[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 16.12.2005

SEC(2005) 1739 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

on EAGGF Guarantee Section expenditure Early warning system No 8–11/2005

TABLE OF CONTENTS

1. INTRODUCTION 3

2. COMMENTS ON THE IMPLEMENTATION OF THE 2005 BUDGET 3

3. CONCLUSIONS 5

1. INTRODUCTION

The annexed table presents the budget’s actual implementation, for the period 16 October 2004 to 30 September 2005, compared to the expenditure profile determined by the indicator which was established on the basis of the dispositions of Council Regulation (EC) No 2040/2000[1] of 26 September 2000 on budgetary discipline.

2. COMMENTS ON THE IMPLEMENTATION OF THE 2005 BUDGET

Hereafter follows a brief commentary on the most significant divergences between the actual and the level of implementation pointed out by the indicator for the various sectors of the 2005 budget (NB: In parenthesis, the current level of over (+) or under (–) execution is presented).

2.1. Monetary factors

The dollar/euro rate

The expenditure incurred in the aforementioned period takes account of the movement in the dollar/euro rate. For a large part of export refunds for agricultural products, particularly for cereals and sugar, and of some internal aids such as aid for cotton, expenditure is influenced by the euro/dollar rate.

The budget adopted by the Budgetary Authority was based on the appropriations requested in the 2005 PDB which was drawn up on the basis of the average parity rate of EUR 1 = $ 1.25. It should be noted that for the period 1 August 2004 to 31 July 2005 the average parity rate was approximately equal to EUR 1 = $ 1.27, i.e. approximately 2% above the rate used for the establishment of the 2005 PDB.

2.2. Subheading 1a – Market factors

2.2.1. Market measures on cereals (+ EUR 169.1 million)

There will be a significant over-implementation of this sector’s appropriations as a result of the increased quantities of cereals going into public storage following the over-abundant 2004/05 cereals harvest. Indeed, at the time of this report, approximately 13.9 million t of cereals have entered public storage as opposed to the hypothesis of 2.6 million t retained in the 2005 PDB.

2.2.2. Direct payments for arable crops (+ EUR 192.8 million)

Following an enquiry as to the Member States’ expected payments, based on their communications with regard to the parameters underpinning the implementation of this scheme, the Commission estimates that an over-execution of approximately EUR 200.0 million compared to the 2005 PDB’s available appropriations will be realised by the end of the budget year.

2.2.3. Sugar (+ EUR 28.1 million)

In the course of the budget year significant quantities of sugar entered public storage. At the time of writing this report, approximately 724 000 t are still in store and they are expected to still be in store by the end of the budget year. Therefore, the Commission expects that, despite the slower rhythm of export refunds payments, there will be an over-implementation of this article’s appropriations.

2.2.4. Olive oil (+ EUR 115.0 million)

There will be an over-implementation of this article’s appropriations as a result of the payment of previous marketing years’ balances by the Member States. However, the estimated over-implementation is expected to be much lower than the current level shown in September.

2.2.5. Textile plants (+ EUR 86.5 million)

The Commission took its decision on the final rate of aid for cotton. The resulting expenditure for cotton is expected to be approximately EUR 67.0 million higher than the amount retained in the 2005 PDB for this measure. Therefore, the current size of over-implementation is expected to be temporary.

2.2.6. Fruit and vegetables (– EUR 80.3 million)

The Commission currently expects that there will be savings as a result of favourable conditions in the fruit and vegetables market. Indeed, the quantities of fruit and vegetables withdrawn from the market are expected to be much lower compared to the quantities retained in the 2005 PDB. In addition, favourable developments have led to increases in the market price for bananas, therefore, leading to reductions in the rate of aid paid for this product. However, the increase in the granting of operational funds for producer organisations observed in the course of the year is expected to lower these savings by the end of the budget year.

2.2.7. Other plant products and measures (– EUR 117.7 million)

There will be an under-implementation of this article’s appropriations as a result of the slowdown observed in the rhythm of payments of the aids for dried fodder. Furthermore, certain Member States have not been keeping up with their intended payments for the various POSEI programmes, thus, further accentuating this article’s expected under-implementation.

2.2.8. Direct aids of a horizontal nature (+ EUR 64.3 million)

As it has been already stated in EWS report No 6/2005, there will be an over-execution of appropriations for the Simplified Area Payments Scheme (SAPS), which involves eight out of the ten new Member States. This will be due to the double rate effect arising from the payment of aids in national currency by these Member States, non-participating in the common currency.

2.2.9. Milk and milk products (– EUR 988.6 million)

The favourable internal and external market conditions have allowed the Commission to reduce the level of export refund rates and of internal market aid rates for the disposal of the different products of this sector compared to the levels retained in the 2005 PDB. This situation has lowered expenditure for the different measures of this sector, thus, leading to savings in this sector. Furthermore, the super-levy was collected for a total excess quantity of more than 1.0 mt of milk compared with the quantity of 0.25 million tonnes in the budget, thus, further increasing the savings in this sector.

2.2.10. Beef and veal (+ EUR 304.6 million)

The Commission agrees with the over-execution which the indicator keeps showing in this sector and considers that this will continue to the end of the budget year as a consequence of the payments for the 2004 animal premiums.

2.2.11. Conformity clearance of accounts (– EUR 499.9 million)

As already pointed out in the EWS report no 6/2005, an increase in the amounts clawed back from the Member States, of approximately – EUR 170.0 million, is expected by the end of the budget year as a result of the conformity clearance of accounts procedure.

2.3. Sub-heading 1b – Rural Development (– EUR 25.8 million)

The 2005 commitment appropriations for rural development (EU-15) and for the transitional instrument for the new Member States were set at the ceiling for this subheading.

All appropriations have been committed for the transitional instrument which is implemented on the basis of differentiated appropriations. By the end of September 2005, payments of EUR 1 167.1 million had been made out of the transitional instrument’s payment appropriations of EUR 1 369.4 million retained in the budget.

The slight current under-execution involves the EAGGF-Guarantee’s rural development commitment appropriations for the EU-15 and it is expected that it could persist to the end of the budget year.

3. CONCLUSIONS

For sub-heading 1a, the uptake of appropriations for the Member States' expenditure from 16 October 2004 to 30 September 2005 amounted to EUR 41 574.4 million, i.e. 97.1% of available appropriations. For this period, the under-spending of the budget’s appropriations when compared to the indicator amounted to approximately–EUR 524.7 million. This is mainly attributable to the animal products’ sector while the plant products’ sector showed an over-execution of the budget’s appropriations. At this point in time, the Commission considers that the trends as to the direction shown by the indicator for both the plant products’ sector (over-execution of appropriations) and for the animal products’ sector (under-execution of appropriations) will continue and will result to a higher overall under-execution by the end of the budget year.

For sub-heading 1b, the uptake of appropriations for the Member States' expenditure from 16 October 2004 to 30 September 2005 amounted to EUR 4 896.2 million, i.e. 71.6% of available appropriations. For this period, the under-spending of the budget’s appropriations when compared to the indicator amounted to approximately– EUR 44.2 million. At this point in time, significant expenditure is expected to be made by the Member States in October 2005.

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[1] OJ L 244, 29.9.2000, p. 27.