CELEX: 51981PC0285
Language: en
Date: 1981-06-10
Title: Proposal for a COUNCIL DECISION on the level of the interest rate subsidy, provided for by Directive 72/159/EEC on the modernisation of farms, to be applied in Ireland (submitted to the Council by the Commission)

ARCHIVES HISTORIQUES
DE LA COMMISSION
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DOCUMENTS "COM"
COM (81) 285
Vol. 1981/0094
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                         COM(81)285 final
                                                        Brussels - 10 June 1981
                                  Proposal for a
                                                        S
                                 COUNCIL DECISION
 on the level of the interest rate subsidy , provided for by Directive
 72 / 159 / EEC on the modernisation of farms - to be applied in Ireland
                   ( submitted to the Council by the Commission )
                                         ."7
                                         y
                                              . • 1 o >
 C0M(81 > 285 final
 ---pagebreak---                       EXPLANATORY MEMORANDUM
Farm development in Ireland has proceeded at a relatively rapid
rate since the accession of the country to the European Communities .
This development has Yiecessi tated a substantial increase in farm
investment , the cost of which has had to be supported mainly through
the use of borrowed capital.'                                           '
The rapid rise in interest rates together with the progressive increase
in normal farm operating costs have contributed to a significant
increase in the cost structure of farming in recent years .      As a result ,
farmers which have borrowed substantial amounts of money to finance
farm development plans under Directive 72 / 159/ EEC now find themselves
in an extremely difficult situation insofar as the servicing of such
                                              the
loans is concerned .    This situation is all / more acute because of the
significant decline in farm incomes which has taken place in Ireland
since 1978 ..   The current interest rate level is approximately 17 to 18 %
It is estimated that interest payments alone absorb about a quarter of
the farmers' total income , leaving them little or no capital for
rei nvestment .
Given this situation , an increase in    the interest rate subsidy for
farmers with existing commitments under Directive 72 / 159/ EEC as well as
for those who are* about to borrow capital to finance farm development
in the future would appear to be entirely justifiable .      Furthermore ,
because of the acute financial problems of farmers who are already
implementing development plaris , and in addition owing to the limited
financial resources available to the Irish exchequer to help remedy
this situation , a 50 % contribution from the EA6GF towards the cost of
this special measure is proposed .
 ---pagebreak--- Proposal for a Council Decision on the level of the interest rate subsidy ,
provided for by Directive 72/ 159/EEC on the modernisation of farms , to be
applied in Ireland .             „
THE COUNCIL OF THK EUROPKAK COI«MJNITIES ,
Having regard to the Treaty establishing the European Economic Community and
particularly its article 43 ; '
Having regard to Council Directive 72/l59/SSC of 17 April 1971 on the
modernisation of farms ( l ) as last amended by Directive 8l/ EL'C (2 ) and in
particular, the second sub–paragraph of Article 8(2 ) and the second
sub–paragraph of Article 19(l ) thereof}
Having regard to the proposal from the Commission ;
Having regard to the opinion of the European Parliament ( 3 ) ;            . ' .
Having regard to the opinion of the Economic and Social Committee ( 4);
Whereas the second sub-paragraph of Article 8(2 ) of Directive 7^/159/SKG
provides that Member States may be authorized to grant interest rate
subsidies exceeding 5 l/°i if* such action is warranted by the situation
of the capital market in the Kember States , and to reduce to 2 Jo the
minimum rate payable by beneficiaries in certain regions ;
Whereas the Irish govemement has requested authorization to raise the
level of the interest rate subsidy to 10 L/o and . ,in the less favoured regions
of the West , of Ireland to 12 c/o\
Whereas the increased level of interest rate subsidy shall equally apply
to existing farm loans incurred towards the financing of expenditure on
development plans eligible for reimbursement by the European Agricultural
Guidance and Guarantee Fund , hereinafter called the "Fund" which have not
as yet been fully amortized ;
Whereas because of the limited funds available to the Irish government
to finance this latter particular measure a 50 ^ contribution from the Fund
towards its cost is recommended ;
 ( 1 ) 0J No L 9 6 , 23.4-1972 , p. 1
 f2V.
 ( 3)
 (4)
 ---pagebreak--- Whereas the Irish government has furthermore requested that the expenditure
resulting from the increase in the subsidy be declared eligible for
financial participation by the Community ;
Whereas the current interest rate of 17»25 /» in Ireland for long term
agricultural loans and the interest rate subsidies of 10 and 12       will
mean that the rate remaining to be paid by the beneficiary shall exceed
the minima laid down by Council Directive 72/159/EEC or by Council
Directive 75/268/EEC of 28 April 1975 on mountain and hill farming and
farming in certain less favoured areas ( l ) as last amended by Directive 80/666/EEC ( 2 );
Whereas the economic and agricultural development of the less favoured
areas of the West of Ireland . within the meaning of Directive 75/268/EEC
is clearly less advanced than that of the other regions ;
Whereas participation by the Fund in the expenditure resulting from the
increase in the subsidy is recommended ;
HAS ADOPTED THIS DECISION
Article 1
Ireland is hereby authorized to increase the interest rate subsidy                (
provided for in the first sub–paragraph of Article 8(2)' of Directive
72/159/EHC to 12 '/o in the less favoured areas and to 10 tjo in other regions.
Article 2
 Ireland is hereby authorized to, grant an interest rate subsidy in 1981 and
 1982 amounting to 5 c/° on "the outstanding part of existing farm loans
 incurred in the financing of eligible expenditure on farm development plans
already approved under Directive 72/159/SEC by the date of entry into
application of this decision*                                <  "
 ( 1 ) OJ No L 128 , 19-5.75 » P- 1
 (2 ) OJ No L 180 . 14.7.80 » p. 30
 ---pagebreak---      Article 3
 1 . The expenditure incurred by Ireland pursuant to Article 1 of this Decision
      shall be eligible for assistance from the Guidance Section of the Fund
     within the limit fixed in the first sub-paragraph of Article iy ( 3 ) of
     Directive "]2/l5y/ti£G or in Article 15 ( l ) of Directive 75/268/j^tiO.
 2 . The expenditure incurred by Ireland in application of Article 2 shall "be
      eligible for reimbursement by the Fund .    The rate of reimbursement by the
     Fund shall be 50 /'»•
     Article 4
1 . The measure provided for in Article 2 forms part of the common measure
     according to Article 15 of Directive                 the financial and general
     provisions of which apply , taking account of the present decision .
2 . The estimated   additional cost to the Fund of the measure referred to in
     Article 2 amounts to 19.25   million EOUs .
     Article 5
     This Decision shall apply until 31 December 19o3 «
     Article 6
     This Decision is addressed to Ireland .
     Done at Brussels ,
                                           For the Council ,
                                           The President
 ---pagebreak---                   FINANCIAL             STATEMENT
                                                                           *·" : 22.5.I98I
1 . EUDGET HEA0IN6 : 8lOO                                                  APPROBIATIONS !    68 l-iliCU
2. TITLE proposal for a Council Decision                    on the level of the interest rate subsidy
              provided for by Directive 72/159/EEC on the modernisation of farms , to be
              applied in Ireland               ·
3. LEGAL BASIS : Article 6 of Regulation 729/70/EEC .
4 . AIMS OF PROJECT : To alleviate the effects of the cost of HIGH interest rates on
              farm development under Directive 72/159/&EC in Ireland ,
                                          PERIOD OF 12 MONTHS  CURRENT         YE * R
5 . FINANCIAL IMPLICATIONS
 5.0 EXPENDITURE
                                                                                       FOLLOWII^^IANCIAL YEAR
       - CHARGED TO THE EC BUDGET                                      pm                   2.75
         ( REFUNDS / INTERVENTIONS )
       - NATIONAL ADMINISTRATION      ·                             7.4 MECU               21.64
                                                                                               –
       - OTHER
 5.1 RECEIPTS
       - OWN RESOURCES OF THE EC                                       -                       -
          ( LEVIES / CUSTOMS DUTIES )
       - NATIONAL
                                             '1983               1984           1985
  5.0.1 ESTIMATED EXPENDITURE MECU               8.25           8.25            pm
  5.1.1 ESTIMATED RECEIPTS
  5.2 METHOD Of CALCULATION
           - See Annex.
   6.0                                                                                                   ?
                                                                                                           rjtmx
   6.1                                                                               ?
                                                                                                           yjUBXK
   6.2                                       ?
                                                                                                           RJÜÜM
   6.3 WILL FUTURE BUDGET APPROBATIONS B£ NECESSARY ?
                                                                                                           YES /M
   OBSERVATIONS
 ---pagebreak---                                          ANNEX
1 ., Cost of Article 1
     The increase . in interest rate subsidy will permi t the capital subsidy on
     long term investments ( 20 years loan equivalent ) ;<o be approximately ^0
     At present the equivalent capital subsidy is 30         Therefore the increase
     in costs will be approximately 2/ 3 rds of the present costs .
     The forecast reimbursement by the EAGGF Guidance Section in I9B2 at the
     current rates is 9»C>6 million ECU , therefore the additional cost is estimated
     at 6 million ECU per year .
2 . Cost of Article 2
     Up to 31 December 1980 the total reimbursement to Ireland in respect of
     Directive 72/159/KI3G ras 14«94 million ECU.
     This represents a total national aid of 60 million ECU , and taking the
     national aid at an average of 25 L/o represents a total investment of 240
     million ECU.    Therefore the capital required by the beneficiary was :
     240 - 60 = 180 l'IECU.
     It is assumed that 50 /<> of this amount remains on loans that is 90 Million ECU.
     An aid towards interest costs of 5 cj° would be 4»5 MECU/year of which FEOGA
     would reimburse 50 'At that is 2.25 KECU/year.       %
3 . Total cost of proposal
     6 + 2.25 = 8.75 MECU per year
4 . Timing of payments
     It is     assumed that this decision would be operational irom the
     1st September 1981 ( l/3 of the year ).
                     YEAR                          FEOGA Reimbursement
                     1982                               2.75  MECU
                     1983                               8.25
                     1984                               8.25
                                   Total              19.25