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: 2007-01-17
Institutions: European Commission
Subjects: EAGGF Guarantee Section, EU Member State, EU financing, financing level, intervention buying, intervention stock

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 17.1.2007 
COM(2007) 12 final 

2007/0005 (CNS) 

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 in an 
economic  burden  for  the  Member  States  which  have  to  put  forward  the  funds  necessary  for 
these intervention purchases. Member States also have to bear the economic burden for the full 
period  in  which  these  products  remain  in  intervention  stores  until  their  removal  from  public 
storage. 

Council  Regulation  (EEC)  No  1883/78  provides  the  general  rules  on  the  financing  of 
interventions by the European Agricultural Guidance and Guarantee Fund, Guarantee section. 
Community legislation further stipulates that the incurred financial charges are reimbursed to 
the  Member  States  on  the  basis  of  a  uniform  rate  of  interest  for  the  community  as  a  whole. 
This is, then, the interest rate used in order to cover the Member States' cost of mobilisation of 
funds aimed to finance public storage operations. This cost is reimbursed to the Member States 
concerned  within  a  2-month  delay  following  the  month  of  their  being  declared  to  the 
Commission.  

In  2005,  the  Council  adopted,  for  the  budget  years  2005  and  2006,  a  disposition  (Council 
Regulation  (EC)  No  695/2005)  concerning  Member  States  which  were  mobilising  the 
necessary  funds  at  interest  rates  which  were  higher  than  the  uniform  rate  of  interest  by 
amending  Regulation  (EEC)  No  1883/78.  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 two years. 

Following the recent increases in interest rates, certain Member States, which still have to bear 
significant  financial  charges  due  the  large  quantities  of  cereals  offered  and  stored  into 
intervention,  requested  that  the  Commission  examines  the  possibility  to  propose  specific 
measures in order to alleviate the Member States' financial burden for a limited period of time. 
Therefore,  the  Commission,  after  examination  of  this  request  and  because  of  the  large 
quantities of cereals in public storage, is hereby proposing to the Council a specific treatment 
in  such  cases  for  a  limited  period  of  time,  i.e.  for  the  financial  years  2007  and  2008. 
Specifically, the Commission proposes that in the cases where the average interest rate, in the 
course of the third month following the reference period utilised for the establishment of the 
uniform interest rate, is more than twice the uniform interest rate for a given Member State, 
provision  should  be  made  for  the  application  of  a  correcting  mechanism.  In  such  cases,  the 
Commission  will  cover  the  amount  which  corresponds  to  the  interest  rate  borne  by  this 
Member  State  minus  the  uniform  rate  of  interest  fixed  by  the  Commission.  The  difference 
should nevertheless be borne by the Member State concerned in order to encourage it to seek 
the least costly financing method. 

This  proposal  involves  additional  expenditure  for  the  Community  budget  which  is  currently 
estimated at approximately EUR 9.3 million for the 2007 budget and at EUR 10.4 million for 
the 2008 budget. It will apply retroactively as of 1 October 2006. 

The Commission considers that this proposal is interlinked with the proposal for abolition of 
the maize intervention and requests the Council to examine and adopt these proposals at the 
same time. 

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2007/0005 (CNS) 

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, and in particular the third 
subparagraph of Article 37(2) thereof, 

Having regard to the proposal from the Commission1, 

Having regard to the opinion of the European Parliament2, 

Whereas: 

(1) 

(2) 

(3) 

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  1883/783,  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  certain  Member  States  the  buying  into  public  intervention  of 
agricultural  products  can  be  financed  only  at  interest  rates  which  are  substantially 
higher than the uniform interest rate. 

(4)  Where,  in  such  cases,  the  average  interest  rates,  in  the  course  of  the  third  month 
following the reference period used for the establishment of the uniform interest rate by 
the Commission, is more than twice the uniform interest rate for a given Member State, 
provision  should  be  made  for  a  correcting  mechanism  to  be  applied.  This  average 
interest rate should nevertheless be partially borne by the Member State concerned in 
order to encourage it to seek the least costly financing method. 

1 
2 
3 

OJ C …, …, p. …. 
OJ C …, …, p. …. 
OJ  L  216,  5.8.1978,  p. 1.  Regulation  as  last  amended  by  Regulation  (EC)  No 1259/96  (OJ L 163, 
2.7.1996, p. 10). 

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(5) 

Regulation (EEC) No 1883/78 should therefore be amended accordingly. 

(6) 

This  amendment  to  the  rules  should  be  carried  out  for  the  financial  years  2007  and 
2008 and should apply from the beginning of the current accounting year, 

HAS ADOPTED THIS REGULATION: 

Article 1 

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

"By  way  of  derogation  from  the  first  subparagraph,  if  the  average  interest  rate  borne  by  a 
Member State, in the course of the third month following the reference period utilised for the 
establishment of the uniform interest rate by the Commission is more than twice the uniform 
interest  rate,  the  Commission  may,  for  the  financial  years  2007  and  2008,  in  financing  the 
interest  costs  incurred  by  that  Member  State,  cover  the  amount  which  corresponds  to  the 
interest rate borne by this Member State minus the uniform rate of interest." 

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 2006. 

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 

BUDGET HEADING: 
05 02 01 02, 05 02 05 08, 05 02 09 04, 05 02 12 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: 
Article 37(2) of the Treaty 

AIMS: 
Financing the extra costs for public intervention operations 

1. 

2. 

3. 

4. 

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 2007 
(EUR million) 

FOLLOWING 
FINANCIAL 
YEAR 2008 
(EUR million) 

– 

– 

9,3 

10,4 (a) 

– 

– 

2009 

2010 

2011 

2012 

– 

– 

– 

– 

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) 

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

6.3  WILL APPROPRIATIONS NEED TO BE ENTERED IN FUTURE BUDGETS? 

YES NO 

YES NO 

YES NO 

YES NO 

OBSERVATIONS: 
(a) 
(b) 

see annexed calculation 

Assuming no change in economic conditions. 
This  financing  is  not  foreseen  in  the  2007  budget.  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, preferably by budgetary transfer. 

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ANNEX 

Calculation of the financing costs for public storage operations 

Budget year 2007 (on the basis of the hypotheses retained in the AL 2007) 

Average 
stock(1) 

Average 
value(2) 

Uniform 
interest rate 
fixed 

Total amount 
without 
derogation 

Specific 
interest rate to 
be proposed 

Total amount 
with 
derogation 

Additional cost 

05 02 01 02 
–Hungary - wheat * 
– Hungary - barley ** 
– Hungary - maize *** 

05 02 05 08 
– Hungary - sugar **** 

05 02 09 04 
– Hungary - alcohol ***** 

Total 

t 

EUR/t 

for 2007 

335.750 
50.820 
4.948.940 

95,20 
91,60 
100,00 

3,2% 
3,2% 
3,2% 

159.900 

287,20 

3,2% 

30.560 

49,03 

3,2% 

17,01 
1,02 
0,15 
15,84 

1,47 
1,47 

0,05 
0,05 

18,53 

4,8% 
4,8% 
4,8% 

4,8% 

4,8% 

25,51 
1,53  
0,22  
23,75  

2,20  
2,20  

0,07  
0,07  

27,79 

8,50 
0,51 
0,07 
7,92 

0,73 
0,73 

0,02 
0,02 

9,26 

(1)  Source : hypotheses retained in the AL 2007 – average stock. 
(2)  Source : hypotheses retained in the AL 2007 – calculation of financial costs. 
* 

Wheat  situation  as  of  3/12/2006:  EU-25:  3 099 000  t,  HU:  522 703  t  or  17%  applied  to  (2 975 000 t  –  1 000 000 t  for  RO/BU)  in 
AL 2007 for EU-25 cost. 
Barley situation as of 3/12/2006: EU-25: 1 166 113 t, HU: 33 862 t or 3% applied to 1 694 000t in LR 2007 for EU-25 cost. 

** 
***  Maize  situation  as  of  3/12/2006:  EU-25:  4 747 770 t,  HU:  4 620 000 t  or  97%  applied  to  (7 102 000 t–2 000 000 t  for  RO/BU)  in 

AL 2007 for EU-25 cost. 

****  Sugar situation as of 1/12/2006: 139 000 t of sugar for HU out of 855 000 t for EU-25, i.e.:16,3% applied to 981 000 t of sugar in 

AL 2007. 

*****  Average stock of alcohol on 30/9/2006 of 33 919 hl applied to the average stock of 3 056 000 hl in AL 2007 for EU-25. 

Budget year 2008  

Average  
stock 

Average  
value  

Uniform 
interest rate 
fixed 

Total amount 
without 
derogation 

Specific 
interest rate to 
be proposed 

Total amount 
with 
derogation 

Additional cost 

05 02 01 02 
 – Hungary - wheat * 
 – Hungary - barley * 
– Hungary - maize * 

05 02 05 08 
– Hungary - sugar ** 

05 02 09 04 
– Hungary - alcohol *** 

Total 

t 

EUR/t 

for 2007 

213.860 
108.120 
6.196.360 

95,20 
91,60 
100,00 

3,2% 
3,2% 
3,2% 

0 

287,20 

3,2% 

30.560 

49,03 

3,2% 

20,80 
0,65 
0,32 
19,83 

0,00 
0,00 

0,05 
0,05 

20,84 

4,8% 
4,8% 
4,8% 

4,8% 

4,8% 

31,20 
0,98  
0,48  
29,74  

0,00  
0,00  

0,07  
0,07  

10,40  
0,33  
0,16  
9,91  

0,00  
0,00  

0,02  
0,02  

31,27 

10,42  

These quantities are estimated on the basis of the balance sheets for cereals intervention included in the maize reform document. 
Hypothesis of no sugar in intervention on 30/9/2007. 

* 
** 
***  Hypothesis of same quantity in intervention as the 2007 one of 30 560 hl. 

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