CELEX: 51991PC0551
Language: en
Date: 1992-02-05
Title: Proposal for a COUNCIL DECISION on transitional national compensation for farmers in Germany

COMMISSION OF THE EUROPEAN COMMUNITIES
                                          C0M(91) 551 final
                                          Brussels, 5 February 1992
                         Proposal for a
                        COUNCIL DECISION
  on transitional national compensation for farmers In Germany
                  (presented by the Commission)
    (Only the German text is authentic)
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                          EXPLANATORY MEMORANDUM
Wnen in 1984 the Council decided to dismantle existing positive MCAs it
also decided that the consequential loss of income for the farmers
concerned would be offset by special aid measuresCD.
As ^ a r d s farmers In Germany the aid now applied    in the wake of the
1934 Council decision involves two components^ 2 ):
- om based on VAT, limited to 3% of the ex-VAT price paid by the
  purchaser for the agricultural product. This aid is valid until
  31 December 1991. (20th VAT directive< 3 >)
- the other based on a per hectare system, the overall volume of which
  is limited to an annual amount not exceeding that granted through a 2
  percentage point reduction in VAT. This aid is valid until
  31 December 1992. (Council Decision No 88/402/EEC< 4 >).
The volume of aid granted annually under these measures amounts to some
DM 2 300 million via the VAT system (for the whole of Germany) whereas
some DM 1 000 mi 11 ion are granted under the hectare system (applied
only in the old Bundeslander).
Although the 1984 Council decision concerning dismantlement of positive
MCAs provides for income compensation which is not of limited duration,
the Council» when adopting the 20th VAT directive, noted that the
income consequences of dismantlement of monetary compensatory amounts
are temporary and degressive. It is therefore logical that any
assistance granted in the context of such dismantlement reflects these
economic real it les.
Cessation of the VAT-based aid from the end of 1991, as currently
provided    for under Community     rules, would nonetheless have a
significant negative effect upon farm incomes in Germany at a time when
these have fallen sharply. The aid granted through the VAT system is
equivalent to some 7% of the net value added of German agriculture.
(1) 0J No L 90, 1.4.1984, p. 1.
(2) For background information: The VAT aid         was    set at 5%  from
    1 July 1984 to 31 December 1988. From 1 January 1989, it has      been
    set at     3%.    The 2% per hectare      aid   was introduced    from
    1 January 1989 following a change in the DM green rate applied    from
    the beginning of the 1988/89 marketing year.
(3) 0J No L 192, 24.7.1985, p. 18.
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Taking particular account of this income situation, the Commission
considers that an Income support measure should be envisaged for 1992
on a national and transitional basis.
The Commission feels however that the VAT system for granting aid must
not be continued as this mechanism links the aid too closely to the
 level of production of each individual farmer. Already in 1987 the
Council, when adjusting agricultural conversion rates in Germany which
entailed a drop in prices in DM*5*, decided that compensatory aid must
not be linked to production. In the Commission's view, the technically
most appropriate way of granting the aid envisaged in 1992 would be
through soclo-structural measures as set out in its proposal of
1989(°). However, no Council decision has yet been taken on that
proposal. Against this background, and In view of the need for any
decision to be taken rapidly In order to fulfil its objective, the
Commission considers that the aid now proposed should be channelled
through a mechanism similar to, and operate In parallel with, the
existing per hectare system with due account being taken of the
particular farm structures in the Lander of the former German
Democratic Republic. This Is the purpose of the attached proposal.
The Commission will review the effects of this proposal before the end
of 1992 having regard to the decisions on the reform of the Common
Agricultural Policy and the need for coherence with these decisions.
(5) Regulation 1890/87 of 2 July 1987 (0J No L 182, 3.7.1987,  p.1.)
 ---pagebreak---                                       - 4 -
                                 Proposal for a
                                COUNCIL DECISION
      on transitional national compensation for farmers in Germany
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having   regard    to   the   Treaty   establishing     the   European    Economic
Community, and in particular Articles 42 and 43 thereof,
Having regard to the proposal from the Commission^ 1 ),
Having regard to the opinion of the European Par I lament< 2 ),
Having regard to the opinion of the Economic and Social Committee* 3 *,
Whereas to offset the income losses resulting from reductions in prices
expressed    in   national   currency    brought   about    in   Germany    by  the
adaptation of agricultural conversion rates, the Council, in Regulation
(EEC) No 855/84 of 31 March 1984 on the calculation and dismantlement
of the monetary compensatory amounts applying to certain agricultural
products* 4 * deemed   that, subject     to certain specified       conditions, a
special aid granted through the VAT system was to be compatible with
the  common    market;   whereas   the   aid  provisions     laid  down    in  that
Regulation are without time limit; whereas in Directive 85/361/EEC of
16 July 1985 on the harmonization of the            laws of the Member       States
relating    to  turnover    taxes  -   Common   system   of    value   added   tax:
derogations    in connection with      the special    aids granted     to certain
farmers to compensate for the dismantlement of monetary               compensatory
amounts applying to certain agricultural products* 5 *, the Council laid
down the conditions under which the VAT system could be used for the
grant of this special aid;
(1)
(2)
(3)
(4) OJ No L 90, 1.4.1984, p. 1.
(5) OJ No L 192, 24.7.1985, p. 18.
 ---pagebreak---                                        - 5 -
Whereas the Council, when adopting Directive 85/361/EEC, noted that the
consequences of the dismantlement of monetary compensatory amounts are
temporary and degressive; whereas farm incomes in Germany have recently
developed    in an  unsatisfactory       manner;     whereas   the   provisions      of
Directive   85/361/EEC  expired       on   31   December    1991;   whereas     it   is
therefore   appropriate   to    lay   down    provisions    concerning     an   income
support benefit for the farm sector in           Germany in 1992;
Whereas the mechanism for the grant of aid provided for                in Directive
85/361/EEC is product ion-1 inked; whereas the income support objectives
now sought would more appropriately be fulfilled                in 1992 through a
scheme linked to area; whereas due account should be taken of the farm
structure   in the Lander      in the     former    German   Democratic     Republic;
whereas the aid provided for in Council Decision 88/402/EEC of 30 June
1988 on aid to farmers in the Federal Republic of Germany* 6 * should be
granted notwithstanding this Decision,
HAS ADOPTED THIS DECISION:
                                     Article 1
Without prejudice to the provisions of Decision 88/402/EEC, Germany is
hereby   authorized  to grant,      from    1 January    1992  until    31    December
1992,   special  national    aid    which     is not    linked   to  prices     or   to
production, under the following conditions:
1.   Individual  farmers shall qualify for aid per hectare of utilized
    agricultural area of their holdings; however, the aid per holding
    shall not be less than DM        1 500 and shall not exceed DM 16 000 per
    year. This aid shall be paid on a one-off basis.
2.   In principle, only    farmers who are members of             the German       farm
    retirement pension scheme (GAL) may qualify for this scheme.
(6) 0J No L 195, 23.7.1988, p. 70.
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3.  Derogations from the provisions of point 1 except as regards the
    one-off   limitation and from the          provisions of point       2 shall   be
    applied   to   the   extent    necessary     to  take   account   of   the   farm
    structure in the Lander in the former German Democratic Republic.
4.  Germany   shall   fix   the unit     amount   referred    to at point     1, the
    conditions of point 3, and all other implementing details in such a
    way as to ensure that the overall volume of the special aid does
    not exceed DM 2 200 mi 11 ion.
                                     Article 2
1.  Germany    shall   notify     to    the   Commission      drafts   of   detailed
    provisions    and    of    any    further     amendments     relating    to   the
     implementation of the aid scheme referred to in Article 1.
    At the request of the Commission, it shall provide further guidance
     information.
2.  Germany may not implement the relevant provisions before such time
    as   the Commission     has ascertained       their   compatibility    with   the
    stipulations set out in Article 1.
    The   Commission    shall    decide    on   whether    to   approve   the   draft
    provisions within two months from the date of receiving them.
                                     Article 3
This Decision is addressed to the Federal Republic of Germany.
Done at Brussels,                                                For the Counci
                                                                  The President
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                                                             GpM^91) 651 final
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