CELEX: 51989PC0091
Language: en
Date: 1989-07-03
Title: ADJUSTMENT OF THE AGRICULTURAL STRUCTURES POLICY [Objective 5(a) of the reform of the Structural Funds]#Proposal for a COUNCIL REGULATION (EEC) amending Regulations (EEC) No 797/85, No 1096/88, No 1360/78, No 389/82 and No 1696/71 with a view to speeding up the adjustment of agricultural production structures#Proposal for a COUNCIL REGULATION (EEC) on improving the processing and marketing of agricultural and forestry products#(presented by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (89) 91
Vol. 1989/0028
 ---pagebreak--- Disclaimer
Conformément au règlement (CEE, Euratom) n° 354/83 du Conseil du 1er février 1983 concernant
l'ouverture au public des archives historiques de la Communauté économique européenne et de
la Communauté européenne de l'énergie atomique (JO L 43 du 15.2.1983, p. 1) modifié en dernier
lieu par le règlement (UE) 2015/496 du Conseil du 17 mars 2015 (JO L79 du 25. 3.2015, p. 1), ce
dossier est ouvert au public. Le cas échéant, les documents classifiés présents dans ce dossier
ont été déclassifiés conformément à l'article 5 dudit règlement ou sont considérés déclassifiés
conformément aux articles 26(3) et 59(2) de la décision (UE, Euratom) 2015/444 de la
Commission du 13 mars 2015 concernant les règles de sécurité aux fins de la protection des
informations classifiées de l'Union européenne.
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 last amended by Council
Regulation (EU) 2015/496 of 17 March 2015 (OJ L 79, 27.3.2015, p. 1), this file is open to the
public. Where necessary, classified documents in this file have been declassified in conformity
with Article 5 of the aforementioned regulation or are considered declassified in conformity with
Articles (26.3) and 59(2) of the Commission Decision (EU, Euratom) 2015/444 of 13 March 2015
on the security rules for protecting EU classified information.
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, S. 1), zuletzt geändert durch die
Verordnung (EU) Nr. 2015/496 vom 17. März 2015 (ABI. L 79 vom 25.3.2015, S. 1), ist dieser Akt
der Öffentlichkeit zugänglich. Soweit erforderlich, wurden die Verschlusssachen in diesem Akt in
Übereinstimmung mit Artikel 5 der genannten Verordnung freigegeben; beziehungsweise werden
sie auf Grundlage von Artikel 26(3) und 59(2) der Entscheidung der Kommission (EU, Euratom)
2015/444 vom      13.   März 2015     über die   Sicherheitsvorschriften für den Schutz von  EU-
Verschlusssachen als herabgestuft angesehen.
 ---pagebreak--- COMMISSI ON . 0 F THE EUROPEAN COMMUNITIES
                                                             COM ( 89 ) 91 final
       f*?"'y/             np qiog
                j?ue!3iaos np ijiog VS>]
      MEl 6861
      \*\
                686! -Z0-.
                       -ZÛ- 2211 P !
                                     £ */
                                                             Brussels , 3 July 1989
      \а                _           ^
                        v
                     Птп-гтГ^Л^Х
            ADJUSTMENT       OF THE   AGRICULTURAL STRUCTURES POLICY
                                            *■
      /Objective 5(a ) of the reform of the Structural Funds_?
                                      Proposal for a
                                COUNCIL REGULATION   ( EEC )
  amending Regulations ( EEC ) No 797 / 85 , No 1096 / 88 , No 1360 / 78 ,
     No 389 / 82 and No 1696 / 71 with a view to speeding up the
             adjustment of agricultural production structures
                                      Proposal for a
                                COUNCIL REGULATION ( EEC )
  on improving the processing and marketing of agricultural and
                                    forestry products
                            (presented by the Commission )
 ---pagebreak---                                                 2
                   ADJUSTMENT OF AGRICULTURAL STRUCTURES POLICY
             [ Objective 5(a ) of the reform of the Structural Funds ]
                                          CONTENTS
Explanatory memorandum
A.    I ntroduct Ion
B.    Development of Structural measures
C.    Objectives of the reform of the Structural Funds
D.    Changes to horizontal measures
      1.   Aid for Investment In agricultural holdings and back-up measures
      2.    Installing young farmers on holdings
      3.   Encouragement of early retirement from farming
      4.   Farming In mountain areas and other less-favoured areas
      5.   Agriculture In env I ronmenta I I y sensitive areas
      6.   Forestry measures
      7.   Measures to adjust production potential             :  set-aside of arable
            land , extensl f Icat Ion , conversion
      8.   Producer groups
      9.   Processing and marketing of agricultural products
      10 . Control
E.    Budgetary aspects
      1 .. Rates of Communlty assistance
      2 . Budgetary Implications of all the changes
F.    Consol Ida t Ion of leg Is I at Ion
Proposal for a Council Regulation ( EEC ) amending Regulations ( EEC )
No 797 / 85 , ( EEC ) No 1096 /88 , ( EEC ) No 1360/ 78 , ( EEC ) No 389/82 and ( EEC )
No 1696/ 71 with a view to speeding up the adjustment of agricultural
production structures .
Proposal for a Council Regulation ( EEC ) on Improving the processing and
marketing of agricultural and forestry products
 Financial statements .
 ---pagebreak---                                            3
                               EXPLANATORY MEMORANDUM
A. INTRODUCTION
   Following the Council decisions on the reform of the Structural Funds ,
   the measures financed by the EAGGF , Guidance Section , need to be adapted
   so as to fully perform their function of " speeding up the adjustment of
   agricultural structures with a view to reform of the common agricultural
   policy "; that    Is Objective 5(a ) as defined         In Article 1      of Council
   Regulation ( EEC ) No 2052 / 88 on the tasks of the Structural Funds .
   As regards    the measures to be provided for            In connection with this
   Objective - common measures of " horizontal " application - the Council
   will have to come to a decision by 31 December 1989 , on a proposal from
   the Commission ,     under Article 43 of        the Treaty ,   as provided for      In
   Article 1(3 )   of    Council   Regulation    ( EEC ) No 4256 / 88  on    the  EAGGF ,
   Guidance Sect Ion .
   The  existing    " horizontal "   measures   comprise    a   series  of    provisions
   governing   aid     for   Investment    In   agricultural      holdings .   Including
   limitations on national        aid , aid for young farmers setting up and for
   mountain and less-favoured areas , producer groups , early retirement and
   the  Improvement of product processing and marketing .             While the basic
   structure of some of the measures , e.g. Investment aid of allowances for
   less-favoured     areas ,   has   been   In  place    for   several   years ,   major
   adaptations of the measures were carried out            In 1985 .   These concerned
   modifications to the       Investment aid provisions to take account of the
   market situation and the need to Improve living and working conditions
    in agriculture .     Other   Important   Innovations at      the  time   related  to
 ---pagebreak---                                       4
   special aid for young farmers , environmentally sensitive areas , and
   forestry measures on farms . In 1988 Important measures were adopted to
   encourage the adjustment of production potential In agriculture , such as
   the set-aside of arable land , extenslf Icat Ion and conversion .
   Most of the measures are optional , the exceptions being aids for
   Investment In holdings and measures to adjust production potential .
B. DEVELOPMENT OF STRUCTURAL MEASURES
   The economic and structural changes which have occurred since the
   agricultural structures policy was first Introduced some thirty years
   ago have been substantial .
   The development can be said to fall Into three stages :
   1.  1962-72 : coordination of national structural policies .
       Community aid confined to the funding of Individual projects to
       Improve agricultural structures .
   2.  1972-85 : Implementation of a genuine Community structural policy .
       This Involved two types of measures :
       - horizontal measures , l.e . measures applicable In all the Member
         States , covering the modernization of production , processing and
         marketing units , vocational training and Incentives for early
         ret I rement ;
 ---pagebreak---                                              5
     - regional          measures    designed        to     reduce     structural      and
         Infrastructural disadvantages , with a view to promoting all forms
        of agriculture In certain regions .
3.   Since 1985       :   attempts to strike a balance between achieving the
     requisite        Improvement       In     the    competitiveness      of     European
     agriculture , gearing production potential to market requirements and
     developing rural areas which are In difficulty .
   The    results of       surveys on     the structure of       agricultural     holdings
   Indicate extensive changes In farm structures In many of the Member
   States between 1960 and 1985 :
     the total number of holdings fell by 33% - 50% In most of the Member
     States ;
   - the    number      of   persons   employed    In    agriculture ,   the    percentage
     accounted for by agriculture In overall civilian employment and the
      labour force needed for each hectare of agricultural                   land fell by
     approximately half ;
   - the physical and economic size of farms virtually doubled ;
   - the percentage of farms run by a person aged 55 or over remained
     v I rtua I ly constant .
These results show that for the most part agricultural structures have
improved     since      the   Introduction      of a    Community   structural     policy ,
although     the extent of        this    improvement    differs from one region         to
another .
The situation        Is more complex and varied than overall               figures might
suggest .     The   complexity     and   diversity of       situations   throughout    the
Community       have     increased   considerably       as   a  result    of    successive
 ---pagebreak---                                         6
enlargements . The accession of Greece , Spain and Portugal has had a
significant Impact on farm structures In the Community , e.g. In 1966 the
average size of holding ranged from 6 hectares In Italy to 18 hectares
In France . The range Is now from 4 hectares In Greece and Portugal to
65 hectares In the United Kingdom . Over the same period the proportion
of   farms    of    under    5 hectares    In    the   Community     has    Increased .
Furthermore ,    the   age   distribution     of   farmers   In   the   Community   Is
concentrated disproportionately         In the higher age bands ;         50% of the
Community 's   farmers are 55 years or          over  and 50% of       these  have no
successors .
A large section of the farming population employed solely or principally
 In farming has benefited less than the remainder from structural change
and the more favourable economic climate .
Also , since the start of the common agr I cul tura I po I I cy there has been
an   Increase    In  the   number  of  farmers     whose   Income   Is   derived  very
 largely from off-farm activities . Some 30% of farmers have gainful
activities outside agriculture ; Income from off-farm activities Is often
greater than that accruing from farming , and this trend Is growing .
There Is therefore       a need to reinforce existing measures In the light
of the present situation and the foreseeable development of the common
agricultural policy .
 ---pagebreak---                                         7
C. OBJECTIVES OF THE REFORM OF THE STRUCTURAL FUNDS
   By virtue of the Single European Act the Council set Itself the goal of
   stepping up measures to Increase economic and social cohesion and , more
   specifically , to narrow the gap between tlye regions of the Community ,
   particularly by the promotion of rural development .         With this end   In
   view , Article 1 of Council Regulation ( EEC ) No 2052 / 88 set the following
   object I ves :
   1.   promoting the development and structural adjustment of the regions
        whose development Is lagging behind ;
   2.   encouraging   conversion    In  the regions      seriously   affected   by
         Industrial decline ;
   3.   combating long-term unemployment ;
   4.   facilitating the occupational Integration of young people ;
   5.   with a view to reform of the common agricultural policy :
        a)   speeding up the adjustment of agricultural structures , and
        b)   promoting the development of rural areas .
   To   this end   the EAGGF ,  Guidance Section ,  was assigned the      task of
    Introducing regional measures to further agricultural development In the
   areas    referred  to   In  Objectives 1 and    5(b )   and  speeding   up  the
   adjustment of agricultural structures by means of horizontal measures
   applicable throughout the Community ( Objective 5(a )), more favourable
   conditions being applicable In the aforementioned areas .
 ---pagebreak---                                          8
In accordance with Article 3(3 ) of Council Regulation ( EEC ) No 2052/88 ,
assistance from the EAGGF , Guidance Section , must be used for the
following purposes :
- strengthening and reorganizing structures with a view to reform of the
  CAP ,
- converting     agricultural      production     and    fostering    supplementary
  act Ivlt les ,
- ensurlng a fair standard of Ilving for farmers .
- developing the social fabric of rural areas , safeguarding the
  environment , preserving the countryside and offsetting the effects of
  natural handicaps .
Measures financed by the EAGGF , Guidance Section , are of two kinds :
- common horizontal measures ,        l.e . applicable    In principle throughout
  the Community .    These are subject to decisions by the Council , acting
  on    proposals   from   the   Commission .    The    Council   will   decide  on
  amendments to existing arrangements by the end of 1989 .             This Is the
  Implementation of Objective 5(a );
- regional    measures .  In   the   context   of   the   new  partnership   system
  ( regional development schemes , Community support frameworks , etc .).
  These measures are Jointly agreed on by the Commission and the
  national , regional or local authorities and result In decisions by the
  Commission , which Is assisted by advisory management committees . This
  Is the Implementation of Objective 1 (" promoting the development and
  structural adjustment of the regions whose development Is lagging
  behind ") and Objective 5(b ) (" promoting the development of rural areas
  with a view to reform of the CAP ").
These proposals are concerned with changes to the horizontal structural
measures for the purpose of Implementing Objective 5(a ) ( speeding up the
adjustment of agricultural structures ) of the reform of the structural
Funds .
 ---pagebreak---                                          9
D. CHANGES TO HORIZONTAL MEASURES
   To   enable  European    agriculture   to  compete     on   Community   and  world
   markets , the common agricultural policy must constantly aim at enhancing
                                                     /
   the competitiveness and efficiency of agricultural holdings .            While the
   markets policy     Is chiefly responsible for ensuring that the necessary
   adjustments    are   carried out   to safeguard      the   long-term competitive
   situation of Community agriculture , the structures policy must also make
   a   contribution    by  strengthening   as  far   as   possible    production  and
   marketing structures .     This must be done , however , without aggravating
   the   Imbalance between the productive resources devoted to agriculture
   and the foreseeable market outlets .       The emphasis should be placed on
   the structural     Improvement of holdings which are In a weak position and
   on establishing young people In farming under viable conditions , to help
   to lower the average age of the farming population .
   At the same time , the structures policy must offer farmers alternative
   sources of Income and even employment within the context of adjustments
   to the CAP .    The Community has accordingly drawn up a range of measures
   to meet the needs of the various situations . The compensatory allowance
   scheme   for  mountain    and  less-favoured    areas    must   also  continue  to
   provide a vital component of the income of farmers who are faced with
   natural handicaps .
 ---pagebreak---                                    -   10
The measures to be adopted In future must be Increasingly Integrated
Into a broader vision of maintaining economic activity and the social
fabric of rural regions , a concern expressed clearly In the Commission 's
paper on " The future of rural society ". Hence they must be designed to
achieve simultaneously economic , social and environmental objectives :
- the modem I zat Ion of farmlng ;
- the maintenance of the farming population , with a              view    to  the
   strengthening of the social fabric In rural areas ;
- providing Income support for farmers In difficulty ;
- the protection of the environment .
With   regard  to  the   form of    Community assistance ,    the   agricultural
structures policy will continue to be based on the co-financing by the
Community of   national    aid schemes ;    as  In the past ,  schemes will    be
governed   by  Community    regulations     and  subject  to  approval    by  the
Commission , following their examination by the Committee on Agricultural
Structures and Rural Development .
As stated earlier , the horizontal measures are to be adjusted to reflect
the reform of the Structural Funds .        One of the most Important effects
of   this  Is the   Increase   In  the   rate of   assistance  from   the  EAGGF ,
Guidance Section , In accordance with the policy of concentrating
financial resources on the less developed regions of the Community .
Other adjustments need to be made . However , the following points
should be stressed In connection with the recent changes In the rules :
 ---pagebreak---                                     - 11-
1. The    Regulation     on    Improving    the    efficiency   of   agricultural
   structures      was     Implemented     only     relatively    recently .  This
   Regulation ,    which was     adopted . In   1985 ,  superseded  the measures
   Instituted    In 1972 .    It represents an Improvement on the previous
   approach In that :
   - the    Investment   aid scheme has been adapted so as            to  Increase
      competitiveness without aggravating the situation In sectors where
      there   Is a surplus ,     to enhance quality and       living and working
      conditions ,   to encourage energy conservation and to protect the
      environment .    There Is scope for greater flexibility so that more
      small and medium-sized family holdings will be eligible .
   - aid for young farmers has been Introduced to offset the ageing of
      the farming population and acquire the dynamism needed to adapt
      production systems to the changed situation .
   - the concept of environmentally sensitive areas has for the first
      time been Introduced Into the common agricultural policy .
   - the    agricultural     measures   have    been   supplemented  by   forestry
      measures for holdings .
2.  In 1987 and 1988 the new approach adopted in 1985 was amplified on a
   number of occasions In the light of considerations contained In the
   Commission 's Green Paper :
 ---pagebreak---                                       -   12
      - back-up measures have been adopted for the markets policy , to help
         restore the balance between supply and demand , In the form of aid
         per hectare for the set-aside of arable land and the
         extens I f Icat Ion and conversion of production ;
      - Inducements       have   been   provided    for    early  retirement  from
         agr Icul ture .
3.    Proposals for the forestry sector are currently under consideration
      by the Councl I .
4.    Some provisions adopted In the recent past require only technical
      adjustment ( aid for early retirement ).
A number of changes have been proposed , bearing In mind the need :
( a ) to   be    consistent    with   the    approach   adopted  under   the other
      Object Ives ;
( b ) to concentrate aid and to provide additional assistance to regions
      Identified as requiring particular attention and to farmers in the
      least-favoured areas ;
( c ) to be consistent with the markets policy by discouraging further
      production of surplus products ;
( d ) to encourage alternative means of Increasing farmers' Incomes and to
      accelerate the taking-over of farms by young farmers capable of
      adapt Ing to change ;
( e ) to take account of environmental requirements .
 ---pagebreak--- 1 . AID FOR INVESTMENT IN AGRICULTURAL HOLDINGS AND OTHER MEASURES TO ASSIST
    AGRI CULTURAL HOLDINGS
    Under the terms of Article 39 of the Treaty , Community Investment aid Is
    Intended to modernize agricultural holdings In order to Improve their
    competitiveness with a view to rational                    development of agricultural
    production .      Any   adjustments        to    this   policy    Instrument     should   be
    designed to foster the modernization and conversion of agriculture , and
    at    the    same    time    be   consistent       with   measures     to    limit   surplus
    production ;     they   should ,    furthermore ,      take account     of   considerations
    regarding " The future of rural society ".
    ( a ) At the moment ,      In order to qualify for Community Investment aid , a
          farmer must have farming as his main occupation , l.e . he must devote
          at   least half his time to farming his holding and derive at least
          half    his   income     from   It .    In   the   light   of   the    considerations
          contained In the report on " The future of rural society ", Community
          Investment aid could also be granted to persons who do not have
          farming as their main occupation , provided they engage In forestry ,
          tourism or      crafts , on a substantial           scale or     In activities for
          safeguarding      the   environment ,       on   their   holdings ,    and   providing
          Income from off-farm activities does not exceed 50% of the reference
          I ncome .
    C b ) As   regards     the   objective      of    Investment    plans    for   agricultural
          holdings , a distinction should no longer be made , for the purpose of
          Community aid , between plans designed simply to stabilize the Income
          level and those designed           to Improve It substantially .           To date , a
          higher level of aid has been payable In the latter case , and this
          situation could encourage some farmers to Increase production and so
          aggravate the problem of finding market outlets .
 ---pagebreak---                                      -   14  -
( c ) Under the existing arrangements , aid Is concentrated on Investment
      not directed towards Increasing production capacity but rather aimed
      at a qualitative Improvement of the conditions under which
      production Is carried out , viz . :
      - Improvement of quality , conversion of production ;
      - reduction In costs , Improvement of living and working conditions ,
        energy savings ;
      - protection and Improvement of the environment .
      This list could be expanded to Include Investment which :
      - diversify sources of Income through tourism , craft-trades or the
        manufacture and sale on the farm of farm produce ;
      - Improve standards of hygiene on livestock farms .
( d ) As regards limitations on Investment aid In certain sectors , all the
      current  restrictions     ( milk ,  pigs , eggs and poultry ) should be
      maintained .   Moreover ,   In view of the market situation In the beef
      and veal sector , to avoid encouraging Intensive production Community
      aid for      Investment , other       than that for safeguarding the
      environment , could be confined to those farms where the stocking
      density does    not exceed two livestock units per hectare of forage
      area .
 ---pagebreak---                                              15
   ( e ) Furthermore , It Is proposed to modify the celling authorized for aid
         granted by the Member States , expressed as a percentage of capital
         expenditure , as follows :
         - In mountain and other less-favoured ar^afs :
            . fixed assets :
               the rate of aid Is to be Increased from 45% to 50% of capital
              expenditure , In order to encourage Investment of this kind , the
              cost    of  which    places  a   particularly   heavy  burden   on  farms
              situation In these areas ;
            . other    Investments :
               the rate of aid Is to be kept at 30% ;
         - In other areas :
            In order to Increase the         level of assistance to those regions
            which are In greatest need , the rates of aid are to be reduced by
            5% , l.e . from 35% to 30% for fixed assets and from 20% to 15% for
            other  Investment .
   ( f ) In   addition ,    In   the  context    of  the  other   measures   to  assist
         agricultural      holdings ,   encouragement    should   be   given   for - the
         formation of mutual assistance groups for the use of practices aimed
         at safeguarding the environment and of groups having as their object
         the introduction of alternative cultivation methods ,           In particular
         organic growing techniques , Integrated crop protection and extensive
         farming methods .
2. INSTALLING YOUNG FARMERS ON HOLDINGS
   These aid measures ,        Introduced In 1985 , are very useful ,     In that they
   offset the ageing of the agricultural population and therefore Introduce
   an enterprising and dynamic approach which should be conducive to the
   adaptation of production systems to the constraints of the market .
 ---pagebreak---                                         16
    In view of the ever-increasing cost of taking over an agricultural
    holding , the celling eligible for Community aid could be Increased from
    ECU 7 500 to ECU 10 000 ,     for both the   Installation premium and the
    capitalized value of the Interest rate subsidy .
    There would also have to be a change In the procedure for Implementing
    this measure , to encourage more extensive and more effective use of It :
    - by allowing Member States to pay the aid either In a lump sum or else
       In several Instalments over a period of five years following
       Installation , to take account of the fact that some charges Incurred
      upon Installation are deferred ;
    - by offering this aid to young part-time farmers who wish to take up
      farming as their main occupation ;
    - by requiring the Member States to specify conditions under which a
      young person can qualify for this aid when he takes over a holding In
      conjunction    with others ,   In order to   ensure  the success of the
      venture .
    Revitalizing the agricultural population requires not only Incentives
    for young people to take up farming under viable conditions but also
    Incentives for the retirement of older farmers who are not capable of
    adapting to the present economic climate .
3 . ENCOURAGEMENT OF EARLY RETIREMENT FROM FARMING
    An optional Community scheme to encourage the cessation of farming was
    adopted recently , In April 1988 .
 ---pagebreak--- The purpose of this scheme Is to provide a guaranteed Income for elderly
farmers    unable    to    adapt   to   the    changed    market    situation .    The   land
vacated by     farmers who retire early can be used to help achieve two
additional objectives :
                                                           /
- a reduction In surplus production In cases where the land Is set aside
   ( option of early retirement with cessation of production ); eligible
   expenditure Incurred by the Member States Is reimbursed by the EAGGF
   In respect of all Community regions ;
- Improvement of agricultural structures In cases where the land Is to
   be used to enlarge neighbouring holdings ( option of early retirement
   with   restructuring );       eligible     expenditure       Incurred    by   the   Member
   States Is reimbursed by the EAGGF only In respect of certain regions
   whose   boundaries      more   or   less    correspond      with   those   of  the   areas
   referred to In Objective 1 of the reform of the structural Funds .
As the second option ( early retirement with restructuring ) does not
apply to all      regions of the Community ,           It    Is proposed to withdraw It
from the Community scheme now In force .
Regarding early retirement , the Commission Is keen to stress that areas
covered by Objectives 1 and 5(b ) can qualify for Community assistance
for    measures   to encourage        the cessation of          farming with a view        to
restructuring agriculture and helping young farmers to set up [ Article 5
of    Regulation   ( EEC )   No 4256 / 88 ].    This makes       It possible     for Member
States    to present measures          for   speeding up the retirement of older
farmers    In  favour     of   young ,   more active ,       successors who are better
equipped    to   adapt     to   changes     in   the market       and   the  need    to  seek
alternative sources of Income .           The Commission Is encouraging Innovating
proposals In this area and will warmly welcome them , providing the young
successors have adequate vocational qualifications .
 ---pagebreak---                                           18
4 . FARMING IN MOUNTAIN AREAS AND OTHER LESS-FAVOURED AREAS
    Farming plays a fundamental part          In preserving the countryside and
    maintaining a minimum population         In mountain areas and other      less-
    favoured areas .     Both of these functions are vital     for the future of
    these areas , which are often predominantly rural .       However , production
    costs    In these areas are higher on account of natural handicaps and
    could . In the absence of Community aid , lead to farms being abandoned ,
    with serious adverse effects on the countryside .      A special scheme aimed
    at    maintaining   farming ,   comprising   the payment  of   a  compensatory
    allowance for natural handicaps , was accordingly Instituted In 1975 ; the
    number of farms qualifying for aid under this scheme rose form 340 000
     In 1976 to 1 050 000 In 1987 .      The scheme Is starting to be applied In
    the new Member States .
    The    present   scheme  Is   a  flexible one ,  whereby  the  amount  of   the
    compensatory allowance can be related to the seriousness of the
    handicaps . Its effectiveness could be Increased by raising the rates of
    Community reimbursement applicable to the poorer regions and by certain
    technical    Improvements :
    ( a ) At present the allowance for . 1 1 vestock farming Is paid without any
           limitation on stocking density . This practice could result In more
           Intensive stockfarming , with the attendant adverse consequences on ;
          - the environment   :
             rlsk of soli eroslon due to overgrazlng ;
          - the market   :
             production surpluses
 ---pagebreak---       With a view to avoiding these problems , most of the Member States
      restrict     allowances     to one   livestock unit   per    hectare of     forage
      area ;    this Is In line with the regulation , which permits additional
      or  limiting conditions to be laid down In respect of the grant of
      the compensatory allowance .
      It  Is therefore proposed to stipulate           In the Regulation that        the
      allowance      Is to be confined to one       livestock unit per hectare of
      forage     area   and    to enable Member    States   to make      the   allowance
      conditional      on compliance with certain practices          for   safeguarding
      the environment .
( b ) As to the celling for Community aid per farm , under                  the present
      scheme the maximum amount of the allowance eligible for assistance
      from the EAGGF        Is 50% of    the reference   Income per man-work unit .
      The    Implementation of this scheme has been hampered by a number of
      administrative difficulties In the Member States .             It Is proposed to
      replace      It   by   a   simpler    scheme  designed    to    concentrate    the
      Community 's efforts on those farms which are In greatest need , l.e .
      family farms .       The Community contribution would be restricted to 90
      units , either livestock units ( LU ) or area units ( ha ).          Furthermore ,
      within the 90 units eligible for aid , the celling for the Community
      contribution would be reduced by half after the first 45 units .
 ---pagebreak---                                         20
5 . AGRICULTURE IN ENVIRONMENTALLY SENSITIVE AREAS
    The  concept   of  environmentally   sensitive areas was     Introduced  Into
    Community legislation in 1985 In order to reconcile farming and nature .
    Originally the Idea was to provide a framework for national aid , but
    since 1987 the premiums per hectare granted to farmers undertaking to
    Implement    practices  compatible    with  environmental   requirements   In
    sensitive areas have qualified for a contribution from the Community .
    This measure Is being put Into effect In the Member States gradually .
    However , the present eligible amounts are significantly lower than the
    loss of Income resulting from the Implementation of ecological practices
    and therefore provide too little Incentive . To encourage the measure to
    be applied more widely In rural areas which are experiencing the
    pressures of a changing world ,      the celling eligible for    the premium
    should be increased .   Furthermore , experience suggests that In future no
    distinction should be made between the       less-favoured areas , where the
    celling eligible Is currently ECU 60/ hectare , and other areas , where it
     Is ECU 100 / hectare on the grounds that the compensatory allowance
    already makes some provision for the protection of the countryside .        It
     is therefore proposed to Increase the celling eligible for the premium
    to ECU 150 / hectare In both types of area .
6 . FORESTRY MEASURES
    On 23 September 1988 the Commission sent the       Council a proposal for a
    strategy and measures for forestry . The aim        Is not merely to develop
    the Community 's forestry resources but            also to encourage the
    reafforestation of farmland , thereby helping      to reduce the area under
    crops . Once they are adopted these measures will represent an essential
    component of the measures proposed by the Member States and the regions
     In their regional or rural development plans .
 ---pagebreak---                                                21
7 . MEASURES TO ADJUST PRODUCTION POTENTIAL ;
    SET-ASIDE OF ARABLE LAND , EXTENS I F ICAT ION AND CONVERSION .
    In 1987 and 1988 the Community adopted three new measures to help adjust
    production potential to market needs .
    1.   Set-aside of arable land , which Is beginning to be applied In the
         Member States ; under this scheme a premium Is paid per hectare taken
         out of production on the basis of the loss of               Income Incurred , on
         condition that the recipient takes at             least 20% of his arable land
         out of product Ion .
    2.   Ex tens I f I cat Ion of production , a scheme adopted by the Council           at
         the same time as the measure on the set-aside of arable land ; this
         will   come     Into  force   In   1989   and  Is defined  as  the  reduction   of
         production by        at   least   20%   In  the case of one or      more   surplus
         products .
    3.   The principle of aid for switching to the production of non-surplus
         products was        adopted by the Council at the same time as the other
         two measures .       On 21    October    1988 the Commission put       before  the
         Council a proposal for an Implementing Regulation .
       Since the schemes for set-aside , extensl f Icat Ion and conversion were
       Introduced only recently , there Is no need yet to adjust them .
       Nevertheless ,      the Commission will prepare shortly a report on their
       Implementation In the Community In the light of which It reserves the
       right   to suggest        changes ,   including adjustments     to   the   rates of
       reimbursement , to make them more attractive and more effective .
 ---pagebreak---                                            22
0 . PRODUCER GROUPS
    Launching aid for producer groups Is provided under four schemes :
    ( a ) Regulation ( EEC ) n° 1360/ 78 on producer groups and associations
          thereof ;
    ( b ) Regulation   ( EEC ) n° 389 / 82 on producer   groups and associations
          thereof In the cotton sector ;
    ( c ) Regulation ( EEC ) n° 1696 / 71 on the common organization on the market
          In hops which Is concerned among other things with producer groups ;
    ( d ) Regulation ( EEC ) n° 1035 / 72 on the common organization of the market
          In fruit and vegetables , which Is concerned among other things with
          producer groups .
     It Is proposed to amend the Regulations mentioned under ( a ), ( b ) and ( c )
    so as to give the Commission the task of determining the rates of
    reimbursement at a later stage . •
    There seems no reason to provide for different rates In the Regulation
    referred to In ( d ), because producer groups In the fruit and vegetable
    sector do not merely have responsibility for the distribution of their
    produce ; they are also the public bodies with responsibility for
     Intervention under the market organization , which Is the same throughout
     the Community .
 ---pagebreak---                                            23
9 . PROCESSING AND MARKETING OF AGRICULTURAL PRODUCTS
    1 .   As a result of the Council decisions on the reform of the Structural
          Funds , the existing " common measure " on the processing and marketing
          of agricultural products ( Regulation t^EC ) n° 355/77 ) will require
          radical restructuring In the period up to 31 December 1989 If It Is
          to make an optimal contribution to the objectives of the reform .
    2.    The restructuring and /or conversion of the agricultural sector to
          take   account   of  market  demand     will   have  repercussions     on   the
          downstream sector , which will      In some    Instances require extensive
          reorganization      to    ensure     the      continuing   efficiency       and
          competitiveness of the food processing Industry .
        Furthermore , In the regions and areas with major development problems
        mentioned In Objectives 1 and 5 ( b ) of the reform of the Structural
        Funds , the Improvement of structures for the processing and marketing
        of agricultural and forestry products Is In many cases an essential
        prerequisite for economic diversification and the development of rural
        areas .
    3.    As the achievement of economic and social cohesion In the Community
          is dependent upon regional and rural development , there Is a case
          for concentrating assistance from the EAGGF , Guidance Section , on
          the regions and areas covered by Objectives land 5 ( b ) over the next
          few   years .  Within  those   regions    the   Commission   Intends ,    where
          possible , to focus attention on the less-favoured areas defined In
          Article 3 of Directive 75 / 268 / EEC .
 ---pagebreak---                                         24
4.    The changes made necessary either by the reform of the Funds , or
      because experience In Implementing Regulation ( EEC ) n° 355 / 77 has
      shown    that   the   Community   approach  could be      Improved , are  as
      fol lows :
( a ) the replacement of project financing by the financing of operational
      programmes or the award of global grants ;
( b ) extending the scope of the measure to embrace forestry as provided
      for In Article 3(3 ) of Regulation ( EEC ) n° 2052 / 88 ;
( c ) excluding the fisheries sector from the scope of the measure given
      that the Commission will be proposing a draft Regulation on the
      processing and marketing of fishery products ;
( d ) drawing up sectoral       plans at   national  level   on   the basis of   a
      detailed analysis of the likely trend of the markets concerned and
      In keeping with       the priorities of    the CAP ,   which plans should
      precede any action taken by the Funds ;
( e ) the    adoption    by   the  Commission ,  within    the   context   of  the
      partnership , of Community support frameworks corresponding to the
      sectoral plans , taking into consideration , where appropriate , the
      Community support       frameworks adopted for    programmes relating     to
      Objectives 1 and 5 ( b );
( f ) adjusting the rates of aid In line with Article 13 of Regulation
      ( EEC ) n° 2052 / 88 and Article 17 of Regulation ( EEC ) n° 4253/ 88 , to
      enable the contribution from the Fund to reach 50% of the eligible
      Investment cost In the regions covered by Objective 1 , and 30% of
      the eligible Investment cost In the other regions ;
 ---pagebreak---                                                 25
    ( g ) simplifying and harmonizing the operat Iona I procedures of the Fund ,
          following the adoption of Regulations ( EEC ) n° 2052 / 88 and 4253 / 88 ;
    ( h ) strengthening      the    role     of    selection       criteria      for     Investments
          qualifying for financing from the Fund as an Instrument of market
          guidance .    The   priorities      and exclusions          for   each of       the   basic
          products are , for the first time , given a specific legal basis ;
    ( I ) giving priority to Investments In marketing and ,                      In that context ,
          encouraging      new   outlets      such     as     those    for    organically       grown
          products ;
    ( J ) making It possible to use other forms of aid than capital grants .
          The option of granting           loans with       Interest subsidies would allow
          greater     flexibility      for    the    Fund      to   differentiate        Its   action
          according to requirements .
5 . Certain     Implementing      rules     will    still      have    to   be    adopted     by  the
    Commission , In particular as regards the following :
        - the Information to be Included In the application for assistance and
          the   presentation       of    that     Information ,       either      for   operational
          programmes or for global grants ;
        - the   role     of    the    authorities        designated        In    accordance      with
          Article 14(1 )      of    Regulation        ( EEC )     n°    4253 / 88     and    of   the
          Intermediaries referred to In Article 16(1 ) of that Regulation , as
          regards follow-up , assessment and supervision .
        These   rules     should     Include     provisions        ensuring      compliance      with
        Community rules on the award of public contracts and environmental
        protect Ion .
 ---pagebreak---                                          26
10 . CONTROL
     The Commission attaches great Importance to the monitoring of the
     Implementation of Community measures .        All the general provisions of
     the reform of the Structural Funds apply to the EAGGF , Guidance
     Section , and they Include the strengthening of checks on structural
     operations   ( Article 7 of Regulation No 2052 / 88 and Article 23 of
     Regulation No 4253 / 88 ).    The Member States accordingly have to make
     the   requisite   provision    to  verify   the   satisfactory   execution   of
     Community-financed measures , to prevent and prosecute Irregularities
     and to recover funds lost as a result of misuse or negligence .            They
     have   subsidiary    responsibility     for  funds   wrongly   paid  out .  The
     Commission can consult      the audit reports when Member States submit
     applications    for payment ,   and   Its staff may carry out on- the-spot
     checks .  The Commission     Intends to make full      use of   Its monitoring
     powers In this area .
     The   horizontal   measures   will   therefore   have   to be  accompanied   by
     provisions on monitoring procedures .
     The existing provisions of Regulation No 797/ 85 on Improving the
     efficiency of agricultural structures which specify the obligations of
     the Member States with regard to Implementation have been tightened up
     ( In particular the last subparagraph of Article 32(1 ).
     The draft Regulation on the processing and marketing of agricultural
     products lays down general rules to ensure efficient cooperation with
     the monitoring bodies to be designated by the Member States In
     accordance with the horizontal legislation ( Articles 17 and 18 of the
     draft Regulation ).
 ---pagebreak---                                                27
E. BUDGETARY ASPECTS
   1 .   RATES OF COMMUNITY PART FINANCING
   ( a ) Measures to Improve production structures
         Article 13 of Regulation ( EEC ) No 2052 / 88 sets out the criteria for
         differentiating        the   rates  of    Community  assistance .  It  provides
         for   :
         I)   a maximum of 75% of the total cost and , as a general rule , at
               least 50% of public expenditure In the regions referred to In
              Object I ve 1 , and
         II ) a maximum of 50% of the total cost and , as a general rule , at
               least 25% of public expenditure          In other regions .
         Having regard to the special           Importance of the horizontal measures
         and     the need   to ensure      that   their  proper  Implementation   Is not
         hindered by the         inability of certain Member States to devote the
         requisite public resources to them , it will be necessary to Increase
         the rates of Community assistance .           It Is proposed to entrust to the
         Commission the task of determining these rates of part-financing In
         accordance with the rules            laid down   In Article 13 of Regulation
         ( EEC ) No 2052 / 88 .    To avoid any uncertainty In the Implementation of
         the measures ,     the Commission would have to fix          the rates   In the
         month following the Council decision on the proposed changes .
   ( b ) Measures to Improve structures for the processing and marketing of
         agricultural products
         At the moment the maximum rate of part-financing granted by the
         EAGGF Is generally 25% of the eligible cost of Investements . This Is
         raised to 35% and 50% In certain areas .
 ---pagebreak---                                         28
        Article 17(3 ) of Regulation ( EEC ) No 4253/88 provides that the
        Commission will determine the Community rates of co-financing In the
        relevant decisions during the procedure leading to the approval of
        the operational programmes .
   2.   BUDGETARY IMPLICATIONS
        Other than In the case of adjustments to the rate of part-financing ,
        the Implications for the budget of the proposals to amend Regulation
        ( EEC ) No 797 / 85 will first be felt In 1991 , when there will be a
        reduction of ECU 33 million ( see Financial Statement annex ).      The
        cut In expenditure will tall off gradually , reaching ECU 13 million
        In 1993 .  As for the rates of reimbursement , the Commission reserves
        the right to fix them .     However , given the need to revise them on
        the basis of Article 13 of Regulation ( EEC ) No 2052 / 88 , the extra
        cost of this In 1990 should be around ECU 100 million .
         In the case of processing and marketing , the financial estimates are
        based on maintaining the budget allocation at Its present        level ,
        after deducting the appropriations for the fisheries sector .
F. CONSOLIDATION OF LEGISLATION
      The Commission undertakes to consolidate the texts of legislation as
      soon as decisions have been taken on the proposed new changes ,         In
      order to Improve the presentation of legislation on the horizontal
      measure , which has been amended several times since It came Into force
      and which will be amended once again as a result of the Implementation
      of Objective 5 ( a ) of the reform of the Structural Funds .
 ---pagebreak---                                                                  9-3
                             Proposai for a
                        Councll Régulation ( EEC )
           amendlng Régulations No 797 / 85 , No 1096 / 88 ,
       No 1360 / 78 , No 389/ 82 and No 1696 / 71 with a view to
speeding up the adjustment of agricultural production structures
 ---pagebreak---                                                                                         30
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 Parliament 2 ,
Having regard to the opinion of the Economic and Social Committee 3 ,
Whereas     Article   1(3 )    of   Council  Regulation   ( EEC )    No 4256/ 88    of
19 December 1988 laying down provisions for Implementing Regulation ( EEC )
No 2052/ 88 as regards the EAGGF Guidance Section4 provides that the
Council    Is  to decide before 31 December 1989 on any alterations           to the
common measures     Introduced under Article 6 of Council          Regulation   ( EEC )
No 729 / 70 of 21 April 1970 on the financing of the common agricultural
policy5 , as last amended by Regulation ( EEC ) No 2048/886 , In order to
achieve the objectives referred to In Council Regulation ( EEC ) No 2052 / 88
of   24 June 1988    on     the   tasks  of  the  Structural      Funds  and    their
effectiveness and on coordination of        their activities between themselves
1
2
3
4 OJ No L 374 , 31.12.1988 , p.     25 .
5 OJ No L 94 , 28.04.1970 , p.      13 .
6 OJ No L 185 , 15.07.1988 , p.      1 .
 ---pagebreak---                                                                                               3/
                                             3
and with     the operations of the European            Investment Bank and the other
existing financial Instruments7 , In conformity with the rules laid down by
Council    Regulation     ( EEC )  No 4253/ 88 of     19 December        1988     laying down
provisions      for    Implementing    Regulation     ( EEC )   No    2052/ 88    as   regards
coordination of the activities of the different Structural Funds between
themselves and with the operations of the European Investment Bank and the
other existing financial Instruments8 , and In conformity with Regulation
( EEC ) No 4256 / 88 Itself ;
Whereas , following the Council decisions on the reform of the Structural
Funds ,   the   measures     financed   by  the   EAGGF    Guidance     Section     should   be
adapted so that        they can fully perform their            role of speeding up the
adjustment of agricultural structures with a view to the reform of the
common agricultural policy within the meaning of Objective 5(a ) of Article
1 of Council Regulation ( EEC ) No 2052 / 88 ; whereas the necessary amendments
should    therefore    be made    to  the measures    to be     taken    In   line with    that
Objective , namely the common measures of horizontal application ;
Whereas ,    If   European    agriculture    Is   to maintain       a   presence     on world
markets , the common agricultural policy must continue to aim at Increasing
the efficiency and competitiveness of agricultural holdings ; whereas , while
the    majority     of   the   adjustments    necessary       to   ensure      the   long-term
competitiveness of Community agriculture must be made through the markets
policy ,    the    structural     policy ,  too ,   must    make     Its    contribution     by
strengthening production and marketing structures as far as possible but
without in any way worsening the imbalance between the productive resources
allocated to agriculture and the foreseeable outlets ; whereas emphasis must
be placed on the structural Improvement of holdings which at present are
weak and on the setting-up          of young farmers under viable conditions ;
  7 OJ No L 185 , 15.07.1988 , p. 9 .
  8 0J No L 374 , 31.12.1988 , p. 1 .
 ---pagebreak---                                                                                     U
                                           4
Whereas , on the basis of these principles , amendments should be made to
Council Regulation ( EEC ) No 797/ 85 of 12 March 1985 on Improving the
efficiency of agricultural structures9 , as last amended by Regulation
( EEC ) No 1609/ 89 10 ;
Whereas the aim of Community Investment aid Is to modernize agricultural
holdings and thus        Improve their competitiveness      In the context of the
rational development of agricultural production ; whereas this aspect of the
structural policy must be adjusted so as to permit the modernization and
diversification of agriculture while remaining consistent with the measures
taken to limit surplus production ; whereas , at present , In order to qualify
for Community Investment aid , a farmer must practise farming as his main
occupation , that Is , he must devote at least half of his working time to
his holding and derive at          least half of his     Income therefrom ; whereas
 Investment   aid should also be granted         to persons who do not     practise
farming as their main occupation provided that on their holding they engage
on    a  substantial     scale  In   forestry ,  tourism  or   craft activities  or
activities     designed     to  safeguard    the   environment   and  maintain  the
countryside and provided that the          Income from their off-farm activities
does not exceed 50% of the reference Income ;
Whereas , with regard to the objective of Investment plans for agricultural
holdings , a distinction should no longer be made , so far as Community aid
 is concerned , between plans aimed at maintaining the level of Income and
those aimed at Improving It substantially ;
Whereas under the existing provisions aid may be granted for Investments
which are not aimed at Increasing production capacity but rather at
 Improving the quality of production facilities ; whereas this aid could be
    9   0J No L   93 , 30.03.1985 , p. 1
    10 OJ No L 165 , 15.6.1989 , p. 1 .
                                           /
 ---pagebreak---                                                                                             33
                                              5
extended to Investments aimed at finding new sources of                   Income , such as
tourism or craft activities or the farm-based manufacture and sale of farm
products , and to Investments aimed at Improving health and hygiene on stock
farms ;
Whereas ,   as   regards    the    limits   placed on     Investment     aids    In   certain
agricultural sectors , the present restrictions ( on the production of milk ,
pigs , eggs and poultry ) must be supplemented by restrictions In the beef
and veal    sector ,   bearing     In mind the situation on the market               for  the
products   concerned     and    the   need   to  provide    no   Incentive    to    Intensive
production ; whereas , however , such restrictions would not apply to aid for
the protection of the environment ;
Whereas the maximum authorized levels for aid granted by the Member States
should be adjusted ;
Whereas ,    In   view   of   the    ever-increasing      cost    of   setting-up      on  an
agr icultural     holding ,   the    maximum     amount    eligible     for   a     Community
contr Ibut Ion towards the aid       for the setting-•up of young farmers should           be
Increased from ECU 7500 to ECU 10 000 In the case of both the                  Installation
premium and     the capitalized value of          the   Interest    subsidy ;  whereas    the
detailed rules for the application of this measure should also be amended
so that wider and more effective use can be made thereof ;
Whereas ,  In the Interests of rational production , encouragement should be
given   to    the   formation     of   mutual   assistance     groups    which    would   use
practices aimed at safeguarding and Improving the environment and
preserving the countryside and to the formation of groups which would
 Introduce alternative cultivation methods such as biological                   techniques ,
Integrated crop protection techniques and extensive farming techniques ;
 ---pagebreak---                                           6
                                                                              зV
Whereas the effectiveness of the current scheme to assist hill-farming and
farming In certain less-favoured areas could be Improved by Increasing the
Community assistance for the less prosperous regions and by making certain
technical adjustments ; whereas ,     in order to reduce the drawbacks both In
terms of markets and the environment , the allowance should be granted for
only one livestock unit ( LU ) per hectare of the total forage area of the
holding ; whereas , In addition , as regards the maximum amount of Community
aid per holding , the administrative difficulties should be overcome by
replacing the existing scheme by a simpler one designed to concentrate the
Community 's efforts on those holdings which are In greatest need , that Is ,
the Community contribution would be restricted to 90 units , be they
livestock units or area units ;
Whereas the amounts currently eligible for aid In areas which are sensitive
In terms of the environment , natural resources and the preservation of the
countryside are significantly lower than the loss of Income resulting from
the use of ecological methods and therefore provide too little Incentive ,
especially   In  less-favoured areas ; whereas ,   In order to ensure that this
measure   Is   more  widely   applied    not  only   In rural  areas which  are
experiencing the pressures of a changing world close to large population
centres but also In less-favoured areas , it Is necessary to Increase the
maximum amount eligible to ECU 150/ hectare ;
Whereas Council Regulation ( EEC ) No 1096/ 88 of 25 April 1988 establishing a
Community scheme to encourage the . cessation of farming ^ should be
amended , In particular to take account of the fact that In the context of
the reform of the Structural Funds the option of early retirement with
restructuring Is no longer a horizontal measure under Objective 5(a ) but a
regionalized measure to be Included In regional / rural development plans
under Objectives 1 and 5(b );
 11 0J No L 110 , 29.04.1988 , p. 1 .
 ---pagebreak---                                                                                                  V
                                               - 7 -
                                                                                           12
Whereas it is also necessary to amend Council Regulation ( EEC ) No 1360/ 78                  ,
                                                           13
as last amended by Régulation ( EEC ) No 3875 /88 , Council Régulation ( EEC ) No
389/82^% as amended by Régulation ( EEC) No 3465/87^% and Counci l Régulation ( EEC )
No 1696/71^% as last amended by Régulation (EEC) No 3998/87^%
Whereas , In accordance with the principles of the reform of the Structural
Funds ,     and    In particular      with Articles      5  and   11  of   Regulation    ( EEC )
No 2052 / 88 ,      the   EAGGF   may    help    to   finance   national    aid   schemes     by
reimbursing expenditure            Incurred by Member       States ;  whereas   the rate of
Community part-financing may be differentiated on the basis of the criteria
and within the limits laid down In Article 13 of the said Regulation ,
HAS ADOPTED THIS REGULATION :
                                            Article 1
Regulation ( EEC ) No 797/ 85 Is hereby amended as follows :
 1 . Article 1 Is replaced by the following :
" Article 1
   I.  With a view to speeding up the adjustment of agricultural structures
       In the Community pursuant to Objective 5(a ) as set out In Article 1 of
       Council Regulation (EEC) No 2052/88% a common measure within the meaning of
       Article 2(1) of Council Regulation (EEC) No 4256/88*% to be implemented by the
       Member States , Is hereby Introduced with the following objectives :
           ( I ) to   help    restore    equilibrium     between    production    and   market
                 capac I ty ;
         ( II ) to    help    Improve   the   efficiency    of   farms   by  developing     and
                 reorganizing     their   structures and by promoting supplementary
                 activities ;
       ( III ) to     maintain    a   viable    agricultural     community   and   thus    help
                 develop the social        fabric of rural      areas by ensuring a fair
                 standard of living for farmers and by offsetting the effects of
                 natural handicaps In mountain areas and less-favoured areas ;
         ( Iv ) to contribute to the safeguarding of the environment and the
                 preservation      of   the    countryside .     Including    the    long-term
                 conservation of natural farming resources .
 }\oj No L 166, 23.6.1978, p. 1 .                 ]*0J No L 329, 20.11.1987, p . 6 .
 Jfoj No L 346, 15.12.1988, p. 3.                 ’°0J No L 175, 4.8.1971 , p. 1 .
 ™0J No L 51 , 23.2.1982, p . 1 .                   0J No L 377, 31.12.1987, p. 40.
 ---pagebreak---                                           8
                                                                           16
2 . In accordance with Article 5(2)(b ) and 11(4 ) of Regulation ( EEC )
    No 2052/88 , the EAGGF Guidance Section , hereinafter called " the Fund ",
    shall , acting under the common measure referred to In paragraph 1 ,
    provide part-financing for national aid schemes by reimbursing , on the
    terms laid down In Title VIII , expenditure Incurred by the Member States
    on    :
    ( a ) schemes designed to encourage the conversion and extenslf Icatlon of
            product Ion ;
    ( b ) measures relating to Investments In agricultural holdings , In
            particular to reduce production costs , to Improve the living and
            working conditions of farmers ,  to promote the diversification of
            their activities , Including the marketing of products on the farm ,
            and to preserve and Improve the natural environment ;
    ( c ) measures to encourage the setting-up of young farmers ;
    ( d ) back-up measures     to assist  agricultural  holdings . Involving the
            Introduction of accounts and the launching of groups , services and
            facilities for the benefit of several holdings ;
    ( e ) measures to support farm Incomes and to maintain viable agricultural
            communities In mountain or less-favoured areas by means of
            agricultural aid for offsetting natural handicaps ;
     ( f ) measures to protect the environment and safeguard the countryside by
  ,         encouraging appropriate farming methods ;
     ( g ) forestry measures to assist agricultural holdings .
 ---pagebreak---                                                                                3 f
                                            9
    In accordance with Title VIII , the Guarantee and Guidance Sections of
    the Fund shall contribute equally , under the common measure referred to
    In paragraph 1 , towards measures linked with the scheme to encourage the
    set-aside of       arable   land . In  the case of     the share of expenditure
    financed by the Guidance Section of the Fund , the financial rules for
    the application of the common measure shall , by way of exception , be
    those which apply to the Guarantee Section .
     * 0J No L 185 , 15.7.1988 , p . 9 .
    ** 0J No L 374 , 31.12.1988 , p . 25 ."
2.  In Article 2(1 ) :
(a)    point ( a ) Is replaced by the following :
       "( a ) practises farming as his main occupation .
       Member States may , however , apply the aid scheme referred to In this
       Title to farmers who do not practise farming as their main occupation
       provided that on their holding they engage on a substantial scale In
       forestry , tourism or craft actlvltes , or activities for safeguarding
       the environment       and maintaining the countryside which qualify for
       public    aid ,   and   provided   that    the  Income  from   their  off-farm
       activities does not exceed 50% of the reference Income referred to In
       paragraph 2 ".
(b)    point ( c ) Is replaced by the following :
       "( c ) submits a plan for materially Improving his holding .
       This    plan  must    show   by means   of   specific  calculations  that  the
        investments are Justified from the point of view of the situation of
       the holding and its economy and that implementation of the plan will
       bring about a lasting Improvement of that situation , and In particular
       of the labour income per man-work unit ( MWU ) employed on the holding ,
       or Is necessary for maintaining the present level of labour Income per
       MWU ".
 ---pagebreak--- 3.  In Article 3 :
(a)    paragraph 1 Is replaced by the following :
       " 1 . The aid scheme referred to In Article 2 may be applicable to
       Investments relating to :
       - the qualitative Improvement and conversion of production In line
           with market requirements ,
       - the diversification of activities on the holding , In particular by
           the Introduction of tourism and craft activities or the manufacture
           and sale of farm produce on the farm ,
       - the adaptation of the holding for the purposes of reducing
           production costs , Improving living and working conditions and the
           hygiene of livestock enterprises or saving energy ,
       - the protection and Improvement of the environment ".
(b)    the following paragraph Is Inserted :
       " 4a . Save where decisions subsequently taken pursuant to paragraph 2
       provide otherwise , aid as provided for In paragraph 1 and granted for
       Investments     relating  to   the beef    sector , other than aid  for
       safeguarding the environment , shall be restricted to holdings where
       the beef-cattle stocking rate does not exceed 2 livestock units ( LU )
       per hectare of forage areas used for feeding the cattle . The LU
       conversion table Is given In the Annex ".
4 . The second subparagraph of Article 4(2 ) is replaced by the following :
    " The value of the aid provided for In paragraph 1 , expressed as a
    percentage of the amount of the Investment , shall not exceed :
 ---pagebreak---     ( a ) in  the case of       the areas referred to        In Articles 2 and 3 of
          Directive 75 / 268 / CEE :
          - 50% for fixed assets ;
          - 30% for other types of Investment ;
    ( b ) In the case of other areas :
          - 30% for fixed assets ;
          - 15% for other types of Investment .
    Where the aid     Is not granted In the form of a capital grant , Member
    States shall draw up each year a table showing the value of the aid ,
    expressed as a percentage of the amount of the Investment , taking Into
    consideration    the average annual        rate of     Interest on non-subs Idl zed
    loans ,   the  value   of    the  Interest   subsidy ,    the term of the   loans ,
    deferred Interest subsidies and repayments and any other factor used for
    expressing the aid In grant equivalent terms ".
5 . Article 7 Is replaced by the following and an Article 7a Is Inserted :
" Article 7
1 . Member States may grant setting-up aid to young farmers under 40 years
    of age on condition that :
    - the young farmer sets up as head of the holding , which means that he
        assumes civil and tax liability or Joint liability for the management
        of the holding and the social status accorded In the Member State
        concerned to self-employed heads of holding ;
    - the young farmer sets up as a farmer practising farming as his main
        occupation or begins , after having set up as a part-time farmer , to
        practise farming as his main occupation ;
 ---pagebreak---      - the      occupational qualifications   of  the  young   farmer  are  to   a
        satisfactory level at the time of his setting-up or at the latest two
        years thereafter ; and
     - the holding requires a volume of work equivalent to at least one MWU .
2 . The setting-up aid may comprise :
     ( a ) a single premium of a maximum eligible amount of ECU 10 000 .       The
           premium may be paid over a period not exceeding five years . Member
           States may replaced the premium by an equivalent Interest subsidy ;
     ( b ) an Interest subsidy on loans taken out with a view to covering the
           costs arising from setting-up .
           The rate of Interest subsidy shall be not more than 5% for a period
           of 15 years ; the capitalized value of the Interest subsidy may not
           exceed ECU 10 000 .
           Member States may pay , In the form of a grant , the equivalent of the
           Interest subsidy resulting from the volume and duration of the loans
           taken out .
3 . Member States shall define :
     - the conditions governing setting-up ;
     - specific conditions In a situation where a young farmer , does not set
         up as sole head of the holding ,   In particular where he sets up as a
         member of an association or cooperative whose principal object Is the
         management of an agricultural holding ;
     - the agricultural occupational training which a young farmer must
         possess at the time of his setting-up , or must achieve within two
         years thereafter , In order for the premium to be eligible under the
         Fund ;
   . - the amount of the setting-up aid .
 ---pagebreak--- Article 7a
Member States may grant young farmers under 40 years of age additional aid
for   investments to be made under a material          Improvement plan within the
meaning of      Article 2(1)(c ),    amounting  to a maximum of      25% of   the aid
granted pursuant to Article 4(2 ), provided that the young farmer submits
the Improvement plan within five years of setting-up , and satisfies the
conditions laid down in Article 7(1 )".
6 . In Article 8 , paragraphs 1 to 4 are replaced by the following :
"1.   National     aid for    Investments   In agricultural  holdings which do not
       satisfy the conditions laid down In this Article is hereby prohibited .
  2.   Investments to be made under a material         Improvement plan within the
      meaning of Article 2(1 ) ( c ) may qualify for national aid exceeding the
       amounts granted pursuant to Article 4(2 ) and Article 7a provided that
       they are for :
       - the construction of farm buildings ;
       - the relocation of farm buildings , where this Is done In the public
           interest ;
       - land    Improvement operations , on condition that account       Is taken of
           the effects on the environment ;
       - the protection and Improvement of the environment ,
       provided that      these higher amounts are granted       In accordance with
       Articles 92 to 94 of the Treaty .
  3.   Investments which are not to be made under a material         Improvement plan
      may qualify for national aid :
       ( a ) of an amount equal to that granted pursuant to Article 4(2 ) and
             Article 7a ,  where   the  labour  income per MWU    Is  lower  that the
             reference Income ,
 ---pagebreak---                                                                              ‘-U
                                        -  14-
       ( b ) of an amount equal at most to three-quarters of that granted
             pursuant to Article 4(2 ) and Article 7a , where the labour Income
             Is not less than the reference Income ; however , national aid for
             energy saving and land Improvement , on condition that account Is
             taken of the effects      on the environment , may be equal to the
             amounts granted pursuant to Article 4(2 ).
       The aid shall be subject :
       - to the conditions laid down In Article 3 ; the number of dairy cows
           referred to In Article 3(3 ) shall be fixed , however , at 40 per MWU
          per holding ;
       - to    the   conditions   laid down  In Article  4(1 ). Aid may  also be
          granted , however , for Investments In the geese and ducks sector for
           the production of foie gras and for the purchase of livestock which
          may be encouraged under Article 4(1 ), provided that     It Is not the
           first purchase .
  4.   With the exception of the cases provided for In paragraph 2 , the sum
       of the aid granted pursuant to Article 4 and this Article may not
       exceed a total      Investment of ECU 60 000 per MWU and ECU 120 000 per
       holding for a period of six years ".
7 . In Article 10 , the first paragraph Is replaced by the following :
" Member States may , on request , grant to recognized groups which have as
their object
- mutual aid between holdings , including the use of practices                for
     safeguarding and improving the environment and preserving                the
     countrys I de ,
-    the Introduction of alternative cultivation practices ,
-    the more rational Joint use of agricultural equipment ,
-    the operation of a group holding .
 ---pagebreak---                                                                                       Ч')
                                          - 15  -
     and which are formed after the entry           Into force of     this Regulation ,
     launch aid as a contribution to their operating costs during not more
     than the first five years after their formation ".
8 . Article 14(3 ) Is replaced by the following :
”3 .   Member States may lay down additional or limiting conditions for the
       grant of the compensatory allowance ,         Including the use of practices
       compatible with the       need to safeguard the environment and preserve
       the countryside ".
9.   In Article 15
(a)    the     first   subparagraph    of   paragraph    1(a )  is   replaced     by    the
       following :
        "( a )  In the case of farms keeping cattle , sheep , goats or equldae ,
                the  allowance   shall   be  calculated    In  relation    to   livestock
                numbers .  The  allowance    may  not   exceed   ECU   101    per  LU .   A
                conversion table for expressing cattle , equldae , sheep and goats
                as LUs is given In the Annex .
                However , In less-favoured agricultural areas where the permanent
                natural handicaps are serious enough to Justify It , the total
                allowance granted may be Increased to ECU 120 per LU .
                The allowance shall be granted In respect of not more than 1 LU
                per hectare of the total forage area of the holding ".
 ---pagebreak---                                              16                                  Г/
( b ) paragraph 3 Is replaced by the following :
      " 3 . The maximum amount eligible under the Fund shall be limited to
            90 units per holding , be they livestock units ( LU ) or area units
            ( ha ).    In addition , after the first 45 units , the maximum amount
            eligible per LU or per hectare shall be reduced to half the
            maximum amount of the allowance referred to In paragraph 1 ".
(c)   paragraph 4 Is deleted .
10 .  Article 16 Is deleted .
 11 . Article 17(1 ) is replaced by the following :
"1 .  In the areas referred to In Article 13(1 ) Member States may grant aid
      to Joint Investment schemes for fodder production , Including the
      storage       and   distribution   of  fodder ,  and for  the  Improvement  and
      equipping of pastures which are farmed Jointly and , In mountain areas ,
      to Joint or Individual         Investment In water points . In minor roads for
       immediate access        to pastures ,   Including mountain pastures ,  and  In
      shelters for herds ".
 12 . Article 18 Is deleted .
 13 .  In Article 19c the figure " lOO " Is replaced by " ISO” and the second
      sentence Is deleted .
 ---pagebreak--- 14 .  Article 21   is deleted .
15 .  Article 22 Is deleted .
16 .  Article 23 Is deleted .
17 .  In Article 24(3 ) the second sentence Is replaced by the following :
" Within two months of the receipt of any draft , the Commission shall , after
consulting the Committee on Agricultural Structures and Rural Development ,
Issue an opinion thereon ".
18 .  Article 25 Is replaced by the following :
" Article 25 ■'
With   regard   to  provisions  forwarded pursuant to  the  second  Indent  of
Article 24(1 ) or to Article 24(4 ), the Commission shall decide within two
months of their being forwarded . In accordance with the procedure laid down
in Article 29 of Council Regulation ( EEC ) No 4253/ 88 ***, whether ,  In the
light of their compliance with this Regulation and having regard to the
objectives of this Regulation and to the need to ensure that the various
measures are properly related , such provisions satisfy the conditions for a
financial contribution by the Community to the common measure referred to
In Article 1 .
*** 0J No L 374 , 31.12.1988 , p. 1 .
 ---pagebreak---                                                    18                                       Y<
l9.      Article 26 Is replaced by the following :
" Ar t I c I e 26
1 . Expenditure          Incurred by Member States        In connection with the measures
      provided for In Articles 1b , 1c , 3 to 7a , 9 to 17 and 19 to 20 shall be
     eligible for aid from the Guidance Section of the Fund .                        Expenditure
      incurred by the Member States In connection with the measures provided
      for      In Article 1a shall        be eligible for aid from the • Guarantee and
      Guidance Sections of the Fund .
  2.     The Commission shall determine the rates of Community part-financing
         for     the different measures       In accordance with the criteria and within
         the      limits   laid down    In Article 13 of Regulation ( EEC ) No 2052 / 88
         under the procedure provided for In Article 29 of Regulation ( EEC ) No
         4253 / 88 .     It shall   take   Its first decisions within one month of the
         entry      Into force of Council         Regulation ( EEC ) No . . . . / 89 **** . If a
         Member      State   so   requests ,    these  rates are    applied     to expenditure
          Incurred with effect         from 1 January 1989 .
             No L    ..."
20 .      In Ar t le le 28 :
 (a)      in paragraph 1 , the date "1 July " Is replaced by "1 May ";
 (b)     paragraph 2 is deleted ;
 (c)     paragraph 4 Is replaced by the following :
          " 4 . The Commission shall adopt detailed rules for the application of
          this Article ".
 21 .     Article 29 Is deleted .
 22 .      In Article 31(1 ) and ( 2 ). the words " Article 7 , second paragraph point
          2 , Article 8(2 ), ( 3 ) and ( 4 )" are replaced by "Article 7a , Article
          8(3 ) and ( 4 )".
 ---pagebreak---                                                 -   19  -
                                                                                          V
23 .     The following article Is Inserted :
“ Ar 1 1 c le 31a
Member States shall make provision for effective monitoring which shall
include       at   least     verification        of    all    aspects   of   the   beneficiary 's
undertaking and of            the supporting documents ,           and on- the - spot checks     to
verify that the Information contained In the application corresponds to the
true       situation .
Detailed rules         for    the application of          this Article shall      be  laid down ,
where       appropriate ,      In accordance        with    the   procedure   provided    for    In
Article 29 of Regulation ( EEC ) No 4253 / 88 ".
24 .      In Article 32(1 ) the last subparagraph Is replaced by the following :
" As regards the amendments made to this Regulation by Regulation ( EEC )
No ..../ 89 , Member States shall bring Into force the measures necessary to
comply with those amendments within six months of the date of entry                            Into
force of that Regulation ".
Article 2
Regulation ( EEC ) No 1096/ 88 Is hereby amended as follows :
 1 . In     Article    1,    the  words      " within     the   meaning   of   Article   6(1 )   of
     Regulation      ( EEC )   No 729 / 70 "    are replaced by       " within the meaning of
     Article 2(1 ) of Council Regulation ( EEC ) No 4256/ 88 *.
* 0J No 374 , 31.12.1988 , p. 25 ."
 ---pagebreak---                                          20
2 . Article 4(1 ) Is replaced by the following :
“1 .    The annual allowance referred to In the first Indent of Article 3(1 )
        may be granted to farmers who practise farming as their main
        occupation within the meaning of Article 2(5 ) of Council Regulation
        ( EEC ) No 797/ 85 of 12 March 1985 on Improving the efficiency of
        agricultural structures’**, who are over 55 years of age and who
        permanently cease all farming activities , provided that agricultural
        production on the agricultural area of the holding Is halted
        throughout the whole period from the time of cessation of farming to
        the time when the farmer reaches the normal retirement age as fixed by
        the social security arrangements currently applicable to farming In
        the Member State concerned .   This period must be not     less than five
        years but   for this purpose   It may be extended , where appropriate ,
        beyond the normal retirement age .
         In the case of leased holdings , Member States may permit up to one-
        third of the area to be taken over by the owner without the cessation
        of production on that fraction of the area .
**0J No L 93 , 30.3.1985 , p. 1 . "
3 . Article 6(1 ) Is replaced by the following :
 "1 .   The supplementary annual premium per hectare referred to In the second
         Indent of Article 3(1 ) shall be granted per hectare of agricultural
        area actually withdrawn from agricultural production ".
4.    In Artide 7 :
 (a)    paragraph 1 Is amended as follows :
        The words " the first Indent of " preceding "Article 4(1 )" are deleted ;
 ---pagebreak---                                                 21                                  H3
(b)    paragraph 2 Is replaced by the following :
       "2 .  The supplementary annual premium per hectare referred to              In the
       second Indent of Article 3(1 ) shall not be eligible for a financial
       contribution            from the European Agricultural   Guidance and Guarantee
       Fund ( hereinafter called " the Fund ") If It Is paid In respect of areas
       for which a premium for the permanent abandonment of areas under vines
       Is paid In accordance with the rules laid down In Article 2 of Council
       Regulation ( EEC ) No 1442 / 88 of 24 May 1988 on the granting , for the
       1988 / 89 to 1995 / 96 wine years , of permanent abandonment premiums             In
       respect of wine-growing areas ***; It shall not be paid In respect of
       areas for which a premium for the permanent abandonment of areas under
       vines Is granted In the form of an annual premium In accordance with
       the rules laid down In Article 9 of Regulation ( EEC ) No 1442 / 88 .
*** 0J No L 132 , 28.5.1988 , p. 3 ."
5 . The last       Indent of Article 8 is deleted .
6.   In Art Icle 9
(a)    the words " the first Indent of " preceding " Article 4(1 )" In the first
       sentence of paragraph 1 are deleted ;
(b)    paragraph 2 Is replaced by the following :
"2 .   The Commission shall determine the rates of Community part-financing
       for   the different measures         In accordance with the criteria and within
       the    limits        laid down   In Article 13 of Council    Regulation  ( EEC )  No
       2052 / 88 **** under the procedure provided for In Article 29 of Council
       Regulation ( EEC ) No 4253 / 88 *****.        It shall take Its first decisions
       within one month of the entry            into force of Council Regulation ( EEC )
       No   . . . ./ 89 ******.      If a Member State so    requests , these  rates    are
       applied to expenditure Incurred with effect from 1 January 1989 .
   **** 0J No L 185 , 15.7.1988 , p . 9 .
  ***** 0J No L 374 , 31.12.1988 , p . 1 .
***»** 0J No L        . . . . "
7 . Article 10 Is deleted .
 ---pagebreak---                                                22
                                                                                        <Го
8 . In Art Iele 11 ,
(a)    the first Indent of paragraph 3 Is replaced by the following :
             where the scheme applied to the abandoned farm Is eligible under
             Article 9 " .
(b)    paragraph 4 Is replaced by the following :
       " 4 . The Commission shall          determine the rates of Community part ¬
             financing     for    the  different     measures    In  accordance  with    the
             criteria    and     within   the    limits   laid   down    In Article 13    of
             Regulation ( EEC ) No 2052 / 88 under the procedure provided for In
             Article 29 of Regulation          ( EEC ) No 4253/ 88 .    It shall  take   Its
             first   decisions      within one month      of   the   entry  Into  force   of
              Régulation      ( EEC )  No   . / 89 .              If  a Member   State    so
             requests ,    these rates are applied to expenditure            Incurred with
             effect from 1 January 1989 ".
9 . Article 12 is replaced by the following :
 " Article 12
 Five years after the entry Into force of this Regulation , the detailed
 rules for Its application shall be reviewed by the Council , on a proposal
 from the Commission ".
 10 .  The second sentence of Article 13(3 ) Is replaced by the following :
 " Within two months of the receipt of any draft , the Commission shall , after
 consulting the Committee on Agricultural Structures and Rural Development ,
  Issue an opinion thereon ".
 11 . Article 14 Is replaced by the following :
 " Article 14
 With regard to provisions forwarded pursuant to the second Indent of
 Article 13(1 ) or to Article 13(4 ), the Commission shall decide within two
 months of their being forwarded , In accordance with the procedure laid down
  In Article 29 of Regulation ( EEC) No 4253/88 , whether , In the light of
  their compliance with t'hls Regulation and having regard to the objectives
 of this Regulation and to the need to ensure that the various measures are
 properly related , such provisions satisfy the conditions for a financial
  contribution by the Community to the common measures referred to In
 Article 1 ".
 ---pagebreak---                                            23                                ςν
12 .   Article      16 Is deleted .
13 .    In Art icle 17 ,
(a)     In paragraph 1 , the date "1 July " Is replaced by "1 May ";
(b)     paragraph 2 is deleted ;
(c)     paragraph 4 Is replaced by the following :
        " 4 . The Commission shall adopt detailed rules for the application of
               this Article ".
Article 3
Regulation ( EEC ) No 1360 / 78 Is hereby amended as follows :
1 . The first sentence of Article 6(3 ) is replaced by the following :
     ”3 . Within six months of the entry         Into force of Council  Regulation
            ( EEC ) No .../ 89* and In accordance with the procedure laid down In
            Article 29 of Council Regulation ( EEC ) No 4253/ 88 ** detailed rules
           of application shall be adopted concerning :
  * 0J No L ...
**OJ No L 374 , 31.12.1988 , p. 1 ."
2 . In Article 11(3 ) the words : " laid down In Article 16 " are replaced by :
     " laid down In Article 29 of Regulation ( EEC ) No 4253 / 88 ".
3 . Article 12 Is replaced by the following :
" Article 12
All the measures laid down In this Regulation shall constitute a common
measure within the meaning of Article 2(1 ) of Council Regulation ( EEC )
No 4256/ 88 ***.
***OJ No L 374 , 31.12.1988 , p. 25 .
 ---pagebreak---                                              24
4 . In Article 13 , paragraphs 3 and 4 are deleted .
5 . Article 14(2 ) Is replaced by the following :
"2 .    The Commission shall determine the rates of Community part-financing
        for the different measures In accordance with the criteria and within
        the     limits   laid down In Article 13 of Council Regulation ( EEC ) No
        2052 / 88 ****    under    the procedure  provided  for  In  Article  29  of
        Regulation ( EEC ) No 4253/ 88 .    It shall take Its first decisions within
        one month of the entry Into force of Regulation ( EEC ) No ..../ 89 .     If
        a Member State so requests ,        these rates are applied to expenditure
         Incurred with effect from 1 January 1989 .
 ****0J No L 185 , 15.7.1988 , p. 9 ."
 6 . In Article 15 ,
 (a)     In paragraph 1 , the date "1 July” Is replaced by "1 May ";
 (b)     paragraph 2 Is deleted ;
  (c)    paragraph 4 Is replaced by the following :
          "A. The Commission shall adopt detailed rules for the application of
         this Article ".
  7 . Article 16 Is deleted .
  Article 4
  Regulation ( EEC ) No 389/ 82 Is hereby amended as follows :
  1 . Article 8(1 ) Is replaced by the following :
      " 1 . Within six months of the date of receipt of each programme or of
            modifications thereto and on condition that all the details
            specified In Article 6 of this Regulation have been provided , the
            Commission shall take a decision as to their approval In accordance
            with the procedure laid down In Article 29 of Council Regulation
             ( EEC ) No 4253/ 88 *.
*
   0J No L 374 , 31.12.1988 , p. 1 ."
 ---pagebreak--- 2 . Article 9 Is replaced by the following :
     " Article 9
     All     the measures provided for        In this Regulation shall       constitute a
     common measure within the meaning of Article 2(1 ) of Council Regulation
     ( EEC ) No 4256 / 88 **.
**0J No L 374 , 31.12.1988 , p. 25 ."
3 . In Article 10 , paragraphs 3 and 4 are deleted .
4.   In Article 11
(a)     paragraph 2 Is replaced by the following :
        " 2 . The    Commission    shall  determine    the  rates   of   Community    part ¬
               financing    for   the  different   measures    In  accordance    with   the
               criteria and within the     limits   laid down  in Article 13 of Council
               Regulation ( EEC ) No 2052 / 88 *** under the procedure provided for In
               Article 29 of Counci l Regulation ( EEC ) No 4253/88 ****. It shall take its
               first   decisions    within one month     of  the   entry   Into  force   of
                                                          *****
              Council    Regulation ( EEC ) No ..../ 89         . If a Member State so
               requests ,  these rates are applied to expenditure           Incurred with
               effect from 1 January 1989 .
         OJ No L 185 , 15.7.1988 , p      9.
   ****
        OJ No L _
                               •I
         OJ No L _
(b)     paragraph 3 Is deleted .
5 . In Article 12 ,
(a)     paragraph 2 Is deleted ;
(b)     paragraph 4 Is replaced by the following :
        " 4 . The Commission shall adopt detailed rules for the application of
               this Article ".
Article 5
Regulation ( EEC ) No 1696 / 71 Is hereby amended as follows :
 ---pagebreak---                                                26                                     S7
In Article 17         :
1 . paragraph 2 Is replaced by the following :
     " 2 . The measures provided for In Articles 8 and 9 shall constitute a
            common measure within the meaning of Article 2(1 ) of Council
            Regulation ( EEC ) No 4256 / 88 *.
*0J No L 374 , 31.12.1988 , p. 25 ."
2 . paragraph 3 Is replaced by the following :
     " 3 . The Commission shall determine the rates of Community part-financing
            for    the   different   measures   In  accordance   with  the  criteria   and
            within the      limits   laid down    In Article 13 of Council     Regulation
            ( EEC ) No 2052 / 88 ** under the procedure provided for In Article 29 of
            Council     Regulation ( EEC ) No 4253/ 88 ***.    It shall   take  Its first
            decisions     within one month of        the entry   Into  force of    Council
                                             ** *
            Regulation ( EEC ) No _ / 89 . If a Member State so requests , these
            rates are applied to expenditure Incurred with effect from
            1 January 1989 .
    **0J No L 185 , 15.7.1988 , p. 9 .
   ***0J No L 374 , 31.12.1988 , p. 1 .
   *** 0J No L _ "
 3 . In paragraph 4 , the date " 30 June " Is replaced by "1 May ".
 4 . paragraph 7 Is replaced by the following :
      " 7 . The Commission shall adopt detailed rules for the application of
      this Article ".
 Article 6
 This Regulation shall enter Into force on the third day following that of
  Its publication In the Official Journal of the European Communities .
 This Regulation shall be binding In Its entirety and dlrectely applicable
  In al I Member States .
 Done at Brussels ,                                        For the Councll
 ---pagebreak---                                                           <rv
                      Proposai for a
                 Council Régulation ( EEC )
on improving the processing and marketing of agricultural
                  and forestry products
 ---pagebreak--- 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 Parliament 2 ,
Having regard to the opinion of the Economic and Social Committee 3
Whereas Article 10(1 ) of Council Regulation ( EEC ) No 4256 / 88 of 19 December
1988 laying down provisions for Implementing Regulation ( EEC ) No 2052 / 88 as
regards the EAGGF Guidance Section 4 provides for a Council decision on
the   forms  of   the Fund 's contribution  to   measures   to
Improve the conditions under which agricultural , forestry and fishery
products are processed and marketed with a view to achieving the objectives
referred to In Council Regulation ( EEC ) No 4253 / 88 of 19 December 1988 "•
laying down provisions for Implementing Regulation ( EEC ) No 2052 /88 as
regards coordination of the activities of the different Structural Funds
between themselves and with the operations of the European Investment Bank
and the other existing financial Instruments 5 ;
Whereas the types of Investments eligible for a contribution from the
EAGGF   Guidance Section ( hereinafter called " the Fund ") should be defined ,
taking account of the current situation both on the agricultural markets
and In the agriculture and food sector , as well as the prospects for
developing outlets for agricultural and forestry products ;
 1  0J N° C
 2 0J N° C      ,
 3 OJ N° C
 4
    OJ N° L 374 , 31.12.1988 , p. 25 .
 5 OJ n° L 374 , 31.12.1988 , p. 1 .
 ---pagebreak---                                           3
                                                                             г
Whereas in order to ensure a coherent Improvement In the processing and
marketing of agricultural and forestry products , financial assistance from
the Fund for Investments In that field should be made conditional on the
Inclusion of such investments      In sectoral plans containing an In-depth
analysis of the situation In the sector and the proposed Improvement ;
Whereas , for such plans , the Commission should adopt sectoral Community
support frameworks , to be drawn up In agreement with the Member States
concerned , within the framework of the partnership , taking account , as
appropriate , of the Community support frameworks adopted for plans relating
to Objectives 1 and 5 ( b );
Whereas an effective means should be adopted for ensuring that Community
action Is consistent with the CAP ; whereas the most effective way to
achieve this Is to adopt selection criteria with which to determine which
 Investments should be given priority for consideration ;
Whereas In order to ensure the necessary transparency In the operations of
the Fund , eligible expenditure should be defined ;
Whereas It must be ensured that      Investments are viable and that farmers
have a share In the economic benefits of the action taken ;
Whereas application of the measure should In general be restricted to the
agricultural products listed In Annex II to the Treaty and to forestry
products ; whereas In certain cases , however , processed products no longer
 Included In the Annex may be of Importance to farmers In so far as they
create new market outlets and / or    Increase the added value of the basic
product ;
Whereas , In connection with the reform of the Structural Funds , Regulation
( EEC ) No 4256 / 88 provides for new forms of assistance by the Fund as
regards Improving structures for marketing and processing agricultural
and forestry products ; whereas general rules should therefore be laid down
for its implementation ;
 ---pagebreak---                                           4
Wherea9 to allow for the differing structural situations In the different
regions of the Community and to ensure that the action of the Fund Is
concentrated where It Is needed , contribution rates should be
differentiated by category of region ;
Whereas to ensure harmony between the Community 's actions and those of the
Member State and to ensure the additionality of Community assistance , the
 Investments selected for financing by the Fund should be co-flnanced by the
Member State ;
Whereas to ensure a smooth transition for the financing arrangements under
Council Regulation ( EEC) No 355 /77^ to the new provisions In this Regulation ,
provision should be made for transitional rules regarding action by the
Fund approved before the entry Into force of this Regulation ;
Whereas provision should be made for the possibility of laying down certain
specific Implementing rules adapted to the special nature of the measure
that Is the subject of this Regulation , to ensure that It Is Implemented
effectively ,
HAS ADOPTED THIS REGULATION :
 6
   OJ No L 51 , 23.2.1977 , p. 1 .
 ---pagebreak---                                            5
                                      Article 1
                          Objectives of the common measure
1 . In order to facilitate the adaptation or orientation of agriculture In
    line with the development of the common agricultural policy , a common
    measure within the meaning of Article 2(1 ) of Regulation ( EEC ) No
    4256 / 88 , designed to Improve and rationalize the treatment , processing
    and marketing of agricultural and forestry products , Is hereby
    Introduced .    Within the framework of this measure , the Fund may
    participate in the financing of investments :
    ( a ) which help to guide production In keeping with foreseeable market
          trends or which encourage the development of new outlets for
          agricultural products , In particular through the production and
          marketing of new products or of high-quality products , Including
          organically-grown products ;
    ( b ) which relieve the Intervention mechanisms of the market
          organizations by furthering long-term structural Improvement where
          this Is needed ;
    ( c ) which are located In regions encountering special problems In
          adapting to the economic consequences of developments on the
          agricultural markets or which will benefit such regions ;
    ( d ) which help to Improve or rationalize marketing channels or
          processing procedures for agricultural and forestry products ;
    ( e ) which help to Improve the quality , preparation and presentation of
          products or which encourage a better use of by-products ,
          particularly by recycling waste .
2 . The chief objective of the common measure Is to contribute towards the
    achievement of Objectives 1 and 5 , as set out In Article 1 of Counci l Regulatior
    ( EEC) No 2052/887 namely speeding up the adjustment of agricultural
    structures with a view to reform of the common agricultural policy and
    promoting the development of         rural areas and     of  the
    regions      whose   development    is   lagging  behind , subject to the
    conditions laid down In Regulation ( EEC ) No 4256/ 88 .
 70J No L 185, 15.7.1988, p. 9 .
 ---pagebreak---                                          6                                  Go
                                    TITLE    I
     SECTORAL PLANS , COMMUNITY SUPPORT FRAMEWORKS AND SELECTION CRITERIA
                                    Art Icla 2
                          Rôle of the sectoral plans ,
              Community support frameworks and selection criteria
In order to ensure that the processing and marketing sectors develop In a
way that Is consistent with Community policy , and particularly with the
common agricultural policy , and to ensure the effectiveness of Community
aid , the financing of Investments must take place within the framework of
plans designed to Improve the structures relating to the various products
in question ( hereinafter called " sectoral plans ") to be drawn up by the
Member States , and on the basis of corresponding Community support frameworks ,
drawn up with due regard for the selection of Investments eligible for
Community financing ( hereinafter called " section criteria ") to be laid down
by the Commission .
                                    Art Icle 3
                              Content of the plans
1 . The sectoral plans shall Include at least the Information specified In
    Art Icles 4 and 5 ;
2 . The Information forwarded with the sectoral plans must reflect the
    situation throughout the Member State In question .
3 . In the case of regions and areas covered by Objectives 1 and 5 ( b ) of
    the reform of the Structural Funds , It must be shown that sectoral plans
    are consistent with the regional or rural development plans and with the
    appropriate Community support frameworks .
 ---pagebreak---                                                                                 Cl
                                      Art Icle 4
                          Analysis of the Initial situation
1 . The Information referred to In Article 3(1 ) must , as regards the current
    situation of the marketing and processing sector , Include at least the
    following :
    ( a ) demarcation of the sector , and the reasons therefor ;
    ( b ) the Initial situation and the trends which can be Inferred from It ,
           In particular as regards :
         . - the economic and social situation In general , In so far as this
             has a bearing on the plan , and In particular the prospective
             outlets for agricultural and forestry products ;
           - the Importance of agriculture and forestry ;
           - the situation as regards the processing and marketing of the
             agricultural and forestry products covered by the plan , and
             especially the existing capacity of the undertakings concerned and
             their geographical distribution .
2 . The Information referred to In paragraph 1 must be up to date .
                                      Art Icle 5
                     Objectives and Implementation of the plans
The Information referred to In Article 3(1 ) must , as regards the objectives
and resources relating to the plan , Include at least the following :
     ( a ) the needs to be met by the plan and the objectives which It Is
           Intended to achieve , In particular the capacity to be reached ;
     ( b ) the economic Importance of the plan for the sector concerned and the
           Implications for agricultural and forestry undertakings ;
 ---pagebreak---                                           8                                   «4
   (c ) any aid measures In place In the sector covered by the plan ;
   (d ) the means proposed for achieving the objectives , particularly the
          total amount of Investment and the financial participation of the
          Member State ;
   (e ) the relationship of the plan to any other measures to encourage the
          harmonious development of the whole economy;
   (f ) the estimated time required for the execution of the plan , which In
          principle should be between three and five years ;
   ( g ) the likely effect * on the environment and , where appropriate , the
          environmental measures to be taken ;
   ( h ) the administrative , legislative or financial measures adopted or to
          be taken to Implement the plan , In particular details of the
          Intended form of action and the authorities or bodies designated In
          accordance with Articles 14(1 ) and 16(1 ) of Regulation ( EEC ) No
          4253 / 88 .
    ( i ) a description of the national arrangements for the management and
          control of the operational programmes or global grants which are the
          subject of the application for aid .
                                      Article 6
                               Updating and new plans
If the period Initially estimated by the Member State for implementation
of a plan has expired , an updated or new plan must , in addition
to the information referred to in Articles 4 and 5 , include a report
showing :
     (a ) the progress made In relation to the forecasts In the expired plan ,
           Including the public funds made available ;
     ( b) a description of developments In the situation regarding the
          processing and marketing of products , showing that there Is a need
          for updating or for a new plan .
 ---pagebreak---                                           9
                                                                                   4>
                                      Article 7
           Submission of sectoral plans and decision on corresponding
                          'Community support frameworks
1 . The sectoral plans and any amendments thereto shall be forwarded to the
    Commission by the Member States concerned .
2 . The Community support frameworks relating to sectoral plans shall be
    established In agreement with the Member State concerned , within the
    partnership , and by Commission decision under the procedure laid down In
    Article 29 of Regulation ( EEC ) No 4253 / 88 and in accordance with the
    rules laid down In Title III of that Regulation .
3 . The Commission shall , aspart of the procedure referred to in paragraph 2 , ensure
    that the sectoral plans are consistent with the priorities of Community policies ,
     In particular those of the common agricultural policy .
                                      Article 8
                                 Select Ion cr i ter la
1 . The selection criteria referred to In Article 2 shall be used to
    determine which Investments are to receive assistance from the Fund ,
    within the framework of the approval of the operational programmes or
    global grants referred to In Article 9 .        The criteria shall lay down
    priorities and Indicate Investments which must be excluded from
    Commun 1 1 y financing .
2 . The selection criteria shall be drawn up In accordance with the
    guidelines of the Community 's policies , particularly the common
    agr Icul tura I policy .
3 . The selection criteria and , where applicable , amendments thereto shall
    be adopted by the Commission .     The decision shall be communicated to the
    Member States and published In the Official Journal of the European
    Commun I ties .
 ---pagebreak---                                           TITLE     II
                       OPERATIONAL PROGRAMMES ANO GLOBAL GRANTS
                                          Art Icle 9
                                     Forms of assistance
     The Fund shall provide assistance In the Implementation of the measure
    which Is the subject of this Regulation by means of         :
     ( a ) part-financing of operational programmes within the meaning of
           Article 5(5 ) of Regulation ( EEC ) No 2052/ 88 ; or
     (b ) the provision of global grants within the meaning of Article 5(2)(c )
           of Regulation ( EEC ) No 2052 / 88 .
                                        Article 10
                                    Applications for aid
1 . The authorities and Intermediaries referred to In Article 14(1 ) and
    16(1 ) of Regulation ( EEC ) n° 4253/ 88 may submit applications for aid
    in the form of operational programmes or global grants .
2 . Applications for aid must supply the necessary information to
    enable the Commission :
           to evaluate the conformity of the proposed measures with Community
           policies , particularly the common agricultural policy ;
           to evaluate the contribution the proposed action will make to the
           the Improvement of processing and marketing structures , the
           coherence of the measures which constitute it and their conformity
           with the sectoral plan , the Community support frameworks and the
           select Ion cr I ter la ;
                                             •  • .    • ♦
    -      to assess the socio-economic Impact of the measures In the areas
           concerned ;
    -      to assess the proposed measures' impact on the environment and
           their effectiveness in that field ;
           to check that the execution methods and the financing are suited to
           the effective Implementation of the measures ;
    -      to determine the precise form of assistance to be provided by the
           Fund , where appropriate on the basis of Information already given In
                                                         I
           any corresponding Community support framework .
 ---pagebreak---                                          Article 11
                         Eligible Investments and expenditure
1 . To be eligible for       aid    from     the   Fund In the forms listed In
     Article 9 Investments must relate to :
     ( a ) rationalizing or developing the market preparation , preservation ,
           treatment or processing of agricultural and forestry products or
           recycling manufacturing waste ;
     ( b ) Improving marketing channels . Including the transparency of price
           format Ion ;
     Cc ) applying new processing techniques , Including the development of new
           products , by-products or markets ;
     (d ) Improving product quality .
2 . Special priority may be given to Investments to Improve the marketing
     structures for agricultural products , particularly If such Investments
     encourage the development of new outlets by facilitating the marketing
    of new products or of        high-quality products having characteristics
    which comply with the Community 's policy on foodstuffs . Including
    organically grown products .
3 . Eligible expenditure In respect of the Investments referred to In
     paragraph 1 may Include :
    (a )   the construction and acquisition of Immovable property , with the
           exception of land purchase ;
    (b)    machinery and equipment , Including computer software and programmes ;
    (c)    general costs , such as architects' , engineers' and consultants'
           fees and feasibility studies , up to a ceiling of 12% of the cost
           referred to in ( a ) and ( b ) .
 ---pagebreak---                                                                                     €6
                                            Artici® 12
                 Products concerned and participation of the producers
1 . Investments must contribute to Improving the situation of the basic
      agricultural production sector In question ; In particular , having regard
      to the specific nature of each sector , they must guarantee the producers
      of the basic agricultural product an adequate and lasting share In the
      resulting economic benefits .
2 . The Investments must as a rule concern the products listed In Annex II
      to the Treaty , to the exclusion of those covered by Council Regulation
                         * (8 )
      ( EEC ) No... / 89        . However , investments relating to forestry products
      and products falling within CN codes 4502 , 4503 and 4504 shall also be
      eligible .
      The Commission may accept Investments relating to other products
      provided the       aid recipients have direct contractual links with
      the producers of the basic agricultural products .
3 . Sufficient evidence must be given that the Investments will be
      prof I tab le .
                                            Article 13
                                     Inéligible Investments
1 . The following Investments shall be excluded :
            Investments at the retail        level ;
             Investments In the marketing or processing of products from third
            countr les .
 2 . The work proposed may not be commenced before the date on which the
Commission receives the application for assistance .
 *( 8 )
        0J No L
 ---pagebreak---                                         -  13
                                      Article 14
                                       Recipients
1 . Aid from the Fund shall be granted to the natural or legal persons , or
    groups thereof , who are ultimately responsible for financing the
    Investments .
2 . Aid from the Fund shall be paid through :
          the authorities designated In accordance with Article 14(1 ) of
         Regulation ( EEC ) No 4253 / 88 ; or
          the Intermediary agencies designated In accordance with Article
          16(1 ) of Regulation ( EEC ) No 4253 / 88 .
                                       Article 15
                    Decision to grant aid and budget commitment
1 . The Commission shall decide on the granting of aid from the Fund in
    accordance with the procedure laid down In Article 29 of Regulation
    ( EEC ) No 4253 / 88 .
2 . The decision referred to In paragraph 1 shall be communicated to the
    authority referred to In Article 14(1 ) of Regulation No 4253 / 88 or to
    the Intermediary referred to In Article 16(1 ) of that Regulation , and to
    the Member State concerned .
3 . In the case of multiannual operations , the authority or Intermediary
    referred to In paragraph 2 shall forward to the Commission each year the
    Information required for the commitment of the annual Instalments
    referred to In Article 20(2 ) of Regulation ( EEC ) No 4253 / 88 and for
    checking that the Investments to be made comply with the decisions taken
    In accordance with paragraph 1 and Article 7(2 ).
 ---pagebreak---                                          TITLE   III
                           FINANCIAL AND GENERAL PROVISIONS
                                         Art Icle 16
                                  Aid rates and rules
1 . Aid from the Fund may not exceed , In relation to the eligible costs of
    the selected Investments :
     ( a ) 50 * In the Objective 1 regions referred to In Article 1(1 ) of
           Regulation ( EEC ) No 2052 / 88 ;
    ■( b ) 30% In other regions .
2 . Aid from the Fund shall In general take the form of capital grants . If
    other forms of assistance are used , they must not exceed the capital
    grant equivalent referred to above .
3 . The Member States concerned must undertake to participate In financing
    the Investments selected by the Commission for assistance from the Fund
    to at least 5% of the eligible costs .                                 *
4 . The financial contribution by the recipients referred to In Article
    14(1 )     in relation to the eligible           costs of the selected
     investments must be not less than :
     ( a ) 25% In the Objective 1 regions referred to In Article 1(1 ) of
           Regulation ( EEC ) No 2052 / 88 ;
     ( b ) 45% In other regions .
5 . Within the field of application of this Regulation , Member States may
    take additional aid measures which are subject to conditions or rules
    differing from those provided for In the Regulation , or where the
    amounts of aid exceed the ceilings specified herein , on condition that
    such measures comply with Articles 92 to 94 of the Treaty .
 ---pagebreak---                                         Article 17
                           Procedures for payment of the aid
1 . Payment of advances or balances to be carried out In accordance with
     Article 21 of Regulation ( EEC ) No 4253 / 88 shall be made to the authority
     designated In accordance with Article 14(1 ) of Regulation ( EEC ) No
     4253 / 88 or , where applicable , to the Intermediary referred to In Article
     16(1 ) of that Regulation .
2 . The authority or Intermediary referred to In paragraph 1 shall check the
     supporting documents relating to the expenditure of the final recipients
     and ensure that they are In order before paying the Community
     contribution .     It shall also make on- the - spot checks to verify that the
     Information contained In the application corresponds to the true situation .
     Payment to final recipients must take place within four weeks of the date
     when the application was lodged , provided that the application contains all
     the documents required to establish that the expenditure was justified .
3 . At the end of each quarter the authority or intermediary referred to in
     paragraph 1 shall forward to the Commission a statement of the payments
     made to recipients , Indicating the references of the supporting
     documents In Its possession .
4 . An Implementation report shall be sent to the Commission every half -
     year .
                                        Article 18
                                   Checks aod . pena I t les
1 . The authority designated In accordance with Article 14(1 ) of Regulation
    .( EEC ) No 4253 / 88 or , were appropriate , the Intermediary referred to In
     Article 16(1 ) of that Regulation shall forward to the Commission , at the
      latter 's request , all supporting documents and evidence that can
     establish that the financial or other conditions have been met . The
     Commission may carry out on- the -spot checks .
 ---pagebreak---                                                                                 + <=>
                                             16
2 . The Commission may decide to suspend , reduce or cancel assistance from
    the Fund granted In accordance with Art Icles 15(1 ) and 14(2 ) of this
    Regulation
          If the Investments have not been Implemented as provided for ; or
          If some of the conditions laid down In the Commission 's decision
          referred to In Article 15(1 ) have not been met ; or
          If time limits set for Implementation have not been respected .
3 . The decision shall be communicated to the Member State concerned and the
    authority designated In accordance with Article 14(1 ) of Regulation
    ( EEC ) No 4253 / 88 or , where appropriate , the Intermediary referred to In
    Article 16(1 ) of that Regulation .
                                         Article 19
                    Transition period for the approval of plans
For twelve months following the entry Into force of this Regulation , a
decision may be taken to provide the assistance referred to In Article 9(1 )
In respect of measures which can be Implemented In not more than one year
and which are not part of an approved sectoral plan , provided that the
sector In question Is covered by a sectoral programme approved by the
Commission under Article 5(1 ) of Regulation ( EEC ) No 355 /77 and that the
Implementation period laid down has not expired .
                                         Article 20
                              Dlscont I nuance of carry-over
By way of derogation from Article 10(3 ) of Regulation ( EEC ) No 4256/ 88 ,
Article 21 of Regulation ( EEC ) No 355 / 77 shall not apply to projects which
have not been granted aid from the Fund for 1990 .
 ---pagebreak---                                         17
                                   Article 21
      Transitional provisions for payments In respect of projects under
                           Régulation ( EEC ) No 355 / 77
1 . From 1 January 1991 , the payment of aid In respect of the projects
    referred to In Article 10(3 ) of Regulation ( EEC ) No 4256 / 88 shall be
    carried out In accordance with Articles 17 and 18 of this Regulation .
2 . Member States shall , not later than 15 December 1990 , communicate to the
    Commission
        the authorities they have designated to pay out the aid In question ;
        the estimated amount of the payments for the first half of 1991 ;
        and
        the basis on which that estimate was calculated .
3 . On receipt of the duly reasoned communication , the Commission shall make
    an Initial lump-sum payment and will make additional payments on the
    basis of the quarterly statements referred to In Article 17(3 ) according
    to the estimated needs communicated by the Member States .
                                    Article 22
                             Extension of programmes
Specific programmes relating to agricultural products approved In
accordance with Article 5 of Regulation ( EEC ) No 355 / 77 for which the
deadlines for completion are between 1 January 1989 and the date of entry into
force of this Regulation shall be extended until the end of the period
referred to In Article 19 .
 ---pagebreak---                                        18                                  ■?г
                                 Article 23
                                 App I I cat Ion
The Commission shall adopt detailed rules for the application of this
Regulation .
                                 Article 24
                              Entry Into force
This Regulation shall enter Into force on the third day following that of its
publication In the Official Journal of the European Communities .
This Regulation shall be binding In Its entirety and directly applicable In
a I I Member States .
Done at Brussels ,                                            For the Counci l
 ---pagebreak---                                                                                                              ?3
       FINANCIAL                     STATEMENT                    conçernlng : a proposed Council Régulation
       amending Régulations CEE C ) No 797 / 85 , ( EEC ) No 1096 / 88 , ( EEC ) No 1360 / 78 ,
        ( EEC ) No 389 / 82 and ( EEC ) No 1696 / 71 , in order to speed up the adjustment of
        the structures of agricultural production .
    1 . Budget (loading : III B         I ten . : 301     Title : EAGGF , Guidance section ; Structural policies
   2 . legal basis ; Art . 43 of the Treat /
   3 . CI assi f i c a t i on ;          K14Hll|ll^lJI£ltNr.n-compul$orv expendi ture
   I. Purpose/descrlptton of the measure : amendments needed following the reform of the
        Structural            Funds :
        1.    Introducing increased reimbursement rates .
       2 . Rationalising the current provisions in order to concentrate expenditure
             on priority objectives .
   5.      Method of calculation
  5.1      Fora of expenditure : Reimbursement of a proportion of public expenditure on the
          regimes in question .
  5.2 Community contribution : To be fixed by the Commission .
  5.3      Calculation : See annex .
  5.      Financial implication as regards operating appropriations
  6.1      àchedule nf commi tuent    appropriations and payment appropri > tions (¡r ECU )
                             Year
                                                      ?Sì?Hì5ment                   is mendments
                                                                                       then
                                                       +     100                           -
                            19 91                       p.m .                           - 32.8
                            1992                        p · ffl ·                       - 23.0
                            1993                        p.m .                           - 1 2.7
                            fötal                                                       - 68.5
6.2 Financing during current year : no j- needed
7 . Observations :
       (1 )     An avocation of some 1UU MECU is proposed for this purpose in the 1990 Budget .
                The cost in subsequent years can only be determined when the actual rates
                are fixed .
 ---pagebreak---                                    ANNEX TO THE FINANCIAL STATEMENT
                     FINANCIAL ESTIMATE RELATING TO THE OBJECTIVE 5a PROPOSALS
                                                   SUMMARY
                                                                                              (ÆCU )
                                                             1990        1991       1992        1993
   REGULATION No 737/85
   - Current oost est I mates                               613         736.2      784.9       842.4
   - Afforestation (up-date of estimates In
      CCM(88)255-A )                                          -
                                                                      +   9.3    +  19.3    +   30
   - other anendnents
      . Investment plans                                      -
                                                                      -   5.4    -   9.8    -    9.2
      . young farmers                                         -
                                                                      +  20.4    +  34.8    +   43.8
      . compensatory allowances                               -
                                                                      -  36      -  36      -   36
      . environnent                                           -
                                                                      +   3.6    +   4.3    +    4.4
      . training                                              -
                                                                      -  15.4    -  16.3    -   15.7
      . total , other anendnents                              -       -  32.8    -  23.0    -   12.7
   - Total reg. 737/85 ( revised )                          613 ( 1 )   712.7      781.2       859.7
    REIMBURSEMENT RATES                                   + 100         p.m.(2 )   p.m.(2 )    p.m.(2 )
( 1 ) excluding advances on the compensatory allowances .
(2) too be determlned subséquent ly .
 ---pagebreak---                                                 2
                                     REGULATION ( EEC ) No 797 / 85
                                                                                         3 ^
1 .   REIMBURSEMENT RATES
      The rates of EAGGF reimbursement on all measures eligible under this
      Regulation and on the other Objective 5a measures are to be fixed by the
      Commission .
      It   Is provisionally estimated that upto 100 MECU could be allocated from
      the 1990 budget for this purpose .
      INVESTMENT AIDS
2.1 . The other amendments of Regulation ( EEC ) No 797/ 85 are made on the basis of
      the current rates of reimbursement . These amendments will only affect the
      costs resulting from new Investment plans , approved after the entry Into
      force of the amending Regulation . This Is expected to be 1 January 1990
      and , because of the reimbursement system , the budgetary effects for the
      EAGGF will only be felt from 1991 onwards ( except In the case of
      compensatory allowances where advances may be granted ).
2.2 . Total volume of Investments under new plans
      On the basis of preliminary results of the existing Investment aid scheme
      under Reg . 797/ 85 and the old scheme under Dir . 72 / 159 , the following
      hypotheses can be made :
      - No . of new plans each year - 25 000
      - Average Investment per plan - 60 000 Ecus ( B )
      - Total       eligible       Investment volume each year           -   25 000    x  60 000
         - 1 500 MECU ( B )
2.3 . Calculation of average rate of capital grant aid :
      Pr opo r t_l on_o f_ tpt_aj_ J_nvestment_vo I ume_ ( In X )
                                                            LFAsC 1 )  Other        Al I
                                                                       areas        areas
      Fixed Investments                                     11         22             33
      Other                                                 22         45             67
      Total                                                 33         67           100
      ExJ_s tj ng_r ates_of_ ajd ( In % )
                                                            LFAs(1 )   Other        Al I
                                                                       areas        areas
      Fixed Investments                                     45         35           ) 28.25
      Other                                                 30         20           )-
      Total capital grant aid - 1500 MECU x              28.25% - 424 MECU .
      Propose_d_rates_of_ a_M ( In % )                                   »
                                                            LFAsO )    Other        Al I
                                                                       areas        areas
      Fixed Investments                                     50         30           > 25.45
      Other                                                 30         15           )
      Total capital grant aid - 1500 MECU x 25.45X - 382 MECU .
(1)   LFAs - Less-favoured and mountain areas ( Dir . 75 / 268 ).
 ---pagebreak---                                                      3
                                                                                                       36
2 4 . The timing of the public expenditure
        Member States have the choice between granting aid as a capital grant or as
        an Interest rate subsidy or as a combination of the two .
        The use of Interest rate subsidies leads to a higher total expenditure
        though this Is spread over a longer period . The following tables may be
        used to convert an estimate made on a capital grant basis' to a realistic
        cost estimate taking account of both kinds of aid :
        Expenditure^ by_type_ of_ahd_and_year_ of_payment_f pr__1 00_Ecus_ of_capUa_l
        0LaO.t _e3.u !v2-1 ®Pi. iayer_age_sj_tuail onj_:
                                       Gap I ta I              Real payments by Member States
                  Type of ald          grant           Year 1      Year 2     Year 3  Year 4        Later
                                      équivalent        (1)                                         years
                                                                                                  ( total )
             Capital grant                   70          35           35
              Interest subsidy               30              5         5          5         5        30
             Al I types of ald              100          40           40          5         5        30
         Expenditure. sch_eduj_e ( all types of aid ):
         Assuming that new Investments are started each year for a constant amount
         ( 100 Ecus of capital grant equivalent ), the total expenditure on new plans
         will progress as follows !
                                                                                                            1
               Year of                              Year of pub I I c expend I ture                         j
                                                                                                            1
             Investment       1990       !    1991        ! 1992          1
                                                                          1     1993     ¡Later years       1
                                                                                                            1
                                         !                !               t
                                                                          1
                                                                                         !    ( total )     1
                                                                          I              1                  1
                                         !                i               1
                                                                                                            1
                                                                                                            1
          1      1990            40      !       40       !         5     1
                                                                          1
                                                                                    5    !         30       1
          1
                 1991                    !       40       !        40     1
                                                                           1        5    !         35       1
          1
                 1992                    j         –       j       40      1
                                                                           1
                                                                                   40     !        40       1
          1
          I      1993                     i        -       i        -
                                                                           1
                                                                           1       40     !        80        1
          1                     – n _     !    _           j      –
                                                                           1
                                                                           1
                                                                                 –        J                  1
          1
          1                       40      !       80       !       85       1
                                                                            1      90     !      185         1
                                                                                           1                 1
                                                                            1
           1
           1
                                          !                !                1                                 1
  ( 1 ) Year of Initial Investment .
 ---pagebreak---                                            4
2.5 . The amendments proposed are as follows :
  a ) Investment aids are to be extended to persons who do not have farming as
      their main occupation , on condition that they engage In forestry , tourist
      or craft activity on their holdings , and provided that their off-farm
      Income does not exceed 50% of the reference      Income .
      Çajculatjon
      The category of        holdings concerned cannot    be measured using currently
      available statistics . The amendment opens eligibility for Improvement plan
      aids only to a small sub-group of part-time farms , le . those which have a
      total     Income below the reference   Income but whose off-farm       Income     Is not
      more than 50% of the reference Income , combined with a significant farming
      activity and a significant forestry / craf t / tour Ist-act Ivlty .
      On the basis of 5 000 Investment plans per year at an average of
      10 000 Ecus ( B ) per plan and an average capital grant rate of 25.45%
      ( see 2.3 .), the total eligible aid would be :
      5 000 plans x 10 000 Ecus x 25.45% - 13 MECU ( B) / Year .
      However ,      part of  the  aid would be  paid  In   the   form of    Interest     rate
      subsidies , thereby spreading the cost over a longer period . Assuming that
      the up-take of aid In the first year Is limited to half the 13 MECU
      forecast for subsequent years and applying the same principles as are set
      out under 2.4 above , the progression of new expenditure Is expected to be
      as fol lows :
                                                                                ( MECU )
                                                 1990        1991       1992         1993
         Eligible national expenditure
         . capital grant equivalent               6.5        13         13           13
         . all types of aid ( see 2.4 .)          2.6         7.8       10.7         11.4
         Average rate of EAGGF
         reimbursements                             -         31%         31%         31%
         Cost for EAGGF                             -         0.8         2.4         3.3
                                                                                Γ ,.
  b ) The contribution of the EAGGF to Investment plans will no longer be reduced
       If the objective of the plan Is only to maintain the level of Income
      ( rather than Improve It ).
      Ç_aJ_cul a_t J_on_
      For all new plans , where Income Is simply maintained , the cost to the EAGGF
      will Increase by 25% . It Is estimated that not more .than 5% of plans fall
       Into this group . The cost Increase will therefore amount to 1.25% of the
      EAGGF cost of new plans .
 ---pagebreak---                                        5
c) Investment aids to be given for diversification of sources of Income          C
    CaJ_cu I atJon.
    Aids of this kind could already by granted In the LFAs . It Is felt that
    only a small proportion of farms In other areas would be Inclined to make
     Investments under these headings . Moreover , In the Objectives 1 and 5b
    regions , special operational programmes may be Introduced with more
    attractive conditions . In those circumstances the extra cost Is unlikely
    to exceed 2% of the total cost of new Investment plans .
d ) Limitation       on Investment aids In the beef sector to those concerning
    extensive production only .
    Çajeu I a_t Jon.
     It Is estimated that around 10% of Investment aids concern beef production
    and that half of these would be affected by the proposed limitation .     On
    that basis the cost would be reduced by around 5% .
e ) Maximum rates of aid applicable to eligible Investments . Increase to 50%
    (+ 5% points ) for fixed Investments In LFAs .       Decrease to 30% and 15%
    (- 5% points ) for fixed and other Investments respectively In other areas .
    Çajcu I at Jorj
    Using the results of 2.3 and 2.4 above , the public expenditure resulting
    from new plans will be ( In MECU ) :
       Pub I I c expend I ture :             1990     1991       1992    1993
       Ex 1st Ing rates of aid
       ( average 28.25% )                     170      339        360     382
       Proposed rates of aid
       ( average 25.45% )                     153      306        325     344
    At an average reimbursement rate of 31% this will cost the EAGGF ( In MECU ):
       National cost In :                    1990     1991       1992    1993
       EAGGF cost In :                       1991     1992       1993    1994
                                                                      _1
       Ex 1st Ing rates of aid              52.7    105.1      111.6    118.4
       Proposed rates of aid                47.4     94.5      100.8    106.6
       Difference                           -5.3    - 10.6     - 10.8  - 11.8
 ---pagebreak---                                            6
2.6 . The EAGGF costs of amendments           to    the   Investment     aid     scheme     may   be
      summarised as follows ( In MECU ):
      1
      1
                                                 1
                                                 1    1990   !    1991   !     1992   1
                                                                                      1    1993   i
      1                                          1           t           1            1
                                                 1           1           1            1
                                                 1           1                        1
          Cost of new plans at new rates of      1           1
                                                                         1
                                                                         1            1           ¡
          aid ( basis for calculation of         1
                                                 1
                                                             1
                                                             1
                                                                         1
                                                                         1
                                                                                      1
                                                                                      1           !
                                                 1
          amendments b , c and d )               1
                                                         -
                                                             !    47.4   !     94.5   1
                                                                                      1   100.8   !
                                                 1           1           1            1           1
                                                 1           1           1            1           1
          Amendments :                           1
                                                 1
                                                             1
                                                             1
                                                                         1
                                                                         1
                                                                                      1
                                                                                      1           !
          a) Part-time farmers                   1
                                                 1
                                                         -
                                                             ¡  +  0.8   ¡   +  2.4   1
                                                                                      1   + 3.3   !
                                                                                      1
          b)  Income maintenance only(+1.25% )   1
                                                 1
                                                         -
                                                             !  +  0.6   Ì   +  1.2   1   + 1 .3  Î
          c) Diversification (+ 2% )              1
                                                  1      -
                                                             !  +  0.9   !   +  1.9    1
                                                                                       1  + 2.0    !
          d) Beef sector limitation (-5% )        1
                                                  1
                                                         -
                                                             Î  -  2.4    i  -  4.7    1
                                                                                       1  - 5.0
          e) New rates of aid                     1
                                                  1
                                                         -
                                                              ! - 5.3     ! - 10.6     1
                                                                                       j - 10.8    1
          f) All amendments ( except              1
                                                  1
                                                              1
                                                              1
                                                                          1
                                                                          1
                                                                                       1
                                                                                       1           Ì
                                                  1                                    1
             reimbursement rates )                1           ! - 5.4     !    -9.8    1   -9.2    !
                                                  1           1           1            1
                                                  1           1           1             1           !
      YOUNG FARMERS
3.1 . The    estimated   cost  of  the   amendments     Is  based     on    the   number     of  new
        Installations each year .
3.2 . Cost of new Installations
        It Is estimated that around 25 000 young farmers are aided each year and
      that this number will Increase by around 5 000 per year as the scheme Is
      more widely applied .
      The average amount of            the   Installation premium             Is estimated at
      7 000 Ecus ( B ), of which      5 000 Ecus are paid In the first year and
      2 000 Ecus are paid In the second year 1 ).
        In addition It Is supposed that an Interest rate subsidy ( average 4% ) Is
      paid on an average loan of 20 000 Ecus .
1 ) It Is believed that the premium Is In practice spread over at least two year
    even though the current text does n't specifically authorize this .
 ---pagebreak---                                               7
      The schedule of public expenditure on new Installations ( from 1990 onwards )
      will therefore be ( In MECU ):
                                                    1990     1991     1992    1993
         Number of new Installations :                25       30       35      40
         Instai lat Ion premia :
         . 1st year             (5 000 Ecus )        125      150      175     200
         . 2nd year             (2 000 Ecus )          -
                                                               50       60      70
         Interest subsidy :
         . 1st year(4%x0.5 yearx20 000 Ecus )         10        12      14      16
         . 2nd year onwards ( 4% )                     -
                                                               20       43      69
         Total                                       135      232      292     355
         EAGGF reimbursements
         ( at 50% reimbursement rate )                68      116      146     178
3.3 . The proposed amendments are estimated as follows :.
  a ) Increase In the ceilings from 7 500 Ecus to 10 000 Ecus (+ 33% )
      Since In many cases the aid granted Is already close to or at the celling ,
      the Increase will have a relatively large Impact on the average level of
      aid and hence on expenditure , say + 25% .
  b ) Introduction of the possibility of spreading the aid over more than one
      year :                /
      This will cost no more overall and In              theory should • delay certain
      expenditure . In practice It is probably           taking place already , so no
      financial impact Is estimated .
  c ) Extension of the scheme to young part-time farmers who set up as full-time
       farmers for the first time :
      Most Installations of young farmers are by taking over a farm which is
      being run by an older member of the family . The Intention of this measure
       Is to Introduce the possibility for a young farmer , who has started part -
       time farming while retaining another Job , to enlarge his farm business and
      become a full-time farmer .         Such cases are likely to be a rather small
      minority and it         Is estimated that they will      lead to an Increase In
      expenditure of around 5% .
  d ) Clearer rules on Joint Installations :
      No cost .
 ---pagebreak---                                             8
3.4 . The EAGGF costs of amendments to the young farmers scheme may be summarised
      as follows ( In MECU ):
                                                      1990      1991         1992        1993
         Cost of new Installations at 50%
         reimbursement rate ( basis for
         calculation of amendments a and c )                    68         116         146
         Amendments :
         a ) Increased ceilings (+ 25% )                      + 17        + 29        + 36.5
         b ) Spreading aid over longer period            -       -            -           -
         c ) Part-time to full-time (+ 5% )              -
                                                              + 3.4       + 5.8        + 7.3
         d ) Rules on Joint Installations                -       -            -           -
         f ) All amendments                              –
                                                              + 20.4      + 34.8       + 43.8
4.*w bESS-FAVOUfl EP AND MOUNTA IN AREAS : Ar t . 1 4 and 45
4.1 . It Is proposed to Impose          two new   restrictions on      the    granting of      the
      compensatory allowances :
  a ) A limit of 1 eligible Livestock Unit ( L.U. ) per forage hectare .                  In many
      Member States such a limitation Is already applied in practice .                 Indeed In
      those areas where the maximum aid per L.U. ( 101 or 120 Ecus ) Is currently
      used , such a limitation automatically results from the text now In force .
      However examination of the reimbursement claims submitted by Member States
      suggests that around 20 MECU of current annual expenditure would become
       Ineligible as a result of this amendment .
  b ) Replacement of the current limitation ( 50% of the reference Income per work
      unit ) by a degressive eligibility system , le .:
      - for the first 45 L.U. ,         the   maximum   allowance    will     be  101 ; ( or 120 )
         Ecus / L.U. ( or ha )
      - for    46-90 L.U. ,    the maximum allowance will      be 50.5      ( or 60 )  Ecus / L.U.
         ( or ha )
      - no reimbursement will        be made on    livestock ( or ha ) beyond the 90 L.U.
          limit .
 ---pagebreak---                                            9
                                                                            йг
      . In most Member States a comparable system Is a I ready I n opera t Ion r On the
        basis of an analysis of F.A.D.N. 1 ) data for those areas where no such
        limitations are applied ,    It Is estimated that annual expenditure will be
        reduced by around 16 MECU . '
4.2 . The two additional limitations are expected to reduce annual expenditure by
        around 36 MECU .
S ^ KENV I RONMENT^ Af tt«;4*a
        It Is proposed to Increase the maximum eligible amount of premium per
        hectare . In the case of environmentally sensitive areas , as follows :
        - normal areas , from 100 Ecus / ha to 150 Ecus / ha ,
        - LFAs , from 60 Ecus / ha to 150 Ecus / ha .
        It Is still too early to have any financial results of the current regime .
        However , In view of the scale of the Increases It might be expected that
        expenditure will  Increase by as much as 50% :
                                                                            ( MECU )
                                                      1990     1991  1992       1993  !
          Current cost estimate                        6.6       7.2   8.6        8.7
          Increase In premia                                   + 3.6 + 4.3      + 4.4
      /
  1 ) Farm Accounts Data Network .
 ---pagebreak---                                      -  1 0
       ORESTAT ION : Art . 201
   The    proposals    made  In  document   C0M(88)255 are  maintained .  However   the
   financial estimates should now be rolled forward one year to take account
   of the delay In adopting the proposal .
                                                                           ( MECU )
   ! EAGGF cost :                                 1990     1991     1992       1993  !
   1                                                                                 1
   1                                                                                 1
   ! C0M(88)255 ; text A                                                             1
                                                                                     1
   ¡ ( ex 1st Ing 25% rate )                       9.3     19.3     30         41.4  !
   t                                                                                 1
   1                                                                                 1
                                                                                     1
   ! New estimate , after timing                                                     1
   ! adjustment ( existing 25% rate )              –
                                                            9.3     19.3       30    :
   1                                                                                 1
   1                                                                                 1
7M TRA I N I NQ : Ar t 21
   Training       Is no longer eligible for assistance from       the  EAGGF   Guidance
   section .      Expenditure will be reduced accordingly .
 ---pagebreak---        FINANCIAL                STATEMENT                concerning : a proposed Council Regulation on the
        improvement of the conditions under which agricultural and forestry products are
       processed and marketed .
  1 . Budget heading : HI B I tea : 301            Title : EAGGF, Guidance Section : Structural policies
  2 . legal basis : Art . 43 of the Treaty .
  3 . Classification :              IHIIIIIIliaiBIMNn -compulsory expenditure
 k . Purpose/description of the measure : replacement of Regulation ( EEC ) No 355 / 77 by a new
       measure in line with the reform of the Structural Funds .
 5.       Method of calculation
 5.1 Fora of expenditure : financial participation in operational programmes .
 5.2 Communi ty contribution : Upto 50% of eligible investment costs in Objective 1 regions .
          Upto 30% in other regions .
 5.3      Calculation :
          It is proposed to maintain the annual allocation at its current level
                              ( without fisheries investments which it is proposed to finance
          under a separate Regulation).
6.        Financial implication
                    ioplication as regards operating appropriations
 5.1 Schedule of commitment appropriations and payment appropriations (m ECU )
                       Year                    C.A.                     P.A.
                      1S 90                     135    (1 )               68
                      19 91                     270                      229
                      19 92                     270                      256
                      19 93                     270                      270
                      following years           p.m .                    122
                      Total                     945                      945
(i .? Financing during current year : not neec|ed
                                                needed.
    ( 1 ) Half the 1990 allocation will be needed for projects submitted in 1989 under
           the existing Regulation ( EEC ) No 355 / 77 .
?. Observations : Pa ym ents schedule :
            Comm tments                                               Payments *
         Year        Amount            1990               1991            1992      1993    Later years
         1990        135                 '68                 54              13        -            -
         1991        270                   «
                                                            175              68       27            –
         1992        270                   -                  _
                                                                           175        68           27
         1993        270                   -
                                                              -               -
                                                                                     175           95
                 r 945                   68                 229            256       270          122
      * 1st year : 65% ( 1990 : 50% only ); 2nd year:25%; 3rd year:T0%.