CELEX: 51995PC0173
Language: en
Date: 1995-05-16
Title: Proposal for a COUNCIL REGULATION (EC) regulating compensation for reductions in the agricultural conversion rates of certain national currencies

COMMISSION OF THE EUROPEAN COMMUNITIES
                                             Brussels, 16.05.1995
                                             COM(95) 173 final
                              Proposal for a
                    COUNCIL REGULATION ŒC)
regulating compensation for reductions in the agricultural conversion rates
                      of certain national currencies
                     (presented by the Commission)
 ---pagebreak---                           EXPLANATORY MEMORANDUM
1. The monetary gaps between agricultural conversion rates and representative market
   rates have exceeded 5% since 24 February 1995 in the case of the
    Belgian/Luxembourg franc and since 16 March 1995 in the case of the German mark,
   the Dutch guilder and the Austrian schilling.
    Since 5 April 1995 the monetary gap for the Danish krone has also exceeded 5%
   compared with the average of the market rates for the 10 preceding days.
   In principle, this overrun of the threshold should entail an adjustment of the
   agricultural conversion rates so as to reduce the monetary gap by half. However, in
   the case of positive monetary gaps, and in accordance with Article 4 of Council
    Regulation (EEC) No 3813/92, delay periods to confirm the monetary situation have
   been introduced before the revaluation mechanism is actuated. The purpose of
   inserting a delay before the agricultural conversion rates are reduced is to prevent
   measures which would have multiannual effects from being triggered, on the basis
   of unstable monetary developments which on their own could reduce the positive
   monetary gaps to" back below the 5% threshold. Thus for the German mark and the
   Austrian schilling, market rates recorded during the reference period ending on
   24 April 1995 produced an average of less than 5%. By contrast, for the other
   currencies referred to above, large monetary gaps persisted, in some cases for up to
   more than three months. In the period from February to June 1995 the budgetary
   impact of this delay in Teducing the gaps for the currencies in question will be on the
   order of ECU 10 million to ECU 15 million per month.
   Over and above the consequences for the Community budget, difficulties have arisen
   for some economic operators as a result of changes in trade flows brought about by
   the maintenance of agricultural conversion rates at unchanged levels, and uncertainty
   as regards possible adjustments to the rates. These agrimonetary difficulties have
   come on top of the wider monetary problems created by changes in the value of the
   dollar and by tfoe sharp devaluation of some Community currencies.
2. In accordance with the agrimonetary system currently in force, a reduction in
   agricultural conversion rates opens up the possibility for the Member States affected
   to introduce compensilery measures. If there is a significant fall in the agricultural
   conversion rate, .they.-'cai) r&<pest two pre-estafolished mechanisms to be operated;
   -      Pursuant ':*o Article T of Heguiation (EEC) No 3813/92, aid payments per
          hectare or per livestock unit, and aid of a structural of environmental nature,
          can be increased m ecus so as to prevent any fall in their value in national
          currency. Since they are increased in ecus, they affect all Member States, even
          those whose currencies have been devalued.
          Pursuant to Article .8 of Regulation (EEC) No 3813/92, compensatory aid for
          income losses due to agrimonetary causes can be granted degressively over
          three years, with Community part-financing, which as a rule is 50%. in the cases
          at issue here.
 ---pagebreak---     The cost to the Community of implementing these pre-established mechanisms could
    be of the order of ECU 1 000 million in 1996 and 1997, faïhVg gradually to produce
   permanent expenditure of approximately ECU 750 millier, per annum from 1999.
   Given the appropriation requirements of the EAGGF Guarantee Section for 1996,
   additional agrimonetary expenditure of the order of ECU 1 000 million is out of the
   question.
3. In general, the high level of monetary gaps is based at present on a money market
    situation which has lasted for almost three months. As a result, if gaps of more than
    5% were to be confirmed, under the rules the agricultural conversion rates in question
    should be reduced so as to alleviate or eliminate their effects on trade flows. The
   destabilising effects on markets become more marked the longer the gaps are
   maintained.
   However, Articles 7 and 8 of Regulation (EEC) No 3813/92 cannot be applied as
   they stand, mainly for budgetary reasons. Article 9 provides the basis for a derogation
   from these two Articles by stipulating that in the event of a substantial revaluation,
   the Council, acting by a qualified majority on a proposal from the Commission, is to
   decide on all necessary measures. It also provides, primarily to comply with
   obligations arising out of the GATT Agreement and budgetary discipline, that such
   measures may involve derogations on aid and the amount by which the monetary
   gaps are dismantled, although these derogations must not result in the threshold being
   widened.
4. If, for the reasons outlined above, unconditional use of Article 7 must be avoided,
   compensation on the lines of the system provided for in Article 8 appears to be the
   appropriate measure to alleviate the effects of a revaluation of the agricultural
   conversion rates in question. To implement such an approach, the Commission's
   proposal is based on the three following principles:
          the compensatory measures must to used to meet actual income losses in the
          light of price movements over the past few years;
          the compensatory measures must not increase resource requirements for the
           EAGGF beyond the possibilities laid down by budgetary discipline;
          the compensatory measures must not lead to overcompensation and, in general
          and mainly, must therefore be applied degressively and as a temporary
          measure.
   Thus, the overall amount of compensatory aid proposed for each Member State
   concerned has been established in accordance with agricultural income statistics for
   1994, on the basis of the following factors:
   (a)    the reduction in agricultural conversion rates will be reflected directly in
          intervention prices and therefore in the value of cereals, sugar beet, beef/veal
          and milk products. For the other agricultural produce of the Member States in
          question, no intervention prices exist and the effect of the agrimonetary
          situation on market prices has been very slight or zero.
 ---pagebreak---           In addition, the fall in the value of feed grains represents a fall in input costs
          in the livestock production sector.
    (b)   Most aid granted to farmers is directly affected by the agrimonetary
          developments.
          However, the aids awarded as part of the reform of the common agricultural
          policy were determined on the basis of a fall in Community prices which has
          not been followed by market prices. In the particular case of oilseeds, the
          reduction in aid per hectare has been considerably smaller than the rise in
          market prices.
          Thus, in the case of cereals, oilseeds, protein plants, flax, beef/veal and the set-
          aside scheme, the agrimonetary reduction in aid in national currency is not a
          real income loss.
          As a result, the aid to farmers which would be taken into account for estimating
          income losses consists of aids per hectare other than that referred to in the
          preceding paragraph, aids or premiums of a structural nature, and aid in the
          sheepmeat, tobacco and seeds sectors.
   The overall amount of compensatory aid thus calculated represents the impact on total
   agricultural income of the Member State in question for a 1% reduction in the
   agricultural conversion rate.
   However, since agrimonetary variations of less than 2% do not have any detectable
   significant impact on market prices, even if there is an intervention mechanism in
   operation, it is proposed not to award any compensatory aid for the first
   one percentage point of reduction in the agricultural conversion rate.
   In addition, in the case of the Belgian/Luxembourg franc and the Danish krone, the
   effects of the devaluations of those currencies in 1993 still persist. In accordance with
   Article 1(e) of Regulation (EEC) No 3813/92, reductions in agricultural conversion
   rates are substantive only in the case of rates less than BFR/LFR 40.4192 or
   DKR 7.53835. Consequently, the effects on incomes of a fall in agricultural
   conversion rates are considered to be compensated a priori by 1.015 percentage
   points in the case of Belgium and Luxembourg and 2.626 percentage points in the
   case of Denmark.
5. In accordance with the principle laid down in Article 8 of Regulation (EEC) No
   3813/92, the compensatory aid is to be granted degressively over three years and the
   Community contribution to the financing thereof is to be adjusted in line with
   requirements and regional possibilities.
   In order to take account of the special importance of certain amounts affected by the
   reduction in the agricultural conversion rate, part of the income loss to be offset
   during the three years the aid is granted will be impossible to reduce and this is to
   be financed fully by the Community.
 ---pagebreak---      Furthermore, should an examination of the situation indicate a continuing loss of
     agricultural income, the period during which the aid is granted could be extended.
     The supplement to be determined as and when the need arises would be limited to
    two additional annual tranches, the amount not exceeding that granted under the last
     tranche.
6. The aid of a structural or environmental nature fixed by the Council and granted
     under the accompanying measures » of the CAP reform generally fall within
     multiannual programmes. In order to avoid calling into question programmes already
     agreed, it is proposed to extend the application of Article 6(3) of Regulation (EEC)
    No 3813/92 without reducing the financing of the annual tranches of the aid granted
    prior to 1996.
On the basis of the principles set out above and the monetary situation on 25 April 1995,
the financial impact of the proposal on the Community budget in relation to the
preliminary draft budget for 1996 results in additional expenditure of ECU 11 million for
1996, which is compatible with financial and international constraints.
The measures to be taken necessarily involve the Community level since this is an area
which is the exclusive responsibility of the Community. The approach is in line with the
general objective of applying the common agricultural policy in a uniform manner and
adapts the provisions already planned by the Council to take account af the current
special situation.
 ---pagebreak---                                        Proposal for a
                        COUNCIL REGULATION (EC) No ..../..
                                           of.......
    regulating compensation for reductions in the agricultural conversion rates
                               of certain national currencies
  THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community,
 Having regard to the proposal from the Commission,
Having regard to Council Regulation (EEC) No 3813/92 of 28 December 1992 on the
unit of account and the conversion rates to be applied for the purposes of the common
agricultural policy , as last amended by Regulation (EC) No 150/95 , and in particular
Article 9 thereof,
Whereas there is a risk of substantial reductions in the agricultural conversion rates for
the Belgian/Luxembourg franc, the Danish krone, the German mark, the Dutch guilder
and the Austrian schilling; whereas monetary gaps greater than 5% have already been
recorded for these currencies over several reference periods; whereas it is necessary to
take steps at Community level to prevent distortions in the implementation of the
common agricultural policy due to monetary causes;
Whereas, in order to curtail the risk of distortions to trade flows caused by the monetary
gaps of the said currencies, these gaps should be reduced if they prove to be still over 5%
by the end of the reference periods introduced to confirm the monetary situation;
1
    OJNoL387, 31.12.1992, p. 1.
2
    O J N o L 2 2 , 31.1.1995, p. 1.
                                          6
 ---pagebreak--- Whereas Article 9 of Regulation (EEC) No 3813/92 provides for a Council decision, in
the event of an appreciable re-evaluation, primarily to comply with obligations under the
GATT agreement and budgetary discipline, on all necessary measures, which may involve
derogations from the provisions of the said Regulation concerning aid and the amount by
which the monetary gaps are dismantled, without, however, resulting in the threshold
being extended; whereas the measures provided for in Articles 7 and 8 of the said
Regulation cannot be applied as they stand; whereas, however, compensation for losses
of income caused by a reduction in agricultural conversion rates needs to be provided,
while taking into account on a flat-rate basis the effects of the 1993 devaluations, the
movements of prices in real terms for products qualifying for compensatory payments as
part of the reform of the common agricultural policy, and the acknowledged sensitivity
of market prices and incomes to agrimonetary adjustments;
Whereas the Community financial assistance must be adjusted having regard to the
situation in the Community regions covered by Objective 1 within the meaning of
Council Regulation (EEC) No 2052/88 of 24 June 19883 and of the special importance
of certain amounts affected by the reduction in the agricultural conversion rates;
Whereas the multiannual aid granted under the accompanying measures for the reform
of the common agricultural policy under Council Regulations (EEC) Nos 2078/92 ,
2079/925 and 2080/926 of 30 June 1992 may not decrease in terms of national currency
without the programmes concerned being called in to question;
Whereas there should be provision for extending the compensatory aid granted over three
successive twelve-month periods should the duration of the effects of the reduction in the
agricultural conversion rates in forthcoming years so require,
HAS ADOPTED THIS REGULATION:
3
     OJNoL     185, 15.7.1988, p. 9.
4
     OJ No L   215, 30.7.1992, p. 85.
5
     OJ No L   215, 30.7.1992, p. 91.
6
     OJ No L   215, 30.7.1992, p. 96.
                                            *
 ---pagebreak---                                          Article 1
This Regulation shall apply in the event of reductions in agricultural conversion rates in
accordance with Article 4 of Regulation (EEC) No 3813/92 introduced before 1 January
1996.
                                         Article 2
1. In the event of a reduction in agricultural conversion rates as referred to in Article
    1, the Member State affected may make compensatory payments to farmers in three
    successive tranches lasting 12 months each, starting with the month following the
    relevant reduction in the agricultural conversion rate. These compensatory payments
    shall not take the form of aid linked to production, other than production during a
    stipulated period prior to introduction of the compensation scheme; they shall not
    favour any particular type of production or be dependent on production subsequent
    to the period stipulated.
2. The total compensatory aid in the first twelve-month tranche shall not be more than:
          ECU 19.9 million in the case of Belgium,
          ECU 21.7 million in the case of Denmark,
          ECU 136.1 million in the case of Germany,
          ECU 1.5 million in the case of Luxembourg,
          ECU 40.6 million in the case of the Netherlands,
          ECU 21.5 million in the case of Austria,
    to be multiplied by the reduction in the agricultural conversion rate referred to in
    Article 1 expressed as a percentage, less 2.015 percentage points in respect of the
    Belgian/Luxembourg franc, 3.626 percentage points in respect of the Danish krone
    and 1.000 percentage points in respect of the currencies of all other Member States.
3. The amounts paid out in the second and third tranches shall not exceed the amount
   paid out in the previous tranche in each case, less at least a third of the amount paid
    out in the first.
                                            Ô
 ---pagebreak---     However, total compensatory aid under each tranche may always be granted up to:
           ECU 1.9 million in the case of Belgium,
           ECU 6.4 million in the case of Denmark,
           ECU 40.7 million in the case of Germany,
           ECU 0.1 million in the case of Luxembourg,
           ECU 2.1 million in the case of the Netherlands,
          ECU 4.7 million in the case of Austria,
   to be multiplied by the reduction in the relevant agricultural conversion rate.
4. The Community contribution to financing these compensatory payments shall be:
          75% of the amounts actually paid out to farmers in Objective 1 regions within
          the meaning of Article 1 of Regulation (EEC) No 2052/88;
          50% of the amounts actually paid out in all other cases.
   However, the Community shall finance 100% of the total compenattory aid referred
   to in the second subparagraph of paragraph 3.
   For the purposes of the financing of the common agricultural policy, this contribution
   shall be considered to form part of the assistance designed to regularize agricultural
   markets.
5. The Commission shall adopt detailed rules for applying this Article in accordance
   with the procedure provided for in Article 12 of Regulation (EEC) No 3813/92.
                                        Article 3
1. Article 6(3) of Regulation (EEC) No 3813/92 shall apply to aid granted before
    1 January 1996 under Regulations (EEC) Nos 2078/92, 2079/92 and 2080/92.
2. Articles 7 and 8 of Regulation (EEC) No 3813/92 shall not apply to the reductions
   in agricultural conversion rates referred to in Article 1 of this Regulation.
 ---pagebreak---                                          Article 4
Before the end of the third period during which the compensatory aid is granted, the
Commission shall examine the effects on agricultural income of the reductions in
agricultural conversion rates as referred to in Article 1.
Where it is established tint income losses are likely to continue, the Commission may,
in accordance with the procedure laid down m Article 12 of Regulation (EEC) No
3813/92, extend the possibility of granting compensatory aid as provided for in Article
2 by a maximum of two additional twelve-month tranches, the maximum amount per
tranche being equal to that granted in the third tranche.
                                         Article 5
This Regulation shall enter into force on 3 June 1995.
This Regulation shall be binding in its entirety and directly applicable in all Member
States.
Done at         ,                                       For the Council
                                          /o
 ---pagebreak---               FINANCIAL STATEMENT
1.       BUDGET HEADING : 322 (390 in 1996) and virtually all lines of the EAGGF Guarantee
                                                                                       APPROPRIATIONS : p.m. (article 322)
2.       TITLE
         Council Regulation fixing compensation relating to reductions in the agricultural conversion rates for certain currencies
         LEGAL BASIS :              Article 9 of Regulation (EEC) No 3813/92
         AIMS :
         Fixing of a degressive aid, cofinanccd by the Community budget, compensating the income loss of producers following the
         reduction of agricultural conversion rates
5.       FINANCIAL IMPLICATIONS                                       PERIOD OF             CURRENT               FOLLOWING
                                                                      12 MONTHS           FINANCIAL            FINANCIAL YEAR
                                                                                           YEAR (95)                    (96)
                                                                        Mio ECU              Mio ECU                 Mio ECU
5.0      EXPENDITURE CHARGED TO
         - THE EC BUDGET
           (REFUNDS/INTERVENTIONS)                                                             p.m.                    + 11
         - NATIONAL ADMINISTRATION                                                                                     + 109
         -OTHER
51       REVENUE
         - OWN RESOURCES OF THE EC
           (LEVIES/CUSTOMS DUTIES)
         - NATIONAL
5.2      METHOD OF CALCULATION :
6.0      CAN THE PROJECT BE FINANCED FROM APPROPRIATIONS ENTERED IN THE RELEVANT
         CHAPTER OF THE CURRENT BUDGET ?                                                                          YES /-NO
6.1      CAN THE PROJECT BE FINANCED BY TRANSFER BETWEEN CHAPTERS OF THE
         CURRENT BUDGET ?                                                                                         YES / NO
6.2      WILL A SUPPLEMENTARY BUDGET BE NECESSARY ?                                                               YES / NO
6.3      WILL FUTURE BUDGET APPROPRIATIONS BE NECESSARY ?                                                         YES/NO
OBSERVATIONS :
In the present situation, assumptions must be made in order to estimate the financial impact of this proposal.
The calculations are based on the monetary gaps of 25 April 1995, in relation to the representative market rates of the preceding 10
days and arc 6.899 for the BLF, 5.984 for the DKR, 5.818 for the HFL, 5.214 for the DM, 5.221 for the Os.
On the basis of the monetary gaps referred to above and taking account of the franchises, the cost to the budget for these 6 Member
Slates would be 253 Mio ECU for 1996.
The cost of the non-reduction in the agricultural conversion rates for the accompanying measures may be estimated at a maximum
of 7 Mio ECU for 1996. This amount should be considered as maximum since for certain measures and certain programmes, the
amounts fixed remain below the ceilings.
It sould be noted that the reduction in the ACR for the Member States concerned also leads to a saving under the DR which, for all
of the chapters of the EAGGF Guarantee, may be estimated at about 249 Mio ECU compared to the PDB 96.
This measure therefore leads to a saving estimated at 11 Mio ECU in 1996.
                                                              I)
 ---pagebreak---                                                                    ISSN 0254-1475
                                                            COM(95) 173 final
                                              DOCUMENTS
EN                                                                            «3
                                     Catalogue number : CB-CO-95-216-EN-C
                                                             ISBN 92-77-89000-2
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