of  animal
contaminations which are a risk to public
health

400 000 000

393 444 000

50 854 668

342 589 332

B1-3330A Plant-health measures – Expenditure one
administrative management
B1-3330B Plant-health  measures  –  Expenditure  on

1 000 000

1 000 000

965 163

34 837

3 000 000

3 000 000

2 728 682

271 318

operational management
Total without transfer
Total with transfer to 2003

569 500 000
569 500 000

569 500 000
569 500 000

223 501 201
258 077 530

345 998 799
311 422 470

Lastly,  it  should  be  noted  that  the  payment  appropriations  available  under  heading
B2-519  (Completion  of  earlier  veterinary  and  plant-health  measures - Differentiated
appropriations)  and  earmarked  for  the  Health  and  Consumer  Protection  DG  were
increased  by 
€1 million  by  transfer  within  the  chapter.  They  thus  totalled
€13 287 000, of which €13 187 285 was paid in 2002.

3.13.

Fisheries

(a)

Budget heading B1-261

The budgetary allocation for fisheries was €17.08 million, €15.4 million of which was
spent, an underspend of €1.6 million.

39

The  overall  budget  underspend  concerns  mainly  the  operational  programme
mechanism,  for  which  the  Member  States  may  decide  not  to  grant  financial
compensation  to  the  producer  organisations,  as  was  the  case  in 2002  (–€2.4 million
compared to budget forecasts).

By  contrast,  expenditure  on  Community  withdrawals  was  higher  than  forecast
(+€1.8 million), in particular as a  result of outstanding balances.

There was also limited use of private storage aid (–€0.9 million).

(b)

Budget heading B1-3240

Council  Regulation  (EC)  No 579/02  (OJ  L  89  of  5.4.2002)  extended,  for  2002,  the
period  of  validity  of  Regulation  (EC)  No 1587/98  (OJ  L  208  of  24.7.1998)
introducing a scheme to compensate for the additional costs incurred in the marketing
of  certain  fishery  products  from  the  Azores,  Madeira,  the  Canary  Islands  and  the
French  departments  of  French  Guiana  and  Réunion  as  a  result  of  those  regions'
remoteness.

The  scheme  is  aimed  at  maintaining,  in  relation  to  the  conditions  enjoyed  by
economic operators on the European mainland, the competitiveness of certain fishery
products which are disposed of to a significant extent.

The  only  annual  report  available  at  this  stage  concerns  the  region  of  Madeira.  The
following  data  was  transmitted  concerning  the  quantities  covered  by  the  scheme
in 2002:

– 

– 

– 

tuna:

black scabbardfish:

mackerel:

2 767 008 kg,

944 977 kg,

0 kg.

3.14.

Information measures

Budget  heading  B1-382  has,  since  2000,  been  earmarked  for  enhancing  public
awareness  of  the  CAP  and  rural  development  policy.  Its  legal  basis  is  Council
Regulation (EC) No 814/2000 and Commission Regulation (EC) No 2208/02.

Grant  applications  are  submitted  by  farming  organisations  for  work  programmes  or
specific measures. These have to follow guidelines laid down in a call for proposals
published annually.

The rate of financing of work programmes and specific measures  is 50%.  However,
in some cases, particularly measures of exceptional interest based on selection criteria
and on certain conditions, the rate may be increased to 75%.

The  rules  also  allow  funding  of  activities  implemented  on  the  Commission's
initiative.

In  2002  appropriations  under  heading  B1-382  were  €8 500 000.  During  the  2002
budget  year  (16 October  2001  to 15 October  2002)  the  following  awareness-raising
activities were financed:

– 
– 

five annual work programmes for €842 811.83,

27 specific measures for €1 123 875.44 and

40

– 

39  actions  carried  out  by  the  Commission  by  means  of  contracts  or  purchase
orders,  including  36  under  heading B1-382  for  €2 397 368.40  and three  under
heading AO3410 for €82 165.13.

3.15.

Promotional measures

Articles  B1-380  and  B1-381  finance  information  and  promotion  programmes  for
agricultural  products  implemented  in  the  EU  and  elsewhere.  The  legal  basis
comprises Council Regulations (EC) Nos 2702/1999 and 2826/2000 and Commission
Regulations (EC) Nos 2879/2000 and 94/02.

The programmes are submitted by trade organisations to the Member States, the latter
being  responsible  for  programme  management  once  the  Commission  has  confirmed
the selection and agreed to part-finance.

The rate of financing of the action plans is 50%. It is degressive: 60% – 40% in the
case  of  two-year  programmes  and  60% – 50% – 40%  in  the  case  of  three-year
programmes.

Moreover  the  rules  allow  the  financing  of  information  measures  carried  out  on  the
initiative of the Commission (sending trade missions to third countries and providing
the latter with information on PDOs/PGIs and organic production).

In  2002,  for  which  the  article  B1-380  appropriations  totalled  €56 million,  40  new
promotion  programmes  were  approved  (Decision C (2002) 3116  final)  worth  an
aggregate €32.1 million.

Payments  of  €11.81 million  were  recorded,  but  related  above  all  to  promotion
measures decided upon previously, under earlier rules.

The  appropriations  in  article B1-381  (€14.3 million)  concern  actions  and  promotion
measures  administered  by  the  Commission  direct.  The  uptake,  of  €5.035 million,
relates mainly to olive oil.

The  uptake  of  appropriations  in  respect  of  each  article  remained  low,  owing  to  the
change  in  the  promotional  arrangements  and  to  delays  in  launching  the  new
programmes.

4.

CONTROL MEASURES

4.1.

Integrated Administration and Control System (IACS)

After  intensive  discussions  with  Member  States  in  four  expert  groups,  a  new
regulation  on  IACS  was  adopted  in  2001  –  Commission  Regulation  (EC)
No 2419/2001. This regulation – which is applicable to marketing years or premium
periods  starting  as  of  1  January  2002  –  compiles  a  number  of  amendments  to  the
previous  regulation,  assures  a  more  coherent  and  logical  layout  and  takes  the
development  of  electronic  tools  for  the  management  of  the  schemes  fully  into
account. The regulation replaces Regulation (EEC) No 3887/92.

Some important advantages of the new regulation are the  general  option  to transmit
claims  etc.  by  electronic  means,  more  efficient  controls  by  maximising  the  use  of
computerised and remote controls, an "integrated" bovine premium control covering
several  schemes  and  a  simplification  of  provisions  concerning  animal  premium
sanctions.

41

Via  audit  mission  and  revised  instructions  for  the  reporting  on  administration  and
control  (incl.  sanctions)  of  claims,  the  Commission  has  verified  the  conformity  of
Member  States'  control  systems  and  ensured  a  homogenous  application  of  the  new
regulation.

Via experts meetings a special effort has been done to promote and communicate the
IACS-legislation  to  Candidate  Countries  in  order  to  ensure  that  the  necessary
adaptations  of  administration  and  control  systems  are  made  well  in  advance  of  the
actual adhesion of these countries.

4.2.

Compatibility with IACS

It follows from Articles 9a(1) and 13(1)(d) of Council Regulation (EEC) No 3508/92
that  a  number  of  aid  schemes  must  be  administered  and  controlled  in  a  way  that  is
compatible with IACS as of 1 January 2003. The provision concerns a total of 12 aid
schemes, e.g. tobacco, wine, olive oil, less-favoured-areas etc.

In  2002  the  Commission  launched  an  enquiry  into  this  provision,  asking  Member
States to report on the present state of compatibility of the schemes and the date by
which compatibility had been or would be reached.

The enquiry showed that all Member States were aware of their obligations in respect
of  compatibility,  and  that  according  to  Member  States  compatibility  in  many  cases
had  been  reached  or  would  be  reached  by  1  January  2003.  Still,  in  some  Member
States compatibility concerning a number of aid schemes would not be reached by the
deadline; most problems were found in the sectors of wine, olive oil and dried fodder.

As of 1 January 2003 compliance with the compatibility obligation will be integrated
into the audits pursuant to Article 7(4) of Regulation (EC) No 1258/1999.

4.3.

Olive oil control agencies

Under  Council  Regulation  (EEC)  No 2262/849  and  Commission  Regulation  (EEC)
No 27/8510,  olive  oil  control  agencies  have  been  established  in  the  main  producer
Member  States,  i.e. Italy,  Greece,  Spain  and  Portugal  (see  pp 53  and 54  of  the
18th Financial Report on the EAGGF).

The four agencies carried out their work in the 2001/02 marketing  year in line with
the  work  programmes  and  forward  estimates  approved  by  the  authorities  of  the
Member States and the Commission.

The  Italian  control  agency  carried  out  thorough  checks  on  1 881 mills,  shortened
checks  on  1 263 mills  and  on-the-spot  checks  on  298 producers,  15 producer
associations and one union in the 2001/02 marketing year. It carried out 2 711 checks
on 933 holdings and mills in connection with the regional yields (mills + producers).
The agency also undertook 1 588 crosschecks, mainly on mills. The number of mills
crosschecked was 453, well above the 10% laid down in Article 30(3) of Regulation
(EC) No 2366/98. During the thorough checks at mills, 938 samples of olive oil were
taken  and 300  (31.9%)  were  sent  to  laboratories  approved  for  analysis  purposes,
which  confirmed  that  the  oils  were  in  conformity  with point 1  of  the  Annex  to
Regulation No 136/66/EEC.

9

10

OJ L 208, 3.8.1984, p. 11.
OJ L 4, 5.1.1985, p. 5.

42

                                                
On the basis of these findings, fines/administrative penalties totalling €445 454 were
recommended  for 852 mills  and  withdrawal  of  approval  was  proposed  for  302  of
them.  The  tax  authorities  were  informed  of  261  cases  of  irregularity,  the  judicial
authority 19,  and  the  authorities  responsible  for  investigating  infringement  of
waste-water treatment rules 141. Following the checks on associations, nine fines and
three withdrawals of approval were proposed. A total of 12 reports were transmitted
to  the  tax  authorities  and  one  to  the  judicial  authority.  The  Agency  noted  that  the
associations  were  still  applying  an  inappropriate  deduction  from  the  aid  paid  to
producers.
As regards producers, 92 penalties were recommended involving refusal or reduction
of the aid for €595 589, and fines totallin g €168 269. Other control authorities were
notified of a total of ten cases.

On  the  basis  of  these  findings  the  competent  regional  authorities  decided  on
41 withdrawals of approval and 82 warnings for mills; 40 cases were not followed up
and 139 are still being dealt with. It must be pointed out that, of the 382 withdrawals
of approval proposed by the Agency, 36 have not  yet been processed, mainly in the
following regions: Calabria (16), Apulia (9), Liguria (5) and Marches (3).

No penalty has yet been decided upon in the case of the associations.

The  irregularities  relating  to  producers  have  been  reported  to  the  paying  agency
(AGEA) for non-payment of, or reduction in, the aid.

Financial  penalties  applicable  under  national  law  were,  until  the  end  of  2001,
imposed by the Repressione Frodi Directorate of the Ministry of Agriculture. In 2002
these  powers  were  transferred  to  the  regions.  To  date,  of  the 839 cases  pertaining
to 2001/02,  only  30 have  been  scrutinised,  six  of  them  resulting  in  a  fine  and  no
action being taken in the remaining 24.

The  Greek  control  agency  carried  out  thorough  checks  on  809 mills  and  shortened
checks  on 341 in  the 2001/02.  This  represents  38.1%  and  16.1%  respectively  of  the
2 124 mills operating during the marketing year. During the inspections samples were
taken  at  602 mills  and  169 of  them  were  analysed.  The  Agency  also  checked
21 associations and 1 751 producer files, four cases of private storage, 48 table olive
packing  plants  and  2 811 producers  and  carried  out  2 064 checks  on  holdings  and
mills  in  connection  with  regional  yields.  The  agency  carried  out  102  checks  in
connection with the setting of yields for the 18 homogeneous areas. In total it carried
out  14 204  crosschecks  on  mills/producers,  726  on  table  olive  producers,  138  on
mills/purchasers and 36 on mills/pomace factories.

The agency proposed  withdrawing approval for 130 mills,  including 113 (for a total
of  2 924 516 kg  of  oil)  for  doubts  about  production.  A  penalty  was  proposed  for
306 mills for failure to comply with the time limits for communicating monthly data.

In the course of the checks the Agency noted that the associations were still applying
an inappropriate deduction – estimated at €24 million – from the aid paid.

in 

respect  of 3 329 producers  who 

Irregularities  were  noted 
together  had
declared 2 468 996 kg  of  oil.  The  correction  concerned 997 531 kg,  leading  to  an
aggregate  fine  of  €1 135 581.  In  the  light  of  checks  carried  out  on 2 811 producers
who  together  had  declared 573 291 trees,  the  agency  ascertained  that 780 producers
had 57 768 fewer  trees  than  declared,  resulting  in  a  correction  of  the  cultivation
declarations concerned.

43

In  2002  the  competent  authorities  dealt  with 236 cases  of  irregularities  involving
mills and imposed fines – ranging from €1  467 to €29 347 and totalling €1 094 564 –
on 197 mills.  They  also  withdrew  approval  in  three  cases.  The  remaining  cases  are
still being dealt with.

In  the  same  marketing  year  the  Portuguese  control  agency  carried  out  checks  on
1 621 producers, 449 mills  and 14 associations.  It  also  carried  out  8 735 crosschecks
and 20 checks on  table  olive  packing  firms.  A total of 300  on-the-spot checks  were
carried  out,  in  connection  with  the  setting  of  regional  yields,  on  100  holdings.  The
checks  led  the  Agency  to  propose  withdrawing  approval  from  73 mills,  rejecting
30 applications for aid and making 168 corrections to amounts payable to producers.
These proposals have been fully accepted by the Member State, which has tended to
apply the sanction proposed.

The  Spanish agency  carried  out  881  thorough  checks  and  120  shortened  checks  on
mills in 2001/02. It inspected 28 producer organisations, 753 producers, 61 table olive
processing undertakings, and carried out 1 174 crosschecks upstream and downstream
from the mills.

The agency proposed withdrawing approval from two associations and nine mills and
sent  warnings  to  280 mills,  mainly  for  failure  to  comply  with  the  time  limits  for
transmitting  the  monthly  declaration  and  for  shortcomings  as  regards  their  stock
records. Warnings were sent out to 19 table olive packing firms for the same reasons.
Withdrawal of approval was proposed for three firms for failure to comply with their
accountancy  obligations.  The  Agency  proposed  rejecting  the  aid  applications  of
22 producers  – four  of  them  table  olive  producers –  for  a  total  of  €1 848 800,  and
correcting 
including
to 148 olive  growers  (€760 000), 
18 growers of table olives, and suspending aid payments to 24 producers.

the  amounts  payable 

The Autonomous Communities informed the agency that, on the basis of the reports
transmitted in recent marketing years, they had withdrawn approval from 23 mills in
2001/02,  had  initiated  withdrawal  proceedings  for  seven  others  and  had  issued
62 warnings with a view to regularising the situation. The Autonomous Communities
reached a final decision in 60 cases which involved producers, asking for the aid paid
(€2 226 633) to be returned. Proceedings for  recovery have been initiated in a further
37 cases.  In  the  case  of  table  olives  the  Autonomous  Communities  have  withdrawn
approval from two firms and issued a total of 14 warnings.

On the whole, however, except as stated above, the Member States did not adequately
follow up the agencies' recommendations on penalties.

4.4.

Part-financing to encourage tighter controls

Under  Council  Regulation  (EC)  No  723/97  of  22  April  1997,  as  amended  by
Regulation  (EC)  No  2136/2001,  the  Community  is,  for  a  seven-year  period,
contributing  towards  the  costs  incurred  by  Member  States  in  implementing  new
action  programmes,  arising  out  of  new  Community  obligations,  approved  by  the
Commission  and  in  force  after  15  October  1996,  and  aimed  at  improving  the
structures or effectiveness of EAGGF Guarantee Section expenditure controls.

Under  the  same  Regulation  (Article  4(3))  the  Commission  may  undertake  work  for
the  maintenance  and  development  of  systems  of  control  and  direct  electronic
information exchange between the Member States and itself. In consultation with the

44

EAGGF Committee, for each annual instalment the Commission has to set, in euro,
the maximum amount of the Community financial contribution, having regard to the
available  appropriations  and  on  the  basis  of  the  programmes  presented  by  the
Member States. The level of the Community financial contribution is 50% of Member
States’ payments of eligible expenditure over the financial year. However, if the total
eligible  expenditure  exceeds  the  budget  resources  available,  the  Community’s
contribution rate is reduced proportionally.

This sixth year of application confirmed the importance that Member States attach to
setting  up  new  control  systems.  Most  of  the  programmes  relate  to  implementing  a
geographical  information  system  (GIS)  and  an  agricultural  parcel  identification
system.

Since  2001  most  of  the  Member  States  have  introduced  programmes  in  connection
with  the  Geographical  Information  and  Digital  Orthophotography  System  (GIS)
resulting from a new provision of Regulation (EC) No 1593/2000.

Following the publication of Council Regulation (EC) No 2136/2001, Member States
had until 31 December 2002 to send in their action plans for 2002.

Commission Regulation (EC) No 2244/2001 amending Regulation (EC) No 1780/97
(laying down detailed rules for the application of Regulation (EC) No 723/97) sets a
three-month  deadline  for  the  fixing,  by  the  Commission,  of  the  maximum  financial
contribution by the Community.

On the basis of the information provided by the Member States concerned  and after
consultation of the Committee of  the Fund  on  19  April  2002,  the  expenditure  to  be
charged  to  the  general  budget  of  the  Community  for  this  action  is  €15 million
for 2002.

Commission  Decision  C(2002) 1908  of 14 May  2002  fixes  the  maximum  amount
payable to the Member States which have sent in an action plan for 2002 (Germany,
Greece, Spain, France, Portugal, United Kingdom, Austria, Finland and Sweden):

2002 – Regulation (EC) No 723/97

Member State

Community contribution in €

Germany

Greece

Spain

France

Portugal

United Kingdom

Austria

Finland

Sweden

2 110 837

1 421 000

3 767 806

3 037 080

1 210 265

2 078 002

753 561

303 000

328 449

For  this  sixth  year  of  application  Belgium,  Ireland,  Italy,  Luxembourg  and  the
Netherlands did not present any programme to be part-financed.

45

In  2002  Commission  departments  undertook  four  audit  missions  in  the  Member
States  (the  Netherlands,  Ireland,  France  and  Austria)  to  check  the  conformity  of
expenditure declared by the Member States.

4.5.

Application of Regulation (EC) No 4045/89 (ex-post controls)

Regulation (EC) No 4045/89 foresees the ex-post scrutiny of larger  beneficiaries by
competent  services  of  the  Member  States.  This  "4045  scrutiny"  should  be  based  on
accounting  and  other  documents  available  at  the  beneficiary,  or  at  suppliers,
customers,  transporters,  etc.  Currently  there  are  some  3 000  companies  selected  for
scrutiny each year.

Following  the  presentation  of  a  report  to  the  Council  in  1999  (doc.  VI/7036/98)  on
the evaluation of the Regulation, the Commission has again visited all Member States
once  or  twice  to  review  the  implementation  of  the  Regulation.  Overall  this  is  at  a
satisfactory level. However, in several Member States one or several of the following
elements require attention by management (Special Department and/or control body):

– 
– 
– 
– 
– 
– 

training of scrutineers,
timely achieving of the minimum rate of control,
monitoring of the execution of controls compared to the plan,
follow-up of recommendations,
quality assurance,
risk-analysis.

In  particular,  there  is  an  increasing  backlog  in  performing  scrutinies  within  the
time-frame laid down (July – June of the year following the EAGGF year). This is a
problem in almost every Member State and is a concern to the Commission.

The mutual assistance provisions set out in Article 7 of the Regulation are functioning
satisfactorily  but  the  Commission  believes  that  enhanced  joint  exercises  can  be
developed.  Mutual  assistance  and  up-  and  down-stream  checking  has  proved  to  be
one  of  the  success  factors  of  4045  scrutiny.  Each  year  there  are  some  350 requests
sent  from  one  Member  State  to  another  to  cross-check  the  reality  and  legality  of
transactions.

Changes to the Regulation

In  June  2001  the  Commission  proposed  amending  the  Regulation.  After  consulting
the European Parliament, the Council adopted these amendments in November 2002
(Regulation (EC) No 2154/2002). The main modifications are:

– 

– 

a decrease in the number of controls by increasing the minimum level of aid per
beneficiary,  used  as  a  basis  for  the  calculation  of  the  minimum  number  of
controls, from €100 000 to €150 000;
the  possibility  for  the  Commission  to  accept  a  reduction  in  the  minimum
number  of  controls  where  two  or  more  Member  States  propose  joint  actions
involving  extensive  mutual  assistance  to  scrutinise  the  same  (multinational)
undertaking, trade flow or a particular sector.

46

Irregularities detected

The  selection  of  companies  for  scrutiny  is  based  on  risk-analysis.  The  IACS-
measures and some similar schemes (Regulation (EC) No 2154/2002) are not subject
to 4045 scrutiny.

The total number of irregularities detected during 4045 scrutiny over the past years is
as  follows  (source  Member  States'  annual  transfers  on  the  implementation  of
Regulation (EEC) No 4045/89).

In respect of control-year

Number of companies
controlled

Number of
irregularities

Total amount
reported to date

1998/1999 (EAGGF 98)

1999/2000 (EAGGF 1999)

2000/01 (EAGGF 2000)

3 520

3 660

3 650

520

590

350

€25 million

€85 million

€20  million

Regulation (EEC) No 4045/89 on scrutiny is the prime contributor to the total number
of  irregularity  cases  reported  to  OLAF  for  EAGGF  Guarantee  spending  under
Council Regulation (EEC) No 595/91.

Other developments

The Member States have themselves established a working group for 4045 in which
the  heads  of  the  special  departments  for  4045  meet  twice  a  year.  They  have  also
established  a  series  of  working  groups  of  scrutineers  for  several  sectors.  Training
seminars  for  scrutineers  and  an  exchange  programme  for  scrutineers,  both  part-
funded  by  OLAF,  have  also  been  developed.  All  these  initiatives  have  contributed
considerably to the ' success ' and quality of ex-post scrutiny.

Special  exercises  have  been  initiated  by  the  Commission  in  respect  of  surveillance
companies (2000) and secondary purchasers of milk (2001).

The first enquiry provided evidence that the use of certificates issued by surveillance
companies  as  proofs  of  arrival  is  limited  but  that  the  quality  of  the  work  of  the
surveillance  companies  has  to  improve.  In  Regulation  (EC)  No  800/1999  the
conditions  for  approval  of  surveillance  companies  were  tightened  and  scrutiny
services are still paying extra attention to the work of surveillance companies.

The  special  exercise  on  second  purchasers  of  milk  provided  some  evidence  of
irregularity  and  showed  that  the  issue  requires  continued  special  attention  in  some
Member States.

5.

CLEARANCE OF ACCOUNTS

5.1.

General

In connection with the rules governing the 2002 clearance of accounts:

– 

– 

on 11 June  2002  a  draft  amendment 
to  Commission  Regulation  (EC)
No 1258/1999  was  transmitted  to  the  Council  whereby  the 24-month  rule  for
financial corrections would become a 36-month rule;
a  proposal for  a Memorandum to  the  Commission  was  drawn  up  on  the  basis
of doc. AGRI/61495/2002 Rev. 2 on the "recurrence" principle applicable under
the accounts clearance procedure;

47

– 

– 

on  10  October  2002  the  Commission  adopted  Regulation  (EC)  No 1884/02
amending Regulation (EC) No 2390/1999 laying down detailed rules as regards
the  form  and  content  of  the  accounting  information  to  be  transmitted  to  the
Commission ("X" tables);
a total of 122 audits were carried out in 15 Member States in the context of the
audits of the clearance of EAGGF Guarantee accounts.

In 2002 the Commission adopted six decisions on the clearance of EAGGF Guarantee
accounts:  Decisions 2002/144/EC,  2002/461/EC,  2002/523/EC,  2002/524/EC,
2002/816/EC and 2002/881/EC.

The corrections concerned totalled €301 294 113.28.

A  total  of 19 meetings,  including  meetings  of  ad hoc  groups  of  experts,  were  held
with the Member States.

– 

– 

– 

three  Commission  Decisions  were  adopted  concerning 
the  closure  of
expenditure  in  connection  with  the  vineyard  register  accounts:  2002/303/EC,
2002/680/EC and 2002/948/EC;
with  a  view  to  assisting  the  Member  States  in  the  setting  up  of  ever  more
effective  control  systems,  four  seminars  were  held,  on  the  IACS,  ex-post
controls  under  Regulation  (EEC)  No 4545/89,  rural  development  and  the
certification  of  accounts,  on  23 April,  23 May,  19  April  and  2 July  2002
respectively;
in 2002 a large-scale survey was carried out among 49 paying agencies – which
together  account  for 90%  of  agricultural  expenditure – with  a  view  to
determining the IT level of their structures. The final report concerned came out
on 21 June 2003.

5.2.

Clearance of accounts under the new procedure

(€million)

Arable crops

Fruit and vegetables

Refunds

Financial audit

Rural development

Animal premiums

Oils and fats

Public storage

Milk products

TOTAL

Decision (9)
2002/523/EC of
28.6.2002

Decision (10)
2002/524/EC of
26.6.2002

Decision
2002/816/EC of
14.10.2002

Decision (11)
2002/881/EC of
5.11.2002

0.23

4.78

–

16.23

9.13

9.75

22.68

4.09

–

66.89

105.57

13.40

–

11.40

–

28.96

–

0.83

–17.44

142.72

–

–

–

5.36

–

–

–

–

–

5.36

9.54

2.51

–

10.92

2.71

48.38

15.73

4.66

–8.14

86.27

5.3.

Clearance of accounts for the 2001 financial year

5.3.1

Introduction

The accounts clearance reform stipulated that paying agencies must be approved and
that from the 1996 financial year accounts clearance was to be split into two distinct

48

procedures: one annual accounts clearance decision verifying the veracity, integrality
and  accuracy  of  the  accounts  sent  in  (Article  5(2)(b)  of  Council  Regulation  (EEC)
No 729/70  and,  from  1 January  2000,  Article  7(3)  of  Council  Regulation  (EC)
No 1258/1999),  and  separate  decisions  excluding  from  Community  financing  any
expenditure  not  effected  in  compliance  with  Community  rules  (Articles  5(2)(c)  and
7(4) respectively of the above Regulations).

Accounts  clearance  is  based  on  annual  accounts  supported  by  certificates  and  audit
reports produced for each paying agency by independent audit bodies, the certifying
bodies (Article 3(1) of Commission Regulation (EC) No 1663/95).

Commission  officials  examined  the  annual  accounts,  certificates  and  audit  reports
transmitted by the deadline of 10 February 2002 and also visited some of the paying
agencies. The purpose of the visits was to assess the work of the certifying bodies, the
extent of the problems reported and the measures taken by the paying agency to solve
the problems identified. Problems were not confined to the accuracy of the accounts,
they  also  stemmed  from  the  paying  agencies’  operational  systems.  The  certifying
bodies  are  required  to  check  that  these  systems  are  sound  enough  to  provide
reasonable assurance that expenditure complies with Community rules.

5.3.2

Decisions

5.3.2.1 Decision 2002/461/EC of 12 June 2002

It  was  decided  to  clear  those  paying  agencies’  2001  accounts  whose  integrality,
accuracy  and veracity had  been confirmed on the  basis  of  the  information  received.
The accounts of the other paying agencies were disjoined from the decision and are
the subject of a later decision. The results of the examination may be summarised as
follows:

– 

– 

– 

the accounts of the paying agency Betaalorgaan van de Vlaamse Gemeenschap
in Belgium were disjoined from the decision;
the  accounts  of  the  paying  agencies  FEGA  and  Paìs  Basco  in  Spain  were
disjoined from the decision;
the  accounts  of  the  paying  agency  in  Greece  were  also  disjoined  from  the
decision.

The  reason  for  the  disjunction  was  non-compliance  by  the  paying  agencies  with
Regulation (EC) No 2390/1999 on the form and content of accounting information.

5.3.2.2. Decision 2002/144/EC of 19 February 2002

It was  decided to clear the 2000 accounts of  all  the  Spanish  paying  agencies  which
had been disjoined from Decision 2001/474/EC of 8 May 2001.

5.3.3. Corrections to accounts

5.3.3.1. Corrections to amounts declared in respect of 2001

Corrections  were  adopted  in  the  light  of  the  remarks  of  the  certifying  bodies  or  of
Commission investigations. The total amount of the corrections is:

– 
– 

Austria: –€0.006 million,

Belgium: +€0.151 million,

49

– 
– 
– 
– 
– 
– 
– 
– 
– 
– 
– 

Germany: +€0.887 million,
Denmark: +DKK1.153 million,
Spain: –€2.083 million,
France: –€5.986 million,
Greece: –€0.421 million,
Ireland: –€2.315 million,
Italy: +€8.367 million,
Luxembourg: +€0.006 million,
Netherlands: +€0.024 million,
Portugal: +€18.890 million,
United Kingdom: –GBP2.934 million.

5.3.3.2. Corrections to amounts declared in respect of 2000

Corrections  were  adopted  in  the  light  of  the  remarks  of  the  certifying  bodies  or  of
Commission investigations. The total amount of the correction is:

– 

Spain: –€0.811 million

5.4.

Cases brought before the Court of Justice against clearance decisions

5.4.1.

Judgments handed down

Since the establishment of the 31st EAGGF Guarantee Section Financial Report, the
Court  has  handed  down 16 judgments  in  appeals  brought  by  Member  States  against
clearance decisions.

The Court rejected the appeals brought in the following cases:

– 
– 
– 
– 

– 

– 

– 

– 

– 
– 

– 

Judgment in Case C-377/99 concerning arable crops in Germany;
Judgment in Case C-332/00 concerning butter for pastrymaking in Belgium;
Judgment in Case C-132/99 concerning hemp in the Netherlands;
Judgment  in  Case  C-130/99  concerning  arable  crops,  animal  premiums,
production aid for olive oil, the permanent abandonment of areas under  vines,
fibre flax, and compliance with payment limits in Spain;
Judgment in Case C-147/99 concerning the public storage of cereals, aid for the
consumption of olive oil, and ewe/goat premiums in Italy;
Judgment  in  Case  C-146/99  concerning  aid  for  the  processing  of  tomatoes  in
Italy;
Judgment  in  Case  C-373/99  concerning  the  fruit  and  vegetables  and  arable
crops in Greece;
Judgment in Case C-170/00 concerning the special premium for bovine animals
in Finland;
Judgment in Case C-118/99 concerning arable crops in France;
Judgment in Case C-263/98 concerning export refunds for cereals and beef/veal
in Belgium;
Judgment  in  Case  C-374/99  concerning  aid  for  the  consumption  of  olive  oil,
and sheep and goats premiums in Spain;

50

– 

Judgment in Case C-375/99 concerning the public storage of beef in Spain.

The Court accepted the following appeals:

– 

– 

the  appeal  lodged  by  France  in  Case  C-277/98  concerning  the  additional  levy
on milk;
the appeal lodged by Luxembourg in Case C-158/00 concerning arable crops.

The Court accepted in part the following appeals:

– 

– 

the appeal lodged by Spain in Case C-130/99 concerning the additional levy on
milk  and  expenditure  on  production  aid 
incurred
before 12 March 1996;
the  appeal  lodged  by  the  Netherlands  in  Case  C-133/99  concerning  aid  for
skimmed milk for the manufacture of casein and caseinate.

for  olive  oil 

5.4.2.

Appeals pending

The situation as at 14 October 2002 with regard to appeals pending is shown, together
with the amounts concerned, in Annexes 19 to 27

51

6.

RELATIONS  WITH  PARLIAMENT  AND  THE  EUROPEAN  COURT  OF
AUDITORS

6.1.

Relations with Parliament

The European Parliament, one of the branches of the budgetary authority along with
the  Council,  is  one  of  the  most  important  interlocutors  of  the  Commission  and
therefore  of  the  EAGGF.  The  natural  framework  for  this  interinstitutional
relationship  is  provided  by  the  parliamentary  sessions  at  which  all  Community
budget matters are dealt with.

The European Parliament has three parliamentary committees with a varying interest
in  agricultural  budgetary  matters:  the  Committee  on  Agriculture  and  Rural
Development, the Committee on Budgets and the Committee on Budgetary Control.

The  Committee  on  Budgetary  Control  performed  its  duty  of  monitoring  the  correct
implementation of the 2000 budget. It was asked to draw up the Parliament Decision
by which that body discharged the Commission.

6.2.

Relations with the European Court of Auditors

6.2.1. Mission of the European Court of Auditors

The  basic  task  of  the  Court  of  Auditors  is  to  audit  the  Community  accounts.  The
Maastricht  Treaty  strengthened  this  role  by  requiring  it  to  provide  a  statement  of
assurance  as  to  the  reliability  of  the  Community  accounts  and  the  legality  and
correctness  of  the  underlying  transactions.  Issuing  this  statement  certifies  that  the
accounts  give  an  accurate  picture  of  the  year  in  question.  It  is  also  of  prime
importance  to  the  budgetary  authority  in  its  deliberations  on  the  granting  of  the
discharge.

As  part  of  its  work,  the  Court  of  Auditors  carries  out  many  audits  within  the
Commission. Court officials frequently visit the EAGGF to gather facts and figures
needed  for  Court  opinions,  sector  letters  or  special  reports;  in  the  light  of  these
investigations, the Court frequently makes suggestions and recommendations to the
Commission  as  to  how  to  improve  its  budgetary  management  to  make  Community
control measures more effective.

6.2.2.

Annual report 2001

The Court of Auditors draws up a general annual report which, over several chapters,
scrutinises management of the Community budget for the previous year. One chapter
is devoted to the activities of the EAGGF Guarantee Section.

Before the report is published, meetings are held between the Court of Auditors and
the  Commission,  at  which  the  Court’s  submissions  and  conclusions  and  the
Commission’s replies and explanations can be discussed. The report is the result of
audits made by the Court in the Community institutions and inspection visits to the
Member States.

In 2002 the annual report for the 2001 financial year included a chapter (Chapter 2)
on the EAGGF Guarantee Section. The main submissions advanced by the Court and
the replies given by the Commission concerned the following:

52

– 

– 

Analysis of budgetary management;

Specific appraisal in the context of the Statement of Assurance:
– 

Control system,

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

– 

Area aid schemes 2.12–2.19,

Results of checks performed by Member States 2.18–2.19,

Animal premium schemes 2.20–2.26,

Control system 2.22,

Results of checks performed by Member States 2.26,

Olive oil 2.27–2.29,

Rural development 2.30–2.33,

Aid for cotton 2.35–2.38,

Casein 2.39,

Deductions 2.41,

the CATS database 2.42;

– 

Clearance of accounts:
– 

Conformity decisions 2.65–2.77,

– 

– 

– 

– 

– 

Key and ancillary controls 2.66,

Analysis of the corrections made in 2001 2.67–2.75,

Clearance of accounts decisions since 1991 2.76;

Follow-up to previous observations:
– 
Durum wheat 2.80–2.89,

– 

The Commission's management of the CMO for sugar 2.90–2.103;

Principal observations in special reports:
– 

The  sound  financial  management  of  the  common  organisation  of  the
markets in the banana sector 2.105–2.117,

– 

– 

The  Commission's  management  of  the  Community  oilseed  support
scheme 2.118–2.123,

Extensification  premium  and  payment  schemes  (EPS)  in  the  CMO  for
beef and veal 2.124–2.127.

6.2.3.

Special reports of the European Court of Auditors

In 2002 the Court published three special reports (SR). The reports are as follows:

– 

– 

SR No 7/2002 on the sound financial management of the common organisation
of  markets  in  the  banana  sector,  together  with  the  Commission's  replies
(OJ C 294 of 28 December 2002);
SR  No 6/2002  on  the  audit  of  the  Commission's  management  of  the
Community  oilseeds  support  scheme,  together  with  the  Commission's  replies
(OJ C 254 of 21 October 2002);

53

– 

SR  No 5/2002  on  extensification  and  payment  schemes  in  the  common
organisation  of  the  market  for  beef  and  veal,  together  with  the  Commission's
replies (OJ C 290 of 25 November 2002).

The full texts of the annual report and the special reports, together with the Court of
Auditors’  comments  and  the  Commission's  replies  are  on  the  Court’s  website:
http://www.eca.eu.int.

54

7.

BASIC  RULES  GOVERNING  THE  EAGGF  GUARANTEE  SECTION  AND
AMENDMENTS MADE IN 2002

7.1.

General/System of advances

– 

– 

– 

– 

– 

– 

Council Regulation (EEC) No 1258/1999 of 17 May 1999 on the financing of
the common agricultural policy (OJ L 160, p. 103),
Council Regulation (EEC) No 1883/78 of 2 August 1978 laying down general
rules for the financing of interventions by the European Agricultural Guidance
and Guarantee Fund, Guarantee Section (OJ L 216, p. 1),
Commission  Regulation  (EC)  No  296/96  of  16  February  1996  on  data  to  be
forwarded  by  the  Member  States  and  the  monthly  booking  of  expenditure
financed  under  the  Guarantee  Section  of  the  Agricultural  Guidance  and
Guarantee  Fund  (EAGGF)  and  repealing  Regulation  (EEC)  No  2776/88
(OJ L 39, p. 5)
amended  by  Commission  Regulation  (EC)  No  1934/2001  of  1 October  2001
(OJ L 262, p. 8)),
Council  Regulation  (EC)  No  2040/2000  of  26  September  2000  on  budgetary
discipline (OJ L 244, p. 27),
Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for  rural
development  from  the  European  Agricultural  Guidance  and  Guarantee  Fund
(EAGGF) and amending and repealing certain Regulations (OJ L 160, p. 80),
Commission Regulation (EC) No 445/2002 of 26 February 2002 laying down
detailed rules for the application of Council Regulation (EC) No 1257/1999 on
support  for  rural  development  from  the  European  Agricultural  Guidance  and
Guarantee  Fund  (EAGGF)  (OJ  L  74,  p.1).  That  Regulation  repealed
Commission  Regulation  (EC)  No 1750/1999,  which  was,  however,  still  in
application during 2001 (OJ L 214, p. 31).

7.2.

Checks

– 

– 

– 

Council  Regulation  (EEC)  No  4045/89  of  21  December  1989  on  scrutiny  by
Member States of transactions forming part of the system of financing by the
Guarantee Section of the European Agricultural Guidance and Guarantee Fund
and repealing Directive 77/435/EEC (OJ L 388, p. 18),
amended by Council Regulation (EC) No 2154/2002 of 26 November 200211,
Council Regulation (EEC) No 3508/92  of 27  November 1992 establishing  an
integrated  administration  and  control  system  for  certain  Community  aid
schemes (OJ L 355, p. 1),
amended  by  Commission  Regulation  (EC)  No 495/2001  (13  March  2001),
(OJ L 72, p. 6),
Commission  Regulation  (EC)  No  2419/2001  of  11  December  2001  laying
down  detailed  rules  for  applying  the  integrated  administration  and  control
system for certain Community aid schemes established by Council Regulation
(EEC) No 3508/92 (OJ L 327, p. 11),

11

OJ L 328, 5.12.2002, p. 4.

55

                                                
– 

Regulation (EC) No 1760/2000 of the European Parliament and of the Council
of 17 July 2000 establishing a system for the identification and registration of
bovine  animals  and  regarding  the  labelling  of  beef  and  beef  products  and
repealing Council Regulation (EC) No 820/97 (OJ L 204, p. 1).

7.3.

Clearance of accounts

– 

– 

Commission Regulation (EC) No 1663/95 of 7 July 1995 laying down detailed
rules for the application of Council Regulation (EEC) No 729/70 regarding the
procedure for the clearance of the accounts of the EAGGF Guarantee Section
(OJ L 158, p. 6)
amended by  Commission Regulation (EC)  No  2025/2001  of  16  October  2001
(OJ L 274, p. 3);
Commission Regulation (EC) No 2390/1999 of 25 October 1999 laying down
detailed rules for the application of Regulation (EC) No 1663/95 as regards the
form and  content  of  the  accounting  information  that  the  Member  States  must
hold at the disposal of the Commission for the purposes of the clearance of the
EAGGF Guarantee Section accounts (OJ L 295, p. 1)
amended by Commission Regulation (EC) No 1884/200212.

The Commission also adopted a number of decisions on the clearance of accounts of
the Member States:

– 

– 

– 

– 

– 

– 

Decision  of  28 June  2002  (2002/523/EC)  under  Article 5(2)(c)  of  Regulation
(EEC)  No 729/70  and  Article 7(4)  of  Regulation  (EC)  No 1258/1999  –  ninth
decision (21 February)13,
Decision  of  26  June  2002  (2002/524/EC)  under  Article  5(2)(c)  of  Regulation
(EEC)  No 729/70  and  Article 7(4)  of  Regulation  (EC)  No 1258/1999  –  tenth
decision14,
Decision of 14 October 2002 (2002/816/EC) amending Decision 1999/187/EC
on the clearance of accounts presented by the Member States in respect of the
expenditure for 1995 under Article 5(2)(c) of Regulation (EEC) No 729/7015,
Decision  of  5  November  2002  (2002/881/EC)  under  Article  5(2)(c)  of
Regulation 
(EC)
No 1258/1999 – eleventh decision16,
Decision  of  12  June  2002  (2002/461/EC)  under  Article  7(3)  of  Regulation
(EEC) No 1258/1999,
Decision  of  19  February  2002  (2002/144/EC)  under  Article  5(2)(b)  of
Regulation 
(EC)
No 1258/199917.

(EEC)  No 729/70  and  Article  7(3)  of  Regulation 

(EEC)  No 729/70  and  Article  7(4)  of  Regulation 

12

13

14

15

16

17

OJ L 288, 25.10.2002, p. 1.
OJ L 170, 29.6.2002, p. 73.
OJ L 170, 29.6.2002, p. 77.
OJ L 280, 18.10.2002, p. 88.
OJ L 306, 8.11.2002, p. 26.
OJ L 48, 20.2.2002, p. 32.

56

                                                
7.4.

Public storage

(a)

Basic rules

– 

– 

– 

– 

– 

– 

– 

Commission  Regulation  (EEC)  No  411/88  of  12  February  1988  on  the
method  and  the  rate  of  interest  to  be  used  for  calculating  the  costs  of
financing  intervention  measures  comprising  buying-in,  storage  and
disposal (OJ L 40, p. 25)
amended  by  Regulation  (EC)  No  2623/1999  of  10  December  1999
(OJ L 318, p. 14),

Commission Regulation (EEC) No 1643/89 of 12 June 1989 defining the
standard  amounts  to  be  used  for  financing  material  operations  arising
from the public storage of agricultural products (OJ L 162, p. 12),

Council  Regulation  (EEC)  No  3492/90  of  27  November  1990  laying
down the factors to be taken into consideration in the annual accounts for
the  financing  of  intervention  measures  in  the  form  of  public  storage  by
the  European  Agricultural  Guidance  and  Guarantee  Fund,  Guarantee
Section (OJ L 337, p. 3),

Commission Regulation (EEC) No 3597/90 of 12 December 1990 on the
accounting  rules  for  intervention  measures  involving  the  buying-in,
storage  and  sale  of  agricultural  products  by  intervention  agencies
(OJ L 350, p. 43),

Commission  Regulation  (EEC)  No  147/91  of  22  January  1991  defining
and  fixing  the  tolerances  for  quantity  losses  of  agricultural  products  in
public intervention storage (OJ L 17, p. 9),

Commission  Regulation  (EEC)  No  3149/92  of  29  October  1992  laying
down  detailed  rules  for  the  supply  of  food  from  intervention  stocks  for
the  benefit  of  the  most  deprived  persons  in  the  Community  (OJ  L  313,
p. 50),

Commission  Regulation  (EC)  No  2148/96  of  8  November  1996  laying
down  rules  for  evaluating  and  monitoring  public  intervention  stocks  of
agricultural products (OJ L 288, p. 6)
amended by Commission Regulation (EC) No 808/1999 of 16 April 1999
(OJ L 102, p. 70).

(b) Depreciation on buying-in during the financial year 2002

– 

Commission Regulation  (EC)  No 2035/2001  of  17  October  2001  fixing
depreciation  percentages  to  be  applied  when  agricultural  products  are
bought in, for the financial year 2002 (OJ L 275, pp. 7 and 8).

This  Regulation  sets  the  systematic  depreciation  coefficients  to  be
applied,  for  the  2002  financial  year,  when  each  agricultural  product  is
bought  in,  and  also  the  coefficients  to  be  applied  by  the  intervention
agencies to the monthly buying-in values of the products to enable them
to determine the depreciation amounts.

57

(c) Additional depreciation of end of the 2002 financial year

– 

Decision  C  (2002)  3688  of  11  October  2002  (not  published)  fixing  the
amounts  and  detailed  rules  for  the  depreciation  of  stocks  of  certain
agricultural  products  bought  into  public  intervention  during  the  2002
financial year.
This  decision  sets  the  amounts  of  additional  depreciation  at  the  end  of
the 2002 financial year.

(d) Uniform interest rate for 2002

– 

Commission Regulation (EC) No 2012/2001 of 12 October 2001 on the
rate  of  interest  to  be  used  for  calculating  the  costs  of  financing
intervention  measures  comprising  buying  in,  storage  and  disposal
(OJ L 272, p. 23).

Sets interest rates for the 2002 accounting year as required by Articles 3 and 4(1) of
Commission Regulation (EEC) No 411/88.

58

N.B.:  Totals  or  subtotals  of  expenditure  in  the  following  tables  sometimes  differ  by
€0.1 million  from  the  amount  obtained  arithmetically  by  adding  the  lines  or  columns.  This
difference is due to rounding up and down. The totals are generally expressed in million euros
while the calculations are done using amounts in euros.

ANNEXES

Available on paper in French from the Directorate-General for Agriculture

and in electronic form from its website

General

1.

Exchange rates in 2002

Budget procedure

2.

Details of the 2002 budget procedure

Cash position and management of appropriations

3.

4.

5.

Summary of outturn for 2002

Advance payments to Member States in the 2002 financial year

Direct payments by the European Commission in the 2002 financial year

Budget outturn

6.

7.

8.

9.

Budget Year 2002 – utilisation of appropriations

Veterinary and plant-health measures

Expenditure charged against the 2002 budget

EAGGF  Guarantee  Section  expenditure  by  chapter  and  by  Member  State  in
respect of the 2002 budget

10. EAGGF Guarantee Section expenditure by chapter

11. EAGGF Guarantee Section expenditure by Member State

12. EAGGF Guarantee Section expenditure by sector

13. EAGGF  Guarantee  Section  expenditure  by  sector  and  in  percentage  terms

(1997–2002)

14. EAGGF  Guarantee  Section  expenditure  by  sector  according  to  the  economic

nature of the measures (1997–2002)

15. Breakdown of EAGGF Guarantee Section expenditure  by  sector  according  to

the economic nature of the measures – 2002 financial year

59

16. Breakdown of intervention expenditure  by chapter  according  to  the  economic

nature of the measures – 2002 financial year

17. Breakdown of intervention expenditure in the form of storage – 2002 financial

year

18. Quantity and value of the products in public storage with intervention agencies

Clearance of accounts

19. Situation as at 14 October 2002 regarding appeals before the Court against the

1993 clearance of accounts decision

20. Situation as at 14 October 2002 regarding appeals before the Court against the

1995 clearance of accounts decision

21. Situation  as  at  14  October  2002  regarding  appeals  before  the  Court  against

Decision 2000/216/EC on the clearance of accounts (4th decision)

22. Situation  as  at  14  October  2002  regarding  appeals  before  the  Court  against

Decision 2000/449/EC on the clearance of accounts (5th decision)

23. Situation  as  at  14  October  2002  regarding  appeals  before  the  Court  against

Decision 2001/137/EC on the clearance of accounts (6th decision)

24. Situation  as  at  14  October  2002  regarding  appeals  before  the  Court  against

Decision 2001/557/EC on the clearance of accounts (7th decision)

25. Situation  as  at  14  October  2002  regarding  appeals  before  the  Court  against

Decision 2002/523/EC on the clearance of accounts (9th decision)

26. Situation  as  at  14  October  2002  regarding  appeals  before  the  Court  against

Decision 2002/524/EC on the clearance of accounts (10th decision)

27. Situation  as  at  14  October  2002  regarding  appeals  before  the  Court  against

Decision 2002/461/EC on the clearance of accounts (accounting audit)

The EAGGF and its financial resources – revenue in the sugar sector

28. Compensation for storage costs for Community sugar

29. Revenue in the sugar sector in the 2001 financial year (situation as at 31 March

2002)

30. Self-financing system in the sugar sector from 1995/96 to 2001/02.

60