CELEX: 51982DC0706
Language: en
Date: 1982-10-25
Title: AIDE-MEMOIRE ON THE FIXING OF THE ECSC LEVY RATE AND ON THE DRAWING UP OF THE ECSC OPERATING BUDGET FOR 1983

ARCHIVES HISTORIQUES
DE LA COMMISSION
COLLECTION RELIEE DES
DOCUMENTS "COM"
COM (82) 706
Vol. 1982/0219
 ---pagebreak--- Disclaimer
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 ---pagebreak--- COMMISSION OF THE EUROPEAN COMMUNITIES
                                                   COM(82)706 final
                                                          October 1982
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                             AIDE-MEMOIRE
                ON THE FIXING OP THE ECSC LEVY RATE
                    AND ON THE DRAWING UP OP THE
                   ECSC OPERATING BUDGET FOR 1983
COM(82 ) 706 final
 ---pagebreak---                                - 2 -
 Preamble
 I.  GENERAL INTRODUCTION                                5
     A.  ECONOMIC CONTEXT                                5
          1.  The economic outlook for 1982 and 1983     5
          2.  Outlook for the coal indnstry              8
          3*  Outlook for the iron and steel industry    8
     B.   POLICY CONTEXT                                11
          1.  Coal policy guidelines                    11
          2.  Steel policy gaidelines                   13
          3»  Social policy guidelines                  16
         4<   Financial activities                      19
II . ANALYSIS OP REQUIREMENTS REPORTED AND RESOURCES
     AVAILABLE FOR THE FINANCIAL TEAR 19 83             21
     A.  REQUIREMENTS REPORTED FOR 1983                 22
          1*  Ordinary requirements                     22
          2.  Requirements not entered in the "budget :
              loans for financing subsidized housing    36
 ---pagebreak---                                         - 3 -
                                                                   Pa*e
       B.   RESOURCES AVAILABLE                                     37
            1*    Resources for the financial year                  37
            2*    Covering of reqnireaents not entered in
                  the budget                                        41
            3.    Stusmary of resources available for 1983          42
III ". DRAFT ECSC OPERATING BUDGET FOR 1983                         43
       A.   COMMISSION APPROACH                                     43
       B.   FINANCING PROPOSALS                                     45
       C.   DRAFT BUDGET                                            45
       AlfNEXiiiS
       A.   OUTTURN OF THE ECSC OPERATING BUDGET FOR 1981
       B.   FORECAST OUTTURN OF THE ECSC OPERATING BUDGET FOR 1982
       C.   ECSC BALANCE SHEET AT 30 JUNE 1982
       D.   DRAFT ECSC OPERATING BUDGET FOR 1983
 ---pagebreak---                                - 4 -
                      AIDE     -  MEMOIRE
               on the fixing of the ECSC levy rate ana on
        the establishment of the BCSC operating budget for 1983
As usual , the views of Parliament will he sought before the
Cannission takes a decision on the levy rate and the ECSC operating
budget for the financial year 1983 *
This aide-m6moire forms the basis for the consultation of
Parliament .  It is divided into the following chapters :
  I.  General introduction.
 II . Analysis of requirements reported and resources available
      for 1983 .
III . Draft operating budget .
Specific factors affecting the covering of budgetary requirements
for 1983 are described in Chapter III .
                                 ζ
                           X          X
The aide-memoire will also be sent to the ECSC Consultative Committee
for information.
 ---pagebreak---                                   - 5 -
I.   GEÊT3EAL INTKOIKJCTIQff
This Chapter seaa&rizes the information needed to sat tfca draft ECSC
operating "budget for 1983 in its economic and political ocntaxt .
A.   IjEOSOHIC CG^.IT
x.   The eccnsaic outlook for 198g and 1933
The lon^-awaited upturn in economic activity in the C«amu.aity had still
not materialized at the end of the first half of 1?62 , one of the aajor
obstacles being the high level of interest ratas .
The chances of activity starting to pick up in the sacond half of the
year depend on stable growth in the Conumnity 's export markets and ,
in particular , on an end to the recession in the United States and a
fall , however slight , in interest rates there , lea-ding to a similar
reduction in the Community.
In these circuastances , a slew recovery in CoaMranity production in
the oeccnd half of the year could be followed by continued growth ,
albeit still moderate , in 1983# On an annual basis s the Consgunity 's
GDP in real tanas could increase by about 0,3% in IpG ? ar«,d by around 1.1$
in 1983 . The half-yearly growth curve suggests a cqj; tiiroal upturn
frosu the second half of 1982 until the end of 19-3 }.
The prospects for the various components of deiaaad say be spumed up
as follows :
- With earned income rising only moderately , private consumption
   will not offer much stimulus to economic growth .    Private consumption
   will grow at a far lower rate than GDP in both 1982 and 1983 .
- Gross fixed capital formation and stock formation were the aain
   demand factors behind the recession affecting the European Caaasunity
   in I98O-8I .  Gross fixed capital formation will continue to drop
   in 1982 , but is expected to increase next yaar in line with overall
   GDP . Stock formation played a ®ajor role in sustaining activity in
   the first part of 1982 .
- In I98I the steady increase in exports and the artoomi: staying drop
   in imports prevented a major reduction in GDP e    Imports are expected
   to increase nore rapidly in 1982 and 1983 » so that the contribution
   of foreign trade to GDP growth will fall neaar to zero , even though
   a sharp rise in exports is forecast .
 ---pagebreak---                                    - 6 -
The growth of output in 1982 will not be sufficient to prevent a
further drop in employment , which will probably fall for the third
year running.    Total employment in the Community will be 2$ lower
this year than in 1979 , corresponding to a loss of 2.2 million jobs
during the recession.    A slight increase in employment cannot b®
expected until next year . The drop in employment in 1982 coincides
with a sharp increase in available manpower , resulting in a very
large increase in unemployment .    An additional 1 500 000 persons
will be out of work in 1932 , bringing the jobless total to
10.5 million (9-2$ of the civilian labour force ).    Another 300 000
will be out of work in 1 983 » when unemployment will total
10.8 million ( 9*4%)»
The results achieved by several years of anti -inflationary policies
are still not impressive .    The average increase in the rate of
inflation in the Community in 1983 ( the consumer price deflator ) is
likely to be only some 1.5 "to 2% below the high 1980 level , with a
rate of around 9*5      For 1982 it will probably be about 10$.
Progress could be made in 1982 and 1983 » however , in the convergence
of the rates of inflation , at least in comparison with the poor
record of the two previous years .
A major improvement has been recorded in the Community 's external
trade balance since 1980 .    That year the current account deficit ,
forced up by the increase in oil prices , was $38 000 million. This
year the deficit should be $10 000 million and in 1983 "the Community's
current balance could be practically in equilibrium.     However , thr
improvement is due mainly to two countries , Germany and the
Netherlands .   The other countries are still recording large deficits .
The following table shows the growth in gross domestic product in
real terms in the Community from 1981 to 1983 » according to the
Commission 's forecasts of May 1982 .
 ---pagebreak---                                GROSS DOMESTIC PROHJCT AT CONSTANT PRICES
                                        change over previous year )
                             1981               I9821                I9831
 Denmark                  . - 0.2                 2.0                 1.6
 Germany                      0.1              - 0.5                  1.0
 Greece                     - 0.7                 0.7                 1.9
 France                       0.3                 1.1                 1.0
 Ireland                      1.1                 2.0                 2.4
 Italy-                     - 0.2                 0.8                 1.0
 Netherlands                - 1.1              - 0.5                - 0.3
 Belgium                    - 1.7              - 0.5                  O.5
 Luxembourg                 - 2.4              - 0.3                  1.0
 United Kingdom             - 1.9              - 0.6                  1.7
 Community                  - 0.6                 0.3                 1.1
 Forecasts .
Source : Commission of the European Communities ,
         Directorate-General for Economic and Financial Affairs ,
         Economic forecasts 1982-83# September-October 1982#
 ---pagebreak---                                    - 8 -
2.     Outlook for the coal industry
In 1982 the Community coal industry is still affected by the economic
recession , while the supply conditions in the main exporting countries
outside the Community have eased .
As a result , demand for coal , including exports to non-Community
countries , should he around 314 million tonnes , about the same as in 1981 *
This situation mainly concerns power stations , coking plants and the
steel industry .    The replacement of oil by coal in industry and
district heating is still proving a slow process .
On the supply side , Community
production looks set to drop by 1.5$ "to 244 million tonnes
and imports by 1»5$ to 68.5 million tonnes , although stocks
are continuing to rise despite the fact that both consumers and
producers consider that they are already too high .     This will cancel
out some of the financial benefits expected from an improvement in
productivity in a number of countries ;   on the whole , the list prices
in the Community are continuing to increase .    The dollar price of
imported coal has dropped slightly from the autumn 1981 peak , but the
dollar appreciated on the foreign exchange markets in the second quarter
of 1982 .
3.     Outlook for the iron and steel industry
In 1981 total crude steel production in the Community amounted to
125.2 million tonnes - a decline of 2.5 million tonnes (2% ) against
1980 .    Capacity utilization fell by approximately 1$ ( 62.6% against
63.9% )*    Demand was stagnant throughout 1981 owing to the continuing
economic recession in the Community , which inhibited any recovery
from the already depressed conditions of 1980 .
 ---pagebreak---                                       - 9 -
However , in the first quarter of 1982 there was some improvement in
demand and a cautious optimism developed in the industry .      Hope was
expressed that 1 982 would show increased levels of consumption and
production of steel resulting from a gradual expansion of general
industrial activity in the Community and in non–Community countries .
As a result there was considerable stock building (2 million tonnes )
and production rose slightly , compared with the fourth quarter of 1981 ,
to 32 million tonnes .
Unfortunately , this optimism proved unfounded :    industrial activity
slackened in the spring and early summer and steel production has followed
this downward trend with 31 million tonnes in the second quarter and
24»6 million tonnes ( estimate ) in the third quarter .    For the first
nine months of 1982 production at 87»6 million tonnes showed a reduction
compared with 1981 of 6.3$ (9 months 1981 - 93*6 million tonnes ).       If the
forecast for the fourth quarter of 1 982 is added ( 25*6 million tonnes ) then
the estimated annual total for 1982 stands at 113*2 million tonnes ,
compared with the 1981 total of 1 25 • 2 million tonnes , a further annual
reduction of nearly 12 million tonnes or 9»5%*       These global figures
exclude Greece .   Exports declined sharply in 1 982 - the first quarter figure
was 5.18 million tonnes compared with 8.3 million tonnes and 7.3 million tonnes
for the third and fourth quarters respectively in 1981 , while imports in 1 982
have been substantial , 3 • 1 5 million tonnes for the first quarter and
3.05 million tonnes for the second quarter against 1.77 million tonnes and
2.39 million tonnes respectively for the third and fourth quarter of 1981 , when
exports were also , admittedly , exceptionally low .
 ---pagebreak---                                   - 10 -
Steel prices increased early in 1982 especially for flat products and , whilst
the recovery in long product prices was not so marked , producers looked forward
to a period of stable and slowly improving price levels to compensate for the
damage caused by the low levels of 1980 and the first half of 1981 .    This
improved situation was not maintained as prices for most products declined in
the early summer of 1982 and in the autumn this deterioration accelerated and
producers were once more concerned about their future viability resulting from
the consequent loss of revenue *   Reinforcement bar and wire rod prices were
particularly seriously affected .
The economio outlook for 1 983 is not encouraging.    Palling interest rates and
in some Member States reduced levels of inflation have failed to stimulate
current consumption or investment in steel intensive goods .    Stable or falling
energy costs are another favourable factor that has not had the positive effect
on industry that might have been expected .    With the growth in the national
economies predicted to be         at most , steel demand is not likely to exceed
115/116     million tonnes given that prospective growth areas are mainly in
the service and light industries , whose steel consumption is negligible .
Exports are not likely to be buoyant , as prospects in the USA sure clouded by
the current tariff problem and trends in other export markets reflect the
stagnation and recession that prevails in the Community .
 ---pagebreak--- B.    POLICY CONTEXT
The general objectives of "the ECSC are determined for all time by Articles 1
to 5 of "the Treaty of Paris .
For both coal and steel , the Commission at intervals initiates proposals and
presents general objectives or guidelines bearing on the future development
of the ECSC industries .    Coal is also one of the particular items covered by
general papers put out by the Commission on the subject of Community snergy
policy .   These documents also cover manpower questions , indicating that the
social dimension forms an integral part of the Community policies conducted
by the Commission/High Authority pursuant to the Treaxy .     In two annual
reports – the Report on the Results of the Survey on Investment in the
Community Coal and Steel Industry and the Financial Report on ECSC Financial
Activity – the ECSC publishes facts and figures on the recent and foreseeable
trend of investments and what the Community is doing to finance them .
The following remarks are not intended to take the place of the data in
those reports , but are simply concerned with certain key points or recent
developments which the Commission wants to highlight in establishing its
draft ECSC operating budget for 1 983 •    The industries themselves , the
ECSC 's social policy and the Community 's financial activity are dealt with
in turn .
1.    Coal policy guidelines
In its communication to the Council of 1 October 1981 on the development
of an energy strategy for the Community , the Commission set out the
framework in which the Community could most effectively meet the challenge
facing it in the energy sector .    On 10 February 1 982 the CoiT^sission than
presented to the Council a communication on the role for coal in Coaucuiu ry
                1
energy strategy .    It draws attention to the need for increasing coal
consumption in order to reduce dependence on oil .
 COM(82)31 of 10.2.1982 ( OJ C 105 , 26.4.1982 ).
 ---pagebreak---                                    - 12 -
To overcome the obstacles which are restraining the demand for coal and
to safeguard economic and secure supply t the Commission proposes the
following measures :
- improvement of price transparency in order to gain a better
  understanding of price trends for all sources of energy , including
  coal | in the common market ;
- Council recommendations to Member States aimed at encouraging the
  conversion of oil-fired installations to coal in general industry ,
  in district heating schemes arxl in public buildings ;
- an R&D programme and a demonstration programme for solid fuel combustion
  and the use of waste to increase coal consumption , to be financed by
  the general budget .
Large-scale domestic coal production is the best guarantee for the
security of supply and protection against unfavourable price trends
on the world market .   The mining industry is also important from the
point of view of employment .    The problem is to maintain mining
capacity in satisfactory economic conditions .    There are several
possibilities open and they oan be summed up by two key words -
rationalization and modernization .
The use of new technologies or the improvement of existing technologies
should be given special attention when considering aid for R&D from the
ECSC budget .   In addition , there is the programme of demonstration
projects for the liquefaction and gasification of solid fuels , which is
financed by the general budget .            v
The Commission is planning to continue its policy of providing funds
for investment in the coal industry , in particular in economic or at
present marginally unprofitable mining capacity ar>H for projects for
using Community coal ( power stations , coking plants , boilers , etc .),
under the ECSC Treaty and with the support of other Community financial
instruments .
 ---pagebreak---                                   - 13 -
The Community financial instruments will also play a useful role in
aiding infrastructure investment .      The creation of adequate transport ,
handling and processing capacity is often a prerequisite for increased
use and sales of coal .
             1    ...      _                       2
Parliament      and other Community institutions      have approved this plan
of action , but the Council has still not taken a definitive decision .
2.    Steel policy guidelines
       Commission measure£ on the steel marke
The principal action taken by the Commission in this field in 19S2 has
been the extension of the anti-crisis measures ( originally introduced in
October 1980 and renewed in July 1 98 1 ) under Article 58 of the Treaty for
a further 12-month period from 1 July 1982 to 30 June 1983 .         This step
was taken , with the approval of the Council , owing to the deterioration
in the market in the second quarter of 1982 , the need to maintain a
balance between supply/demand in such circumstances and above all to
avoid further erosion of prices that were already showing signs of
pressure by May/June . Mandatory quotas were imposed for most flat and
long products except for heavy plate and sections , where producers agreed
on establishing a voluntary quota system .        However , owing to severe
disruption in the market for wire rod , this product was added to the
group of mandatory products .      Owing to a further deterioration in the
market for steel and poor prospects for the fourth quarter of 1982 , very
severe abatement rates for all products , with the exception of certain
coated sheet , have proved necessary for the third and fourth quarters of
 1982 .   The Commission reinforced its monitoring and surveillance of
producers' prices to implement the provisions of Article 60 of the Treaty .
Meanwhile , to allow Member States to set up their own systems of
surveillance , the handover of responsibility for merchants * prices was
deferred until 1.1.83 .      After that date the Member States' own
administrations will have the responsibility for ensuring that steel
merchants adhere to the price rules of Article 60 .
  Resolution of 14.5.1982 , £)J C 149 , 14.6 . 1 982 , p. 134 ).
  Opinion of the Economic and Social Committee , session of 26.5 .
   ( OJ c 205 , 9.8.1982 ).
 ---pagebreak---                                 - 14 -
Steel in external relations
The Commission has renewed for 1982 the steel arrangements concluded in
1981 with the fourteen countries which are the Community 's main steel
suppliers and maintained the system of basic external prices for
non-Community countries without such arrangements .
The price discipline provided for in the arrangements has been tightened
in the light of the policy of strengthening internal prices introduced
in late 1981 .
The surveillance of import prices of steel produots imported from
countries subject to the basic prices , maintained in close collaboration
with the Member States , has led to the introduction of provisional
anti-dumping duties *
The provisional results for the first half of the year and the forecasts
for the second half suggest that total Community exports will probably
drop considerably .   Imports , which were much higher in the first half of
the year than in the corresponding periods of 1980 and 1981 , will
probably drop in the second half of the year .
Conununit^r solutions £o_struc;tural> £roblems
Since the difficulties facing the steel markets are continuing - or even
worsening - the success of Community policies depends first and foremost
on the consistency and efficiency of the specific anti-crisis instruments ,
the quota system and the code of aids , which should serve the restructuring
objective for 1985 *
This objective is conditional on several factors :
- The maintenance and development of Community solidarity .     The unity of
  the internal market must be preserved as a precondition for the adjustment
  process and Community cohesion should be used offensively and no longer
  defensively in trade negotiations .
- Reinforcement of efforts to adjust the production apparatus to demand both
  quantitatively and qualitatively.      The stage of short-term assessment must
  be completed and decisions made from a medium-term structural angle .
 ---pagebreak---                                - 15 -
- Choice of suitable reference parameters for competitiveness .   An
  accurate assessment must be made of the leeway to b® made up on
  competitors , which is a major factor for ensuring the viability of
  the industry .
- Establishment of links between steel strategy and general industrial
  strategy .  The steel industry must not be viewed in isolation , but
  its future must be seen together with that of all levele of the metal
  industry and manufacturing industry as a whole .
- Extension of accompanying ms&sxires , in particular as regards conversion .
  An effective industrial redeployment guideline should ba adopted ,
  combining the need for alternative employment and the promotion of
  growth industries .
Halfway into the period set for corapletin^ the structural adjustments ,
the Community measures have already had some positive results .   However ,
work in preparing the General Steel Objectives for 1925 show that the
over-capacity problem will grow worse as market prospects deteriorate .
Efforts must therefore be redoubled and a new coordinated attack launched
by firms , governments and the Commission ,
The examination of all the restructuring plans in the light of the
prospects and guidelines of the General Objectives for Steel will be the
crucial stage in the Community plan for improving the production structure
of the steel industry .
 ---pagebreak---                                - 16 -
3.    Social policy guidelines
The social policy conducted by the High Authority/Commission uses a
number of financial instruments provided for by Artioles 54 to $6 of
the ECSC Treaty.    In the case of the coal and steel industries , the
Commission can
- grant low-interest loans from own funds to promote workers * housing
   under Article 54 ECSC ;
- finance research projects on occupational safety under Article 55 ECSC .
These measures will continue on the basis of the principles outlined in
Chapter II of this aide-m&noire .
Whereas these aids enable the Commission to help improve the working and
living conditions of workers employed in the ECSC sector , Article $6 of
the Treaty enables it to help workers who have lost their jobs , are
forced to change jobs or are threatened by unemployment as a result of
technological change or fundamental changes in market conditions in the
coal or steel industries .
The Commissions operations in this sector are based on Article 5^(2 )
and have been considerably stepped up in recent years because of the
structural and cyolical crisis affecting the steel industry in particular .
The aids granted by the Commission under this second paragraph take two
forms :                                   '
 - Under point (a) loans may be granted to help oreate jobs likely to
    reabsorb steel and coal workers into the labour market .  These loans
    carry an interest subsidy.    Although this aid comes primarily under
    the heading of regional policy , it is also of major importance for
    the social sector .
 ---pagebreak---                                  - 17 -
– Under point ( b ) non-repayabl e aid for the redeployment of workers is
  granted in the form of tideover allowances aiid contributions to the
  resettlement or vocational retraining of worxers in accordance with
  conventions or agreements reached with the Governments of the Member
  States ,
The importance of these two typea of aid from the High Authority can be
gauged when it is considered that , between January 1 978 and July 1982 ,
the Community steel industry , not cottatiiig Greece , lost 32»7'$ of its
1978 labour force as 260 000 workers were mt.de redundant . The numbBr of
jobs lost in 1980 and 1P81 alone was 7'\ 000 and 49 000 respectively®
Because of the simultaneous decline of most other branches of industry ,
redundant steelworkers who have been aided by the redeployment measures
have found it increasingly difficult since 1979 "to find a job ; new
industries are not being set up now as they were in the past a:nd existing
industries cannot be developed fast enough to absorb both school-leavers
and workers who have been made redundant#
The aids in the form of conversion loans accompanied by an interest
subsidy make a substantial contribution to tbe creation of jobs , for
which steelworkers have first option . Despite increases in past years
in the volume of appropriations available and the capacity of new ,
economically viable undertakings to absorb aid , it is still possible to
grant aid for only a few jobs lost m comparison with the number of
redundancies over the past two years .
The increased difficulties the Commission is encountering in helping
steelworkers to find new jobs are mainly d-ue to the growth in unemployment
since 1978 . Average annual unemployment rose froin 6 million in 978 and
1979    6®8 million in 1980 and 9*0 million in 19SI®
 ---pagebreak---                                - 18 -
In 1982 there will be 10 . 5 million unemployed.
Conscious of this deterioration , the Commission has long teen stressing
the need for developing policies and measures to create new jobs .
However , these policies and measures do not make it any the less necessary
to continue appropriate redeployment measures .
The ECSC 's traditional redeployment aids have been - and still are - an
important means of easing the situation of redundant coal and steel
workers .  But speoial measures have had to be taken in view of the
extremely difficult situation of the steel industry.     In May 1979 "the
Commission accordingly made proposals for the establishment of speoial
temporary allowances to help steel workers under the Community restructuring
plan.
The Commission produced an aid programme up to the end of 1984 at an
estimated cost of 212 million ECU .   By taking a broad interpretation of
Article 56 ECSC , the Council approved Community aid for early retirement
and short-time working in June 1 981 ^ . This programme , financed initially
by ad hoc national contributions and then by contributions from the general
budget to the ECSC , will put the Community in a better position to meet
its obligations towards workers in this key industry.     However , new
requests for aid other than the existing traditional aids may increase
future budget requirements under Artiole 56(2 ) (b).
  Conclusions of the 717"th Council meeting of 24 June 1981 .
 ---pagebreak---                                - 19 -
4.  Financial activities
ECSG Financial Report No 27 , summarizing the Community 's borrowing and
lending and financial aid in 1981 was published at the beginning of
July 1982 .
Borrowings contracted in 1981 totalled 325*4 million ECU , compared with
1 004 million ECU in 1f80 and 837 million ECU in 1979°     With the exception
of loans paid out for the construction of subsidized housing , payments in
all the sectors financed by the ECSC dropped sharply during the year .
Industrial loans'* amounted to 287 million ECU in 1981 , compared with
757 million ECU in 1980 and 595 million ECU in 1979 , conversion loans^
to 86 million ECU , compared with 266 million ECU and 59 million ECU , and
                         ■>
subsidized housing loans to 15 million ECU , compared with 8 million ECU
and 22 million ECU .
Total borrowing and lending since the inception of the ECSC is thus
brought to 8 574 million ECU and 8 4*8 million ECU respectively ( including
240 million ECU in loans from own funds ). The balance outstanding at
31 December 1981 was 5 884 million ECU .
In 1982 loans raised at 30 August amounted to 466 million ECU and loans
paid out were at a corresponding level .
The prospects for a revival of activity over the coming months will depend
on whether investments planned by steel firms are brought into line with
Community restructuring policy and on the availability of funds for
interest subsidies for priority investments , particularly conversion
projects .
Ths same will apply for 1983 , when the ECSC will have to pursue am active
policy of aid for investments in these priority sectors and , as far as
possible , for increased productivity in the coal sector .
 Article 54 ECSC .
^Article 56 ECSC .
\oans under Article 54 ECSC paid from ECSC special reserve funds and part
 of the former ECSC pension fund .
 ---pagebreak---                                   - 20
A general estimate of the likely trend in loan applications may be
inferred, from a survey conducted in early 1932 on the planned investments
in the Community coal industry : 1 800 million ECU in 1982 and 1 600
million ECU in 1983 compared with 1 751 million ECU in 1 981 , 1 655 million
ECU in 1980 and 1 1 67 million ECU in 1 979-
Investment in the steel industry , which dropped to 2 050 million ECU in
1973 and 1979 , picked up to 2 375 million ECU in 1980 and 2 762 million ECU
in 1981 .  It is expected to drop to 1 800 million ECU in 1 982 and pick up
in 1983 .
If the active policies envisaged above can be implemented , the High
Authority proposes borrowings by the ECSC which could again amount to
around 1 000 million ECU in 1983 , provided that market conditions work to
the advantage of the undertakings concerned .
 ---pagebreak---                                   - 21 -
 II . ANALYSIS OF REQUIREMENTS REPORTED AND RESOURCES AVAILABLE FOR THE
      FINANCIAL YEAR 1983
Article 49 of the ECSC Treaty empowers the Commission to procure the
funds needed to pursue the activities set out in that Treaty by imposing
levies on the production of coal and steel .   These levies are assessed
annually on the various products according to their average value , but ,
pursuant to Article 50 » "the rate may not exceed    unless previously
authorized by the Council .
To fix this rate it is first of all necessary to estimate requirements ,
then to consider how far these may be covered from budgetary resources
other than the levies , namely the interest on investments and on loans
financed out of own funds and cancellations of provisions .   The amount
which will have to be covered by the levies can then be determined .
Next , the likely yield from the levies is calculated on the basis of a
preliminary - and thus sometimes unavoidably inaccurate - estimate of the
average values of the various products , and in the light of the estimates
( also somewhat tentative ) of the volume of output during the year . The
probable levy yield is first expressed as the estimated yield from a
rate of 0.01%.   The requirements and resources are the two main elements
described in this chapter .
The following presentation of requirements reported and foreseeable
resources is modelled on the systematic analysis of the data for the
various budget headings in the general budget , set out in Part II of the
general introduction to the preliminary draft budget .   As with the
 ---pagebreak---                                - 22 -
general budget , this presentation lists separately the main features of
each heading ( legal basis and description of the operation , type and
breakdown of expenditure , explanation ). Three categories of expenditure
are unavoidable , in that they derive from decisions already taken
( administrative expenditure , aid to coking coal and coke for the steel
industry ) or from framework agreements with the Member States ( on aids
for redeployment ). To give a clear picture , the explanation for
expenditure which is not unavoidable ( research and interest relief
grants ) is more detailed than for the other chapters .
A.   REQUIREMENTS REPORTED FOR 1983
The traditional terms will be used here :   "B " signifies requirements ,
while " R", which will appear later , signifies resources .   These terms
are intentionally different from those used in the general budget
("expenditure " and " revenue ").
1 . ORDINARY REQUIREMENTS
CHAPTER B 1 :   ADMINISTRATIVE EXPENDITURE
                                                     ( million ECU )
       1982 - Appropriations authorized                     5
       1 983 - Appropriations requested                     5
       Percentage change                                    -
1 .  Legal basis and description of operation
Legal basis :
- Article 50 of the EGSC Treaty ;
- Article 20 of the Merger Treaty ;
- Council Decision of 21 November 1977 ( 0J L 306 , 30 November 1 977 » P « 28 );
- ECSC contribution to the Commission 's administrative expenditure .
2.   Type and breakdown of expenditure
Annual payment in four equal quarterly instalments .
3.   Explanation
The Council has set the annual amount of the payment at 5 million ECU .
 ---pagebreak---                                      - 23 -
 CHAPTER B 2 :      SOCIAL MEASURES
 B.2.1      Aids for redeployment ( Article 56 ECSC )
                                                         ( million ECU )
           1982 - Appropriations authorized                    117
           1983 – Appropriations requested                     100
           Percentage change                                  - 15/°
 1 .     Legal "basis and description of operation
 Legal basis ;
- Articles 50 and 56 of the ECSC Treaty ;
- Bilateral agreements concluded between the High Authority/Commission
     and the Governments of the Member States .
 The High Authority/Commission provides non-repayable aid towards :
     ( i ) the payment of tideover allowances to workers ;
   ( ii ) the payment of resettlement allowances to workers ;
 ( iii ) the financing of vocational retraining for workers having to
           change their employment .
 In some cases , the tideover allowance is replaced by a contribution
corresponding to the cost of a bridging-pension scheme .
The grant of the aid is conditional upon payment by the State
concerned of a special contribution of not less than the amount of that
aid , unless an exception is authorized by the Council , acting by a
two–thirds majority .
2.      Type and breakdown of expenditure
Creation of a provision to subsidize the expenditure on redeployment
incurred by the Member States according to the procedure set out in
the agreements signed .
 ---pagebreak---                                - 24 -
Total requirements could amount to around 100 million ECU ,
35 million ECU for the coal industry and 65 million ECU for steel .
3«  Explanation
The coal industry's requirements in 1982 were considerably underestimated ,
especially in the United Kingdom .  The gradual rationalization of the
industry through the closure of uneconomic pits suggests that expenditure
in 1983 will be as high as in 1982 , at least in the United Kingdom .
Requirements in the iron and steel sector continue to be high .
Market developments obviously make it very difficult to forecast
production and employment levels and may upset the restructuring
programmes which are already difficult to draw up .
The estimated requirements cannot be broken down by sector , as in past
years , on the basis of information supplied by the governments .  Since
the steel industry restructuring programmes are still being discussed at
national level , the Commission was unable to base its forecasts on precise
data except in the coal sector where requirements are estimated at some
38 million ECU .  In the absence of detailed information for 1933 , the
Commission based its estimates for the steel industry on current trends .
 ---pagebreak--- B 2.2 - SOCIAL MEASURES IN CONNECTION WITH THE RESTRUCTURING OF THE IRON
         AND STEEL INDUSTRY
                                                            ( million ECU )
    1982 - Appropriations authorized                               50
    1983 - Appropriations requested                                50
 -  Percentage change                                               –
1 . Legal basis and description of operation
Legal basis : Conclusions of the 717th Council meeting of 24 June 1981 ,
introducing two temporary social measures under Article 56(2 ) (b) ECSC , on a
broad interpretation of that provision .
The measures involve contributions by the ECSC towards the financing of special
allowances for early retirement and short-time working to be paid to workers
 in iron and steel undertakings under the Community restructuring programme .
These measures supplement the traditional aids for redeployment authorized under
Article 5^(2 ) (b ) ECSC .
The appropriations will he committed in stages as the necessary funds become
available *
2.   Type and breakdown of expenditure
Aids in the form of partial reimbursement of the expenditure incurred by the
Member States . The procedure for these aids is laid for each Member States in
accordance with the common aid criteria drawn up for the Community as a whole .
3.   Explanation
The 50 million ECU earmarked for 1983 will make it possible to continue
financing the programmes for the early retirement and short-time working
adopted in previous years . The funds for the temporary special measures have
to "be staggered over a number of financial years because the cost of early
retirement is covered for three years for each worker . Allowance is also
made for the fact that the provision of the necessary funds has fallen
behind the schedule for implementing "the measures being financed .
 ---pagebreak---                                         - 26 -
   CHAPTER B 3 - AID FOR RESEARCH
                                                                      ( mi llion ECU )
                                   1982                  1983
Heading         Sector                                                     Percentage
                              Appropriations        Appropriations
                                authorized*                                   change
                                                      proposed
 B.3.1         Steel                19                   23                    + 21
 B.3.2          Coal                14                   19.5                  + 39
 B.3.3         Social               10                   11.5                  + 15
 TOTAL AID FOR RESEARCH             43                   54                    + 25
 * Not including supplementary appropriations of 7 million ECU ( see Annex B ).
   1.  Legal basis and description of operation
       Legal basis : Articles 50 and 55 of the ECSC Treaty
   The High Authority / Commission is required to encourage technical and economic
   research into the production and increased use of coal and steel and occupational
   safety in the coal and steel industries . To this end it grants aid to finance
   research after receiving the Council 's assent .
   2.  Type and breakdown of expenditure
   Creation of provisions to cover part-subsidies which take the form of the
   repayment of a proportion of the actual costs of research projects approved by
   the High Authority / Commission in accordance with the procedures provided for
   in the Treaty ( consultation of the ECSC Consultative Committee and the receipt
  of the Council 's assent ). In most cases , the aid granted amounts to 60% of
   the estimated and substantiated costs . ,
   3.  Explanation
   The initial budget for 1982 would have made it possible to cover 35% of the
   requests made . The increase in funds made available for 1982 increased this
   figure to around 41% and the amount earmarked for 1983 should enable this
   level to be maintained .
 ---pagebreak---                                      - 27 -
B.3.1 - STEEL RESEARCH
Slower economic growth , the continuing imbalance between supply and demand,
increased costs and the lack of profitability have all fuelled the crisis still
affecting most of the Community steel industry .
Although progress has been made as regards productivity , modernization , restructuring
and redeployment , the international competitiveness of the European steel industry
needs to be improved as a matter of urgency and a good deal remains to be done
on this front . To improve overall performance , more sophisticated products with
a higher value added must be manufactured for domestic and export markets .
The declining competitiveness in the Community is reflected in factors such as
the levels of productivity , the growing advantages enjoyed by foreign producers
with regard to technical facilities and operating costs and the share of the
world steel market . To reverse this downward trend , it is widely accepted that
research has an important party to play; this is underlined in the framework
programme for Community scientific and technical activities drawn up by the
      . .  1
Commission .
However , the creation and adoption of new technologies are obstructed by a
number of factors , including insufficient R&D . Recent estimates show that research
expenditure on steel in Europe averages 2.2 ECU per tonne of steel produced
compared with 4 ECU per tonne in Japan and 2.7 . ECU per tonne in the United States .
It cannot be disputed that the technological supremacy of Japanese manufacturers
in several steel production sectors is partly linked to the higher level of
research expenditure . One important outcome of this trend is that Community steel
   Framework programme for Community scientific and technical activities
 1984-87 : first outline ", SEC(82)896 final .
 ---pagebreak---                                        - 28 -
producers have bought Japanese Licences and expertise in their efforts to improve
efficiency and regain profitability . However , although adoption of foreign
technology may enable the Community steel industry to compete on equal terms ,
it does not give it any advantage . It is evidently necessary , especially in the
present financial climate in the sector , to step up Community aid to steel
research with emphasis being placed on medium-term objectives .
To meet the industry 's new technological and economic objectives , new guidelines
                                                                  1
were recently laid down for ECSC research in the period 1981-85 ; the programme
has two main objectives :
  (i )  to reduce production , processing and fabrication costs ;
( ii )  to make semi-finished and finished products which better meet the needs
        of consumers and users ( particularly as regards cost and quality ).
Priority will still be given to conserving raw materials and energy , to energy
substitution , to increasing the productivity of plants and to improving quality
and quality control at all stages of production , processing and fabrication .
The 1983 programme will cover the following technical sectors :
-    blast furnace technology ;
-    steel production ;
-    continuous casting ;
-    rolling mi Ils ;
-    steel properties and utilization .
 1 0J C 99 , 2.5.1981 .
 ---pagebreak---                                        - 29 -
          In addition to the existing ECSC programme of steel research /
 it is proposed in 1983 to finance a parallel programme of pilot plant
 projects for the iron and steel industry . The initiative , which will
 represent a logical extension of the present collaborative research
 effort / will give a much needed stimulus to the evaluation and ultimate
 commercial exploitation of new technology in European steelmaking .
          The proposed programme will cover the testing and the validation
 of technologies / arising from research / applied both to new processes
 and product routes on a pilot-scale as well as to the modification of
 existing production methods in works trials where major capital
 expenditure is required .
          The overall objectives and technical scope of the programme
will be the same as those referred to above in connection with the
existing research activities .
          Of the total appropriation of 23 million ECU proposed for steel research
 in 1983 / the following breakdown is envisaged :
                existing programme                           14 million ECU,
                pilot-scale research programme                9 million ECU.
B.3.2 - COAL RESEARCH
On 9 June 198(rthe Council laid down the new Community energy policy objectives
for 1990 which can be summed up as an increased effort to reduce dependence on
oil ; oil consumption is to be reduced to 40% of gross primary energy consumption
and supplies are to be more widely diversified . The return to coal in the shape
of a policy for replacing oil by coal will help to meet these objectives . The
Commission for its part has developed a new energy strategy for the Community
 Resolution of 9 June 1980 (OJ C 149. 18.6»80).
 ---pagebreak---                                      - 30 -
                                                                       1
and reaffirmed the role which must be played by coal in this strategy . In
this document , the Commission emphasized R&D , in particular as regards methods
for producing , coking and using coal , and the need to increase R&D expenditure
in order to raise the level of productivity in the Community coal industry .
Several conclusions made in the document - " Role for coal in Community energy
strategy " - suggest that the still serious difficulties in Community mines can
be overcome by stepping up R&D in the coal technology sector .
                                                             2
The medium-term guidelines for coal research ( 1981 to 1985 ) drawn up by the
Commission are more relevant than ever and a large number of technical research
projects have been submitted to the Commission for financial aid under Article 55
of the ECSC Treaty .
Most of the projects put forward are already joint research programmes or will
fit into existing programmes . Joint implementation in collaboration with the
coal mines and research institutes in the Community leads more quickly to results
which can be used in practice .
Research in mining engineering is now concentrating on modern management techniques
in view of the increasingly high underground investment . The main items , in
decreasing order of importance , are working and winning , outbye operations and
preparatory work .
Research into firedamp , climate and rock pressure is still important because of
the constant increase in mining depth .
Increasing priority is being given to surface coal preparation because of the
need to provide customers with products satisfyihg their specifications .
Joj C 105, 24.4.1982 .
  0J C 94 , 17.4.1980 .
 ---pagebreak---                                     - 31 -
Better utilization and beneficiation of mine products / in particular as regards
combustion and conversion of coal into hydrocarbons ( second generation of
processes )^ fits in perfectly with the current Community energy strategy .
Carbonization is still the focal point of research into coking ; the aim is to
improve coke quality at the same time as increasing output and capacity .
The 1983 coal research programme will cover the following topics :
Mining engineering
- Preparatory work
- Firedamp - ventilation and climate
- Rock pressure and support
- Winning and working
- Outbye operations underground
- Modem management techniques
Utilization and beneficiation
- Preparation of coal
- Coking
- Combustion of coal
- Benef iciation and new products
B.3.3 - SOCIAL RESEARCH
The success of previous programmes justifies the continuation and development
of the programmes in progress .
The various sectors of the industries involved / management and workers and the
research institutes can all benefit from the development of various research
projects to improve working conditions .
It is clearly necessary to identify the most important topics , which will be
selected for coordination at Community level / and to avoid any duplication of
research at national level .
Community research therefore benefits all sectors involved in health and safety
at work ; since ECSC social research is still the only research at Community
level dealing with workers * health and safety/ the sectors chosen to be covered
 ---pagebreak---                                       - 32 -
 "by multiannual research programmes are as follows :
       the effect on workers' health of occupational hazards and physical
       conditions at their place of work
       ergonomics
       mine safety :  the second programme was adopted by the Commission in
       July 1982
       industrial health in coal mines ( measures against dust and harmful gases
       in mines )
       technical measures to combat pollution at the place of work and near
       to steelworks
       safety in the steel industry .
CHAPTER B 4 :      AIDS IN THE FORM OF INTEREST SUBSIDIES
                                                                  ( million ECU )
                                                                1
  Heading                         1982             1983
                                                                    Percentage
                            Appropriations     Appropri ati ons
                            authori zed*                             change
                                               proposed
  B .4 .I  Investment             7                9                 +   29$
  B . 4.2  Conversion            40 (*)           44                 +  lOfo
  TOTAL AID IN THE FORM ()F
  INTEREST SUBSIDIES             47               53                 +   131°
  Not including supplementary appropriations of 3 million ECU ( see Annex B ).
1.     Legal basis and description of the operation
Legal basis :     Articles 54 ( investment ) and 56 ( conversion ) of the
                  ECSC Treaty , and Decisions of the High Authority/Commission .
The ECSC may use its own resources to provide interest relief on certain types
of loan . The subsidy is calculated in ECU at a rate and for a term fixed by
the Commission . It currently stands at 3$ for five years .
2.     Type and breakdown of requirements
Provision for offsetting part of the interest due on loans disbursed by the
ECSC , in accordance with the contracts drawn up between the Commission and the
beneficiaries .
3.     Explanation
ECSC loans with interest subsidies are the principal financial instruments for
promoting priority investments to meet the requirements for the coal and steel
industries and to create jobs for former ECSC workers .
 ---pagebreak---                                      - 33 -
B.4.1 - Investment b
In the investment field , the aim of interest subsidies is to encourage
certain types of investment in the ECSC industries .       The Commission 's
current criteria for granting subsidies are as follows :
–     research and training centres , and the elimination of bottlenecks
      ( OJ C 73 , 18 June 1970 );
-     stabilization of coal production :     subsidies are limited to investment
      in shafts , underground workings and haulage and winding equipment
      ( 0J C 79 , 29 March 1980 ).
The Commission reserves the right to apply and adapt these criteria
in the light both of its assessment of current priorities and of
the appropriations available . It is envisaging the possibility of
encouraging priority investment in coal , notably for energy– saving
( COM(82)357 )»       Cta "the other hand, apart
from certain cases where interest subsidies are already being given ,
 it confirms that it is not planning to give this form of support
 for steel restructuring .
B.4.2 - Conversion
 Conversion loans with interest subsidies are granted to firms or public
bodies which encourage investments creating new jobs in regions hit
by declining economic activity in the coal and steel industries .
 The guidelines drawn up by the Commission for granting conversion
 loans are published in OJ C 178 , 27 July 1977 .     They have since been
 changed slightly ( OJ C 82 , 29 March 1979 » pi 8 ) to improve and
 clarify the terms of global loans , which have proved a very effective
 instrument for creating new jobs in small and medium-sized undertakings .
 ---pagebreak---                                   - 34 -
The maximum loan eligible for interest relief at the rate of 3$ for
5 years at the moment is 20 000 ECU per new job , equivalent to maximum
non-repayable aid of 3 000 ECU per job .   When recruiting , the recipients
undertake to give priority to former ECSC workers .
This programme is thus designed to help provide jobs for workers
formerly engaged in the Community 's iron and steel or coal industries
and thereby to meet , in this specific field , some of the Commission 's
basic obligations under Article $6 of the ECSC Treaty .
In the first half of 1982 the Commission authorized nine conversion
loans totalling 116 million ECU ( five direct loans totalling
24 million ECU and four global loans totalling 92 million ECU ) to
create 5 500 new jobs .
In 19^3 , as in the past , the stress is likely to be placed on the
continuing conversion requirements of the iron and steel industry .
It is self-evident that rationalization and restructuring plans for
the industry in 1983 will involve further redundancies , and thought
must now be given to ways of compensating for this .
An allocation of 44 million ECU would help to promote the creation
of at least 14 000 new jobs in 1983 .
It should also be noted that both the non-quota* and quota sections of the
European Regional Development Fund help to create jobs in regions
hit by the steel crisis .
 OJ L 271 , 15.10.1980 , p. 9 .
 ---pagebreak---                                   - 35 -
 CHAPTER Β 5 : - AIDS UNDER ARTICLE 95 OF THE ECSC TREATY ( COKING COAL
 AND COKE FOR THE STEEL INIXJSTRY )
                                                            ( million ECU )
   I982 - Appropriations authorized                            6
   1983 - Appropriations requested                             6
           Percentage change                                   -
 1.   Legal basis and description of "the operation
 Legal basis :
 -    Article 95 of the ECSC Treaty
 -    High Authority/Commission Decision 73/787/ECSC of 15 July 1973
      ( OJ L 259 t 15 September 1973 ), as last amended by
      Decision 896/82/ECSC of 20 Aprii 1982 ( OJ L 106 , 21 Aprii 1982 ).
 The ECSC makes a lump-sum contribution to the special fund for easing
 intra–Community trade , the rest of the finance being provided by the
 Member States and the steel industry .     This scheme will be reviewed
 after 1 January 1984*.
 2.   Type and breakdown of requirements
 Provision for a lump-sum contribution of 6 million ECU to the fund
 ( the ECSC annual contribution ).
 Community aid may be granted in respect of a maximum amount of 47 million ECU ,
 corresponding to 14 million tonnes of coking coal per year . If
 trade drops below these limits , the reduced subsidies will be drawn
 first from the Community's contribution (6 million ECU ) and the 17 million ECU
 contributed by the steel industry and then from the 24 million ECU
paid in by the Member States .
 3.   Explanation
The aim of the special system of aid to coking coal and coke is to help
maintain production of blast–furnace coal for the Community 's iron and
steel industry , and permit the sale of this coal and the coke derived from
it .
Apart from Community aid the system authorizes the producing countries
to grant production and sales aid to their collieries .
  See Parliament Resolution of 19 February 1982 (0J C c*
                                                       C 66' 15. 3.1982, p. 104).
 ---pagebreak---                                   - 36 -
It also lays down pricing rules enabling coal undertakings which supply
the steel industry to grant rebates on their list prices provided that
these rebates do not cause the delivered prices to work out lower than
those derived from the guide price for imported coal , which the Commission
publishes regularly .
2.  REQUIREMENTS NOT ENTERED IN THE BUDGET :    LOANS FOR FINANCING
SUBSIDIZED HOUSING
In addition to the requirements to be financed by non-repayable grants
from the year 's resources , there is the ECSC housing subsidy scheme ,
which has been in operation since 1955 *    Forecasts for this programme
are included in this aide-memoire to complete the picture of all ECSC
interventions for Parliament and the Consultative Committee .    For
ease of understanding , the presentation follows the same analytical
format as for the requirements already described .
1.  Legal basis and description of the operation
Legal basis ;   Article 54 and Decisions of the High Authority/Commission
assigning to the housing programmes the funds from " special reserve "
constituted by interest from investments and from loans against own
funds .
ECSC intervention takes the form of reduced-interest loans , and eases
the cost of financing housing by adding the funds lent by the Community
to resources provided nationally .
2.  Type and breakdown of requirements
Grant of long-term loans at lfo interest to the responsible national
bodies or other financial institutions .
                                          V
The Commission intends to allocate 30 million ECU , averaging out at
15 million ECU a year , to the second phase ( 1982-83 ) of the ninth
subsidized housing programme .
 ---pagebreak---                                     - 37 -
 3.   Explanation
'This scheme has the twin aim of :
 –    complementing Community policy in the coal and steel industries ; and
 -    improving living conditions for workers in these industries .
 The criteria for the granting of the loans are described in detail on
 pages 2 and 3 of OJ C 299 1 30 November 1979 •
 The scheme is both in the interest of workers , since it alleviates the
 effects of price increases and high interest rates , and of benefit
 to the industry , since it facilitates reorganization .
 The number of dwellings subsidized by means of ECSC loans at 1 January I98I
 stood at 171 035 .
 B' . RESOURCES AVAILABLE
 The remarks on terminology made on page /      / apply here too .
 1.   Resources for the financial year
 CHAPTER R 1 :    GENERAL RESOURCES
 TITLE R 1.1 :    Levy
 1.   Legal basis and description
 Legal basis :
 -    Articles 49 and 50 of the ECSC Treaty
      Decisions 2/52 and 3/52 of 23 December 1952 .
 The levies are calculated on the basis of a fixed scale per tonne which is
 decided each financial year by the High Authority/Commission and published
 in the Official Journal .
 ---pagebreak---                                    - 38 -
  2.   Type and breakdown
Levy resources sure the sums owing , and duly established , in the form of
levies payable on output in the 1983 financial year and calculated on the
basis of the production declarations made ty the undertakings .
3.     Explanation
The latest estimates of the average values which serve as the basis for
calculating the levies suggest that the figures for the 1983 financial
year , which relate to the reference period from 1 July 1981 to 30 June 1982 ,
will be some 20% higher in the case of coal and roughly 12% for steel than
the figures for 1982 .
It should be noted that there is sun appreciable margin of uncertainty in
these figures ;    this is because the departments concerned are not yet in
possession of all the requisite data , and forecasting production in present
economic conditions is very uncertain .
Tonnage subject to the levy , and yield from a rate of levy of 0.01%.
                                   Production forecasts   Yield from levy rate
                                   on which the levy is   of 0.01%
             Product               calculated                (million ECU )
                                   (million tonnes )
     Brown coal briquettes and
     semi-coke derived from brown
     coal                                  4.1                    0.02
     Hard coal of all categories        197.7                     1.39
                 Coal - total                                     1.41
                                               4T
     Pig iron other than that
     used for making ingots                3.2                    0.04
     Steel in ingots                     106.0 (*)                 I . 98
     Finished products                    81.3                    0.71
                Steel – total                                     2.73
I
I
                GRAND TOTAL                                       4.14
  * Cautious estimate in view of the uncertainty currently surrounding the
     steel industry .
 ---pagebreak---                                     - 39 -
TITLE R 1.2 :  Interest :   other headings
1.   Legal basis and description
Resources deriving from income on investments and on loans against
non-borrowed funds will be determined when the Commission adopts the
balance sheet at 31 December 1982.     Under its Decision of 30 April 1 97 5 »
the Commission enters in the budget the interest available from the
previous financial year .
Fines : Articles 47 , 58 and 60 of the ECSC Treaty ( mainly ).
A breakdown of forecast resources based on the latest estimates is given
below :
   Titles                   Heading                            million ECU
   R 1.2       Interest on investments and loans
                                                                80
               against non-borrowed funds
   R 1.3       Fines and surcharges for late payment             5
   R 1.4       Miscellaneous revenue                            token entry
                                                         .             ....
3.   Explanation
The figure for interest revenue is based on an estimate of the resources
which the Commission will be in a position to release when it adopts th®
balance sheet at 31 December 1982 .
Prom an accounting point of view , revenue from the fines imposed by
the Commission under Article 58 of the ECSC Treaty should be regarded to
a certain extent as deferred resources , in view of the appeals made to
the Court of Justice .    It is vary difficult to forecast the amount which
will be collected in 1983 , especially since the legal proceedings in disputed
oases are likely to go on for one or two years .     It is proposed that only
those cases where recovery is in progress should be taken into consideration .
 On the basis of the information currently available , it is proposed that
 5 million ECU be entered under this heading .
 ---pagebreak---                                 - 40
CHAPTER R 2:   CANCELLATIONS OF COMMITMENTS WHICH WILL PROBABLY NOT BE
               IMPLEMENTED
1.  Legal basis and description
The provisions created in response to Commission aid decisions must be
given tangible form within a reasonable period of time by the contracting
of legal commitments .
The Commission 's Internal Rules for the drawing up and implementation of
the ECSC operating budget therefore provide that in the exceptional event
of undue delay at this stage the provisions will be cancelled .
The Rules also provide that once all parties have disoharged their
obligations under the legal commitment , any remaining part of the provision
will likewise be cancelled .
The amounts thus released become available again as resources for the
current financial year .
2.  Nature and breakdown
Save in the exceptional cases where decisions on the earmarking of funds
are not followed up within a reasonable period of time by legal commitments ,
any cancellation of earmarked funds normally indicates complete discharge
of the contract , agreed with the other contracting party .
The estimate of 5 million ECU shown in this chapter relates , in essence ,
to cancellations of allocations for conversion and resettlement aid .
Only a token entry would be needed for the other items which might be
involved ( cancellations of balances remaining in respect of contracts
which have been performed in full , delayed legal commitments , etc .).
3.  Explanation
It is difficult to estimate the rate of cancellation in respect of
resettlement programmes , as it depends on several factors such as negotiations
with the governments concerned . The estimated figure of 5 million ECU for
1983 is based on an average rate .
 ---pagebreak---                                      - 41 -
CHAPTER R 3 ;   REVALUATION OF ASSETS ASP LIABILITIES
This chapter , carrying a token entry , is to record the net effect of
changes in exchange rates during the financial year .
CHAPTER R 4 ;   UNUSED RESOURCES FROM THE FIXlffClAL YEAR 1982
This chapter , carrying a token entry , records any balance remaining from
the previous financial year ELS resources for the current financial year .
CHAPTER R *5 :  EXCEPTIONAL REVENUE
1    Legal basis
– Conclusions of the 717th Council meeting of 24 June 1981 ,
– Article 235 of the EEC Treaty ,
– Article 49 of 'the ECSC Treaty .
2,   Nature and breakdown
This chapter records the additional resources intended solely for financing
social measures in connection with the restructuring of the steel industry
( article B.2.2 ).  In 1981 the Member States made national contributions
amounting to 50 million ECU to the ECSC for this .
In 1982 , another 62 million ECU carried over from 1981 was transferred
from Chapter 65 of the General Budget to the ECSC .     A second transfer of
50 million ECU in respect of 1982 is expected before the end of the year .
In its preliminary draft budget for 1983 the Cossmission has proposed a
transfer of 50 million ECU from Chapter 65 of the General Budget .
2.   COVERING OF REQUIREMENTS NOT ENTERED IN TEE BIIK^T
Funds to cover requirements for the construction of subsidized housing are
obtained from :
– the resources made available for this in the former ECSC pension fund ;
– the resources in the special reserve .
These resources are made up of the repayments of loans already made and
fresh appropriations allocated to the special reserve .
The allocation to the special reserve of the additional resources required
will be decided when the Corns) issi on adopts the balance sheet at 31 December 19-32 .
 ---pagebreak--- 3.  SUMMARY OP RESOURCES AVAILABLE FOR 1983
The estimates of traditional resources other than levies amount to
90 million ECU ( interest available : 80 million ECU ; fines :  5 million
cancellations : 5 million ECU ). As the yield from a levy rate of 0.01$
has been estimated at 4*14 million ECU , the yield obiained from levies
can be estimated at 1 28 million ECU, assuming that the current rate of
0.31$ is maintained . The total ordinary resources available for 1983t
assuming that the levy rate remains unchanged , is thus estimated at
218 million ECU .
 ---pagebreak---                                                43
III .  DRAFT ECSC OPERATING BUDGET FOR 1983
       A.   COMMISSION APPROACH
                For the purposes of evaluating the draft budget for 1983 / the Commission
       considers that a price increase of 8.8 X should be taken into account to
       compare the figures for 1982 and those for 1983 .
                The revised forecast implementation of the operating budget
      for 1982 ( Annex A ) should also be taken into consideration .      The Commission
      has used the contingency reserve of 30 million ECU entered in the balance
      sheet at 31 December 1981            to cover a reduction in the likely yield from
       levies ( 19 million ECU ) and to increase the amounts earmarked for conversion
       ( from 40 to 43 million ECU ) and for research ( from 43 to 50 million ECU ).
               This 16.2 X increase in the Research chapter was the Commission 's
      response to the concern expressed in its aide-memoire on the draft budget
                  2                            . .   . .                               3
      for 1982          and underlined in Parliament 's resolution of 15 December 1981 .
               The main financial problem faced when preparing the ECSC budget for
      1983 was again that of balancing the budget in view of the serious difficulties
      currently affecting the industries , in particular the Community steel industry .
      In the social sector , these difficulties are reflected in the need to enter
      large amounts for the commitment of redeployment aid and for new temporary
      social measures ( aid for early retirement and aid for short-time working )
      approved by the Council on 24 June 1981 for the period 1981-84 as the
      social side of the Community 's steel policy .
             Published in July 1982 in ECSC' Financial Report N° 27 .
           2 C0M(81 ) 652 , 10.11.1981 , page 46 .
           30J C 11 , 18.1.1982, page 27 .
 ---pagebreak---                                    - 44 -
         It has been accepted that these social measures for the steel industry
  cannot be financed from the ECSC 's traditional resources .   To finance the
  aid of 50 million ECU to be committed in 1983 , the Commission therefore
  proposed to the budget authority in its preliminary draft budget for 1983
  that 50 million ECU be entered in Chapter 65 ( Contribution to the ECSC for
  social measures in connection with the restructuring of the steel industry ).
  The new measures will thus have no effect on the balance between the ECSC 's
 traditional requirements and resources .
         Since decisions on financing the new social aids are to be taken under
 the procedure for the general budget / the following remarks discuss only the
 problem raised by the balance between traditional requirements and
 resources .
        With overall resources of 218 million ECU / assuming the levy is kept
at its present rate , and taking into account the other unavoidable expenditure
 ( redeployment aid estimated at 100 million ECU/ administrative expenditure
fixed by the Council under Article 20 of the Merger Treaty at 5 million ECU
and aid for coking coal fixed at 6 million ECU by Commission decision under
Article 95 of the ECSC Treaty )/ the remaining funds available to meet research
and interest subsidy requirements would be 107 million ECU ( 218 - ( 100 + 5 + 6 ) = 107)i
        Additional resources could be obtained by raising the levy rate
( 4.14 million ECU for each increase of 0.01 X ).   However / the crisis affecting
the steel industry for the past few years will continue in 1983 and could
become even more serious .    In the coal industry/ there are still problems in
selling the coal produced and stocks are expected to increase further .
Under these circumstances the Commission therefore considers that it would
be wrong to raise the levy rate above the present 0.31 X.
 ---pagebreak---                                     - 45 -
 B.   FINANCING PROPOSALS
          The Commission 's proposals for the 1983 ECSC operating budget are
     tabulated in Annex D and are based on the following factors :
     - total resources of 268 million ECU / including special resources of
        50 million ECU in aid of the special social measures for steel ;
     - unavoidable expenditure' of 111 million ECU to be charged to the traditional
        resources of 218 million ECU :
        é    5 million ECU in administrative expenditure ;
                             • -
        . 100 million ECU in redeployment aid ;
             6 million ECU in aid to coking coal / and steel plant coke ;
     - 107 million ECU to be allocated to research expenditure and interest
        subsidies .
     As regards the division of the 107 million ECU between the two chapters
     concerned , the Commission considers that interest subsidies should be
     sustained in the present situation especially in connection with conversion /
    given the direct link with the creation of new jobs .      It therefore proposes
    that this chapter be given 53 million ECU/ of which 44 million ECU will
    be for conversion aid .
    The amount left for aid to research      is thus 54 million ECU .  It is
    proposed that     23 million ECU be devoted    to steel / 19.5 million ECU to
    coal and 11.5 million ECU to social research .     This amount is about 25 X
    higher than the original allocation for the current financial year .
    By way of conclusion , the Commission proposes that the 1983 ECSC operating
    budget be adopted at a total amount of 268 million ECU/ broken down as
    shown in Annex D.
    It therefore proposes that the levy rate be set at 0.31 % .
                                                                  \
C.  DRAFT BUDGET
    The draft budget established by the Commission and amounting to 268 million
    ECU is presented in Annex D.
                                               I
 ---pagebreak---                                                                                                                      ANNEX A
                                             OUTTURN OP THE ECSG OPERATING BUDGET FOR 1981
                                                                                                              ( million ECU )
             REQUIREMENTS                   BUDGET 1      OUTTURN                       RESOURCES
                                                                                                                   BUDGET
                                                                                                                               OUTTURN
                                            FIGURES                                                                FIGURES
OPERATIONS TO BE FINANCED PROM                                          RESOURCES OP THE FINANCIAL YEAR
CURRENT RESOURCES ( NON-REPAYABLE)
1.  Administrative expenditure                5            5            1 . Current resources                    167          168 . 5
2.  Sooial expenditure                      236          172.6              1.1 Yield from levy at 0.31#               127            126.6
    2.1 Aid for redeployment ( Art . 56 )         124           124         1 .2 Interest on investments and
    2.2 Social measures connected                                                on loans from non-borrowed
        with restructuring of steel                                              funds                                  40             40
        industry                                  112            48.6       1.3 Pines and surcharges for
3·  Aid for research ( Article 55 )          44           44                     delayed payment                                        1.9
    3*1 Steel                                       19            19        1 .4 Miscellaneous
    3.2 Coal                                        16            16    2.  Cancellation of commitments whioh
    3*3 Social                                       9             9        will not be implemented               25           27.7
4·  Interest subsidies                       32           33.2          3·  Unused resouroes carried over
    4·1 Investment ( Art . 54 )                      7             7        from the financial year I98O          11.4         11 .4
    4.2 Conversion ( Art . 56 )           ,         25            26.2      3.1 Interest subsidies                      10.7           IO .7
5«  Aid for coking coal and                                                 3.2 Miscellaneous                            0.7            0.7
    metallurgical coke ( Article 95 )         6            6            4.  Exceptional revenue                  112           48.6
6.  Revaluation of assets and                                           5·  Drawings on contingency
    liabilities                                            1.7              reserve                                7.6          7.6
          Sub-total                         323          262.5                         Sub-total                 323          263.8
          Surplus                                          1.3                         Deficit
          TOTAL - BUDGET                    323          263.8                         TOTAL - BUDGET            323          263.8
OPERATIONS FINANCED BY LOANS
                                                                        ORIGIN OF NON-BORROWED FUNDS
FROM NON-BORROWED RJNDS
                                                                        6.  Special reserve and former
7·  Subsidized housing                       11           11
                                                                            ECSC Pension Fund                     11           11
 Commission 's budget estimates at 10 November 1981 .
 ---pagebreak---                                                                                                                ANNEX 3
                                      FORECAST OUTTURN OF THE ECSC OPERATING BUDGET FOR 1982
                                                                                                                   (million ECU )
                                                Budget     Forecast                                              Budget Forecast
                REQUIREMENTS                                                           RESOURCES
                                                figure     outturn                                               figure outturn
  OPERATIONS TO BE FINANCED FROM CURRENT                            RESOURCES FOR THE FINANCIAL YEAR                        .
  RESOURCES ( NON-REPAYABLE )
  1 . Administrative expenditure                5        5          1 . Current resources
  2 . Social expenditure                      167      230.4            1.1 Yield from levy at 0.31 X             140      121
      2.1 Aid for redeployment (Art . 56)         117        117        1.2 Interest on investments and on         75       75
      2.2 Social measures connected with           50        113.4'          loans from non-borrowed funds
          restructuring of steel industry                               1.3 Fines and surcharges for late        token      -
  3 . Aid for research ( Art . 55 )            43       50                   payment                             entry
      3.1 Steel                             >      19
                                                                        1.4 Miscellaneous                        token
                                                              22
      3.? Cerst                                    14         17                                                 entry
      3.3 Social                                   10         11
                                                                    2 . Cancellation of commitments which will      3         5.5
                                                                        not be implemented
  4 . Interest subsidies                       47       50          3 . Revaluation of assets and liabilities    token
      4.1 Investment ( Art . 54 )                   7          7                                                 entry
      4.2 Conversion ( Art . 56 )                  40         43    4 . Unused resources carried over from       token      63.4
                                                                        1981                                     entry
  5 . Aid for coking coal and                   6        6
      metallurgical coke ( Art . 95 )                               5 . Exceptional revenue                        50        50
                                                                    6 . Drawings on contingency reserve                     26.5
                                              268      341.4                                                      268      341.4
      RESERVE                                                           RESERVE
      Any other aid                            25        -
                                                                        Customs duties                             25         -
      Research                                     21
      Interest subsidies                            4          -
                                              293      341.4                                                      293      341 .4
  OPERATIONS FINANCED BY LOANS FROM                                    ORIGIN OF NON-BORROWED FUNDS
 NON-BORROWED FUNDS
6 . Subsidized housing                         15       15              Special reserve and former ECSC
                                                                        Pension Fund                               15       15    I
         113.4 = 63.4 million ECU carried over from 1981 plus 50 million ECU for 1982 .
 ---pagebreak--- Information relating to levies
The latest available information on production and. the levy yield
for the current financial year is given below :
Levy yield for the period from January to June 1982 ( provisional estimate )
                                  Production
                                 serving as a         Yield
                                basis for the      per tonne     Levy yield
            Product             calculation of     at 0.31%
                                 the levy in       levy rate     million ECU
                                million tonnes
                                     (1 )             (2)            (3 )
 Brown-coal briquettes and
 semi-coke                                 2.0     0.11625          0.2
 All types of hard coal                   98-1     0.19725         19.3
      Total for coal                                               19.5
 Pig iron other than that
 required for the
 manufacture of ingots                     1 .8     0.36820         0.7
 Steel ingots                             62.7      0.51594        32.3
 Finished products                        48.0      0.24191        11 .6
      Total for steel                                              44.6
           GRAND TOTAL                                             64.1
 3 - (1 ) χ (2)
 ---pagebreak---                                                                                                                    ANNEX C
                                            ECSC BALANCE SHEET AT 30 JUNE 1982
                                                                                                            ...
                                                                                                                . million  ECU )
                ASSETS
                                                                                  LIABILITIES
 1 .  Cash in hand, balances with central                             1.  Bonds and coupons due but not yet
      banks                                    23.0                       presented for payment                      245.9
 2.   Claims on credit institutions           656.9                   2.  Long-term and medium-term debts          6 185.3
     - repayable on demand                           19.9
     - with agreed maturity dates or
        periods of notice                           637.0
3.   Debt securities held in portfolio        384.4                   3.  Other liabilities                            0.3
4.   Loans outstanding                     6 321.6                    4.  Accruals and deferred income               259.0
5.   Recoverable issuing costs and                                    5.  Commitments for ECSC operating
     redemption premiums                       56.9                       budget                                     742.8
6.   Bank deposits for bonds and coupons                              6.  Reserves                                   492.9
     due but not yet presented for payment   245.9
                                                                         A.   Guarantee fund                                300.0
                                                                         B.   Special reserve                               150.0
                                                                         C.   Former pension fund                            42.9
7.   Land and buildings                         0.4                  7.  Unallocated balance                          76.6
8.   Other assets                            134.1
9.   Accruals and deferred income            179.6
                                           8 002.8                                                                8 002.8
 ---pagebreak---                                                                                                                  ANNEX D
                                            DRAFT ECSC OPERATING BUDGET FOR 1983
                                                                                                              ( mi llion ECU )
             REQUIREMENTS                        PROPOSALS                           RESOURCES                      PROPOSALS
 OPERATIONS TO BE FINANCED FROM CURRENT                                 RESOURCES FOR THE FINANCIAL YEAR
 RESOURCES ( NON-REPAYABLE )
 1.   Administrative expenditure                   5                    1.   Current resources
 2.   Social expenditure                        150                          1.1  Yield from levy at 0.31%              128
      2.1 Aid for redeployment ( Art . 56 )            100                  1.2   Interest on investments and
      2.2  Social measures connected with                                         on loans from non-borrowed
           restructuring of steel industry              50                        funds                                  80
 3.   Aid for research ( Art . 55 )              54                         1.3   Fines and surcharges for
      3.1  Steel                                        23                        late payment                             5
      3.2  Coal                                         19.5                1.4 Miscellaneous                       token entry
      3.3  Social                                       11.5            2.  Cancellation of commitments
 4.   Interest subsidies                         53                         unlikely to be implemented                     5
      4.1  Investment ( Art . 54 )                       9              3.  Revaluation of assets and
      4.2 Conversion ( Art . 56 )     !                 44                  liabi li ties                           token entry
 5.   Aid for coking coal and                                           4.  Unused resources carried over
      metallurgical coke ( Art . 95 )             6                         from 1981                               token entry
                                                                        5.  Exceptional revenue                          50
                                               268                                                                     268
OPERATIONS FINANCED BY LOANS FROM                                      ORIGIN OF NON-BORROWED FUNDS
NON-BORROWED FUNDS
6.   Subsidized housing                          15                    6.   Special reserve and former
                                                                            ECSC Pension Fund                            15
3–                –
  In the event of resources exceeding requirements , the surplus will be allocated to interest subsidies for
  conversion ( Item B-4-2 ) .
                                                              V