[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 20.1.2006

SEC(2006) 83 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

on EAGGF Guarantee Section expenditure Early warning system No 12/2005

TABLE OF CONTENTS

1. PROVISIONAL UTILISATION OF APPROPRIATIONS 3

2. COMMENTS ON THE IMPLEMENTATION OF THE 2005 BUDGET 3

3. CONCLUSIONS 5

1. PROVISIONAL UTILISATION OF APPROPRIATIONS

The uptake of appropriations under heading 1 of the budget amounted to EUR 48 888.2 million, i.e. 98.4% of appropriations. This is a net amount after deduction of amounts clawed back through the financial corrections of the clearance of EAGGF-Guarantee’s accounts and through the suspensions and reductions of advances imposed in the course of the budget year.

The annexed table presents the 2005 budget’s provisional utilisation of appropriations for the period 16 October 2004 to 15 October 2005. The final implementation figures will be only known after 31 December 2005 because the Commission can still make direct payments by that date. By comparison to the initial budget appropriations, this implementation shows an overall under-execution of approximately– EUR 788.4 million broken down as follows:

- for sub-heading 1a, it amounts to – EUR 725.9 million, and

- for sub-heading 1b, it amounts to – EUR 62.6 million.

2. COMMENTS ON THE IMPLEMENTATION OF THE 2005 BUDGET

The 2005 budget’s provisional implementation for the most significant articles is influenced by the following factors (NB: in parenthesis, the 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

For subheading 1a, the budget’s appropriations were under-executed for the animal products sector while they were over-executed for the plant products sector:

- the over-execution for the plant products sector amounted to EUR 335.7 million and mainly involved cereals, arable crops, textile plants and direct aids of a horizontal nature;

- the under-execution for the animal products sector amounted to– EUR 795.3 million and mainly involved milk and pigmeat.

However, the execution pattern was not homogeneous within these sectors. Over/under execution involved mainly the following articles:

2.2.1. Market measures on cereals (+ EUR 270.6 million)

This over-implementation results from the increased quantities of cereals going into public storage following the over-abundant 2004/05 cereals harvest whereby approximately 13.9 Mt of cereals entered public storage as opposed to the hypothesis of 2.6 Mt covered by the credits made available by the Budgetary Authority.

2.2.2. Direct payments for arable crops (+ EUR 173.5 million)

This over-execution is due to the fact that payments made by the Member States for the area aids for cereals were higher than the credits accorded by the Budgetary Authority which, at the time of adoption of the budget, had reduced the credits requested by the Commission for this measure.

2.2.3. Textile plants (+ EUR 59.6 million)

This over-execution is due to the fact that, because of the higher quantities of cotton, Member States made payments which were higher than the credits accorded by the Budgetary Authority which, at the time of adoption of the budget, had reduced the credits requested by the Commission for this measure.

2.2.4. Fruits and vegetables (– EUR 65.6 million)

This under-implementation is the result of favourable conditions in the fruits and vegetables market where lower quantities of fruits and vegetables were withdrawn from the market, compared to the quantities retained in the budget, and where the rate of aid paid for bananas was lower than the one retained in the budget as a result of their increased market price.

2.2.5. Other plant products and measures (– EUR 136.0 million)

This under-implementation result from a slowdown in the rhythm of payments of the aids for dried fodder as well as from lower payments made by Member States for the various POSEI programmes.

2.2.6. Direct aids of a horizontal nature (+ EUR 65.0 million)

This over-execution of appropriations for the Simplified Area Payments Scheme (SAPS), which involves eight out of the ten new Member States, is due to the double rate effect arising from the payment of aids in appreciating, against the Euro, national currencies by these Member States which do not participate in the common currency.

2.2.7. Milk and milk products (– EUR 1 049.3 million)

This under-implementation result from the lower expenditure incurred for the different measures due to the favourable internal and external dairy market conditions. These conditions 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 budget. Furthermore, the milk 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.

2.2.8. Beef and veal (+ EUR 288.1 million)

This over-execution result from the increased number of 2004 animal premiums paid by the Member States as opposed to the number retained in the budget.

2.2.9. Conformity clearance of accounts (– EUR 169.9 million)

This amount is considered as a receipt and its increase is due to the increase in the amounts clawed back from the Member States as a result of the conformity clearance of accounts decisions taken by the Commission within the budget year.

2.3. Sub-heading 1b – Rural Development (– EUR 62.6 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.

By the time of writing this report, all commitment and nearly all payment appropriations foreseen in the budget for the transitional instrument, which is implemented on the basis of differentiated appropriations, have been made.

The current under-execution involves the EAGGF-Guarantee’s rural development commitment appropriations for the EU-15 and it is the result of under-implementation of certain rural development schemes such as the early retirement (new system), agri-environment (new system) and forestry (new system).

3. CONCLUSIONS

In view of the under-spending explained above, amounting to – EUR 725.9 million for sub-heading 1a, the Commission proposed, through the submission of Amending Budget No 8/2005, to the Budgetary Authority the reduction of the EAGGF-Guarantee’s appropriations for this sub-heading by EUR 650.0 million. This Amending Budget was adopted by the plenary session of the European Parliament in December 2005.

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