CELEX: 51973DC1846
Language: en
Date: 1973-11-07
Title: AIDE-MEMOIRE ON THE FIXING ON THE ECSC LEVIES AND OPERATING BUDGET FOR 1974

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (73) 1846
Vol. 1973/0320
 ---pagebreak--- Disclaimer
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concernant l'ouverture au public des archives historiques de la Communauté économique
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In accordance with Council Regulation (EEC, Euratom) No 354/83 of 1 February 1983
concerning the opening to the public of the historical archives of the European Economic
Community and the European Atomic Energy Community (OJ L 43, 15.2.1983, p. 1), as
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file have been declassified in conformity with Article 5 of the aforementioned regulation.
In Übereinstimmung mit der Verordnung (EWG, Euratom) Nr. 354/83 des Rates vom 1.
Februar 1983 über die Freigabe der historischen Archive der Europäischen
Wirtschaftsgemeinschaft und der Europäischen Atomgemeinschaft (ABI. L 43 vom 15.2.1983,
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 ---pagebreak--- COMMISSION GIF THE EUE.OE5AN GOMMUNEIIES
                                               COM(73)1346 final
                                               Brussels , 7 November 1973
                              AIDE-MEMOIRE OH THE
                         FIXING O? THE ECSC LEVIES
                           MD OPERATING BUDGET
                                 FOR 1974
  COM(73 ) 1 8 1-6 final
 ---pagebreak---                                                                XIX/504/73-3
i
>                                   A3DS-mroiRE    .
        en the fixing of the BC?C levies and operating budget for 1974
             Articles 49 and 50 of the Treaty establishing the European Coal
  and Steel Community empower the Commission to obtain the funds needed to
  finance the activities provided for in the Treaty by imposing levies on
  the production of coal and steel .    These levies are assessed annually on
  the various products according to their " average value", but the " rate "
  of the levies mcy not exceed 1> of this " average value" unless previously
  authorised by the Council under Article 50 .
             In calculating the rate of the levies several factors must be
  takrn into account .   First , requirements must be scrutinized .  Then it is
  necessary to assess how far they can be financed by the revenues arising
  from the investment of the Community * s own funds and other sources of in­
  come ( repayments , cancellation of commitments ...). In this way it is
  possible to calculate the sum to be provided through the levies .        taking
  account of the average value of the various products and the estimated
  production during the year , the rate of levy needed to yield the sum
  concerned can be worked out .    Calculation of the rate thus depends on
  estimates of production :   these estimates are difficult to make because
  the industries concerned react very sensitively to the behaviour of the
              r
  economic cycle .
             Following the usual practice , the views of the four competent
  committees of the European Parliament are requested and - as the Parliament
  indicated in its resolution " on the ECSC f s operating budget and levies
  for 1971 " - it is in fact the European Parliament " as a whole " that will
  pronounce on the levies and the operating budget of the ECSC .
 ---pagebreak---                                         - 2 -                    XIX/504/73-S
                                               /
              This aide-memoire forms the basis for the consultation of the
  Parliament . .
              It shall be noted that this initial draft of the operating budget
  is based on existing monetary conversion rates and not on those which would
  result from the adoption of the Commissions draft decision based on real
  exchange rates .    The departments concerned consider at present that it
  would be a highly hazardous process to forecast the precise consequences of
  the new system , given that needs and resources must , in global terns ,
  represent the same amount in units of account .
                                          *
                                       *    *
  I.   EXIiCUTICN OP THE 1973 OPERATIONAL BUDGET (Annex I )
      A.    Rescurces
            84.5 KUA in place of 74®
            The favourable development of the economic situation has continued
  in the steel sector and has allowed a yield from the levies in excess of
  the original estimates, which were admittedly cautious , (i.e. 66 MUA
  instead of 63.8 MUA).
            This caution was basically due to the uncertainty of the
- economic outlook linked with the monetary crisis .    It can . also be explained
 ---pagebreak---                                          - 3 -                     XIX/ 504/7 3-E
  "by reference to the outturn of previous years (particularly 1971 )> when
  income from the levies failed, to reach the amount estimated .
             The srme considerations affected the estimates of interest on
  investments and on loans from non-borrowed funds , and expected income from
  these sources is well above the estimate ( 11.8 MUA instead of 10 MUA) .
             Lastly , there is a credit of 6,5 MUA against the heading
  " Cancellation of commitments which will not now be implemented".
  B.    Fbcpcndituro forecasts
        84.5 MUA instead of 74 MUA .
             The expected resources should provide full cover for needs , for
  which the forecasts , amended as necessary , are as follows :
   1.   Administrative costs                     :  18 MUA
  2.    Aid to resettlement                      :  38 MUA instead of 40 MUA
  3.    Aid to research                          :  18.5 HUA instead of 16 MUA
  4.        to  cckin "? coal                    :    4 MUA following the ECSC
                                                        Commission ( O.J. 259/ 36 of
                                                        15 Sept . 1973 ).
  5.    Interest rebates                         :    6 MUA instead of 0 ( articles
                                                      54 and. 56 ) .
■ In drawing up the 1973 budget , it was foreseen that those needs would bo
                              1
  met by mixed fund loans v      drawing on the amounts payable by the new
  member countries , by way of contribution to the SCSC 's reserves .        The pay­
  ment of these contributions having been delayed , it has been necessary to
  use part of the income from the Community 's 'own funds' to meet the
  requirements for interest rebates .
  0.    Workers houaing     : 10 MUA as forecast
  mThis    system allows the granting of reduced interest loans , by mixing
      funds borrowed at market rates ( Article 49 ) with the 3CSC*s own funds .
      Each 1 MUA of ECSC funds is combined with 1 .5 MUA of borrowed funds to
      constitute a nixed loan of 2.5 MUA :    this allows a Sfi interest rate
      rebate for 5 years .
 ---pagebreak---                                         - 4 -                   m/504/73-E
II .     INITIAL DRAFT OF THE 1974 OPIIRATINC BUDGET ( Annex II )
             The 1974 . operating budget is the first to take proper stock of
the enlargement of the ECSC . At the same time , the influence of inflation
throughout the Community , along v;ith the need to implement the policies
incumbent on the ECSC in both the industrial and the social fields , have
had significant effects on the ECSC 's operating budget for 1974 « Require­
ments for funds have increased .
A.     Requirements reported for 1974
1.     Administrative expenditure
             The total of 18 MUA in the Merger Treaty is still valid .
2.     Aid to resettlement
             Foreseen requirements for aid to resettlement exceed those for
1973     :   41  MUA as against 38 MUA.
             Several factors have contributed to this increase :
-    the Federal Republic of Germany has speeded up its programme of closures
     for 1974 and subsequent years ?
-    submission of the applications foreshadowed by the United Kingdom
     for 1973 has been hold back .    As a result of this delay , there will
    bo more revests in 197-5 ;
-    inflationary increases have affected certain categories of expenditure .
             Tho c:rpccted breakdown is shown in the following table :
                                                  Steel     Coal           Total
     Germany ;                                , .  0.5      10.0           10,5
     Belgium       :                               0.5    -  4.0             4.5
    Denmark
     France                                        1.0       5.5             6.5
     Ireland
                                                    *         *               *
     Italy
                                                              #               *
    Netherlands
                                                    *                         *
     Luxembourg
     United Kingdom                         .     5.0                     T9-5
                                                  7.0       34.0          p.0
*Not significant
 ---pagebreak---                                       - 5 -                  XIX/504/7>E
 3.  Md to rcsoarch
            The promotion of research laid upon the ECSC by Article 55 °f
the Treaty , calls for an increase in financial aid to enable the Community
to face up to the demands put forward , both for the purpose of maintaining
the competitive position of European products in the steel sector
 (production and testing) and energy sector , and in order to improve
occupational safety and effectively combat industrial pollution in the areas
affected by the ECSC Treaty .
            For the various fields of research, the overall aid requested,
calculated on the assumption that the ECSC contributes 6Cffo of the total
cost of the research amounts to : ,
               research into steel technology                   24     MUA
               research into coal technology                    13.5   MUA
               Social research                                   7-5   MUA
                                                                45
            As m the past , the various committees of experts will examine
these applications and allocate priorities to each within the limits of the
funds available .
4.   Aid to cc:cinf'C coal
            The aid to coking coal (5 ?IUA) was the subject of the Commission2 s
Decision No . 73/287 ECSC of 25 July 1573 ( 0 . J. 259/36 of 15 September 1973).
            This Decision established a system of subsidies during the period
1973-72 for coking coal and coke intended for the Community 's steel
industry , of which some 55^ will bo contributed by the steel industry ,
25$     "^ie countries cncerned and 20>c by the ECSC . The ECSC 's contribution
amounts to 4 MUA in 1973> 5 MUA in 1974 and' 6 MUA a year from 1975-78 *
5.   Interest rate rebates
            Requirements for subsidised loans , under the ECSC Treaty , Articles
54 (investment ) and Article 5 '5 (redevelopment ), arc. estimated to amount to
133 KUA . For the Commission, a subsidised loan is one which benefits from
a 3/a interest rebate for a, period of 5 years , the subsidy thus representing
approximately 15^ of the total loan .
            Thus 20 MUA of non-recoverable funds would be needed to back up
the issue of the 133 MUA of subsidised loans .     The breakdown is :
 ---pagebreak---                                            - 6 -                  X!X/504/7 >--
              - Article 54          :   8 HUA
              - Article 56          :  12 MUA
                                  .    20   MUA
              Under the system of nixed, fund loans already outlined , it would
  "be necessary to make available 53 MUA of the JilCSC 's own funds to support
   the total of 133 MUA of loans .
              Tho Commission thinks it preferable in this matter not to use the
  technique of mixed fund loans , since , in the event , this approach only solve
  the problem for thG 3 years ( 1973 I 1974 » 1975 ) during which the new Member
  States are due to pay their contributions to tho ECSC f s reserves , and has
  no impact on the problem of subsidized loans from 197o onwards , when these
   contributions will cease .    Moreover , the Commission considers that it would
  be unsound to tie up part of its capital resources in this type of operation
  for the whole period involved (as much as 15 years , as a rule). It would
  accordingly prefer to invest these funds to best advantage and have extra
  income at its disposal in the form of the additional interest earned .
' 6.    Special reserve appropriation (workers' housing)
              The Commission decided on 22 December 1972 to allocate 20 MUA
  towards the implementation of the second stage of the SCSG 's seventh
  financial aid programme for housing construction .      This stage covers tho
  financial years 1973 and 1974 and as 10 MUAhavo been allocated in 1973 a
  further 10 MUA should bo provided in the 1974 budget .
        Forecast resources for 1974
              Tho yield of tho levies for 1974 will be influenced by :
  - a drop of around 5$ i*1 coal production by comparison with 1973 ?
       an increase of around 2f/o in steel production by comparison with 1973 ?
  -    a slight increase in tho average values of iron and steel products .
   1 ) Coal levies ( coal and lignite )
  -     In 1974 the total production on which levies are calculated might reach
                           235   million metric tons of coal
                             4   million metric tons of lignite
 ---pagebreak---                                   - 7 -                      XIX/504/73-E
– The average value s to be applied are :
             18.52 u.a . for coal
             12.98 u.a . for lignite               r
- The "unit yield" of the levy - 'i.e . the yield at a rate of 0.10/o -
    will amount to :
              4.35 million u.a . on coal
              0.05 million u.a. on lignite
In round terms , levies on forecast coal production for 1974 would yield
              12.76 IOTA at a rate of 0 . Zrfl°
              13.20 MUA at a rate of 0.30$
              13-o4 IOTA at a rate of 0.31$
Steel levies
– Estimates indicate that the production on which the levies are
    calculated could reach the following levels , allowing, for a 3$
    increase on the production forecast for 1973 :
    Pig iron and cast iron                      : 5«5 million metric tons
 ' Bcssener steel                               :    15 million metric tons
  ' Steel other than Bessemer steel             : 140 million metric tons
    Finished products                           : 113 million metric tons
– The average values to be applied- have been assessed at some 6% above
    these for 1973 » since the Commission departments concerned have not
    yet received all the necessary information .
- The unit yield of the levy will probably reach :
                0.33 IOTA on pig and cast iron -
                1 . 08 MUA on Bessemer steel
               13.86 IOTA on steel other than Bessemer steel
                4.23 IOTA on finished products
In round terms , levies on iron and steel products for 1974 . would yield
               56.55 MUA at a rate of 0.29$
               58.50 IOTA at a rate of 0.30$
               60.45 IOTA at a rate of 0.31$ '
 ---pagebreak---                                           - 8 -                 xix/504/73-:.:
 3)     The remaining resources are mainly interest on investments and
         loans from non-borrowed, funds , which the Directorate-General for
        Credit and Investments estimated at 12.4 MUA for 1974 .
        However , on the assumption that the new Member States' contribution
        to the ECSC 's reserves are invested and not used for mixed fund
        loans ( see page 3» IB5 and note ( l )), addition income of some
        3.3 MUA can be    assumed .
4)      The miscellaneous heading includes penalty payments and interest and
        fines for arrears of payment ...
5)      Cancellation of commitments which will not be implemented relates to
        credit balances on successfully completed operations .     They are
        estimated at 5*5       for 1 974-
6)      Lastly the table of resources includes 2 items representing lion-
    ■ borrowed funds :
        -   repayments on loans made from the special reserve and constituting
            the SCSC 's contribution to the construction of workers * housing ;
        -   an element of the former ECSC pension fund , used in combination
           'with these repayments to make up the allocation of 10 MUA needed
            to implement the 2nd instalement of the 7th workers * housing
            construction programme ;
C.      The balance between requirements and resources
              Simple addition of the requirements put forward would give a
total of 129 MUA, without taking into account the "workers ' housing"
scheme which relates to loans , not to the use of non-recoverable funds . To
meet all these requirements , the rate of the levy would have to be fixed
at 0.45
              Since account must be taken of , the practical possibility of
implementing the level of operations presupposed by such an amount , as
well as the "ability to pay" of the coal and steel industries , it would
not be at all appropriate to raise the rate of the levy to this level .
              A review of priorities is therefore necessary .
      \
 ---pagebreak---                                      - 9 -                   XIX/504/73-E
           The allocation for three of the requirements to be met from
current resources has already been fixed :
-   the contribution to administrative costs must be held at 18 MUA
-   the amounts to be allocated as " aid to resettlement " - an obligatory-
    item of expenditure - total 4-1 MUA
-   aid to coking coal , set at 5 MUA
                          i.e . a total of 04 MUA .
           In addition , the Commission is under considerable pressure from
the firms concerned , from the Community 's research institutions , and
                                      1
indeed from the Parliament itself v     , to give greater encouragement to
research .  The Commission shares these convictions .    In its view , an ex­
ceptional effort , should be applied both in order to maintain the competitive
position of European products and in order to improve occupational safety .
Expenditure in 1973 having beon 18.5 MUA, the same level of aid , allowing
for pay and price increases , implies about 20 to 20.5 MUA in 1974 «     A
7.57- increase in the level of aid would thus raise the appropriation to
215 MUA .  This appears reasonable if it is remembered that , in 1973 » the
Community only met 40^ of requests for aid totalling 46 MUA, and that
requests for the coming year amount to 45 MUA .     An appropriation of 21.5 MUA
would meet A&/c of the demand ,    It should be noted in addition that the
ECSC 's research aid in the steel and coal sectors does not account for
more than 5--10/*- of the total research effort in these fields .
           In consequence , irreducible requirements total 85 » 5 MUA ( 64 MUA
plus 21.5 MUA). The amount left available for interest subsidies would
thus , with a levy rate of 0.2J?o, amount to only 5-11 MUA (yielding a loan
total of 34 MUA). The Commission considers that as a minimum it should be
able to appropriate 10 MUA for this purpose , yielding
  1
v 'Resolution of 19 January 1971 » Paragraph 4
 ---pagebreak---                                       - 10 -                    ΠΧ/504Λ3-ϋί
some 67 IiUA of subsidized loans .     However , being aware of the difficulty
of increasing the levy rate of 0.31 /-* as would be necessary in order to
appropriate 10 MUA for this purpose,the Commission is prepared to limit
the rate to O . 3O/0 . This would allow 7«5 MUA to be allocated for interest
subsidies in 1974 » (yielding some 50 KU*- of subsidized loans ).
                                         #
                                     *     *
           The Commission therefore asks the Parliament to agree that the
levy be fixed at 0.30/a .
 ---pagebreak---                                          FORECAST OUTTURN OF OPERATING BUDGET FOR 1973 ( in MUA )                         ANNEX I
                                                                                                              I
                                           Original       Forecast
                                                                                 RESOURCES
                                                                                                                Original      I Forsc-ast
                      REQUIREMENTS                                                                              estivuate
                                           est imate      O'atturn                                                            j outturn
                                                                                                                              I         «
                                                                    – 11
  OPERATIONS TO BE FINANCED
  FROM ORDINARY RESOURCES                                                 ORDINARY RESOURCES
  ( NON-RSCOVERAELE)
                                           18             18
                                                                          l ) Levy yield                         63,8             66
  1 ) Administrative expenditure
  2 ) Aid to resettlement ( art . 56 )     40             33              2 ) Interest on investments and
                                                                              on loans from non-borrowed         10               11,8
   3) Aid to research ( art . 55 )         16             18,5                funds
         a," Steel                              8               8,1
         bjc) Coal                              *               5,9       3) Miscellaneous                  !     0,2              0,2
               Social                           4               4,5                                         I
                                                                                                            I
  4 ) Aid to coking coal ( art . 95 )                      4              4 ; Cancellation of commitments
>             /
                                                                              which will not now be                                6,5
: 51. lire er est rebates                                  6
                                                                              implemented
         a ) Art. 54 - Investment
        b ) Art. 56 - Redevelopment         1         !       13
                                       i
                                           74         !I  34,5        j                                          74           [
                                                                                                                              1
                                                                                                                                  84,5  _
                                                                       II                                   .
  OPERATIONS FINANCED WITH LOANS                                          ORIGIN OF NON-BORROWED FUNDS      J                             I
  FROM NON -BORROWED FUNDS
  o ) Mixed fund loans                     19,2
                                                                          5) Repayments on loans for        j      4,8       ,     4,8
                                                                              workers' housing
       ( art . 54 snd art . 56 )
                                                                          6 ) Part of the former ECSC              5,2    'j
  J ) Special reserve appropriation j      10             10                  pension funi
                                                                                                                                    5,2
       ( workers' housing)             <                                                                                    I
   ' ) Transfer to renervos
                        ___            I
                                                          19,2        !
                                                                          7 ) Contributions by the acceding
                                                                              States to SCSC reserves
                                                                                                                 19,2      j      19,2
 ---pagebreak---                                  INITIAL DRAFT OP THE ECSC OPERATING BUDGET FOR 1974              ( in MUA)                     ANNEX II
                                        Requests   Proposai                                                        Requests      Proposai
          REQUIREMENTS
                                                      0,30 1o  0.31 $                     RESOURCES                                            0,31 %
                                         0,45 %                                                                     0,45 1o       0 , 30 %
                                                                                                                1
                                                                                                                                                      ■ 1 i
OPERATIONS TO BE FINANCED
FROM ORDINARY RESOURCES                                                         ORDINARY RESOURCES
( NON-RECOVERABLE)
1 ) Administrative expenditure
2 ) Aid to resettlement ( art . 56 )
                                         18
                                         41
                                                   18
                                                   41
                                                              18
                                                              41
                                                                                l ) Levy yield
                                                                                2 ) a - Interest on investments
                                                                                                                J 107,7           71,7          74,09
                                                                           li           and on loans from non-       12,4         12,4          12,4
3 ) Aid to research ( art . 55 )         45        21,5       21,5         11
                                                                          11
                                                                                        borrowed funds
                                                                           11
        Steel                               2b          10       ) 10               b - Interest on acceding
        Coal                                13,5                                                                      3,3           3,3          3,3
        Soci al                              7,5         6,S          5,5
                                                                     ΑΟ    11II
                                                                                        States' contributions
4 ) Aid to coking coal ( art . 95 )       5         5          5
                                                                   .
                                                                           11
                                                                           i
                                                                                3 ) Miscellaneous                     0,1          0,1       j
                                                                                                                                             I
                                                                                                                                                 0,1
5 ) Interest rebates                     20         7,5        9,8939      | 4 ) Cancellation of commitments                                 I
     al Art„ 54 - Investment                            3        ) 3.95 j           which will not now be             5,5          5,5           5,5
    b ) Art. 56 - Redevel opment            12          4,5      ) 5>
                                                                   51# j!           implemented
                                                                          α
                                        12Q        93         95,39                                                 129
                                                                                                                            'Lîl
                                                                                                                              :
                                                                                                                                                95,39
OPERATIONS FINANCED WITH LOANS                                                  ORIGIN OF NON-BORROKED FUNDS
FROM NON-BORROWED FUNDS
                                                                                5 ) Repayments on loans for
6 ) Special reserve appropriation
    ( workers' housing )
                                         10        10         10                    workers' housing             j    5,5          5,5       1   5,5
                                                                                6 ) Part of the former SCSC           4,5          4,5
                                                                                    pension fund                                                 4,5
                                                                                                                                           , 1