2006/39/EC: Council Decision of  23 January 2006  on the approval of exceptional national aid by the Republic of Cyprus to Cypriot farmers for the purpose of repaying part of agricultural debts created long before accession of Cyprus to the European Union
Date: 2006-01-27
Institutions: Council of the European Union
Subjects: Cyprus, State aid, accession to the European Union, aid to agriculture, control of State aid, debt, redemption

L 23/78

EN

Official Journal of the European Union

27.1.2006

II

(Acts whose publication is not obligatory)

COUNCIL

COUNCIL DECISION

of 23 January 2006

on the approval of exceptional national aid by the Republic of Cyprus to Cypriot farmers for the
purpose of repaying part of agricultural debts created long before accession of Cyprus to the
European Union

(2006/39/EC)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty
establishing the European
Community, and in particular Article 88(2), third subparagraph,
thereof,

Having regard to the request made by the Republic of Cyprus
on 21 November 2005,

Whereas:

(1)

(2)

(3)

the plan of Cyprus

On 21 November 2005, Cyprus presented to the Council
a request for a decision in accordance with the third
subparagraph of Article 88(2) of the Treaty declaring
that
to grant national aid to
Cypriot farmers for the purpose of repaying part of agri-
cultural debts created long before the accession of Cyprus
to the European Union as a result of exceptional circum-
stances is compatible with the common market.

Intensive
efforts have been made by the Cypriot
to put back to work the many tens of
Government
thousands of farmers and rural people who were forced
to abandon their farms and households after the Turkish
invasion in 1974.

In order to enable these farmers and rural people to
pursue their activities in Cyprus, Government-guaranteed
loans were issued for the acquisition of machinery and
livestock and/or the realisation of other investments in
agriculture.

(4)

In the 1990’s, Cyprus was hit by an unprecedented and
severe drought which lasted for seven years, with devas-

(5)

(6)

tating consequences for agricultural production and farm
incomes. In the hope of a better harvest in the following
year, many Cypriot farmers hit by the drought resorted
to borrowing in order to buy farm inputs, thus falling
into a trap of accumulated debt year after year. The
extent of the losses suffered by the Cypriot farmers and
the accumulation of their debts affected their ability to
repay existing loans.

A political commitment to deal with the accumulated
farm debt problem was given by the Government early
in 1999, but through failure to reach an agreement with
the unions of
farmers the proposed debt repayment
scheme was not implemented before accession to the
Union.
long discussion and the
pressure of the serious challenges facing the agricultural
sector of Cyprus after accession that farmers unions came
to revise their positions.

It was only after

After the accession of Cyprus to the Union, the agri-
cultural
sector of Cyprus entered into a period of
extended crisis and farm incomes registered a decline
unlike in all the other new Member States. Farm gate
fruit other than citrus went
prices of cereals and of
down substantially. A considerable share of the grape
harvest could not
find normal market outlets and
Cyprus requested and was granted Community aid to
implement an immediate grubbing-up scheme. Antici-
pating the needs for adjustment, conversion and diversi-
fication, the national Rural Development Plan for the
period 2004 to 2006 incorporated a number of
considerable
schemes
people.
investment
However, the accumulated farm debt from the period
before accession proved to be a major stumbling block
to the implementation of that Plan, with Banks and other
financial
institutions requiring repayment of previous
loans before issuing new ones.

programmes
farmers

requiring
other

and
by

rural

and

27.1.2006

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Official Journal of the European Union

L 23/79

(7)

of

agricultural

the credit agencies to provide further
The refusal of
borrowing constitutes a major obstacle to the efforts of
modernisation and
and
upgrading
livestock production units. This lack of modernisation
and the consequent lower productivity and reduced prof-
itability,
together with the resulting hard living and
working conditions of the Cypriot farmers, entails the
risk of abandonment of growing, with the consequent
risk of serious economic and social repercussions for
the Cypriot farmers concerned.

(8)

The aid is intended as relief to the following categories of
farmers which are affected by the accumulation of debts
and unable to repay the loans given:

— those who were registered as farmers with the Social
Security Fund and paid social security contributions
up to 31 December 1998,

— displaced farmers who held a professional

license,
and whose annual
income from non-agricultural
employment did not exceed CYP (Cyprus pounds)
6 000 on 31 December 1998,

— those who are today receiving a pension and were

registered as farmers on 31 December 1998,

— those who lived in the

countryside

and were
employed in farming, but also exercised another
non-agricultural profession, provided that their non-
income did not exceed CYP 6 000 on
agricultural
31 December 1998.

(9)

The aid to be granted from Cyprus amounts to CYP
to EUR 39 330 000), corre-
23 000 000 (equivalent

sponding to loans contracted between 1974 and the
31 December 1998.

(10)

(11)

The number of beneficiaries by the proposed national aid
scheme is estimated to be over 15 000 farmers.

Exceptional circumstances
therefore exist, making it
possible to consider as compatible with the common
market the aid planned by Cyprus for Cypriot farmers
for the purpose of repaying part of agricultural debts
created long before accession of Cyprus to the Union,

HAS ADOPTED THIS DECISION:

Article 1

to EUR 39 330 000)

National aid granted by the Republic of Cyprus for CYP
to enable
23 000 000 (equivalent
Cypriot farmers to repay to Banks and other financial
insti-
tutions part of
their agricultural debts, which were created
before 31 December 1998 due to the exceptional circumstances
that prevailed before and up to that date, shall be considered
compatible with the common market.

Article 2

This Decision is addressed to the Republic of Cyprus.

Done at Brussels, 23 January 2006.

For the Council
The President

J. PRÖLL