Report from the Commission to the European Parliament and the Council on EAGF expenditure - Early warning system No 4-7/2008
Date: 2008-10-13
Institutions: European Commission
Subjects: agricultural expenditure, aid for restructuring, common agricultural policy, fund (EU), implementation of the budget, revenue, sugar industry

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.10.2008 
SEC(2008) 2652 final 

REPORT FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

on EAGF expenditure 

Early warning system 

No 4-7/2008 

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TABLE OF CONTENTS 

1. 

2. 

3. 

4. 

5. 

6. 

INTRODUCTION.............................................................................................................. 3 

COMMENTS ON THE IMPLEMENTATION OF THE EAGF 2008 BUDGET.............................. 3 

IMPLEMENTATION OF THE REVENUE ASSIGNED TO EAGF................................................ 5 

REVENUE ORIGINATING FROM THE TEMPORARY RESTRUCTURING AMOUNTS 
 (SUGAR SECTOR)........................................................................................................... 5 

IMPLEMENTATION OF THE SUGAR RESTRUCTURING FUND.............................................. 6 

CONCLUSIONS................................................................................................................ 6 

ANNEX 

PROVISIONAL CONSUMPTION OF EAGF APPROPRIATIONS UP TO 31/05/2008 

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1. 

INTRODUCTION 

For the period 16 October 2007 to 31 May 2008, the budget’s actual implementation level 
compared to the expenditure profile pointed out by the indicator, established on the basis of 
the dispositions of Article 20 of Council Regulation (EC) No 1290/20051, is presented in the 
annexed table. 

2. 

COMMENTS ON THE IMPLEMENTATION OF THE EAGF 2008 BUDGET 

A brief commentary on the reasons for which the most significant divergences between the 
actual  and  the  expected  level  of  implementation  for  certain  sectors  of  the  2008  budget  is 
presented hereafter: 

2.1.  Monetary factors 

In accordance with Article 21 of Regulation (EC) No 1290/2005, the budget adopted by the 
Budgetary  Authority  was  drawn  up  on  the  basis  of  the  average  parity  rate  for  July-
September 2007  of  EUR 1 = US $ 1.37.  It  should  be  noted 
the  period 
1 August 2007  to  31 May 2008,  the  average  parity  rate  was  approximately  equal  to 
EUR 1 = US $ 1.47, i.e. 7.3% above the rate used for the establishment of the 2008 budget. 

that,  for 

The  expenditure  incurred  in  the  aforementioned  period  takes  account  of  the  movement  in 
the EUR/US$ parity rate. It should be pointed out that fixing export refunds for agricultural 
products, particularly for  sugar, is influenced by the trend in this parity rate. 

2.2.  Market factors 

2.2.1.  Cereals (- EUR 49.6 million) 

This under-implementation of appropriations, when compared to the level of the indicator, 
is due to the acceleration of the rhythm of sales of cereals from intervention in combination 
with  the  high  level  of  domestic  prices  at  which  these  sales  are  realised  as  opposed  to  the 
lower price level retained at the time of establishment of the 2008 budget. 

2.2.2.  Refunds for non-Annex I products (- EUR 23.8 million) 

This under-implementation of appropriations, when compared to the level of the indicator, 
is primarily due to the overall reduction in the level of export refunds granted as opposed to 
the refund levels retained at the time of establishment of the 2008 budget. 

2.2.3. 

Sugar (- EUR 100.0 million) 

This under-implementation of appropriations, when compared to the level of the indicator, 
is  both  due  to  the  reduced  quantities  of  exported  sugar  and  to  the  overall  reduction  in  the 
level of export refunds granted as opposed to the quantities and the refund levels retained at 
the time of establishment of the 2008 budget. 

1 

OJ L 209,  11.8.2005,  p. 1.  Regulation  last  amended  by  Regulation  (EC)  No 320/2006  (JO L 58,  28.2.2006, 
p. 42). 

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2.2.4.  Fruits and vegetables (+ EUR 191.1 million) 

This over-implementation is primarily due to the payments made by the Member States for 
the  operational  funds  for  producer  organisations compared  to  the  level  of  the  indicator  on 
31 May 2008. 

It  should  be  noted,  though,  that  the  nature  of  this  over-execution  of  the  budget's 
appropriations  is  technical.  Revenue  estimated  at  EUR 467.0 million  has  been  assigned  to 
finance  expenditure  for  the  operational  funds  for  producer  organisations  in  the  fruits  and 
vegetables  sector.  The  2008  budgetary  appropriations  requested  and  granted  by  the 
Budgetary Authority for this sector did not include this revenue. Therefore, the expenditure 
currently  incurred  is  compared  to  the  indicator  which  applies  to  a  level  of  appropriations 
which is lower by the revenue assigned to this sector. This is the reason for the current over-
implementation of the budget at this point in time.  

It should be noted that the amount of the revenue assigned to fruits and vegetables should be 
sufficient to cover the level of expenditure expected to be incurred by Member States in this 
sector. 

2.2.5.  Wine (- EUR 222.4 million) 

This under-implementation of appropriations, when compared to the level of the indicator, 
is due to: 

– 

– 

the  smaller  expenditure  incurred  by  Member  States  for  the  distillation  of  wine  both 
because of the lower quantities of by-products of wine-making going to distillation as 
well as to the lower quantities of wine distilled for the alcohol industry, and  

the lower  expenditure incurred  by Member States for restructuring and reconversion 
aids. 

2.3. 

Direct aids (+ EUR 1 043.8 million) 

This  over-implementation  resulting  from  the  comparison  of  the  expenditure  incurred  with 
the  level  of  the  indicator  mainly  relates  to  decoupled  direct  aids  and,  particularly,  to  the 
single payment scheme. 

It  should  be  noted  that  the  nature  of  this  over-execution  of  the  budget's  appropriations  is 
technical.  Revenue  estimated  at  EUR 1 470.0 million  has  been  assigned  to  finance 
expenditure  for  the  single  payment  scheme.  The  2008  budgetary  appropriations  requested 
and  granted  by  the  Budgetary  Authority  for  this  scheme  did  not  include  this  revenue. 
Therefore, the expenditure currently incurred is compared to the indicator which applies to a 
level of appropriations which are lower by the revenue assigned to this scheme. This is the 
reason for the budget’s over-execution at this point in time. 

It should be noted that the amount of the revenue assigned to direct aids should be sufficient 
to cover the level of expenditure expected to be incurred by Member States in this sector. 

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2.4. 

Audit of agricultural expenditure 

2.4.1.  Accounting clearance of previous years' accounts (+ EUR 234.2 million) 

This over-implementation result from the comparison of the correction claw-backs already 
carried out with the level of the indicator at this point in time for this sector. 

However, all the accounting clearance decisions expected within this budget year have been 
already taken by the Commission. The net amount expected to be clawed back through these 
decisions  including  an  estimate  of  the  corrections  for  payment  delays  still  expected  to  be 
made  stands,  at  this  point  in  time,  at  approximately  – EUR 40.0 million.  This  amount, 
compared  to  the  amount  of  – EUR 370.0 million,  which  was  retained  by  the  Budgetary 
Authority  in  the  2008  budget,  leads  to  lack    of  budget's  appropriations  of  approximately 
EUR 330.0 million.  This  shortfall  in  claw  backs  has  to  be  covered  by  a  transfer  of 
appropriations and it will lead to a corresponding increase in EAGF expenditure.  

3. 

IMPLEMENTATION OF THE REVENUE ASSIGNED TO EAGF 

The  annexed  table  shows  that  assigned  revenue  amounting  to  EUR 726.7  million  was 
collected as of 31 May 2008. Specifically: 

– 

– 

– 

The conformity clearance claw-backs amounted to approximately EUR 431.2 million 
with additional amounts expected by the end of the budget year,  

The  receipts  from  irregularities  amounted  to  approximately  EUR 74.8 million  with 
additional amounts also expected by the end of the budget year, and  

From the milk levy an amount of approximately EUR 220.1 million was collected as 
compared to the initial estimate of EUR 219.0 million. 

Contrary to the initially estimated amount of EUR 1 138.0 million, the amount of assigned 
revenue carried over from 2007 into 2008 eventually amounted to EUR 1 159.5 million. 

4. 

REVENUE  ORIGINATING  FROM  THE  TEMPORARY  RESTRUCTURING  AMOUNTS  (SUGAR 
SECTOR)  

In  November  2007,  Member  States  paid  the  second  instalment  of  the  temporary 
restructuring amounts  due  for  the  abandonment  of  the  2006/07  sugar  quotas  amounting  to 
approximately  EUR 858.1 million.  Furthermore,  Member  States  also  paid  the  first 
instalment of the temporary restructuring amounts due for the abandonment of the 2007/08 
sugar  quotas  amounting  to  approximately  EUR 1 734.7 million.  Therefore,  total  assigned 
revenue  of  EUR 2 592.9 million  in  the  form  of  temporary  restructuring  amounts  has  been 
transferred to the Commission as of 31 May 2008. 

Finally,  contrary  to  the  initially  estimated  amount  of  EUR 530.0 million,  the  assigned 
revenue  carried  over  from  2007  into  2008  eventually  amounted  to  EUR 735.8 million.  At 
this  point  in  time,  after  the  aid  payments  made  under  the  sugar  restructuring  fund  (NB: 
please  see  point  5  below),  the  temporary  restructuring  amounts  present  a  balance  of 
EUR 1 951.5 million. 

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5. 

IMPLEMENTATION OF THE SUGAR RESTRUCTURING FUND 

As of the end of May, Member States paid approximately EUR 641.4 million for aids of the 
2006/07 marketing year to the restructured sugar industry, for diversification aids as well as 
for aids to sugar refining. These aids were paid from the aforementioned revenue originating 
from the temporary restructuring amounts.  

6. 

CONCLUSIONS 

The uptake of the EAGF budget's appropriations, for the reimbursement of Member States' 
expenditure  from  16  October  2007  to  31  May  2008,  for  market  measures  and  direct  aids 
amounted to EUR 37 995.8 million, ie: it involved an over-execution of these appropriations 
by approximately EUR 946.8 million.  

This  over-execution  is  primarily  attributed  to  decoupled  direct  aids  and  especially  to  the 
single payments scheme as well as to the shortfall in the claw-back corrections with regard 
to  the  accounting  clearance  of  EAGF’s  accounts.  With  regard  to  market  measures,  at  this 
point in time, savings are expected in a number of sectors like wine and sugar.  

At this point in time, it should be pointed out that the available level of revenue assigned to 
EAGF  will  be  sufficient  to  cover  any  over-execution  of  the  budget's  appropriations.  This 
assigned  revenue  is  composed  of  an  amount  of  EUR 1 159.5 million  carried  over  from 
budget year 2007 to 2008 and of an amount of EUR 726.7 million collected as of 31/5/2008 
compared  to  the  2008  budget's  foreseen  amount  of  freshly  assigned  revenue  of 
EUR 799.0 million. 

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A N N E X 

BUDGET YEAR 2008 (*)

PROVISIONAL CONSUMPTION OF THE EAGF APPROPRIATIONS

Situation to the 31/05/2008
in EUR million

Original
appropriations
Budget (*)

Consumption
from
November to
May

EUR mio

EUR mio

A

B

Utilisation

Consumption profile (**)
as at May

Gap between
implementation and
indicator

%
C=
B/A

%

D

EUR mio
E=
D*A

%

F=C-D

EUR mio

G=B-E

9,0

9,0

-9,0
p.m.
150,0
307,0
576,0
48,0
21,0
728,0
1.412,0
50,4
372,0
167,0
61,0
p.m.
149,0
4.032,4

30.494,0
5.775,0
563,0
36.832,0

1,8

1,8

-42,5
0,0
77,0
110,6
296,8
35,7
7,9
639,8
715,6
32,6
220,6
106,9
30,2
0,0
101,4
2.332,7

30.364,2
4.934,7
109,0
35.407,9

20,5 %

37,7 %

20,5 %

37,7 %

471,8 %
0,0 %
51,4 %
36,0 %
51,5 %
74,5 %
37,5 %
87,9 %
50,7 %
64,7 %
59,3 %
64,0 %
49,5 %

68,1 %
57,8 %

99,6 %
85,4 %
19,4 %
96,1 %

-79,6 %

67,2 %
66,8 %
68,9 %
84,6 %
32,9 %
61,6 %
66,4 %
54,4 %
60,7 %
62,9 %
69,5 %

55,2 %
65,1 %

96,7 %
82,8 %
19,0 %
93,3 %

3,4

3,4

7,2

100,9
205,1
396,8
40,6
6,9
448,7
938,0
27,4
225,9
105,0
42,4

82,2
2.627,0

29.472,7
4.784,3
107,1
34.364,0

-17,2 %

-17,2 %

551,4 %

-15,9 %
-30,8 %
-17,4 %
-10,1 %
4,6 %
26,3 %
-15,7 %
10,3 %
-1,4 %
1,1 %
-20,0 %

12,9 %
-7,3 %

2,9 %
2,6 %
0,3 %
2,8 %

-1,6

-1,6

-49,6

-23,8
-94,5
-100,0
-4,8
1,0
191,1
-222,4
5,2
-5,3
1,9
-12,2

19,2
-294,3

891,5
150,4
1,9
1.043,8

p.m.

-10,4

-0,8 %

62,5 %

-231,3

-63,3 %

234,2

3,0
3,3
4,7
15,8

29,6
0,7

17,1 %
50,3 %

90,9 %
28,6 %

93,3 %
87,6 %

25,0 %
25,0 %

25,6
27,6

8,1
0,6

-76,2 %
-37,3 %

65,9 %
3,6 %

-370,0
p.m.
27,5
31,5

32,5
2,4

14,3

265,0

0,0

0,0 %

0,0 %

0,0

0,0 %

206,8

78,0 %

84,5 %

223,9

-6,4 %

40.876,5

37.995,8

93,0 %

90,6 %

37.049,0

2,3 %

p.m.
p.m.
p.m.
p.m.

p.m.
p.m.
p.m.
p.m.
p.m.

431,2
74,8
220,7
726,7

641,4
2.592,9
0,0
0,0
1.951,5

-20,9
-11,7

21,4
0,1

0,0

-17,0

946,8

05 01

05 02
05 02 01
05 02 02
05 02 03
05 02 04
05 02 05
05 02 06
05 02 07
05 02 08
05 02 09
05 02 10
05 02 11
05 02 12
05 02 13
05 02 14
05 02 15

05 03
05 03 01
05 03 02
05 03 03

05 04

05 07

05 08

11 02
17 01

17 03

17 04

Expenditure
(1) ADMINISTRATIVE EXPENDITURE FOR EAGF
05010401 and 05010407
Total 05 01 Administrative expenditure for EAGF
INTERVENTIONS IN AGRICULTURAL MARKETS
Cereals
Rice
Refunds on non-Annex 1 products
Food programmes
Sugar
Olive oil
Textile plants
Fruits and vegetables (estimation of 467 Mio EUR credits coming from revenue)***
Products of the wine-growing sector
Promotion
Other plant products/measures
Milk and milk products
Beef and veal
Sheepmeat and goatmeat
Pigmeat, eggs and poultry, bee-keeping and other animal products
Total 05 02 Interventions in agricultural markets (excluding 05 02 16)
DIRECT AIDS
Decoupled direct aids (estimation of 1470 Mio EUR credits coming from revenue)***
Other direct aids
Additional amounts of aid
Total 05 03 Direct aids
OTHER EXPENDITURE
050401 Rural development financed by the EAGGF-Guarantee Section-Programming
period 2000-2006
05070106 Accounting clearance of previous years' accounts
(3) 05070107 Conformity clearance of previous years' accounts
Other lines (05070102 and 050702)
POLICY STRATEGY AND COORDINATION OF AGRICULTURE AND RURAL
DEVELOPMENT POLICY AREA
(2) FISHERIES MARKETS
(1) (2) ADMINISTRATIVE EXPENDITURE OF 'HEALTH AND CONSUMER
PROTECTION' POLICY AREA
17010401, 17010404 to 17010406
(1) (2) PUBLIC HEALTH
17 03 02 Community tobacco fund - direct payments by the EU
(1) (2) FOOD SAFETY, ANIMAL HEALTH, ANIMAL WELFARE AND PLANT HEALTH
170401 to 170405 and 170407
Total Expenditure (excluding 05 02 16)

6 7 0 1
6 7 0 2
6 7 0 3

Revenue
Clearance of EAGF-accounts (estimation : 500 Mio EUR)
EAGF Irregularities (estimation : 80 Mio EUR)
Superlevy from milk producers (estimation : 219 Mio EUR)
Total Revenue (excluding 6 8)

05 02 16
6 8 0 1
6 8 0 2
6 8 0 3

Sugar Restructuring Fund
Sugar Restructuring Fund (estimation of 1344 Mio EUR credits coming from revenue)***
Temporary restructuring amounts - Assigned revenue (estimation : 2374 Mio EUR)
Irregularities concerning the temporary restructuring fund — Assigned revenue
Clearance with regard to the temporary restructuring fund — Assigned revenue
Total Sugar Restructuring Fund

(*)   Budget year = 16.10.2007 to 15.10.2008 but direct expenditure possible until 31.12.2008
(**)  For direct payments it concerns the commitments
(***) Including use of revenues carried over of last year
(1)    Chapter not exclusively EAGF
(2)    Chapter outside title 05 but included in EAGF
(3)    Used only for cases in which Member States are beneficiaries

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