Proposal for a Council Regulation amending Regulation (EEC) No 1883/78 laying down general rules for the financing of interventions by the European Agricultural Guidance and Guarantee Fund, Guarantee Section .
Date: 2005-02-04
Institutions: European Commission
Subjects: EAGGF Guarantee Section, EU financing arrangements, accession to the European Union, agricultural expenditure, intervention buying

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 4.2.2005 
COM(2005) 27 final 

. 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EEC) No 1883/78 laying down general rules for the financing  
of interventions by the European Agricultural Guidance and Guarantee Fund,  
Guarantee Section 

. 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

Common  Agricultural  Policy  legislation  obliges  Member  States  to  buy  from  producers 
agricultural products which are subject to an intervention mechanism. When these producers 
present their products in an approved intervention centre, this purchase obligation results to an 
economic burden for the Member States which have to borrow the funds necessary for these 
intervention  purchases.  Community  legislation  further  stipulates  that  the  incurred  financial 
charges are reimbursed to them on the basis of a uniform rate of interest for the community as 
a  whole  within  a  2-month  delay  following  the  month  of  their  being  declared  by  the 
responsible services of the Member State concerned.  

In  1993,  the  Council  adopted  a  disposition  (Regulation  (EEC)  No  1571/93)  concerning 
Member States which were mobilising the necessary funds at interest rates which were higher 
than the uniform rate of interest by amending Council Regulation (EEC) No 1883/78 relating 
to the general rules on the financing of interventions by the European Agricultural Guidance 
and  Guarantee  Fund,  Guarantee  section.  On  the  basis  of  this  disposition,  the  EAGGF-
Guarantee reimbursed to any Member State, which incurred an interest rate which was higher 
than the double of the uniform rate, the interest rate difference for the part borne by it beyond 
this level. The part of the charge defined as the difference between the uniform rate and the 
double  of  this  rate  remained  at  the  charge  of  the  Member  State  concerned.  This  disposition 
was applied for three years. 

Certain  new  Member  States,  which  have  to  bear  significant  financial  charges  due  the 
increased quantities of cereals offered into intervention because of the increased production of 
cereals (Hungary), requested that the Commission examines the possibility to repeat this past 
disposition for a limited period of time. Therefore, the Commission, after examination of this 
request and because of the increased quantities of cereals offered into intervention, is hereby 
proposing to the Council to repeat this disposition for a similar limited period of time, i. e: for 
the  financial  years  2005  to  2007.  The  Council  is  requested  to  adopt  these  provisions 
concerning  the  Member  States  which  bear  an  increased  interest  rate,  when  compared  to  the 
uniform rate of interest, by amending Regulation (EEC) No 1883/78. 

This provision will be temporary and it will have a period of validity of three years. It will 
apply  retroactively  as  of  1  October  2004.  This  proposal  involves  additional  financial 
expenditure  for  the  Community  budget  which  is  currently  estimated  at  approximately 
EUR 18.0  million  on  the  basis  of  the  forecasts  established  for  the  2005  budget  and  of 
information available to the Commission as of mid-November 2004. 

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Proposal for a 

COUNCIL REGULATION 

amending Regulation (EEC) No 1883/78 laying down general rules for the financing  
of interventions by the European Agricultural Guidance and Guarantee Fund,  
Guarantee Section 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, 

Having regard to Council Regulation (EC) No 1258/1999 of 17 May 1999 on the financing of 
the common agricultural policy1, and in particular Article 2(3) thereof, 

Having regard to the proposal from the Commission, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

For  intervention  operations  for  which  a  unit  amount  has  not  been  set  by  market 
organisation  rules,  basic  Community  financing  rules  have  been  set  by  Council 
Regulation  (EEC)  No  1883/782,  in  particular  as  to  the  method  of  establishing  the 
amounts to be financed, the financing of expenditure resulting from tying up the funds 
needed for intervention purchasing, the valuation of stocks to be carried over from one 
year to another and the financing of expenditure resulting from the physical operations 
of storage. 

Article 5 of Regulation (EEC) No 1883/78 provides that the interest charges incurred 
by  Member  States  in  mobilising  the  funds  used  to  purchase  public  intervention 
products are to be financed by the Community at a uniform interest rate. 

It  may  appear  that  in  a  Member  State  the  buying  into  public  intervention  of 
agricultural  products  can  be  financed  only  at  interest  rates  which  are  substantially 
higher than the uniform interest rate. 

In  so  far  as,  in  such  cases,  the  difference  in  interest  rates  is  more  than  twice  the 
uniform  interest  rate  for  a  given  Member  State,  provision  should  be  made  for  a 
correcting  mechanism  to  be  applied.  That  difference  should  nevertheless  be  partially 
borne by the Member State concerned in order to encourage it to seek the least costly 
financing method. 

1 
2 

OJ L 160, 26.6.1999, p. 103. 
OJ L 216, 5.8.1978, p. 1. Regulation last amended by Regulation (EC) No 1259/96 (OJ L 163, 2.7.1996, 
p. 10). 

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(5) 

This amendment to the rules should be temporary and, consequently, be carried out for 
the  financial  years  2005  to  2007.  It  must  apply  from  the  beginning  of  the  current 
financial year. 

HAS ADOPTED THIS REGULATION: 

Article 1 

The third subparagraph of Article 5 of Regulation (EEC) No 1883/78 is hereby replaced by 
the following: 

”The first subparagraph notwithstanding, if the interest rate borne by a Member State is more 
than  twice  the  uniform  interest  rate,  the  Commission  may,  for  the  financial  years  2005  to 
2007, in financing the interest costs incurred by that Member State, cover the amount which 
corresponds to the uniform rate of interest plus the difference between double that rate and the 
rate borne by the Member State.” 

Article 2 

This Regulation shall enter into force on the day of its publication in the Official Journal of 
the European Union. 

It shall apply to expenditure incurred from 1 October 2004. 

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

Done at Brussels, […] 

For the Council 
The President 

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FINANCIAL STATEMENT 

1. 

2. 

3. 

4. 

BUDGET HEADING: 
05 02 01 02, 05 02 02 02, 05 02 09 04, 05 03 01 02, 05 03 01 04 

APPROPRIATIONS:
EUR 399 Mio 

TITLE: 
Council Regulation amending Regulation (EEC) No 1883/78 laying down general rules for the financing 
of interventions by the European Agricultural Guidance and Guarantee Fund, Guarantee Section 

LEGAL BASIS: 
Council Regulation (EC) No 1258/1999 on the financing of the CAP 

AIMS: 
Financing the extra costs for public intervention operations. 

5. 

FINANCIAL IMPLICATIONS 

5.0 

CHARGED TO THE EC BUDGET 

EXPENDITURE 
– 
(REFUNDS/INTERVENTIONS) 
– 
– 

NATIONAL AUTHORITIES 
OTHER 

5.1  REVENUE 

OWN RESOURCES OF THE EC  

– 
(LEVIES/CUSTOMS DUTIES) 
– 

NATIONAL 

5.0.1  ESTIMATED EXPENDITURE 
5.1.1  ESTIMATED REVENUE 

5.2  METHOD OF CALCULATION: 

(see Annex) 

12 MONTH 
PERIOD 

(EUR million) 

CURRENT 
FINANCIAL 
YEAR  2005 
(EUR million) 

FOLLOWING 
FINANCIAL 
YEAR  2006 
(EUR million) 

– 

– 

18.3 

18.3 (a) 

– 

– 

2007 

18.3 (a) 
– 

2008 

2009 

2010 

– 

– 

– 

6.0  CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE 

RELEVANT CHAPTER OF THE CURRENT BUDGET? 

see (b) 

6.1  CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF 

THE CURRENT BUDGET? 

see (b) 

YES / NO 

YES / NO 

6.2  WILL A SUPPLEMENTARY BUDGET BE NECESSARY?  see observation under (b) 

YES / NO 

6.3  WILL APPROPRIATIONS NEED TO BE ENTERED IN FUTURE BUDGETS? 

YES / NO 

OBSERVATIONS: 

see annexed calculation 

(a) 
(b) 

Assuming no change in economic conditions. 
This  financing  is  not  foreseen  in  the  LR  APB  2005.  The  Commission,  within  the  framework  of  the 
execution of the budget, will mobilise the necessary resources for financing this measure by the most 
appropriate procedure, i.e. budgetary transfer or supplementary budget. 

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A N N E X 

Calculation of additional financing costs following amendment  
of Council Regulation No 1883/78 

Member 
State/Product

Expected 
average stock 
(in million t) (2)

Average value 
(€/per tonne) 
(3)

Average total 
value (in 
million €)

Declared 
interest rate 
(%) (1)

('c)

(d)=(b)x('c)

('e)

103,80
103,80
103,80
103,80

82,60
82,60
82,60
82,60

86,10
86,10
86,10

1357,56
1357,56
1357,56
1357,56

1505,70
1505,70
1505,70

0,00
149,33
3,98
5,16

1,88
8,91
0,06
2,58

64,80
0,28
3,24

27,15
13,58
1,36
1,36

60,23
15,06
1,51

4,74
11,89
6,00
8,50

4,74
11,89
6,00
8,50

11,89
6,00
8,50

4,74
6,00
11,89
8,50

4,74
6,00
11,89

(a)
WHEAT
UK
HU
PL
SK

BARLEY
UK
HU
PL
SK

MAIZE
HU
PL
SK

BUTTER
UK
PL
HU
SK

SMP
UK
PL
HU

Rice

Alcohol

TOTAL

(b)

0,000
1,439
0,038
0,050

0,023
0,108
0,001
0,031

0,753
0,003
0,038

0,020
0,010
0,001
0,001

0,040
0,010
0,001

p.m

p.m.

Difference with 
double the 
uniform rate of 
2,2%
(f)=[(e)-4,4%]

Additional 
financing 
cost (in 
million €)
(g)=(f)x-(d)

0,34
7,49
1,60
4,10

0,34
7,49
1,60
4,10

7,49
1,60
4,10

0,34
1,60
7,49
4,10

0,34
1,60
7,49

0,00
11,18
0,06
0,21

0,01
0,67
0,00
0,11

4,85
0,00
0,13

0,09
0,22
0,10
0,06

0,20
0,24
0,11

18,26

Note (1) : For PL the 3-month rates for the period March-August 2004 were used as found in Eurostat. Therefore, 
differences might appear between these rates and the actual government funding rates.  
Note (2) : Based on quantities offered into intervention as of 14/11/2004.  
Note (3): Based on the values included in the LR APB 2005

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