52001DC0064

REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT on progress in implementation of the specific measures for the smaller Aegean islands in 1996 and 1997

TABLE OF CONTENTS

1. Introduction

2. Measures provided for in Regulation (EEC) No 2019/93

3. Progress in implementation of the measures

3.1. Specific supply arrangements

(1) Yoghurt

(2) Sugar

(3) Wheat flour

(4) Feedingstuffs

(5) Fruit and vegetables

3.2. Measures to support local products

(1) Livestock

(2) Milk products

(3) Fruit, vegetables and flowers

(4) Potatoes

(5) Wine sector

(6) Olive groves

(7) Honey

4. EAGGF Guarantee Section expenditure on implementation of the measures

5. Derogations applicable to structural measures

6. National system of controls

7. Evaluation report

8. Economic Impact

9. Conclusions

ANNEX 1 Regulations adopted at 31 December 1995

1. Framework Regulation

2. Detailed rules of application

(1) Specific supply arrangements:

(2) Measures to support local products

3. Derogations applicable to structural measures

ANNEX 2 Administrative acts adopted to implement the measures

1. Specific supply arrangements

2. Measures to support local products

3. Derogations applicable to structural measures

ANNEX 3 Aid for supply - summary table

ANNEX 4 Summary table - aid for local production

PREFACE

This document combines both the annual report on the implementation of the specific agricultural measures applied in the Aegean islands for the years 1996 and 1997 as well as a general report on the impact these measures had on the economic situation of the islands.

These two reports are foreseen by Article 15(1 and 2) of Regulation (EEC) No 2019/93.

1. Introduction

The Rhodes European Council of 2 and 3 December 1988 recognised the specific socio-economic problems affecting certain island regions of the Community.

In line with the conclusions of the aforementioned European Council and in compliance with its commitments, the Commission undertook a general study of the specific problems of the Aegean islands in partnership with the Greek authorities, which resulted in the drafting of an interim Commission report [1] on progress in the study. This study phase enabled the Commission to submit a final report [2], accompanied by suitable proposals, defining the overall strategy and practical means of solving the problems of the Aegean islands.

[1] SEC(92) 36 final of 13 January 1992.

[2] COM(92) 569 final of 23 December 1992.

The final report outlined the Community's response and enabled the Commission, in the agricultural field, to submit its regulatory proposals designed to draw up a framework of agricultural measures to be financed by the EAGGF Guarantee and Guidance Sections.

The proposed measures were intended to encourage the economic and social development of small islands (less than 100 000 inhabitants) featuring a difficult geographical situation and structural backwardness in relation to other regions of the Community.

The difficulties experienced by such islands in kickstarting their economic and social development stem from their insularity, remoteness, small land area, and difficult relief and climate.

In view of the islands' specific problems, the Commission proposal contemplated a series of multiannual and multisectoral measures designed to facilitate supplies, provide financial support for production with a view to improving the islands' self-sufficiency, and improve their agricultural structures and the living conditions of their inhabitants.

The Council followed up the Commission proposals by adopting Regulation (EEC) No 2019/93 [3].

[3] OJ L 184, 27.7.1993, p. 1.

The Commission quickly adopted all the regulations needed to implement the measures planned, so making their implementation possible as of 1993, but the administrative procedures for actual execution and the necessary adaptation of the economic operators to the new mechanisms introduced meant that only a small number of measures in support of local products could be executed in 1993. In 1994 all the measures were implemented except for that relating to the development and/or diversification of production and/or improvement of the quality of the fruit, vegetables and flowers, which could not be implemented in 1995 either, owing to a lack of personnel in the national administration.

In accordance with Article 15(1) of Regulation (EEC) No 2019/93, the Commission is required to present an annual report on the implementation of the measures planned.

In 1996 the Commission presented the first report to Parliament and the Council on the implementation of the programme during 1993 and 1994 (COM(96) 387 final).

In 1998 the Commission presented the second report to Parliament and the Council on the implementation of the programme during 1995 (COM(1998) 292 final).

This report covers the implementation during 1996 and 1997.

The late preparation of the reports is due to the national administration's difficulties in obtaining all the information needed to compile them from regional offices in the islands.

In accordance with Article 15(2) of Regulation (EEC) No 2019/93, the Commission is required to present a general report on the economic situation of the Aegean islands, showing the impact of the measures implemented. To this purpose an evaluation report was commissioned and carried out by an independent consultant (Speed Ltd) and its results are shown in points 7 and 8 below.

2. Measures provided for in Regulation (EEC) No 2019/93

The Regulation introduces:

- a set of specific market measures with expenditure to be borne by the EAGGF Guarantee Section (essentially specific supply arrangements and aid for certain local products), for which specific headings were included in the Community budget for a total of EUR 25 million in 1996 and EUR 24,3 million in 1997 (EUR 21 million and EUR 20,4 million under heading B1-1833 for plant products in 1996 and 1997 respectively, and EUR 4 million and EUR 3,9 million under heading B1-2513 for livestock products for 1996 and 1997 respectively),

- a series of derogations needed in the structural field, in order to facilitate EAGGF Guidance operations. However, additional amounts were not entered in the budget for these derogations, the expenditure being covered by EAGGF Guidance appropriations under the CSF.

3. Progress in implementation of the measures

3.1. Specific supply arrangements

The arrangements seek to offset the extra costs, due to the geographical situation of the islands, of supplies of a certain number of products for everyday consumption from the rest of the Community, so they are available at fair prices.

The quantities of products qualifying under these supply arrangements are determined on the basis of forecast supply balances, reviewed periodically in the light of market requirements. Special attention is paid to the knock-on effects of the arrangements, in particular as regards the passing-on to the final user of the benefits granted.

For the purposes of applying the supply arrangements, the islands were classified in two groups A and B on the basis of their distance from the mainland and the aid was determined on the basis of the transport costs calculated from the usual ports of shipment in mainland Greece.

The islands and the prefectures (nomoi) belonging to group A (islands close to mainland) are Thassos, Samothrace, Sporades, Kithira, Antikithira, Amouliani, the islands of the prefecture of Evvia, excluding the island of Evvia, and of the prefecture of the Kiklades islands, Kea, Kithnos, Giaros, Andros, Tinos, Siros, Mykonos, Dilos and Rinia.

The islands and prefectures belonging to group B (distant islands) are the Prefectures of the Dodecanese, Khios, Lesvos and Samos and the islands of the prefecture of the Kiklades, excluding those in group A.

The Community contribution accounts for 90% of the total cost of the measures, the remaining 10% being borne by the Member State.

The aid for supplies was fixed at EUR 15/t and EUR 30/t [4] for groups A and B respectively. In addition, the aid for 1993 was to be increased by 50% in order to encourage the operators to implement the measure quickly.

[4] Since 01.02.1995 when the correcting factor (1,207509 at the time) for the agricultural conversion rates was abolished, the aid was adjusted to EUR 18,11/t and EUR 36,22/t respectively.

In the case of fruit and vegetable supplies, implementation was to be temporary and digressive (from 1993 to 1997). For 1994, 1995, 1996 and 1997, the aid was fixed at 80%, 60%, 40% and 20% of the amount applicable in 1993.

Implementation of the measure started in 1994 only, as the relevant administrative instruments needed to be approved and the Greek administration and the operators needed to adapt to the new procedure.

The situation regarding the development of supplies by product is as follows:

(1) Yoghurt

Progress in implementation:

>TABLE POSITION>

There was no interest shown by the dairy suppliers for this measure during 1996 and 1997. This outcome was expected following the poor implementation performance of previous two years. The industry maintains that the high cost of the special labelling of each pot (a national provision requirement to show that the product is subsidised by the EAGGF) in relation to the low rate of aid in terms of the product's value prevents it from passing on the aid to the end user.

The Greek authorities consider that an increase in the unit aid to offset the extra cost of the labelling and the introduction of some flexibility at the time when the certificates for aid are approved might contribute to the improvement of this measure.

(2) Sugar

Progress in implementation:

>TABLE POSITION>

The Greek Sugar Industry (GSI) is the major supplier of the product. In 1995 it supplied 92% against 8% of the smaller sugar traders. The low use of the fixed balance of local production/needs in 1996 is due to the GSI's abstention from the aid scheme.

According to the Greek authorities' view this situation has improved in 1997 because the GSI has re-organised its supply system and increased its participation in the aid scheme (67,55%), despite the low supplies made to the islands from group A. It is deemed by the same view that there exists the potential for increased supplies to the islands of group A given the presence on these islands of renown small companies producing sugar based products.

(3) Wheat flour

Progress in implementation:

>TABLE POSITION>

Implementation is progressing satisfactorily even though for the islands in group A there is a lower (58%) utilisation of the 1997 balance compared to that of 1996.

The Greek authorities attribute the successful implementation of this measure to the healthy competition between the big suppliers from the mainland participating in this aid scheme as well as to the efficient factor that characterises the transportation of commodities with high specific weight such as flour and sugar.

(4) Feedingstuffs

The following table shows, implementation of this measure is proceeding very satisfactorily, particularly for the islands in group B, and for some products it approaches 99% of the forecast supply balance.

Barley produced on the island of Limnos has been covered by the arrangements and qualifies for the aid for the islands in group A, irrespective of the island of destination. The low out-turn is due to the reduction of Lesvo's supplies from Limnos because, according to the Greek authorities, the barley supplies from the mainland northern ports Alexandroupoli and Kavala to Lesvos are more competitive since they benefit with the group B rate of aid.

>TABLE POSITION>

(1) Regulation (EEC) No 2958/93 of 27 October 1993.

(2) Regulation (EC) No 150/95 of 23 January 1995: as from 1.2.1995 the correcting factor (1,207509) for agricultural conversion rates was abolished and consequently amounts fixed in ecus were adjusted.

(3) Regulation (EC) No 2949/95 of 20 December 1995.

(4) Regulation (EC) No 258/96 of 12 February 1996.

(5) Regulation (EC) No 2416/96 of 18 December 1996.

(6) Regulation (EC) No 87/97 of 20 January 1997.

(5) Fruit and vegetables

Progress in implementation:

>TABLE POSITION>

(1) Regulation (EEC) No 2958/93 of 27 October 1993.

(2) Regulation (EC) No 150/95 of 23 January 1995: as from 1.2.1995 the correcting factor (1,207509) for agricultural conversion rates was abolished and consequently amounts fixed in ecus were adjusted.

(3) Regulation (EC) No 2995/95 of 19 December 1995.

(4) Regulation (EC) No 2432/96 of 18 December 1996.

In the case of fruit and vegetable supplies, implementation was intended to be digressive and to cover a limited time span (until 1997) in order to facilitate supplies to the islands for a period, pending the adaptation of local production through specific incentives provided for in the programme.

As Table 5 shows, implementation of the measure is weak. This can be put down to the fact that fruit and vegetables are supplied to the islands in small quantities and by small operators without the facilities to complete the administrative procedures necessary to take advantage of the aid.

3.2. Measures to support local products

(1) Livestock

The following aid is granted to support the sector:

- fattening aid for male bovine animals, equal to an additional EUR 40/head on top of the special premium provided for in Article 4b of Regulation (EEC) No 805/68 on the common organisation of the market in beef and veal,

- a supplement to the suckler-cow premium provided for in Article 4d of Regulation (EEC) No 805/68, paid to beef and veal producers. The supplement is equal to EUR 40 per suckler cow held by the producer on the day of the application, subject to a ceiling of 40 cows per holding.

Progress in implementation:

>TABLE POSITION>

Implementation of the measure is progressing satisfactorily. As a result, 21-23% of bovine animals qualifies each year for the second instalment of the fattening aid for male bovine animals.

(2) Milk products

Aid amounting to EUR 2.28/t/day is granted for the private storage of certain local cheeses (feta, graviera and ladotyri).

There is a ceiling of 5 000 t/year and the minimum storage period is 60 days. The aid must not exceed the amount corresponding to the standard storage period of 150 days.

Progress in implementation:

Table 7

>TABLE POSITION>

(1) Regulation (EC) No 3393/93 of 10 December 1993.

(2) Regulation (EC) No 1802/95 of 25 July 1995: as from 1.2.1995 the correcting factor (1,207509) for agricultural conversion rates was abolished and consequently amounts fixed in ecus were adjusted.

Implementation of the measure was poor on account of fast disposal of production.

(3) Fruit, vegetables and flowers

Aid per hectare is granted to producers and recognised producer groups implementing programmes of initiatives approved by the competent authorities for the development and/or improvement of the quality of the fruit, vegetables and flowers. The initiatives supported must seek in particular to develop production and product quality, in particular by varietal conversion and improvements in cultivation techniques. They must be incorporated in programmes implemented for at least three years and must cover at least 0.3 ha. The programme does not cover tomatoes.

Payable on a yearly basis for up to three years, the aid can amount to up to EUR 500/ha where the Member State contributes at least EUR 300/ha and if the individual producer or producer group contributes at least EUR 200/ha. If the Member State's and/or the producers' contribution is lower than those amounts, the Community aid is reduced proportionally. The aid is increased by EUR 100/ha where the programme of initiatives is submitted and implemented by a producer group or organisation, it provides for technical assistance for implementation and must cover at least 2 ha. From 1995 on, the above amounts were adjusted to EUR 603.75, EUR 362.25, EUR 241.50 and EUR 120.75 respectively, due to abolition of the corrective factor for agricultural conversion rates.

Implementation of this measure was expected at the end of 1995 but in actual fact it was never implemented to date. Reasons for this failure are attributed to lack of personnel at the local authorities responsible for publicising the measure and mobilising the farmers. The non-formation of producers into groups and consequently the non-compilation of initiatives programme. The lack of interest from specialist companies to offer technical assistance and the small size of holdings, which often have less than the minimum area necessary for implementation.

(4) Potatoes

Flat-rate aid of EUR 494/ha is granted each year for growing seed potatoes and potatoes for human consumption on plots of at least 0.2 ha and a maximum of 3 200 ha of land cultivated and harvested a year.

Progress in implementation:

Table 8

>TABLE POSITION>

(1) Regulation (EEC) No 2019/93 of 19 July 1993 and (EC) No 3404/93 of 10 December 1993.

(2) Regulation (EC) No 150/95 of 23 January 1995: as from 1.2.1995 the correcting factor (1,207509) for agricultural conversion rates was abolished and consequently amounts fixed in ecus were adjusted.

Implementation is progressing fairly satisfactorily, attaining 48,25% and 50,5% of the maximum in 1996 and 1997 respectively. The target of 3 200 ha was probably not achieved because of the minimum holding requirement of 0.2 ha laid down to qualify under the measure.

(5) Wine sector

- Area under vines

Flat-rate aid of EUR 394.83/ha is granted for the continued cultivation of vine varieties geared to local production of quality wines psr.

Progress in implementation:

>TABLE POSITION>

Implementation of the measure is progressing satisfactorily.

As from the 1997/98 wine year, the aid was to be granted solely to producer groups or organisations which introduce measures for improving the quality of wines produced included in a programme approved by the national authorities, entailing in particular facilities for improving conditions of vinification, storage and distribution.

- Private storage of liqueur wines

Aid is granted for the ageing for at least two years of local quality liqueur wines produced by traditional methods. It is paid during the second year of ageing for up to 40 000 hl a year.

Progress in implementation:

Table 10

>TABLE POSITION>

Progress in implementation has been very poor as local production is currently being disposed of quickly on the market. In 1996 storage was interrupted so no aid was paid. In March 1997 a quantity of 67,5 hl went into storage. The aid is paid at the end of two years of storage. The table shows the costs for the period of the calendar year when a quantity of wine was in storage.

(6) Olive groves

Fixed-rate aid of EUR 120/ha/year is granted for maintaining olive groves in areas of traditional olive cultivation, provided that the trees are kept and maintained in good production conditions. The minimum density was set initially at 50 trees/ha. As from 1995, the minimum density was increased to 80 trees/ha.

Progress in implementation::

Table 11

>TABLE POSITION>

Progress in the measure is very satisfactory.

(7) Honey

Aid per hive in production is granted to recognised honey-producer groups for the production of honey of specific quality with a high thyme-honey content who undertake to carry out annual programmes of initiatives to improve the conditions under which quality honey is marketed and promoted. The aid amounts to EUR 10/hive/year subject to a maximum of 50 000 hives/year. For a transitional period of two years (1993,1994) while groups were established and recognised, aid of EUR 7/hive was granted to any bee-keeper with at least 10 hives, and was subject to a maximum of 100 000 hives.

Progress in implementation::

Table 12

>TABLE POSITION>

(1) Regulation (EC) No 3063/93 of 5 November 1993.

(2) Regulation (EC) No 2362/95 of 9 October 1995: as from 1.2.1995 the correcting factor (1,207509) for agricultural conversion rates was abolished and consequently amounts fixed in ecus were adjusted.

It is observed that in both years the quantities approved exceeded the fixed balances and as a consequence a reduction factor was applied 0,311048 for 1996 and 0,337757 for 1997.

In 1996, six groups comprising 912 members received the aid after the national authorities approved their programmes. In 1997 nine groups submitted programmes for aid.

4. EAGGF Guarantee Section expenditure on implementation of the measures

The costs shown in Chapter 3 and set out in the tables in Annexes 3 and 4 are calculated per calendar year on the basis of the figures provided by the Greek authorities. In view of the time needed by the latter to check and declare expenditure to the Commission on the one hand, and of the lack of correspondence between the calendar year (for implementing the measures) and the budget year (16 October to 15 October of the following year) (for payments by the EAGGF Guarantee Section) on the other, expenditure declared and charged to the EAGGF Guarantee Section per budget year in 1996 and 1997 is as follows.

>TABLE POSITION>

The EAGGF's contribution to the cost of the supplies amounts to 90% of the total in Annex 3.

5. Derogations applicable to structural measures

(1) Notwithstanding Articles 5, 6, 7, 10 and 19 of Regulation (EEC) No 2328/91 on improving the efficiency of agricultural structures [5], investment aid for agricultural holdings located in the smaller Aegean islands is granted under the following conditions:

[5] OJ L 218, 6.8.1991, p. 1. Last amended by Regulation (EEC) No. 950/97 (OJ. L 142, 2.6.1997, p. 1).

- the investment aid scheme can be applied to farmers who do not practise farming as their main activity but draw at least 25% of their overall income from farming their holdings and whose farms do not require more than the equivalent of one man-work unit (MWU) as long as the investments planned do not exceed EUR 25 000. Except for local specialities, all food produced must be for local consumption,

- simplified accounts must be kept,

- on family pig farms, the limits laid down by Regulation (EEC) No 2328/91 need not be met. However, once the plan has been completed, the equivalent of at least 10% of the food consumed by the pigs must be produced on the holding,

- in the case of egg and poultry production, investments are allowed on family holdings,

- the maximum aid for investments is 55% for any type of investment,

- the compensatory allowance may be increased to EUR 180.5/LU for up to a maximum of EUR 3 540 per holding in 1993 and this may be granted for all vegetable crops, as long as they are produced in a manner compatible with the requirements of environmental protection,

- when the compensatory allowance for all the less-favoured areas is calculated, account will be taken of cows whose milk is intended for the market within that region.

(2) Notwithstanding the second subparagraph of Article 17(3) of Regulation (EEC) No 4253/88, the Community contribution can be increased to over 50% in the case of investments in the processing and marketing of certain agricultural products with a view to improving the living conditions of the inhabitants.

Progress in implementation:

>TABLE POSITION>

6. National system of controls

With a view to effective monitoring of aid for supplies, an interministerial Decision (No 443790 of 22 December 1993) specifying the supporting documents to accompany the products was published. It designates the bodies responsible for controls and lays down the method of payment and the rules for checking that the aid is actually passed on to the end user. This procedure is applied in all cases as regards the supporting documents. Sampling checks are carried out by the regional offices of the Ministry of Agriculture.

In the case of measures to support local products, specific administrative acts covering each activity were published on the implementation of the measures and the procedure for granting the aid. Controls involve general administrative and on-the-spot sampling checks.

The checks conducted and the results are set out in Table 15 below.

Table 15

>TABLE POSITION>

For structural measures, the procedure applied for checks is the same as for the normal implementation of the measures.

To be more precise:

- in the case of improvement plans, the checks are applied to all investments,

- in the case of young farmers, each individual case is examined to see whether the recipient meets all the requirements, and

- in the case of the compensatory allowance, both general administrative and on-the-spot sampling checks are applied.

7. Evaluation report

The evaluation report by the independent consultant gives the following results:

"Specific Supply Arrangements" (SSA).

The aid on wheat flour and feeding stuffs showed a high degree of implementation and had an important impact on prices helping to maintain competitive prices even of supplies not participating in the aid scheme.

Implementation of the aid on sugar and fruit and vegetables was irregular for the former and low for the latter whereas for yoghurt was nil. In the case of fruit and vegetables and yoghurt main reason for the poor or no use of the aid scheme is cited the fact that they are considered consumer products of high added value and the aid is very small. Further reason for the fruit and vegetables failure to benefit from the aid scheme is due to the structure of wholesale and retail trade. Similarly sugar forms a very small part in high added value products such as the sector of Turkish delight sweets in Syros or the boiled sweets in Chios so as to have an impact on the final product price.

A general remark on this measure is that the transportation cost differences do not appear to be proportional to the actual distances and in no case do they correspond to the subsidy difference between A and B group of islands. Special attention was drawn to certain small islands where the subsidy never reached when products were transported from main island ports.

Some of the recommendations proposed for this measure is:

The replacement of grouping the islands into two groups A and B by a system based on the actual transport cost according to island destination.

The re-examination of the products subsidised by identifying which products are essential for human and animal consumption in relation to production and/or consumption standards prevailing in the islands.

In order to promote the distribution of fruit and vegetables in the islands it is suggested to initiate specific incentives for producer groups in the mainland that will undertake the distribution of their produce to the islands.

"Support Local Products" (SLA)

There was widespread implementation of the measures regarding traditional agricultural activities: livestock breeding, olive cultivation, the quality wines psr vineyards and bee-keeping.

There was limited implementation of the measures in the area of product storage (private storage of cheeses and ageing of wines) and in fruit and vegetables. The former is due to market conditions, namely quick circulation of the products or the marginal coverage of storage cost by the aid. The latter is due to the requirement of a minimum holding area to qualify for the aid and to the absence of producer groups.

The aid given by the measures for the support of local production although not too high does cover a critical percentage of the product cost.

Recommendations proposed for these measures are:

The suggestion to continue subsidising the olive groves, vineyards, livestock and bee-keeping.

The measure designed for private storage of cheese and wines to be re-examined or limited.

The suggestion of more flexible criteria for subsidising fruit and vegetables producers and the establishment of producer groups to be re-examined.

"Derogation applicable to structural measures"

It appears that the implementation has had a far more dynamic effect than was anticipated on the level of agricultural holdings through the mass implementation of improvement plans.

Recommendations proposed for these measures is:

The successful implementation of the derogation applicable to the structural fund (improvement plans, compensatory allowance, young farmers) clearly indicates the need for continuing this measure.

Public Administration and monitoring

Concerning public administration and monitoring of the Regulation (EEC) No 2019/93, the major weakness identified was the lack of an effective mechanism for monitoring implementation.

It is strongly recommended to establish a Monitoring Secretariat that will undertake the task of monitoring the implementation of the Regulation by specified procedures and computerised data and file keeping.

The management and implementation of the interventions of the Regulation need improvement especially with regard to the certification of payments in the supply arrangements as well as the evaluation and selection of beneficiaries (register of beneficiaries, simplification of certification procedures, avoidance of ex post reductions of subsidies.

8. Economic Impact

It is clear that in the case of the two measures implemented, SSA and SLA, given their specificity and moderate amount of aid, the impact indicators showing the economic situation on the Aegean islands are prices in the former case and production costs in the latter. Whereas in the case of the derogations measure, the implementation of which has surpassed initial expectations, the indicator is the high percentage of agricultural holdings that have benefited on the islands as well as its significance. The research was carried out in four island towns the capitals of prefectures Syros, Rhodes, Chios and Mytilene.

Specific Supply Arrangements seem to influence the local markets both in the level of prices and in respect of its structures. According to the field survey carried out by SPEED LTD the implementation of the SSA measure exerts pressure on the level of prices by decreasing also non-subsidised product price as it is shown below.

Animal Feed: The following two tables indicate the tendency of private traders to adjust their prices (with or without subsidy) to stay in line with the corresponding prices of the Union of Co-operatives who distributes the greater quantities.

>TABLE POSITION>

>TABLE POSITION>

A = Andros, K = Kea, M = Milos.

Flour: The extent to which the reduction is being passed on to the final consumer can only be indirectly calculated. From a sampling of prices for final bakery products the fascinating conclusion emerged that in all four towns the prices were the same as or lower than the corresponding prices in Athens. The following table is a sample of the consumer price development of flour in the Athens area, Chios and Lesvos.

>REFERENCE TO A GRAPHIC>

It can be observed from this table that average consumer prices in Chios and Lesvos seem to exceed systematically, though with varying magnitude, those observed in Athens-Piraeus area by around 5% on average.

The existence of these higher prices in Chios and Lesvos explain the burden that add the transport costs to final consumer prices.

The pattern of retail price developments, in terms of annual rates of change, of flour is similar and fairly smooth in all areas (Athens-Piraeus, Chios and Lesvos)with a decreasing pace which is explained by the decreasing rate of inflation in Greece in recent years.

From discussions between SPEED LTD and local representatives of the flour trade it emerged that one of the positive effects of the implementation of the SSA measure is that in periods where there is no subsidy the industry cannot return to the original price which prevailed before the subsidy was introduced. The industry is under pressure from its customers, because of intense competition, to retain its prices at the level of the subsidised product. The presence of competition is confirmed by the price differentials shown on the above table. The competition in the Athens-Piraeus area is fiercer because of the price policies applied by the large supermarket chains.

Sugar:

In the case of sugar, a contradiction arises between the prevailing sugar market conditions and the following table on consumer price development regionally which leads to the conclusion that it is not transport costs that directly determine the retail price.

>REFERENCE TO A GRAPHIC>

It is observed from the table that the retail price of sugar does not differ significantly between the two island towns (Chios, Lesvos) and the Athens-Piraeus area leading to the conclusion that price subsidisation through the Regulation is playing a positive role in alleviating transport costs in the Aegean islands. However this does not hold if the following market conditions are considered:

- there is a single sugar producer and supplier in Greece the Hellenic Sugar Industry (HSI) situated in Northern Greece,

- SPEED LTD found that HSI by operating its own discount policy it was difficult to prove that the benefit of the support passed over to the consumer,

- in 1996 there was only 4,81% absorption of the allocated balances and the price was not affected according to the above table.

Yoghurt: The balance was not used at all.

Support for Local Products had widespread implementation in livestock breeding, olive cultivation, the quality wines psr vineyards and bee-keeping but was limited in product storage (cheese and ageing of wine) and fruit and vegetables cultivation. The subsidies paid in the years 1993-96 appears to have covered a particularly significant part of local production, and to have contributed decisively to sustaining agricultural activity in most island regions.

This measure was assessed by relating the subsidies to the actual cost of production. It is of course difficult to speak of an average or representative cost of production on the islands. Conditions of cultivation vary significantly, especially on the islands. Local research conducted on the islands of Rhodes and Kos showed that subsidies cover 5,5% of the cost of olive oil production, 14,9% of the cost of production of grapes for wine, 4,1% of the cost of cattle breeding and 12,6% of the cost of producing thyme honey.

>TABLE POSITION>

Source: Field survey.

Subsidies for the maintenance of olive cultivation were given a favourable response in Chios and Lesvos (important olive producing regions), in two olive production areas of Lesvos the subsidy share in the production cost represents 12,5% and 19,8% respectively. This high percentage demonstrates the importance of the aid to the most specialised island in olive growing.

In the Cyclades (region with very limited production of olives) the subsidy was deemed inadequate to maintain olive cultivation. In the prefecture of Dodecanese the subsidy was deemed slightly more significant, compared to Cyclades, in improving the income of growers and maintaining olive groves.

Subsidies for the maintenance of quality wines psr vineyards earned a positive reaction in the prefectures of Lesvos and Cyclades. The subsidy contribution to the maintenance of vineyards and the support of vine growers' income was deemed decisive in the prefecture of Lesvos (quality wines psr Limnos).

Support measures for livestock farming seem to have made a significant contribution to maintaining the livestock capital of the islands. In the prefecture of Lesvos the contribution was appraised as "decisive" while in Chios, the Cyclades and the Dodecanese the appraisal was "fairly important contribution".

Subsidies for the Associations of Beekeepers appear to make a reasonably significant contribution to improving trading conditions and promotion of honey. Bee-keeping and honey production had recorded growth in the prefectures of Chios, Lesvos and the Cyclades. In fact in Lesvos the impetus was decisive once payment of the subsidy had been made.

Although the investigation covered isolated production units, their selection on the basis of the systematic character of their activity leads to the conclusion that the aid given by the measures of Regulation (EEC) No 2019/93 to support local production, albeit not too high, does cover a critical percentage of the production cost, which for a large number of agricultural holdings may mean the difference between financial ruin or survival.

Derogation from the Structural Measures as implemented on the Aegean islands in the period 1994-97 laid the foundations not only for maintaining the agricultural population and preserving the agricultural activity on the islands, but also for developing an effective initiative to reverse the trend in which the population has been abandoning the countryside regions of the islands.

Evidence of this particular qualitative economic impact on the Aegean islands is manifested in the high number of investment plans approved and the highest number of holdings (establishments) that benefited from this aid in relation to the total of the thirteen regions in Greece.

>TABLE POSITION>

Source: Research on improvement plans (1997) VAKAKIS/KANTOR/REMACO.

>REFERENCE TO A GRAPHIC>

The above tables show that over the period 1994-97 in the five prefectures of the North and South Aegean the number of investments in improvements schemes constitute 16,4% of the total number of schemes approved for the whole country.

The islands of the Aegean, with the increased incentives (investment support of up to 55% and 68% for young farmers) and the flexible application of the qualifying criteria (entitlement to the aid farmers who have at least 25% of their income from farming) as provided by the Regulation (EEC) No 2019/93, are the region of the country with the highest proportion of farming holdings implementing improvement schemes.

More specifically throughout the whole region 44,64% of the improvement schemes concern young farmers (under 40). Likewise 49,25% are being carried out by farmers with less than 10 years farming activity.

As for the size of the budget of the improvement schemes 49,6% are low budget schemes (EUR 23 000), which is to be expected given the size of holdings on the islands. However there is also a considerable number of schemes with a relatively high budget (over EUR 57 000 - 20.2% of the schemes).

The majority of schemes being implemented on the islands concern investment in crop cultivation (42%), agricultural buildings and equipment (13,2%) and rural tourism activity (11%). In comparison with the country as a whole, the Aegean islands show relatively little in the way of schemes involving tractors and livestock breeding equipment.

9. Conclusions

Regulation (EEC) No 2019/93 was adopted by the Council on 18 July 1993 and certain measures in support of local products (measures to support stockfarming and for the continued cultivation of areas with vines and olive groves and honey production) were applied from 1993. The supply measures were applied only from 1994, despite a 50% rise in the aid to encourage speedy implementation.

In 1996 and 1997 implementation of the supply measures averaged 64.0% and 84.3% respectively in relation to the forecast supply balances, and 74.8% and 90.3% in relation to the forecast cost for those periods, though the rate of implementation varied considerably from one product to another. The highest rate was achieved for animal feedingstuffs and flour. The lowest rate was recorded for fruit, vegetables and potatoes. Yoghurt showed a zero rate of implementation for these two years.

Generally, implementation of the measures in support of local products progressed satisfactorily. The exception was the measure for production of fruit, vegetables, and flowers despite the planned progressive fall of the supply aid for these products in order to encourage fast development of local production of such products with a view to improving availability of fruit and vegetables to the local market.

Best performances were achieved by the measures to maintain olive groves where the minimum density foreseen for the granting of the aid was increased in 1995 from 50 trees/ha to 80 trees/ha, the measures for the cultivation of vineyards for the production of quality wines psr and the measures for the production of honey.

Progress in the implementation of the measures for fattening male bovine animals, the maintenance of suckler cows, the production of potatoes for human consumption and seed potatoes was fairly satisfactory. Progress was poor in the case of the private storage of certain cheeses and liqueur wines owing to fast disposal of local production in those years.

As regards the derogations concerning structural measures, the provisions on derogations from Regulation (EEC) No 2328/91 on improving the efficiency of agricultural structures were adopted in 1993, so enabling 15 000 farmers to take advantage of the derogation concerning the compensatory allowance. However, the derogation measure from processing and marketing of agricultural products has no completed project(s) to show as yet during this period other than the approval of four planned investments on refrigeration and storage units.

In 1996 and 1997, a number of checks were conducted by the Greek authorities to see whether the measures were applied properly. It is important that the co-ordination in the management and monitoring of the programme is enhanced and controls on the passing on of the aid to the consumer are increased.

Although overall progress in the programme seems to be satisfactory, the above observations together with those of the independent evaluator call for some adjustments to the Regulation (EEC) No 2019/93.

The Greek authorities have presented requests for certain measures to be adapted. The Commission, taking into account some of these requests and on the basis of its own assessment on the implementation of this Regulation, will examine the possibility of making certain adjustments that will result from the following:

in the case of Specific Supply Arrangements:

- the revision of the two rates of aid for groups A and B,

- the revision of the classification of the islands into these groups,

- the feasibility of introducing a third rate of aid or group for the transportation costs from main island ports to smaller island ports,

- the revision of the products list, namely whether to remove or maintain products such as yoghurt, sugar and fruit and vegetables or whether to add straw in the fodder supply;

in the case of aid to local produce:

- the revision of the products list, namely whether to remove or maintain products such as milk products (concerns storage of cheese), fruit and vegetables, flowers, and from the wine sector the storage of wines/liqueur wines.

- the revision of the list of islands for the possibility to include the island of Gavdos in the system of aid for supplies and for aids for the maintenance of olive groves. This island is situated 35 miles to the Southwest of Crete, has 60 inhabitants, 2 000 sheep, olive groves and has neither drinking water nor electricity.

In the new period 2000 to 2006 the derogation from structural measures is abolished since specific conditions are not provided any more for the Aegean islands under the new Rural Development Regulation (1257/1999). However, this measure was very successful in its implementation on the Aegean islands. According to the (53) whereas of Council Regulation (EC) No 1257/1999 the Greek authorities may submit a well justified request to the Commission for further flexibility or derogation in favour of agricultural holdings, for investments in processing and marketing of agricultural products as well as for measures in diversification activities for fostering the multifunctionality of the rural areas in these islands. Anyhow an increment in the rate of aid is justified by the higher investment cost in the islands in relation to the rest of the country and by other natural handicaps special to these islands.

ANNEX 1 Regulations adopted at 31 December 1995

1. Framework Regulation

- Council Regulation (EEC) No 2019/93 of 19 July 1993 introducing specific measures for the smaller Aegean islands concerning certain agricultural products(1).

(1) OJ L 184, 27.7.1993, p. 1.

2. Detailed rules of application

(1) Specific supply arrangements:

- Commission Regulation (EEC) No 2958/93 of 27 October 1993 laying down detailed rules for the application of Council Regulation (EEC) No 2019/93 as regards the specific arrangements for the supply of certain agricultural products(1),

(1) OJ L 267, 28.10.1993, p. 4.

- Commission Regulation (EC) No 3163/93 of 17 November 1993 establishing the forecast supply balance as part of the specific arrangements for the supply of milk products to the smaller Aegean islands(1), as amended by Commission Regulation (EC) No 3004/94(2),

(1) OJ L 283, 18.11.1993, p. 18.

(2) OJ L 317, 10.12.1994, p. 4.

- Commission Regulation (EC) No 1802/95 of 25 July 1995 amending the Regulations that fixed, prior to 1 February 1995, certain prices and amounts in the market in milk and milk products of which the value in ecus was adapted as a result of the abolition of the correction factor for agricultural conversion rates

(1) OJ L 174, 26.7.1996, p. 27.

- Commission Regulations (EC) No 1445/94 of 23 June 1994(1) and No 1731/95 of 14 July 1995(2) establishing the sugar forecast supply balances to the smaller Aegean islands for 1994/95 and 1995/96,

(1) OJ L 157, 24.6.1994, p. 7.

(2) OJ L 165, 15.7.1995, p. 4.

- Commission Regulation (EC) No 3254/93 of 26 November 1993 laying down detailed rules for the application of Council Regulation (EEC) No 2019/93 as regards the specific supply arrangements for certain fruits and vegetables for the benefit of the smaller Aegean islands(1), as amended by Regulations (EC) No 2747/94(2) and (EC) No 3128/94(3),

(1) OJ L 293, 27.11.1993, p. 34.

(2) OJ L 290, 11.11.1994, p. 8.

(3) OJ L 330, 21.12.1994, p. 45.

- Commission Regulation (EC) No 822/94 of 13 April 1994 adjusting the CN codes for apples listed in the Annex to Council Regulation (EEC) No 2019/93 introducing specific measures for the smaller Aegean Islands concerning certain agricultural products(1),

(1) OJ L 95, 14.4.1994, p. 1.

- Commission Regulation (EC) No 1363/95 of 15 June 1995 amending the Regulations that fixed, prior to 1 February 1995, certain prices and amounts in the market in fruit and vegetables and the market in processed fruit and vegetable products, of which the value in ecus was adapted as a consequence of abolishing the corrective factor for agricultural conversion rates(1),

(1) OJ L 132, 16.6.1995, p. 8.

- Commission Regulation (EC) No 825/94 of 13 April 1994 adjusting the CN codes for apples listed in Annexes to Regulation (EC) No 3254/93 laying down detailed rules for the application of Council Regulation (EEC) No 2019/93(1),

(1) OJ L 95, 14.4.1994, p. 7.

- Commission Regulation (EC) No 3175/94 of 21 December 1994 laying down detailed rules for application for the specific arrangements for the supply of cereal products to the smaller Aegean islands and establishing the forecast supply balance(1),

(1) OJ L 274, 6.11.1993, p. 12.

- Commission Regulation (EC) No 3173/94 of 21 December 1994 laying down detailed rules of application for the specific measures for the smaller Aegean islands with regard to the special arrangement for the supply of dried fodder(1),

(1) OJ L 335, 23.12.1994, p. 51.

- Council Regulation (EC) No 150/95 of 23 January 1995 amending Regulation (EEC) No 3813/92 on the unit of account and the conversion rates to be applied for the purposes of the common agricultural policy(1).

(1) OJ L 22, 31.1.1995, p 1.

(2) Measures to support local products

- Commission Regulation (EEC) No 2889/93 of 21 October 1993 laying down certain detailed rules for the application of Regulation (EEC) No 2019/93 as regards the supplements to the special premium for producers of beef and veal and to the premium for maintaining suckler cows(1),

(1) OJ L 263, 22.10.1993, p. 8.

- Commission Regulation (EC) No 2417/95 of 13 October 1995 updating and amending Regulations in the beef sector fixing before 1 February 1995 certain prices and amounts whose values in ecus have been adjusted because of the abolition of the corrective factor in agricultural conversion rates(1),

(1) OJ L 248, 14.10.1995, p. 39.

- Commission Regulation (EC) No 3393/93 of 10 December 1993 laying down detailed rules governing the granting of private storage aid for certain cheeses manufactured on the smaller Aegean islands(1),

(1) OJ L 306, 11.12.1993, p. 32.

- Commission Regulation (EC) No 3253/93 of 26 November 1993 laying down detailed rules for the application of Council Regulation (EEC) No 2019/93 as regards the support measures for local products for the smaller Aegean islands in the fruit, vegetable and flower sectors(1),

(1) OJ L 293, 27.11.1993, p. 28.

- Commission Regulation (EC) No 3404/93 of 10 December 1993 on rules for the application of Council Regulation (EEC) No 2019/93 introducing specific measures for the smaller Aegean islands, as regards the growing of potatoes for human consumption and seed potatoes(1),

(1) OJ L 310, 14.12.1993, p. 7.

- Commission Regulation (EC) No 3112/93 of 10 November 1993 laying down detailed rules for the application of the specific aid arrangements for the smaller Aegean islands in respect of areas under vines and the private storage of liqueur wines(1),

(1) OJ L 278, 11.11.1993, p. 52.

- Commission Regulation (EC) No 2537/95 of 30 October 1995 amending the Regulations that fixed, prior to 1 February 1995, certain prices and amounts in the market in wine, of which the value in ecus was adapted as a consequence of abolishing the corrective factor for agricultural conversion rates(1),

(1) OJ L 260, 31.10.1995, p. 10.

- Commission Regulation (EEC) No 2837/93 of 18 October 1993 laying down detailed rules for the application of Council Regulation (EEC) No 2019/93 with regard to the maintenance of olive groves in traditional olive-growing areas(1), as amended by Regulations (EC) No 3499/93(2) and (EC) No 2813/94(3),

(1) OJ L 260, 19.10.1993, p. 5.

(2) OJ L 319, 21.12.1993, p. 22.

(3) OJ L 298, 19.11.1994, p. 24.

- Commission Regulation (EC) No 3063/93 of 5 November 1993 laying down detailed rules for the application of Council Regulation (EEC) No 2019/93 with regard to the aid scheme for the production of honey of specific quality(1)

(1) OJ L 274, 6.11.1993, p 5.

- Commission Regulation (EC) No 2362/95 of 9 October 1995 amending Council Regulation (EEC) No 2019/93 which fixed before 1 February 1995 the amount of aid for the production of honey for the smaller Aegean islands, whose value in ecus has been adapted due to the abolition of the corrective factor of the agricultural conversion rate(1).

(1) OJ L 241, 10.10.1995, p. 12.

3. Derogations applicable to structural measures

- Commission Decision of 4 May 1994 concerning greater efficiency in agricultural structures in Greece (smaller Aegean islands) in accordance with Regulation (EEC) No 2328/91,

- Commission Decision of 28 March 1995 on improving the efficiency of agricultural structures in Greece in accordance with Regulation (EEC) No 2328/91.

ANNEX 2 Administrative acts adopted to implement the measures

1. Specific supply arrangements

- Ministerial Decision No 443790 of 22 December 1993 on the supporting documents required for payment of aid for supplies of certain agricultural products to the smaller Aegean islands (Greek OJ B No 927 of 23 December 1993),

- Ministerial Decision No 186854 of 19 July 1995 amending Decision No 443790 of 22 December 1993 on the procedures and the supporting documents required for payment of aid for supplies of certain agricultural products to the smaller Aegean islands,

- Administrative Act No 2/94 laying down strict rules on the transport and normal marketing of subsidised products as regards the marking of the purchase price on the shipping document, as amended and supplemented by Administrative Acts Nos 4/94 and 8/94 (Greek OJ No 244 of 7 April 1994),

- Administrative Act No 4/94 on markings on packs of yoghurt qualifying for consumption aid in the Aegean islands,

- Administrative Act No 5/94 of 19 May 1995 on markings on packs of yoghurt qualifying for consumption aid in the Aegean islands (Greek OJ Section 2 No 489 of 1 June 1995),

- Ministerial Decision No A2-1292 of 22 March 1994 on the marketing of animal feedingstuffs qualifying for aid for supplies to the Aegean islands (Greek OJ No 244 of 7 April 1994),

- Ministerial Decision No A2-2201 of 15 April 1994 on the marketing in bulk of animal feedingstuffs in the Aegean islands (Greek OJ No 313 of 25 April 1994),

- Circular No 145348 of 26 January 1996 on the specific arrangements for supplies of certain agricultural products to the smaller Aegean islands.

2. Measures to support local products

- Stockfarming:

Ministerial Decision No 190019 of 1 July 1994 on additional aid for the fattening of male bovine animals and the supplement to the premium for the maintenance of suckler cows (Greek OJ No 536 of 7 July 1994);

- Private storage of certain locally manufactured cheeses:

Ministerial Decision No 190080 of 1 July 1994 on the supporting documents for entry into and removal from storage and additional procedures relating to aid for the private storage of certain locally manufactured cheeses in accordance with Regulations (EEC) No 2019/93 and (EC) No 3393/93;

- Potatoes for human consumption and seed potatoes:

Circular No 166309 of 26 February 1994 on procedures for the granting of aid per hectare to potato producers in the Aegean islands;

- Continued cultivation of areas under vines for the production of quality wines psr in traditional areas of production:

Circulars No 444236 of 1 December 1993 and No 326567 of 16 March 1994 concerning the implementation of the specific aid scheme for areas under vines producing quality wines psr in the smaller Aegean islands under Council Regulation (EEC) No 2019/93,

Ministerial Decision No 328321 of 14 March 1995 on the granting of aid for continued cultivation of areas under vines for the production of quality wines psr in the smaller Aegean islands under Council Regulation (EEC) No 2019/93 (Greek OJ B 211 of 23 March 1995);

- Ageing of locally produced liqueur wines:

Ministerial Decision No 189304 of 28 June 1994 on procedures for granting aid for the ageing of liqueur wines in the smaller Aegean islands;

- Maintenance of olive groves:

Circular No 212538 of 7 December 1993 on the procedure for granting flat-rate aid for the maintenance of olive groves in the smaller Aegean islands;

- Honey:

Circular No 212538 of 7 December 1993 on procedures for granting aid per hive for the production of honey of specific quality (Greek OJ B 215 of 1 April 1994),

Decision No 329361 of 23 March 1994 on the authority responsible, the procedure, the supporting documents and controls for implementation of the specific procedure for granting aid for the production of honey of specific quality (thyme) in the smaller Aegean islands (Greek OJ B 215 of 1 April 1994),

Ministerial Decision No 344487 of 17 April 1995 on the approval of programmes of initiatives of honey producer groups for 1995;

- Management and controls:

Agricultural Ministry Circular No 173440 of 27 March 1995 on the Integrated Administration and Control System and the rules for the application of certain Community aid schemes.

3. Derogations applicable to structural measures

- Ministerial Decree No 112 of 27 December 1993 on the implementation of Regulation (EEC) No 2019/93 introducing specific measures for the smaller Aegean islands concerning certain agricultural products. Derogations applicable to structural measures: improvement plans and compensatory allowances,

- Ministerial Decree No 149 of 30 November 1994 on the aid scheme for mountain and hill areas and for less-favoured areas for 1994 (compensatory allowance) pursuant to Council Regulation (EEC) No 2328/91 on improving the efficiency of agricultural structures,

- Ministerial Decision No 415312/6255 of 29 September 1994 on procedures for the inclusion of investment plans in Council Regulation (EEC) No 866/90 of 29 March 1991 on improving the processing and marketing conditions for agricultural products, as amended by Regulation (EC) No 3669/93, and the procedure for granting national and Community aid,

- Circular No 432922/7249 of 12 December 1994 on the implementation of Regulation (EEC) No 866/90 for the period 1994-99,

- Ministerial Decision No°372828/10012 of 11 December 1996 on incentives for young farmers to set up in farming under Regulation (EEC) No 2328/91,

- Ministerial Decision No°252 of 11 December 1996 on incentives and aid for speeding up the adjustment of agricultural structures under Regulation (EEC) No 2328/91.

ANNEX 3 Aid for supply - summary table

(The EAGGF Guarantee Section covers 90% of the amounts mentioned in the table)

>TABLE POSITION>

ANNEX 4 Summary table - aid for local production

>TABLE POSITION>

(1) 384 t feta cheese and 14 t graviera cheese. For 150 days each.

(2) 320 t feta cheese for 150 days.

(3) Stored less than 2 years.

(4) Storage since March 1997.

SEC(92) 36 final of 13 January 1992.

COM(92) 569 final of 23 December 1992.

OJ L 184, 27.7.1993, p. 1.

Since 1995 when the correcting factor for the agricultural conversion rates was done away with, the aid has been EUR 18/t and EUR 36/t respectively.

OJ L 218, 6.8.1991, p. 1. Regulation last amended by Regulation (EC) No. 950/97 (OJ. L 142, 2.6.1997, p. 1).