CELEX: 51976PC0195
Language: en
Date: 1976-04-28
Title: Proposal for a COUNCIL REGULATION (EEC) amending the method of calculating monetary compensatory amounts#Proposal for a COUNCIL REGULATION (EEC) fixing a new exchange rate to be applied to the Italian Lira for agricultural purposes and amending Regulation (EEC) No 557/76 (submitted to the Council by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (76) 195
Vol. 1976/0061
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                  COM(76)195 final.
                                                  Brussels . 28 April 1976 .
           I
                                                        G
                              Proposal for a
                         COUNCIL REGULATION ( EEC )
  amending the method of calculating monetary compensatory amounts
                           ^  Proposal for a
\                      , COUNCIL REGULATION ( EEC )
          fixing a new exchange rate to be applied to the
      Italian Lira for agricultural purposes and amending
                        Regulation , ( EEC ) No 557/76
             ( submitted to the Council by the Commission)
                                                /
  COK(76 ) 195 final .
 ---pagebreak---                        EXPLANATORY MEMORANDUM
                                                              /
 1.   The movement of exchange rates in the Community since the beginning of
 March 1976 has "brought about an extremely disturbing situation mainly
 connected, with the depreciation of the pound and the Italian lira.
 The monetary compensatory amounts at present applicable to the depreciated
 currencies ( the others have not changed ) are :
           Product ;  Products whose new     Products whose new   Exception for
                      marketing year has     marketing year has   common wheat
  Member
                      already begun (milk,   not yet begmn ,      until 1 July
    State \           beef and veal ,        until the date of    1976 (Regulation
                      pigmeat , products     commencement of      (EEC ) No 2638/75
                      covered by             that marketing
                      Regulation (EEC ) No   year ( cereals ,
                      1059/69                eggs and poultry ,
                                             wine and sugar )
  Italy                    20.8                     27.6        ]
(United Kingdom            17.4                     17.4                 24.7
I Ireland                  13.4                     15.6                 18.3
                   I
  Prance                    2.6                      2.6
 2.   This situation has serious disadvantages .  It results in widely divergent
 price levels in the Member States , the differences reaching about 35$*
 Furthermore , in view of the volume of imports into the two countries in question ,
 Italy and the United Kingdom , it results in considerable expenditure for the
 Community , since the compensatory amount s payable by the two Member States are
 borne by the EAGGF ( see financial effects ).
 The maintenance of existing price levels in these Member States by means
 of the monetary compensatory amounts , although to some extent a factor
making for stability , is also , from another aspect , a source of imbalance .
 If the compensatory amounts remained permanently at such high levels , the
risk of distortion would undoubtedly arise .
 ---pagebreak--- 3.   The persistence of "this situation can endanger the common agricultural
policy .    It is therefore necessary to put in hand immediately a number of
measures to deal with the abovementioned difficulties , these measures may
be divided into three sections :
( a) application of Article 2a of Reflation (EEC ) No 974/71
Article 2a lays dam that the exporting Member State may ("by agreement with
the importing Member State ) pay the monetary compensatory amount which the
latter must grant on imports .      That provision would "be applied in the
United Kingdom and Italy .      Owing to the use of the conversion rate applicable
under the "budget ("double rate " device ), this measure results in a reduction
in the Community * s liabilities in terms of units of account .
This system was applied to exports from all Member States to Italy from
June 1973 to January 1974 *      Furthermore , from 1971 "to 1973 » another system
was applied whereby the exporting Member State granted all the compensatory
amounts arising from the position of its currency and that of the importing
Member State .     In addition , the compensatory amounts payable under the accession
procedure are also granted at the time of export .
This category of measures can be applied under Regulation (EEC) No 974/71 for 1976 .
(b ) Measures relating to the Italian lira
      ( i ) devaluation of the "green" lira.      This measure is the subject of the
             attached second proposal for a regulation .
      ( ii ) Apart from the reduction in the monetary compensatory amounts which
             such devaluation producers , a further reduction in these amounts
             may be obtained (and that is the aim of this proposal ) by
             introducing a " corrective factor ".   This would be like the
             "exemption" of 1.5 points already in force ( the last subparagraph
             of Article 2(l)(b ) of Regulation (EEC ) No 974/71 ) applied to the
             differences calculated in accordance with the normal rules for
             calculating the monetary compensatory amounts .     The level of the
             corrective factor may be determined by taking into consideration
             the advantage for trade in the importing Member State of the fact
             that the price of the goods , is henceforth diminished by the incidence of
             the application of Article 2a referred to under (a) above .
             It is proposed that this factor should be fixed at a flat rate of
             2 points .
 ---pagebreak---                                   » 3 -
           For products for whlah the marketing year has not yet hs^-n,
           in particular sugar, cereals ajid eggs and poultry , the economic
           effect of the devaluation of the lira may be anticipated V
           increasing, temporarily until the beginning of the marketing
           year in question, the corrective factor from 2 to 4 points.
           However , no corrective factor will apply in the wine sector
           until 16 December , in view of the present market situation.
            The Council would at that time take a decision on the matter .
( c ) Measures relating to.
In the United Kingdom a corrective factor would also be. applied m oraer to
reduce the monetary compensatory amount ; this factor would be so fixed tha-
consumer prices would not be affected, having regard t? the advantage for
trade in that State, and accordingly for the consumer ^rice, of the tact
 that the price of the goods is henceforth diminished by the incidence of .e
 application of Article 2(a) referred to under (a) above ;
 The Commission will submit its proposal orally to the Council .
 4. The measures provided for in this proposal entail a derogation from the
  normal system of compensatory amounts; they must therefore be adopted m
  accordance with the procedure laid down in Article 43' and 235 of the Treaty,
  i.e. after consultation of the European Parliament .
  Owing to the urgency of the matter, however , it appears necessary to adopt
  these measures provisionally on the basis of Article 103 of the Treaty and
   therefore without consulting the Parliament - and possibly to adopt them
   later , and definitively, in accordance with the normal procedure .
 ---pagebreak---                               Proposal for a
                     COUNCIL REGULATION (EEC )
                    amending the method of calculating -
                    monetary compensatory amounts
THE COUNCIL OP THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Community ,
and in particular Article 103 thereof ,
Having regard to the proposal from the Commission ,
Whereas Council Regulation (EEC ) NO 974/71 of 12 May 1971 on certain measures
of conjunctural policy to he taken in agriculture following the temporary
widening of the margins of fluctuation for the currencies of certain Member
States^^, as last amended "by Regulation (EEC ) NO 557/7^^\ introduced
monetary compensatory amounts for which it determines the method of calculation
Whereas the current situation is marked "by a considerable weakness of certain
currencies , resulting in very high monetary compensatory amounts , whereas the
persistence of this situation can endanger the common agricultural policy ;
Whereas it is consequently necessary to implement measures immediately to deal
with this situation ; whereas it is possible to this end to reduce the monetary
compensatory amounts by introducing , in respect of the currencies of those
Member States which are especially affected , a factor to correct the rate
which is used as the basis of calculation of the said amounts ;
Whereas Council Regulation (EEC ) No         /l6 , of               , provides
for devaluation of about 6% in the representative rate of the lira, to take
effect in principle at the beginning of the marketing year ; whereas it would
appear appropriate , in order to lessen the effect of this devaluation on the
Italian economy , to provide for a transitional increase in the corrective
factor until the devaluation takes effect ;
( 1 ) OJ No L 106 , 12.5.1971 , p. 1
( 2 ) OJ No L 67 , 12 . 3 . 1976 , p. 1
 ---pagebreak--- Whereas it is neoesaary , however , ."to exclude wine -temporarily from the
application of the corrective fac\or in Italy because of the present
market situation ,
HAS ADOPTED THIS REGULATION:                             ■'
                               Article 1
1.   The rate serving as the basis of calculation of the monetary compensatory
amounts arising from application of Article 2(l ) of Regulation (EEC) No 974/71
shall he reduced by the following corrective factors :
(a) 2 points for Italy ,
(b )      points for the United Kingdom .
2 . However in Italy , the corrective factor shall be raised to 4 points in
respect of the sugar sector until 30 June 1976 and in respect of the cereals ,
eggs and poultry , meat sectors until 31 July 1976#
                               Article 2
1 . Article 1 shall not apply to the monetary compensatory amounts valid in
Italy for wine.'
2 . The Council , acting by a qualified majority on a proposal from the
Commission, shall before 16 December 1976 decide on the corrective factor
to be applied to this product in Italy .
                               Article 3
This Regulation shall enter into force on 3 May 1976 .
This Regulation shall be binding in its entirety and directly applicable
in all Member States .
Done at Brussels ,                                             Por the Commission
                                                                 The President
 ---pagebreak---             Financial repercussions of "the agri-monetary
            measures proposed for the Lira and Sterling
A.  Introduction
Pursuant to Article 7 of Regulation (EEC ) Ho 974/71 » "the expenditure
and receipts from the application of monetary compensatory amounts are
financed in full "by the Community . Such expenditure and receipts , in
particular in connection with preparatory work on budgets and in
estimating the financial incidence is evaluated by multiplying the trade
assumptions (value for customs purposes ) with the percentages of MCA
to be applied for the various currencies .  Since the changes in the
representative rates laid down in Council Regulation (EEC ) ITo 557/76
come into force at the beginning of the marketing years , for the different
products the percentages applied to the MCA will at any given time differ
from product to product .
 ---pagebreak---                                                          - 2 -
               B.    Forecast of expenditure on monetary compensatory amounts under
                     the 1976 "budget assuming no change in the rules .
               The changes in the exchange rates of the lira and £ sterling have
!              considerably increased the percentages of MCA applied in respect of
!              these currencies . Expenditure has thus "been considerably increased .
               The attached table shows the changes in these percentages and the
               appropriations for the MCA 's in the 1976 budget and the estimated
i
               expenditure for 197° if there is no change in the rules or the monetary
               situation .
               Percentage applied in MCA          '        Budget appropriations     Forecast of expendi­
  Currency    assumed    beginnmg           mid-
                                                           for MCA ( Chapt . J6 )    ture assuming no
              in the     of 1976            April
                                                           260.7 M.ua, of which      change in the rules
                                                           the following amounts     and the monetary
              budget                        1976           are earmarked for the     situation , as at
                                                           currencies in question mid-April 1976
  Bfrs/Lfrs    +  2        +     2      + 1.4 to 2.0               + 10.1                 +  8.1
  FI           +  2        +     2      + 1.4 to 2.0               + 27.0                 + 29.9
  DM           + 10        +    10      + 7.5 to 10.0              - 34.3                 - 29.0
  £ st .       -  8      -6.4 to 13 .il -17.4  to 24.7             +264.8                 +461.0
  Irish £      - 2.4     -4.8 to 7.2 -13.4 to 18.3                - I6.9                  - 67.8
  Lira                                  -20.8 to 27.6                                     +286.9
  FF                                          2.6                                         - 43.6
  Dlr
  Total                                                             260.7                  745.5
                                                       3                                                  3
                                                                          Rounded : 745 M.ua
( l ) As mentioned in the introduction,         the percentages of MCA applied vary from
       sector to sector according to the date on which each marketing year begins .
 ---pagebreak---                                       - 3 -
       m
 C. Financial incidence of the "orcoosed measures
     !•   Measures concerning MCA
          (a) to be decided "by the Council                        ,.
                                                                   ( in M.ua
                                                                 Incidence     on
                                                              1976 budget         12-month
                                                                                   period
      Introduction of a corrective factor to reduce
      the percentage of MCA applied to :
       - the lira                                              - 22                 - 41
        - £ sterling ( including the effecis of the
          MCA's in trade between the UK and Ireland)                          I
                                                                              I
                                                                                    _    *
      Amendment of the representative rate of the lira:
                                                                             I
      - leading to a reduction of about 7*3$ in the
          MCA applied                                          - 75                 -139
      – leading to increased expenditure in respect
          of the " double rate "                               +  8                 + 75
      (b ) to be decided by the Commission under the                          1
            Management Committee procedure
            By joint agreement , the exporting Member
            State also grants MCA for the importing
            Member State (Italy and the United
            Kingdom). The savings arise from the
            absence of the effect of the double
            rate on such expenditure                           -110                 -350
            TOTAL                                              -199                 -455
                                                           f
 It should be observed that there is an element of    uncertinaty in these
 calculations with respect to the lag in payments .    Particularly in the case
 of one Member State , this lag can only be roughly   estimated . Introducing
 the payment of MCAs by the exporting Member State    will lead to a small lag
 in payment with an accelerating effect for which an allowance has been made in
 the calculations .
D.    Conclusion
 Changes m the monetary situation have led to a considerable increase in
 expenditure on MCA which at the present time can be estimated at 745 M.ua
■under the 1976 budget instead of the 260 M.ua included when the budget
was established .     The proposed measures will reduce expenditure under this
heading in the 1976 budget by about 200 M.ua. (not having taken into account
 the introduction of a corrective factor for monetary compensatory amounts
 applicable in the United Kingdom .
* The introduction of a corrective factor for the £ sterling will involve
   savings of about 25 M.ua per percentage point of monetary compensatory amount
   not applied (period 12 months ).
 ---pagebreak---                    EXPLANATORY MMORAM)UM
                                                             > .
Council Regulation (EEC ) No 557/76 of 15 March 19^6 on the exchange
rates to be applied in agriculture (OJ No L 67 , 1 §. 3.1976 , P * l )
fixed the representative rate applicable since 15 March 1976 f°r "the
Italian lira for Milk , Beef and Veal , Pigmeat and Products falling
within the scope of Regulation (EEC ) No 1059/69 (0J No L 141 of
12.6.1969 , p.l ).
In recent weeks , however , the Italian lira has depreciated considerably ,
resulting in a monetary compensatory amount calculated actually on
the basis of a rate of     20,8 .     It is therefore advisable to amend the
representative rate of that currency to bring it more into line with
the present economic situation .        The new rate should be determined
having regard both to its effect upon price levels in Italy and to the
desirability of reducing monetary compensatory amounts .             The representative
rate of the Italian lira should consequently be reduced by 6.023$.
The following table shows the effects of the proposed measure .
                                                    1            effects on
      old rate                   new rate
                                 ( 6.023%             prices           the monetary
                                  deval . )                        compensatory amounts^ ^
  Lit 100 - 0.110497 u.a .     Lit 100- =              + 6.409%       old   22.27
                               0.103842 u.,a .
  1 u.a . = Lit 905*000     ;I 1 u.a . =
                               Lit 963.000        :                   new   14*91
( l ) calculated on the basis of the prices recorded durin g the period from
       14 to 20 April 1976 .
 ---pagebreak--- VI-H–1
                                  Proposal for a
                           COUNCIL REGULATION ( EEC )
                      fixing a new exchange rate to "be applied
                      to the Italian Lira for agricultural purposes
                    • and amending Regulation ( EEC ) N° 557/76
       THE COUNCIL OP THE EUROPEAN COMMUNITIES ,
       Having regard to the Treaty establishing the European Economic Community ,
       Having regard to Council Regulation N° 129 on the value of the unit of account
       and the exchange rates to "be applied for the purposes of the common agricultural
       policy ( l ), as last amended "by Regulation ( EEG ) N° 2543/73 ( 2 ), and in particular
       Article 3 thereof ,
       Having regard to the proposal from the Commission ,
       Whereas Council Regulation (EEC ) N° 557/76 of 15 March 1976 on the exchange
       rates to "be applied in agriculture and repealing Regulation (EEC ) N° 475/75 ( 3 ),
       as amended "by Regulation (EEC ) N° 650/76 (4 )» fixed a representative rate for
       the Italian Lira ; whereas the movement of the Italian Lira indicates the advi­
       sability of fixing a new representative rate which reflects more closely the
       present economic situation ; whereas it would be appropriate to bring it into
       force in principle on the dates on which a price change occurs ;
       Whereas the Monetary Committee will be consulted and whereas , in view of the
       urgency of the matter , the proposed measures should be adopted under the
       conditions laid down in Article 3 ( 2 ) of Regulation N° 129 ,
       HAS ADOPTED THIS REGULATION :
                                            Article 1
       In Article 2 ( l ) of Regulation (EEC ) N° 557/76 , point (f) is amended as follows s
       " ( j°)  for the Italian Lira :
                                 Lit 100 = O . IO3842 unit of account
       ( 1 ) OJ N 0 106 , 30.10.1962 , p. 2553/62
       ( 2 ) OJ N° L 263,19.9.1973 , p. 1
       ( 3 ) OJ N° L 67,15.3.1976 , p. 1
       ( 4 ) OJ N° L 79 , 25.3.1976 ,?. 1                                            ./.
 ---pagebreak---                                Article 2
The following paragraph is added to Article 2 of Regulation ( EEC ) N° 557/ 76 *
" 3 . However , the representative rate of the Italian Lira shall "be applied j
      ( a) from the dates shown in ( a), ( t>) and ( c ) of the paragraph 2 for the
            products mentioned therein ;
      (t>) from the "begining of the 1976/77 marketing year for the other products
            for which the marketing year has not commenced "by 3 Key 1976           ;
      ( c ) from 3 May 1976      in all other cases ."
                               Article 3
This Regulation shall enter into force on the day of its publication in the
Official Journal pf the European Communities .
This Regulation shall "be "binding in its entirety and directly applicable in
all Member States .
Done at Brussels .                                         For the Council ,