52001SC0949(02)

PRELIMINARY DRAFT GENERAL BUDGET of the European Communities for the financial year 2002 - General introduction Expenditure analysis by activities and revenue by titles

(presented by the Commission)

TABLE OF CONTENTS

1. Introduction

2. Expenditure analysis by Policy Areas

3. Expenditure Analysis by Activities

3.1. Economic and financial affairs

3.2. Enterprise

3.3. Competition

3.4. Employment and Social Affairs

3.5. Agriculture and Rural Development

3.5.1. General presentation

3.5.2. Main factors underlying the preliminary draft for 2002

3.5.3. Level of appropriations by activity

3.6. Energy and Transport

3.7. Environment

3.8. Indirect Research

3.9. Direct Research

3.10. Information Society

3.11. Fisheries

3.12. Internal Market

3.13. Regional policy

3.14. Taxation and Customs Union

3.15. Education and Culture

3.16. Media and Communication

3.17. Health and Consumer Protection

3.18. Justice and Home Affairs

3.19. External relations

3.20. Trade

3.21. Development and Relations with ACP Countries

3.22. Enlargement

3.23. Humanitarian Aid

3.24. Fight against Fraud

3.25. Commission's Policy Coordination and Legal Service

3.26. Commission's Administration

3.27. Budget

3.28. Audit

3.29. Statistics

3.30. Pensions

4. Revenue - Analysis by Title

4.1. General assessment

4.2. Revenue forecasts for 2002

4.2.1. Traditional own resources

4.2.2. Value Added Tax (VAT) bases

4.2.3. Gross National Product (GNP) bases

4.2.4. Other revenue

4.3. Correction of budgetary imbalances

4.4. Budgetary impact of the European Economic Area Agreement

1. Introduction

For the second consecutive year, the Preliminary Draft Budget for the European Commission is also presented using the Activity Based Budgeting (ABB) approach. Under this approach, the Commission's undertakings have been broken-down into some 200 Activities, grouped into 30 Policy Areas, which form the basis for an aggregate analysis of the PDB 2002. ABB provides a view of the full resource utilisation for each of the Commission's policies, including financial appropriations for operational and administrative expenditure, as well as human resources. The presentation of this document replaces the traditional analysis which was based on titles and chapters of the budget, where the entire expenditure side of the budget was divided into a Part A for administrative appropriations, and a Part B for operating appropriations.

In order to illustrate the ABB approach, this analysis is presented following the nomenclature in preparation in Commission's services, which is still to be considered as provisional. This nomenclature is structured by titles, corresponding to Policy Areas, subdivided by chapters, corresponding to the Activities. The first chapter of each title (hereafter referred to as ABB chapter 01) comprises all management and support resources of the Policy Area, allowing to show the total resources related to each Policy Area within the title. Other chapters comprise financial interventions resources, including programmes, subsidies, etc.

This part starts by presenting the overall budget arranged by Policy Areas, showing the resources for the Budget 2001 and the PDB 2002 in two broad categories: total appropriations (financial interventions plus management and support) and human resources. The section also shows how the amounts by Policy Area are distributed under the headings in the Financial Perspective, providing an interface between the two budget structures. A second section provides a more detailed analysis by Activity and explains the variations observed in comparison with the Budget 2001. The last section presents the revenue side of the PDB 2002, using the traditional presentation by titles.

2. Expenditure analysis by Policy Areas

ABB terminology

* Financial Interventions include most of traditional Part B appropriations, but also certain appropriations found in Part A, such as subsidies, which are aimed at having an impact for beneficiaries outside the EU institutions. These resources are allocated to Activities.

* Management and Support appropriations include most of traditional Part A resources (salaries, building costs, etc). Management and Support also include appropriations in Part B which are of administrative nature, such as technical and administrative assistance and other support expenditure directly related to the programme or action;

* Human resources, which include establishment plan posts (financed under title A-1 and A-6) and support staff. Support staff includes outside personnel financed under title A-1, A-3, A-4, A-6, A-7, staff financed from the research budget, estimates of staff financed from the structural funds so-called "mini-budgets" and on BA-lines.

Table II.1 below shows, for the Commission only (section III), the Budget 2001 and the PDB 2002 by Policy Areas. The table presents the total of appropriations and the human resources allocated to each Policy Area expressed in person/years. Details for each Policy Area are shown in the subsequent section of this document.

Table II.1. Section III: Budget 2001 and PDB 2002 by Policy Area (in EUR million and person/years)

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Correspondence between ABB and the Financial Perspective

The overall framework for the budget is the Financial Perspective contained in the Interinstitutional Agreement of 6 May 1999 on budgetary discipline and improvement of the budget procedure. Thus, despite having applied the ABB approach in the preparation of the PDB 2002, the ceilings by headings of the Financial Perspective continue to be the main point of reference. Therefore it is important to have a clear view of how the ABB nomenclature translates into the headings.

Table II.2 provides a presentation of the 2002 PDB by Policy Area and Headings. Rows correspond to Policy Areas into which the Commission's activities have been grouped. In columns are presented the headings of the Financial Perspective (and sub-headings where appropriate). This table shows for each Policy Area the resources which fall under each of the headings of the Financial Perspective. As the Commission's resource allocation process follows the ABB approach, this table is necessary in order to check that the resources allocated respect the ceilings. The last row shows the margin left under the ceilings.

The amounts found in Table II.2 correspond to all financial resources, including Financial Interventions and Management and Support appropriations. It is worth noting that a majority of Policy Areas include resources which correspond to more than one heading. For instance, the Fisheries Policy Area includes resources under heading 1a (EAGGF Guarantee) 2a (FIFG), 3 (Control of Fisheries), 4 (International Fisheries agreements) and 5 (Management and support resources for Fisheries).

Table II.2. Figures by Policy Area and financial perspective heading (FI+MS in MioEUR)

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3. Expenditure Analysis by Activities

The ABB approach is designed to show the link between resources allocation and political orientations, by presenting resources by Policy Area and Activities, the level at which political initiatives are taken. It therefore focuses on commitment appropriations, presented for each Policy Area in the following tables and comments. The payment appropriations, resulting from the implementation of the budget, are generally not discussed here. When it is considered necessary for the relevant activity, references to payment appropriations are made in the comments only.

3.1. Economic and financial affairs

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Management and support expenditure for Policy Area Economic and financial affairs (EUR52.0 million; 0.3%)

The stepping up of activities related to the introduction of the euro in 2002 will be achieved through internal redeployment of human resources from the other activities. The Commission is undergoing an assessment as to the possibility of transfers of activities from Brussels to Luxembourg to make the best use of all available resources in the Economic and Financial Affairs DG.

International economic and financial questions (EUR337.0 million; +8.0%)

The financial interventions in this Activity relate to macro-economic aid in the form of grants amounting to EUR124 million and to the reserve for the loans guaranteed by the EC amounting to EUR213 million. These are generally balance of payments support measures which accompany IMF backed reform programmes. They require an ad-hoc Council decision as legal basis. In an effort to make regional envelopes more transparent, the budget articles for macro-economic aid are integrated, since the budget 2001, into the geographical chapters and form part of the regional financial envelopes.

The macro-economic straight grant for Armenia, Georgia and Tajikistan under Council Decision 97/787/EC is rolled over at the same level as in the 2001 budget, at EUR24 million.

The macro-economic straight grant for the western Balkans has been significantly increased in 2001 (EUR80 million) in response to the needs of the region. It is proposed to raise this assistance at EUR100 million in 2002. The beneficiaries, under existing legal basis and new proposals, will be Bosnia, Albania and mainly the FRY (Serbia, Montenegro, Kosovo). This amount is part of the CARDS annual envelope for the region.

The Guarantee reserve is determined by the financial perspective and evolves in line with inflation. It is used to guarantee loans to third countries granted directed by the EC (macrofinancial assistance loans, Euratom loans) and granted by the EIB.

Financial Operations (EUR71.9 million; -1.2%)

The Employment Initiative (1998-2000) is being followed up under the Enterprise programme. EUR71 million is allocated to improving the financial environment of enterprises, as in 2001. This involves the promotion of guarantee facilities to increase the volume of loans available to small businesses by risk-sharing through national guarantee systems, and risk-capital schemes to invest in specialised venture-capital funds focusing on SMEs for which investment risks are higher. These investments are managed by the European Investment Fund.

A small part of the appropriation is devoted to the interest subsidies on loans given following the earthquakes in Greece in 1986 and the cyclone in Madeira (Portugal) in October 1993. As the amount of the loans outstanding is declining, requirements have dropped from EUR1.3 million in 2001 to EUR0.9 million in 2002.

Economic and Monetary Union (EUR33.1 million; -1.8%)

As the euro is being introduced at the start of 2002, it is proposed that EUR28 million, the same as in 2001, be allocated to the information campaign on "the Euro - A Currency for Europe" under the PRINCE programme (B3-306).

The increase in economic studies and inquiries (A-3500) is 7,5% in continuation with the action made last year. This increase will make it possible to extend these studies to candidate countries. This increase is partly compensated by a decrease in studies related to the monetary union.

3.2. Enterprise

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Management and support expenditure for Policy Area Enterprise (EUR112.3 million; +5.6%)

Encouraging Entrepreneurship (EUR43.2 million; -4.2%)

This activity covers two programmes:

1) The new multiannual programme for Enterprises and Entrepreneurship (2001-2005), which takes over from the 3rd multiannual programme for SMEs. Its aims are:

* to promote entrepreneurship as a valuable and productive life skill;

* to encourage a regulatory and business environment that takes account of sustainable development, and in which innovation and entrepreneurship can flourish;

* to improve the financial environment for SMEs;

* to enhance the competitiveness of SMEs in the knowledge-based economy;

* to ensure that business support networks and services to enterprises are provided and coordinated.

The operation to improve the financial environment is included with Economic and Financial affairs. EUR27.6 million is proposed for the other four operations under Articles B5-510 and B5-510A, the latter line being included in Chapter 01 ABB.

2) The objective of the IDA programme (Interchange of Data between Administrations - B5-7210) is to provide, through the trans-European networks, the support needed by administrations for the telematic interchange of the information, data and documents necessary for the operation of the internal market.. At EUR24 million, including the BA line included in Chapter 01 ABB), the appropriation proposed for 2002 is the same as in the 2001 budget.

Research - Promoting innovation and change (EUR86.5 million; -16.7%)

This Activity corresponds to the specific research programme "Promotion of innovation and encouragement of SME participation". The aim is to promote innovative activities, including the creation of enterprises, and to facilitate the dissemination and exploitation of research results and support technology transfer.

Including the administrative expenditure planned for this programme in Chapter 01 ABB, the appropriation proposed comes to EUR95 million, about 13.5% less than in 2001. This corresponds to the schedule planned for the specific programme and ensures that the whole allocation laid down for the programme in the 5th framework programme for research will be entered in the budget.

Getting still more from the internal market (EUR43.5 million; +5.8%)

This Activity covers measures designed to ensure the smooth operation of the internal market in the field of standardisation and harmonisation, in particular through the following actions:

1) Operation and Development of the Internal Market (B5-3002) covers the Commission's tasks concerning the implementation of the internal market directives, in particular notification of technical regulations, certification, authentication and market surveillance in the field of standardisation, sectoral comparison in the food, pharmaceutical, vehicle and construction areas, etc. EUR11.4 million for commitments is proposed in 2002, including the BA line included in Chapter 01 ABB, which is more than the EUR9.9 million in 2001.

2) The subsidy for the European Agency for the Evaluation of Medicinal Products (B5-3120) is a balancing subsidy. The Agency is responsible for administering the centralised authorisations issued by the Commission for new medicinal products, supports the mutual recognition of national authorisations (traditional medicinal products), the collection and evaluation of the undesirable effects of medicinal products (monitoring pharmaceuticals), and the preparation of veterinary recommendations in foodstuffs. A balancing subsidy of EUR14 million is proposed for 2002, as in 2001. The fees payable by companies for obtaining and renewing Community marketing authorisations will be worth an estimated EUR46.5 million in 2002 compared with EUR42.6 million in 2001.

In contrast to the EUR1.3 million in 2001, EUR3.3 million is included in this subsidy as a special contribution for fee waivers for orphan drugs (B5-3121) in accordance with a new regulation which entered into force in 2000.

3) Standardisation and Approximation of Laws (B5-313) covers standardisation, verification and authentication measures in various industries, in particular through the work on European standards carried out by European standardisation bodies, technical projects designed to introduce European conformity testing services, and the development of an information policy on the application of standards. For this article, EUR16.1 million is proposed for 2002, including the BA line included in Chapter 01 ABB, compared with EUR17.1 million in the 2001 budget.

Competitiveness and other policies (EUR8.0 million; +14.3%)

"Industrial competitiveness policy for the European Union" (B5-326) is intended to promote the ongoing adjustment of Community industry to industrial change in an open and competitive market, with a view to developing an industrial competitiveness policy for the European Union by benchmarking and other initiatives. Commitment appropriations of EUR8.9 million are proposed for 2002 compared with EUR7.9 million in the 2001 budget; this includes the administrative and support expenditure included under Chapter 01 ABB. This line now also finances the Community contribution to the EU-Japan Centre for Industrial Cooperation to facilitate Community firms' access to the Japanese market.

3.3. Competition

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The implementation of competition policy, including mergers, anti-trust, market liberalisation and State aid control, to ensure a level playing field for companies competing in the single market is one of the Commission's key tasks under the Treaty, and one which faces ever more complex challenges. It is also a key dimension of the enlargement process and a factor in Europe's global competitiveness. The advent of the single currency has been and remains a further dynamic factor stimulating the reorganisation of markets and adding to the challenges competition policy faces.

Overall priorities in 2002 will include the implementation of the revised legislative framework for antitrust, a hoped-for revised framework for merger control, decreasing backlogs of cases in certain areas, and enhancing the Commission's scope to focus on the highest priority cases, launch ex officio investigations as well as monitor implementation and develop soft law frameworks to prevent competition and State aid problems from arising at an early stage. The service sector and competition in newly liberalised sectors such as telecoms, electricity and postal services will constitute particular sectoral focuses. Special emphasis will also be placed on increasing the transparency of State aid through the implementation of the State aid register and scoreboard.

Management and support expenditure for Policy Area Competition (EUR74.1 million; +10.8%)

Significant additional human resources are foreseen to cope with the growing number of merger cases, state aid interventions, enlargement and further additional obligations in the context of international cooperation.

Mergers, antitrust and market liberalisation (no appropriations)

The priority for Merger Control will be to assure the effective discharge of the Commission's obligation to review mergers with a Community dimension, while progressing as far as possible with work on the review of the Merger Regulation. This must be seen in the context of the rapid rise in merger decisions in recent years (on average exceeding 30%) which continues unabated.

Anti-trust policy. With an eye to enlargement and new European governance, and building on a proposal adopted by the Commission in September 2000, the Commission will, in 2002 and 2003, put in place a new enforcement system for more effective application of the EC anti-trust rules (Articles 81 and 82). The new system builds upon more decentralised application of EC antitrust rules by national competition authorities and national courts in addition to continued and reinforced application of these EC rules by the European Commission. The Commission intends to focus on the most important cases, which are of major legal, economic or political interest for the EU. The adoption of far-reaching reforms creating a modern, transparent and efficient legal framework for the proper functioning of competition inside an enlarged Community remains a priority.

Enforcement against cartels and similar anti-competitive practices is a key element in creating the conditions for a successful single market and monetary union. The adoption of a new Council regulation, planned for 2002, will be crucial to provide a modern and efficient instrument for anti-cartel enforcement.

Liberalisation

Liberalisation is an essential objective of Community Competition Policy. All our enforcement tools (antitrust, mergers, State aid) should underpin specific liberalisation initiatives so as to make these efforts effective for the benefit of the consumer. Particular attention will be paid to the traditional public utility sectors (telecommunications, post, energy, transport) in which our aim will be to foster the development of a level playing field on a European level. Beyond the further liberalisation in the traditionally reserved areas mentioned above, a linked objective is to ensure that the establishment of a single market in heavily regulated sectors (including liberal professions, insurance, pension funds, waste management and sport) is not undermined by anti-competitive practices.

Control of State aid (no appropriations)

As well as assessing the State aid implications of the progressive liberalisation of hitherto restricted sectors, the Commission also intends to give priority to the review of a considerable number of cases/schemes involving taxation policy issues. Continuing priority will be given to the simplification and modernisation of the State aid rules, and the development of new guidelines where necessary, in particular in respect of risk capital. The Commission is in the process of implementing a State aid Register and a State aid Scoreboard whose aim is to increase transparency and put pressure on Member States in order to reduce the overall volume of distortive State aid.

International cooperation (no appropriations)

Due to the increasing integration of the world economy, all competition issues are taking on global dimensions that necessitate much closer international cooperation between competition authorities in different countries and in the framework of multilateral organisations. As regards enlargement, the Commission will pursue its efforts of granting technical assistance to the candidate countries to ensure the setting up of credible competition authorities and the effective enforcement of competition laws.

3.4. Employment and Social Affairs

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The bulk of the appropriations assigned to this Policy Area are devoted to the European Social Fund (ESF). The ESF appropriations are mainly implemented by the Member States as a part of decentralised management: it applies to all the main programmes (Community Support Frameworks and Single Programming Documents - EUR8 963 million) but also to the Community Initiative EQUAL (EUR512 million). Within the ESF, the Commission directly manages only Innovative Actions and technical assistance (EUR47 million).

Management and support expenditure for Policy Area Employment and Social Affairs (EUR94.0 million; -8.8%)

Employment and European Social Fund (EUR9 532.6 million; -3.0%)

By and large, commitment appropriations for this chapter of the ABB nomenclature are ESF appropriations predetermined within the overall framework for the Structural Funds, as decided by the Berlin European Council in 1999. This overall framework is presented in the part devoted to the presentation by financial perspective headings (heading 2).

The budget year 2002 will be the third in the 2000-06 programming period.

The ESF is financing:

* Objective 1, to promote development and the structural adjustment of the less developed regions (together with the ERDF, the EAGGF Guidance section and the FIFG);

* Objective 2, to promote the economic and social conversion of areas in structural difficulty (together with the ERDF);

* Objective 3, to support the adaptation and modernisation of policies and systems for education, training and employment; and

* EQUAL Community initiative, for the development of human resources in a context of equal opportunities.

Activities promoted by the ESF include in particular:

* Developing and promoting active labour market policies to combat and prevent unemployment,

* Promoting equal opportunities,

* Promoting and improving training, education and counselling.

A further EUR47 million is for Community-scale innovatory measures, including studies, pilot projects and exchanges of experience and technical assistance in the form of preparatory, monitoring, evaluation and control measures.

As there is only one single fund involved, ESF resources for Objective 3 and EQUAL are predetermined, whereas the specific level of appropriations devoted to the ESF for objective 1 and objective 2 derives directly from the amounts entered into the programmes negotiated with the Member States. ESF share in Objective 1 might still be marginally altered depending on the finalisation of some negotiations. For objective 2, negotiations are not yet finalised with some countries. The breakdown of allocation between the ESF and ERDF has been assessed on the basis of the relative share of the programmes currently decided and will have to be revised afterwards.

In addition to the implementation of these budget lines for the new period, the winding up of the previous programming period will remain an important task in 2002 but it will only require payment appropriations. The overall issue of payments is addressed in the presentation by financial perspective headings (heading 2).

Despite the re-entry of unused 2000 appropriations, the appropriations for the ESF are slightly down from the 2001 budget. It amounts to EUR9 522 million, including the management and support expenditure counted in ABB Chapter 01. That could be explained by the decrease in the relative share applied to ESF for objectives 1 and 2. Budget 2001 was established on the basis of the relative share of ESF during the previous period 1994-1999 while PDB 2002 is based on the current share of the programmes already adopted in the current period 2000-06, which happens to be lower than that of the previous period.

Other social and employment programmes in the activity

In July 2000 the Commission proposed a multiannual programme for Community incentive measures in the field of employment. In line with this proposal, a reduction of 34% is proposed to bring the total to EUR10 million for 2002 (B5-502).

It is not planned to continue the preparatory measures for a local commitment for employment (B5-503) in 2002. By contrast, it is proposed that the EUR13 million for European Employment Services (EURES) (B3-4011) be retained.

Work organisations and working conditions (EUR57.7 million; +0.5%)

The appropriations proposed for Industrial Relations and social dialogue (B3-4000) for 2002 and for Information and training measures for workers' organisations (B3-4002) are to be kept at EUR12 million and EUR11 million respectively (including the BA line in Chapter 01 ABB). A 50% increase to EUR6 million is proposed for Information, consultation and participation of representatives of undertakings (Item B3-4003) in order to step up transnational cooperation between workers' representatives and employers' representatives in connection with information, consultation and participation in companies operating in more than one Member State. A 6% increase to EUR15.9 million is suggested for the subsidy to the European Foundation for the Improvement of Living and Working Conditions (B3-420) in order to finance the Observatory on Industrial Change.

An increase of 2.8% is proposed for Health protection, hygiene and safety at work, including a subsidy for the European Trade Union Technical Bureau for Health and Safety (B3-4310), raising these appropriations to EUR3.6 million. The Community subsidy for the European Agency for Safety and Health at Work (B3-4311) is to increase by 32% to EUR9 million to finance measures for small businesses and the European information week on health and safety.

Promoting an inclusive society (EUR40.7 million; +5.7%)

The Commission proposes the following amounts for 2002:

* EUR11 million for preparatory measures combating and preventing exclusion (B3-4105) in 2002. This corresponds to the amount planned in the multiannual programme (2001-05) proposed by the Commission in June 2000;

* EUR2.3 million for aid to families (B4-4102) and EUR3 million for the free movement of workers (B3-4110);

* EUR16.2 million (+EUR2 million) for combating discrimination (B5-803). This corresponds to the amount planned for 2002 in the multiannual programme (2001-06) adopted by the Council in October 2000 for combating and preventing discrimination based on race, ethnic origin, religion, disability, age or sex.

The need to ensure that the European Monitoring Centre on Racism and Xenophobia (B5-809) has the means to perform its tasks has prompted an increase of 15% compared with the 2001 budget allocation, raising the appropriation from EUR5.3 million to EUR6.1 million.

EUR4 million is proposed in reserve for 2002 in preparation for the European Year of Disabled Citizens in 2003 (B5-806).

Equal opportunities for women and men (EUR10.3 million; -1.0%)

The programme (2001-05) relating to the Community framework strategy on gender equality was approved on 20 December 2000. Budget line B3-4012 carries an allocation of EUR10 million as planned in the programme. This is to finance measures to promote equality of opportunities, including the legislative aspects by:

- training and dissemination of best practices regarding equality,

- improving understanding and knowledge of direct and indirect gender discrimination,

- support for action to measure and evaluate the effectiveness of current policies and practices,

- support for and development of the capabilities of the key actors in this field.

3.5. Agriculture and Rural Development

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3.5.1. General presentation

Scope of the Policy Area

The Policy Area "Agriculture and Rural Development" covers the following:

* Heading 1: EUR46 222 million, except for EUR602 million for Veterinary and Plant Health measures (B1-33 + part of the provision for additional BSE and FMD needs, see below) and the market expenditure in the fisheries sector (B1-26 and part of B1-32 );

* A total amount of EUR3 822 million for different measures under other Headings, i.e. EUR2 957 million for agricultural expenditure under the Structural Funds (i.e. the EAGGF-Guidance section), EUR560 million for external actions (mainly the pre-accession agricultural instrument "SAPARD"), EUR250 million for the Monetary Reserve and, finally, EUR54 million for controls and other operations in the agriculture sector in Heading 3 (B2-51).

A summary table, presenting the link between ABB nomenclature and current nomenclature is contained in Annex I. It should be noted that the annex does not include, under "Management and Support", resources for personnel, buildings and other administrative expenditure, but only the appropriations for the BA-lines and technical assistance.

General trend in the appropriations for the Policy Area "Agriculture and Rural Development"

The EUR49 556 million proposed for this Policy Area for 2002 is significantly higher (+EUR1 550 million = +3.2%) than the EUR48 006 million in the 2001 budget. This increase is fully in line with the evolution of the Financial Perspective (FP). Indeed, for the main parts of the Policy Area, the Commission proposes to include in the budget the full amount available under the FP or an amount close to the FP. For Heading 1, appropriations remain EUR365 million (0.8%) below the ceiling, compared to EUR506 million in the 2001 budget. For the agricultural part of the Structural Funds, for SAPARD and for the Monetary Reserve, the full amount is put in the budget.

The evolution of the main chapters (in the ABB nomenclature) of the Policy Area can be summarised as follows:

* Chapter 01 "Management and support expenditure": Financial management (including SAPARD) has been retained with a significant reinforcement in terms of human resources in 2002.

* Chapter 02 "Plant Products": the appropriations increase from EUR27 838 million in the 2001 budget to EUR28 100 million in the PDB 2002. Whereas the needs for the arable crop sector and for wine increase significantly, mainly as a result of the Agenda 2000 reforms, savings are envisaged for sugar and rice (in line with the proposals to reform these sectors) and for textile plants (mainly as a result of the reform of the cotton sector);

* EUR12 958 million is proposed for the Chapter 03 "Animal Products", which is an increase of 10% compared to the 2001 budget. This evolution is entirely due to the beef sector, where appropriations increase by EUR1.4 billion, mainly linked to the Agenda 2000 reform, as well as to a provision for additional BSE and FMD needs. However, significant savings are expected for the sheep meat sector in line with the Commission's proposal to reform the sector and, to a lesser extent, as a result of increased consumption. Concerning the BSE/FMD provision of EUR1 000 million, EUR850 million has been allocated to the Chapter "Animal Products" and EUR150 million to the Policy Area "Health and Consumer Protection". The reserve had to be split in this way for the purpose of the presentation of the budget on the basis of ABB nomenclature, but it is only indicative (not binding).

* EUR7 546 million is provided for Chapter 05 "Rural Development", as compared with EUR7 458 million in 2001, in line with the evolution of the FP. It is stressed that this Activity not only covers the current Chapter B1-40 (Rural development, EUR4 595 million), but also EAGGF-Guidance, financed under the Structural Funds (EUR2 950 million).

More details on the needs over the years 1999 to 2003 are given in the working document on heading 1, pursuant to Article 6 of Regulation No 2040/2000 of 26.9.2000.

3.5.2. Main factors underlying the preliminary draft for 2002

Legislative framework and reforms of the Common Agricultural Policy

The preliminary draft budget is based on the reform of agricultural markets adopted under Agenda 2000, and legislative proposals now being discussed or adopted by the Council.

The reforms decided in the framework of Agenda 2000

The reforms under Agenda 2000 relate in particular to arable crops (cereals, oilseeds and protein crops), beef and veal, wine and milk products. For the milk sector, the Council has decided to increase production quotas pending the reduction in prices and the introduction of compensatory aid in 2005. There should be no additional expenditure in 2002 compared to 2001. Also for the vine-growing sector, most of the increase in needs takes place in 2001. An additional amount of about EUR120 million is foreseen in the PDB, in order to fully include in the budget the new instrument for restructuring and conversion.

However, the price reductions and corresponding increases in direct aids for arable crops and beef/veal are planned over two and three marketing years respectively, and thus require considerable increases in the agricultural budget for 2002. If price reductions lead to budgetary savings, the latter are more than offset by increased expenditure for the compensatory aids.

Other reforms and legislative proposals

As in the past, the preliminary draft budget is based on legislative proposals which have already been presented to the Council, or which are being drawn up by the Commission. At present, the Commission has tabled proposals to reform three sectors, which have yet to be decided, i.e. in the sugar, rice, and recently, the sheep and goat sectors. The savings expected from these reforms amount to nearly EUR1 billion.

In order to combat the BSE crisis, the Council decided a first series of measures in December 2000. Since then, the Commission has presented a seven-point plan in February 2001, the financial consequences of which are integrated into the PDB.

The Commission intends to table, in the months to come, a legislative initiative aiming at launching a new scheme for the protection of Plant and Animal Genetic Resources. Awaiting the adoption of a legal basis, EUR10 million is put in B0-40. It is further the intention of the Commission, to put in place some measures in the domain of promoting Family Farming. As the current regulation on Information Measures relating to the Common Agricultural Policy (Council Regulation (EC) No 814/2000) already covers this item, the Commission proposes to finance them on the corresponding line B1-382, and to increase it by EUR2 million.

Finally, the PDB takes account of the reform of the cotton sector, on which agreement was reached in Council on 24 April 2001.

Exceptional uncertainties linked to the outbreak of the second BSE crisis and of Foot and Mouth Disease: the provision of EUR1 billion

For the estimate of the needs of the beef sector, the PDB is based on the same economic scenario as that used to establish the cost of the seven-point plan i.e. a drop in consumption of 10%, and in exports of 40% for the calendar year 2001. 2002 would see a 7% drop in consumption, but recovery of exports. This scenario is very uncertain however, also due to the outbreak of Foot and Mouth Disease. Moreover, the needs for the co-financing for the eradication of the latter are at present impossible to assess with an acceptable degree of precision. For these reasons, the Commission proposes to put EUR1 000 million of the EUR1 365 million remaining available below the FP in Chapter B0-40, and to clearly earmark it for the additional costs which might arise as a consequence of BSE and Foot and Mouth Disease. The Commission will re-evaluate the situation in October in the framework of the Letter of Amendment.

Monetary parameters

Euro-dollar parity

According to Article 8 of the new Council Regulation (EC) N° 2040/2000 of 26 September 2000 on budgetary discipline, when the Commission adopts the preliminary draft budget concerning agricultural expenditure, it has to draw up the budget estimates for Titles 1 to 3 of Subsection B-1 using the average euro-dollar market rate observed over the most recent three-month period, ending at least 20 days before adoption by the Commission of the budget document. The average parity observed during this period, i.e. the first three months of 2001 is EUR1 = $0.92. Since the 2001 budget, as modified by Supplementary and Amending Budget N° 1/01, is based on a rate of EUR1 = $0.87, the PDB 2002 is based upon a lower euro-dollar rate. In fact, the gap between world and Community prices is increasing, resulting in additional needs compared with the 2001 budget.

Agrimonetary system

The introduction of the euro and the abolition of the agricultural conversion rates ("green rates") with effect from 1 January 1999 have radically altered the agrimonetary situation. The income compensations granted to producers under the agrimonetary system are much lower than in 2000 and 2001, when agrimonetary expenditure was exceptionally high. This is due to the fact that the aid decided by the Council to offset income losses as a result of the abolition of the green rates is degressive and the second and third tranches are co-financed. However, due to the current strengthening of the UK£, new aids will probably have to be paid in agreement with the new agrimonetary scheme, decided for the currencies which do not make part of the euro. The overall expenditure is expected to fall from about EUR900 million in 2000 to EUR430 million in 2001 and to EUR304 million in 2002.

Agricultural Guideline (Annex 2)

According to the decisions taken at Berlin, the scope of the Agricultural Guideline has been expanded. Apart from Heading 1, the pre-accession agricultural instrument (SAPARD) in Heading 7 and the amount "available for accession" in Heading 8, relating to agricultural expenditure, now come under the ceiling set by the Guideline.

The Guideline for 2002 has been calculated on the basis of the Council Regulation (EC) No 2040/2000 on budgetary discipline. The 1995 budget is now the reference year, instead of 1988, as used until now. The Agricultural Guideline for 2002 thus comes to EUR50 867 million, an increase of EUR2 079 million (4.3%) over the Agricultural Guideline for 2001 (EUR48 788 million).

When agricultural pre-accession aid of EUR555 million is included, total expenditure comes to EUR47 142 million, i.e. some EUR3.7 billion under the Agricultural Guideline.

Conciliation procedure for agricultural expenditure

The new Inter-Institutional Agreement for the period 2000 to 2006 maintains the rule requiring the Commission to identify, in its Preliminary Draft Budget, appropriations connected with new or planned legislation, and those arising from the application of legislation existing when the previous budget was adopted. "New legislation" is taken to mean any new or planned legal basis and any amendment to the basic instrument governing the principle of the expenditure made since the previous budget was adopted.

When applied to agricultural expenditure, this definition covers all instruments or regulations establishing a common market organisation or amending the basic principles of an existing market organisation and those corresponding to more specific operations, regardless of whether or not they come under a market organisation. In practice, this means regulations adopted by the Council supplementing or amending instruments listed in the remarks column of the budget. On the basis of these criteria, a certain number of measures have been adopted since the 2000 budget was adopted. Others have been proposed by the Commission and are still being scrutinised. These measures are listed in Annex 3.

3.5.3. Level of appropriations by activity

The following section compares the level of appropriations in the PDB 2002 and the 2001 budget for each of the 6 Chapters of the Policy Area "Agriculture and Rural Development".

Management and support expenditure for Policy Area Agriculture and Rural Development (EUR135.1 million; +3.5%)

Financial management (including SAPARD) has been retained with a significant reinforcement in terms of human resources in 2002.

Plant products (EUR28 100.0 million; +0.9%)

This Chapter of the ABB nomenclature covers the current Title B1-1 "Plant Products" of the budget and those parts of Chapters B1-30 (Non-annex 1 products) and B1-31 (Food programmes) which concern plant products. The appropriations increase from EUR27 836 million in the 2001 budget to EUR28 100 million. Whereas the needs for the arable crop sector and for wine increase significantly, mainly as a result of the Agenda 2000 reforms, savings are envisaged for sugar and rice, in line with the proposals to reform these sectors, and for cotton, as a result of the reform decided by the Council in April 2001

In order to make the new ABB nomenclature as transparent as possible, the Commission regrouped expenditure into Articles for most of the individual sectors, the evolution of these appropriations are as follows:

Market measures for cereals (EUR967 million; - EUR67 million)

The table below shows the main assumptions for 2001 and 2002 as regards traditional market support expenditure budgeted in chapter B1-10 (Articles B1-101 and 102).

>TABLE POSITION>

Expenditure on export refunds drops to EUR81 million (-EUR180 million), a decline of almost 70% of appropriations for 2001. This is largely due to the ongoing reduction in institutional prices under Agenda 2000, the expected rise in world prices; and the smaller quantities scheduled for export (-3.1 million tonnes).

Requirements for storage expenditure in 2001 are substantially higher than in 2000 (+206 million), up some 56%. This is due to an expected increase in stocks, and thus in related costs.

For processed products (Non-Annex I), expenditure forecasts are the same as in the 2001 budget. This is in line with the conclusions of the Uruguay round (GATT). The ceiling for export refunds under Chapter B1-30 was to be reduced from 717 million in 1996 to 415 million in 2001. This figure is retained for 2002 to comply with the WTO obligations. It is emphasised, that in order to guarantee a normal development of the production and trade of processed products, the Commission will use, if required, the facility of inward processing. Of this figure of EUR415 million, only EUR29 million concerns cereals. This is down from EUR43 million on 2001. The saving is a result of the general downward trend in cereal refunds.

Rice (EUR47 million; - EUR149 million)

The Commission produced a new proposal concerning the common organisation of the rice market in 2000. It is on the basis of this proposal - COM(2000) 278 final - that the appropriations for 2002 have been calculated. The final decision, in the form of a Council regulation, may yet alter the scenario.

The significant decrease in the appropriations is primarily due to the transfer of per hectare aids for rice to Chapter B1-10 arable crops (EUR129 million in 2001). Further reductions are due to the estimated fall in costs for intervention stocks from 44 million for 2000/01 to 15 million for 2001/02. This fall arises from a commitment under the reformed regime not to buy in any further stocks. As a result of the reform, net savings in the preliminary draft budget 2002 are expected to be EUR64 million. However, as the reform mainly consists of switching from market support (public intervention) to direct aid, the savings on the market support measures, which are budgeted under this article, are much higher.

Export refunds, however, are slightly up (+EUR9 million). This is largely a consequence of falling world prices for rice, which widens the gap between Community and world prices.

Food programmes (EUR224 million; +EUR3 million)

As in the past, EUR200 million has been earmarked for free distribution of agricultural products to the needy (Article B1-310), the same as in 2001.

Refunds for food aid operations (B1-311) are EUR3 million higher than in 2001; giving a figure for expenditure of EUR24 million.

Direct payments for arable crops (EUR17 759 million; +EUR873 million)

The appropriations for direct per hectare payments(current Articles B1-104 and 105) increase (+ 873 million). Part of this increase (+EUR161 million) is a result of the reform of the rice sector, which consists mainly, as indicated above, of switching from the classic intervention scheme (i.e. public storage) to direct aid. A further increase (EUR100 million) is accounted for by the increased use of the voluntary set-aside scheme for small producers. The balance is accounted for by the entry into force of the second step of the Agenda 2000 reform.

Sugar (EUR1 603 million; -EUR280 million)

The foreseeable expenditure in the sugar sector is down on the 2001 appropriations, mainly because account is taken of the Commission's proposal for a reform of the sugar regime, starting from the 2001/02 marketing year. As a consequence of the suppression of the storage refund system some EUR358 million should be saved.

More expenditure is foreseen for refunds (ACP countries and chemical industry) because of the foreseeable drop in world prices, and consequently an increase in the refunds. The unit refund would rise from EUR430/tonne for 2000/01 to EUR460/tonne for 2001/02.

The export refunds for sugar incorporated in Non-Annex I products amounts to EUR183 million. The small increase (+EUR4 million) is attributable to the rising unit refund for sugar.

Olive oil (EUR2 389 million; -EUR84 million)

Expenditure forecasts for olive oil are lower than the 2001 appropriations. Virtually all the decrease is accounted for by the drop in expenditure on production aid (-EUR78 million), and in particular the assumptions used for establishing the quantities of olive oil for which aid will be granted.

The 2002 figure is based on the national guaranteed quantities (NGQ) eligible for aid and provided for in the basic regulation. The 2001 appropriations for Italy were based on quantities slightly higher than its NGQ. In fact the quantity "normally" allowed by the regulation for 1999/00 was increased by 80% of the difference between its NGQ and the actual production for 1998/99.

Fibre plants and silk worms (EUR703 million; -EUR128 million)

There is a substantial reduction (-15%) in forecast expenditure on fibre plants and silkworms in Chapter B1-14, resulting from the reforms in the cotton, and flax and hemp sectors.

According to the reform for flax and hemp, expenditure for this sector is estimated at EUR80 million, of which only EUR21 million remains within this article (the bulk of it is transformed into direct aids and included in the budget accordingly).

The appropriations requested for cotton (EUR681 million) are down (-EUR61 million). The reform decided by the Council on 24 April 2001 left unchanged at 50% the percentage by which the guide price will be reduced for the Member States where actual production exceeds the Guaranteed National Quantity. However, when production exceeds a quantity of 1 500 000 tonnes, this percentage will be gradually increased. Without the reform, requirements for cotton would be EUR770 million. The estimated requirements also take into account a world price for unginned cotton of EUR345/tonne (instead of EUR355/tonne), and a quantity produced of 1 600 000 tonnes (instead of 1 570 000 tonnes).

Fruit and vegetables (EUR1 647 million; -EUR18 million)

Forecast expenditure for fruit and vegetables is slightly down on the 2001 appropriations (-1%). This is due to lower estimates for the nut scheme (-EUR44 million), the compensatory aid for bananas (-EUR23 million), and the compensation for withdrawals (-EUR10 million). On the other hand an increase in requirements (+EUR70 million) is expected for production aid for processed tomato products as a result of the reform in 2001 (higher processing thresholds and higher aid for tomatoes).

For the free distribution of fruit and vegetables (B1-314), a flat EUR9 million is proposed (-EUR2 million).

Products of vine-growing sector (EUR1 275 million; +EUR122 million)

Wine growing is one of the four agricultural sectors, which the European Council decided to reform in March 1999. The reform is the biggest change in the sector since it was established in 1962. As far as the budget is concerned, it consists of two strands: the first is a simplification of the market mechanisms, i.e. the different types of distillation are to be rationalised. Although this will not produce any direct savings, it will increase transparency and reduce the number of unknown factors. The second, and most important part of the reform, is the establishment of an instrument for restructuring vineyards, which is expected to cost over EUR422 million this year.

The expected increase in expenditure is due to the high level of the 2000 harvest, leading mainly to higher distillation costs (+EUR50 million) and higher storage costs for alcohol (+EUR36 million). For the second year of application of the new scheme for restructuring vineyards, the new costs to cover the lost of income causes an increase of EUR42 million. In contrast, a decrease is expected in refunds expenditure, due to the decrease in rates (-EUR10 million).

The first indications of the year's harvest will be available when the Letter of Amendment is presented in October.

Tobacco (EUR984 million; -EUR16 million)

Following the 1992 and 1998 reforms, expenditure for this sector has become relatively stable. Production eligible for premiums is subject to a strict quota system. However, savings in the order of EUR16 million are expected for the specific aid. In fact, the new scheme foresees that the specific aid is paid at the same time as the other premiums and no longer with a certain delay. This causes a temporary increase of expenditure in 2001.

Other plant products/measures (EUR502 million; +EUR6 million)

* Dried fodder and grain legumes (EUR385 million; +EUR1 million)

The appropriations proposed for this sector are at practically the same level as the requirements set for 2001. The requirements for 2002 are based on production of 4.8 million tonnes for heat-dried fodder (maximum guaranteed quantity: 4.4124 million tonnes) and production of 250 000 tonnes for sun-dried fodder (maximum guaranteed quantity: 443 500 tonnes).

The overall amounts for grain legumes remains constant at 72 million. A drop in production for both lentils and peas, and vetches is foreseen, but the total quantities still exceed the maximum guaranteed area of 40 000 ha.

* Seeds and hops (EUR117 million; +EUR5 million)

For seeds (EUR105 million), it is planned to pay an average aid of EUR299/tonne (instead of EUR285/tonne for the 2001 budget) for a total quantity of 350 900 tonnes. For hops (EUR12 million), an area of 25 000 hectares should receive a premium of EUR480/hectare.

Animal products (EUR12 958.0 million; +14.0%)

This Chapter of the ABB nomenclature covers the whole of current Title B1-2 - Animal products (with the exception of the fisheries sector B1-26), and expenditure on non-Annex I products (B1-30) and food programmes (B1-31) which concern animal products. It comprises also an amount of EUR850 million as part of the provision created to cope with additional BSE and FMD needs. In fact, for the purpose of the ABB exercise, a certain amount of the provision had to be allocated to market measures, and the remainder (EUR150 million) under the Policy Area "Health and Consumer Protection". It should be stressed that this split is only indicative and not binding. As can be seen from Annex I, the EUR850 million has not been allocated to the different animal sectors, falling under this Policy Area, and it is not further commented on under the different sectors.

The EUR12 958 million proposed for this Activity presents an increase of EUR1 592 million compared with the 2001 budget. Appropriations in the beef sector rise by EUR1.4 billion, of which EUR1.2 million is linked to the Agenda 2000 reform of the beef sector. The remaining EUR200 million as well as the special provision created in order to cover the significant additional market costs due to the BSE and FMD crises explain the other part of the increase. On the other hand, expenditure for sheep meat should diminish, e.g. as a consequence of the lower consumption of beef (price effect) and of the inclusion in the budget of the proposal to reform the sheep and goat sector.

It is clear, however, that these appropriations will probably have to be updated in the Letter of Amendment, in line with the evolution of the current crises.

The evolution of the appropriations of the different animal sectors reads as follows:

Milk and milk products (EUR2 617 million; +EUR23 million)

Savings are expected for the various subsidised disposal programmes for skimmed-milk powder (-EUR64 million) and for public storage of butter (-EUR30 million).

On the other hand, only EUR36 million has been entered in 2002 for the supplementary levy (charge imposed on quantities in excess of quotas). The reason being, that in Agenda 2000, quotas were raised for the campaign 2001/2002 by 502 000 tonnes, which means that quota overruns will be smaller and levies will fall by EUR53 million.

A small increase in requirements is expected for exports (+EUR25 million). This is accounted for by the increase of the level of refunds for cheese and "other milk products" in order to comply with the market previsions.

The export refunds for milk and milk products incorporated in Non-Annex I products amounts to EUR200 million, which represents and increase of EUR40 million compared with 2001, in line with the increase of the export refund

The new scheme for school-milk (Article B1-312) adopted by the Council in 2000 has reduced the Community contribution from 95% to 75% of the target price. For 2002 this scheme has full effect, and requirements are EUR81 million (-EUR8 million).

Beef and veal (EUR8 371 million; + EUR1 393 million)

Compared with the 2001 budget (including SAB 1/2001, i.e. the costs of the first BSE measures package), appropriations increase significantly for Chapter B1-21 Beef and Veal (+1.4 billion or +20%), mainly due to the second step of premium increase foreseen in Agenda 2000 reform (+EUR1 190 million) and, to a lesser extent, to the net additional expenditure due to the BSE crisis (+EUR203 million).

Direct payments

The beef sector is one of the four agricultural sectors which the March 1999 European Council decided to reform. It is a continuation of the 1992 reform involving a further gradual reduction of institutional prices with, in return, an increase in the amount of compensatory direct aid and the introduction of new aid.

With EUR6 275 million, these direct payments account for 75% of the chapter appropriations. Following the second instalment of the increase in premium, requirements for the suckler cow premium rise by nearly EUR193 million (total EUR2 031 million), and those for male animals by EUR181 million (total EUR1 800 million). On top of this comes the new slaughter premium increase of EUR655 million (total EUR1 371 million). The extensification premium, which is now also paid to milk herds in certain Member States, is at EUR751 million. A further increase of EUR161 million must be added as the amount set aside to enable Member States to make additional payments (total EUR322 million).

BSE measures and budgetary consequences on other measures of the Common Market Organisation

To face the new BSE outbreak the Commission proposed, in February, a second package of measures (the so-called seven-point plan). The estimate of expenditure for the beef sector is based on the economic scenario which underpins the seven-point plan. The main elements of this scenario can be summarised as follows. Net production in 2002 (calendar year) should be 7 980 000 tonnes, compared with production of around 7 350 000 tonnes in 2001. In 2001, consumption should drop by 10% and exports diminish by 40% compared to normal levels. For 2002, a slight recovery of consumption is supposed (7% below normal level) and exports will recover with the lifting of embargoes decided by many third countries. As a result, high quantities of meat have to be removed from the market. This will be done by buying into public storage an additional quantity of 401 000 tonnes, with a cost of EUR795 million (including costs for maintaining 310 000 tonnes bought under 2001 budget) and by entering 300 000 tonnes into the new special purchase scheme (EUR420 million). The closing stocks will then be at 711 000 tonnes.

Requirements for the voluntary slaughter programme (cattle over 30 months old in the United Kingdom) due to the first BSE crisis are estimated at EUR334 million, i.e. EUR12 million less than in 2001.

For the compulsory and selective slaughter programmes, an amount of EUR75 million is entered (+EUR62 million compared with 2001) in order to face the increase due to the new cattle involved in the new crisis.

In total, the appropriations to deal with face the old and the new consequences of BSE are EUR1 624 million.

In contrast, there should be a decrease in needs for export refunds (-EUR92 million compared with 2001, reaching a total EUR480 million, i.e. 6% of the chapter) as a result of the embargoes and taking into account a certain recovery of exports.

However, in case of the drop in internal consumption and in exports being higher than foreseen in the second package tabled by the Commission before the FMD outbreak, an additional quantity might have to be removed from the market. Also special market measures might appear necessary e.g. in the field of animal welfare. If additional needs appear, the should be financed by means of the special provision budgeted in Chapter B0-40. This provision is meant to cope with additional market as well as veterinary expenditure.

Sheepmeat and goatmeat (EUR970 million, i.e. -EUR650 million)

Appropriations for Chapter B1-22 (Sheepmeat and goatmeat) are in line with the new regime proposed by the Commission for this CMO. The main modifications of the regime concern the ewe and goat premium. In particular, and taking into account the results of an evaluation study, it is proposed that the actual premium which is paid as compensation between a basic price and an average market price be replaced by a flat rate payment. This will be stable and predictable for farmers and simplify the administration of the regime.

Based on an average level of price during the representative period of 1998-2000, the proposed levels for the premium are at EUR21 per ewe and at EUR16.8 per milk producing sheep and per goat. A supplementary premium of EUR7/ewe or goat shall also be granted to producers in Less Favoured Areas and/or practising transhumance (comparable with the existing Rural World Premium).

The main reason for the decrease of EUR650 million in the appropriations foreseen compared with the 2001 budget is that the new proposal intends that payments shall be made not earlier than 16 October of the calendar year; consequently, the first payment to be made under the new regime will occur after the 16 October 2002, falling under the 2003 EAGGF budget year (one-off savings of EUR560 million under the 2002 budget). The rest of the decrease in appropriations is due to recent improvement in market prices levels (due to the BSE crisis consequences on the sheep sector), leading to a lower level of last instalments to be paid for premiums under the finishing regime. As a matter of fact, as the actual premium is paid in several instalments, the appropriations of one budget year have to cover parts of two marketing year premiums: during the 2002 budget, the last part of current premium (affected by the level of prices during 2001 marketing year) will have to be paid. Remaining payments have also to be made for the additional "Rural World premium".

The total of these remaining premiums represents EUR826 million. Including the remaining additional premium, the total of the "old regime" premium to be paid will be EUR956 million. From 2003 onwards the total of the "new regime" premium to be paid per budget year for sheep and goats (including supplementary premium) is estimated at EUR1 838 million.

The table below shows the price assumptions for the marketing years 2000 and 2001, the corresponding sheep premium for these years, and the proposed fixed rate premium from 2002 onwards.

>TABLE POSITION>

The remaining appropriations are for private storage (EUR15 million).

Pigmeat, eggs, poultrymeat and other measures for animal products (EUR150 million; -EUR24 million)

The appropriations requested for 2002 in Chapter B1-23 total EUR147 million, and EUR3 million is allocated to Chapter B1-30 (Non-Annex I products). Of the EUR147 million, EUR70 million is for pigmeat and EUR64 million for eggs and poultry. This corresponds to spending on export refunds for the quantities agreed by the Union with the World Trade Organisation (443 500 tonnes for pigmeat, 98 800 tonnes for eggs and 286 000 tonnes for poultry). Given the reduction in production costs as a result of the lower cereals prices decided in Agenda 2000, the better market situation and the increased competition for export licences, the level of refunds is also lower.

The situation on the pigmeat market looks satisfactory, and so nothing has been entered for private storage measures. In addition no appropriation is proposed for exceptional market support measures to deal with epizootic diseases, such as classic swine fever.

It is proposed that EUR14 million be entered for specific aid for bee keeping, corresponding to the programmes declared by Member States.

The export refunds for eggs incorporated in Non-Annex I products amount to EUR3 million, down by EUR1 million on 2001.

Ancillary expenditure (EUR273.1 million; -60.0%)

This Chapter of the ABB nomenclature covers expenditure for POSEI with the exception of fisheries (in current Chapter B1-32), monitoring and preventive measures (B1-36), clearance of accounts (B1-37 and 41), promotion measures (B1-38), other measures, i.e. mainly the agrimonetary aids (B1-39), monetary reserve (B1-6), and some other minor schemes (B2-51 and B7-821). They are grouped into 4 Articles.

Horizontal Schemes (EUR53.3 million; +EUR10.7 million)

The Commission proposes to create a new line in Heading 1 for a new scheme on Genetic Resources, the legal base of which is to be presented in the course of the coming months. This new scheme is seen to replace the current measure financed under Article B2-517. EUR10 million is provided in Chapter B0-40.

The proposed appropriations (EUR18.8 million, i.e. +13.4%) for data networks (B2-512) cover two different actions. On the one hand, it concerns part of the Farm Accountancy Data Network (FADN) for which appropriations remain quite similar from one year to another. On the other hand, it deals with surveys on the structure of agricultural holdings, for which an increase of 26.7% is foreseen, taking into account the importance of the statistical data to be provided for analysing the different aspects of Community agriculture.

The appropriations proposed for the restructuring of systems for agricultural surveys (EUR3.5 million for B2-513) are increased by 16.7%. They correspond to the amounts fixed in the decisions concerning the improvement of agricultural statistics and the application of aerial-survey and remote-sensing techniques adopted by the Parliament and the Council in 2000.

The appropriations for the protection of forests against fires and atmospheric pollution (EUR16 million for B2-515) remain unchanged from 2001.

For international agricultural agreements, the level of appropriations provided for 2001 is continued for 2002 (EUR5.437 million).

Control of agricultural expenditure (-EUR630 million; +EUR53.7 million)

* Monitoring and preventive measures (EUR54 million; -EUR54.7 million)

Expenditure for the olive oil register (EUR17 million) is down by EUR20 million. The reason for this decrease is that, with the exception of Greece, all the Member States concerned are well advanced in the settlement of the oil register, and as a consequence fewer appropriations are needed.

The appropriations for the vineyard register are up by EUR5.2 million, because of an expected increase in payments by Member States for this scheme.

Expenditure forecasts for control and prevention measures proper are down by EUR40 million on the 2001 figure. This decrease is the result of the non-acceptance by the Council of the proposal to amend Regulation No 723/97, and also the fact that no proposal to amend Regulation No 3508/92 was presented. On the other hand, the Commission will propose prolonging the current scheme on the implementation of Member States' actions for programmes on control of EAGGF Guarantee section expenditure (yearly cost estimated at EUR15 million, put in B0-40 pending adoption of the legal base).

* Controls and other operations in the agricultural sector (B2-511)

The proposed appropriations (EUR16 million) increase by EUR1 million in comparison to 2001 because of the reinforcement of the means in favour of the control agencies in the sector of olive-oil.

* Clearance of previous year's accounts and reduction/suspension of advances (-EUR700 million, i.e. same amount as in the 2001 budget)

The yield to the budget of the clearance of accounts is put at EUR600 million as in 2001 .

This amount is derived from an estimate of corrections, which could be made in 2001, as a result of compliance audits carried out on the basis of the new clearance regulations.

A further EUR100 million is included in the chapter as an estimate of sums that may be reduced or suspended, temporarily, pursuant to Article 14 of the Regulation on budgetary discipline should Member States fail to comply with the regulations.

Inserted under subheading 1b, Chapter B1-41 will accommodate corrections resulting from the clearance of accounts for Title 4 (Rural development) and the reductions/suspensions of advances relating to this title. No appropriations are foreseen at this stage.

Promotion of agricultural products and of food quality (EUR66.8 million; + EUR0.3 million)

An evaluation of measures to promote agricultural products is ongoing. The appropriations proposed are in line with the financial statement of the two new regulations concerning, on the one hand promotion inside the Union, and on the other hand promotion in third countries.

The Commission proposes to increase the appropriations for line B1-382 - enhancing public awareness of the CAP - by EUR2 million, for a new scheme aimed at promoting family farming. This can be done under the current regulation governing the line.

Schemes related to common market organisations (EUR783 million; -EUR365 million)

* Programmes for the most remote regions and the Aegean Islands (EUR239 million; +EUR10 million)

The forecasts for expenditure for POSEI are based on the proposed reform of the regime presented by the Commission at the end of 2000. The programmes for the French overseas departments, POSEIDOM, see an increase of EUR10 million, EUR7 million of which is due to the transfer of aid to the pineapple industry from B1-15 fruit and vegetables. POSEIMA (Madeira and the Azores) see an increase of EUR2 million, POSEICAN (Canary Islands) will experience an overall decrease of some EUR2 million, while the overall figures for the remote Greek islands and aid for the delivery of rice to Reunion remain stable. A further EUR15 million is allocated to fisheries, in the Policy Area "Fisheries".

* Other measures (EUR294 million; -EUR123 million)

Expenditure mainly concerns agrimonetary aids. These are paid to farmers in order to compensate for income losses due to movements of the different European currencies.

Expenditure for the agrimonetary compensation payments is slowing down since 2000. In fact, expenditure on the "old" scheme which was applicable before the introduction of the euro on 1 January 1999, and on the "transitional" scheme accompanying the introduction of the euro and the abolition of the "green ECU", are significantly decreasing. This is due to the degressivity of the aids. Expenditure for the so-called transitional scheme is expected to fall from EUR256 million in 2001 to EUR120 million. Concerning the "old" scheme, which was applicable before the 1 January 1999, only a relatively small amount of EUR23 million remains to be paid in 2002.

However, new and increased expenditure is expected for the "new" scheme, decided for those currencies that do not participate in the euro. Expenditure is estimated at EUR161 million to compare with EUR99 million in the 2001 budget. As the UK£ has strengthened considerably against the EUR, the United Kingdom has requested payment of the first tranche of the agrimonetary aids it is entitled to under Community legislation. In the light of the crisis in British agriculture, it is expected that also the second tranche, to be financed on the 2002 budget, will be requested.

* Monetary Reserve (EUR250 million; -EUR250 million)

Whereas for EAGGF Guarantee expenditure, the monetary reserve was EUR500 million until 2001, it is foreseen by the Inter-Institutional Agreement that it will be phased out: EUR250 million is budgeted for 2002 and will be wound up in 2003.

Rural Development (EUR7 545.5 million; +1.2%)

In addition to Chapter B1-40 (rural development), this Activity comprises agricultural measures financed under the Structural Funds i.e. the Guidance Section of the European Agricultural Guidance and Guarantee Fund (EAGGF)

Rural Development (EUR4 595 million; +EUR100 million)

2002 is the third year of implementation for the new scheme, which was proposed by the Commission within the framework of Agenda 2000 and was approved by the Berlin Council in March 1999.

The appropriations allocated for rural development are set exactly at the level of the ceiling of the Financial Perspective. The sum foreseen is adequate, by definition, to cover the expenditure determined in the various rural development plans presented by the Member States and adopted by the Commission.

The different schemes and their corresponding measures, are as follows:

* investment in agricultural holdings (EUR227 million);

* setting up of young farmers (EUR161 million);

* training (EUR33 million);

* early retirement (EUR192 million);

* less-favoured areas and areas with environmental restrictions (EUR835 million);

* agri-environment (EUR2 115 million);

* improving processing and marketing of agricultural products (EUR191 million);

* forestry (EUR288 million);

* and finally a variety of measures for promoting the adaptation and development of rural areas (EUR500 million). There is also a provision for miscellaneous expenditure (EUR53 million).

These measures comprise not only those launched under the new rural development regulation, but also expenditure on the ongoing accompanying measures, launched under the previous programming period. Total needs for the latter in 2002 are estimated at EUR489 million. It should be noted that, according to the principle of subsidiarity, Member States can shift between the different schemes within certain limits.

Agricultural expenditure under the Structural Funds (EUR2 950 million; -EUR13 million)

By and large, the commitment appropriations for the (EAGGF) Guidance section are predetermined within the overall framework for the Structural Funds, as decided by the Berlin European Council in 1999. This overall framework is presented in the part devoted to the presentation by Financial Perspective headings (Heading 2).

The EAGGF Guidance Section contributes to the financing of Objective 1 (B2-100) to promote development and the structural adjustment of the less developed regions together with the ERDF, ESF and the FIFG. The Community Initiative LEADER for rural development is exclusively financed by the EAGGF (B2-140). The specific level of appropriations devoted to the EAGGF Guidance Section derives directly from the amounts entered into the programmes negotiated with the Member States. The EAGGF Guidance amount for Objective 1 might still be marginally altered depending on the finalisation of some negotiations.

In addition to the implementation of these budget lines for the new programmes, the winding up of the previous programming period will remain an important task in 2002 but it will only require payment appropriations. The overall issue of payments is addressed in the presentation by Financial Perspective headings (Heading 2).

The EAGGF Guidance Section resources amount to EUR2 950 million, roughly the same as last year's budget, despite the re-entry of unused 2000 appropriations for Objective 1. This increase is, however, offset by the reduction, albeit marginal, in the share of EAGGF in Objective 1: while budget 2001 was established on the basis of the relative share of EAGGF in Objective 1 during the previous period 1994-1999, the 2002 PDB is based on the current share within the programmes already adopted, which happens to be slightly lower than that of the previous period.

Sapard (EUR545.0 million; +2.8%)

Financial execution of payment appropriations on 2002 will mainly depend on the rhythm of accreditation of the SAPARD agencies in applicant countries and on the rapidity of execution of individual projects. Neither of those aspects is amenable to forecasting in a meaningful sense. Both aspects are highly unpredictable because they mainly depend on the capacity of these countries to set up reliable administrative structures and by the lack of relevant precedents.

Taking account of the above, the Commission proposes to provide for commitments up to the ceiling of the Financial Perspective (EUR555 million). It also proposes to fix estimated payments of Community funds in 2002 on the basis of the hypothesis that they would be of the same order as those retained in the 2001 budget i.e. EUR460 million. It is in fact estimated that the payment of advances, which represents half of the payments expected in 2001, will be replaced in 2002 by a greater rate of reimbursement of payments to the final beneficiaries. On top of this, EUR10 million is requested for management and support.

Annex 1: Agriculture and rural development in EUR million

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Annex 3

1. New Legislation (decided since 15 december 2000)

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2. Planned Legislation

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3.6. Energy and Transport

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Management and support expenditure for Policy Area Energy and Transport (EUR104.1 million; -3.4%)

The subsidy for the Euratom Supply Agency (A-300: EUR0.2 million; -1.4%) is rolled over.

Inland, air and maritime transport policy (EUR28.0 million; +15.2%)

The main objectives of the measures financed under the Activity "Inland, air and maritime transport policy" are the establishment of the Air safety agency (proposal presented in 2000) with EUR2.3 million in 2002, and of the Maritime safety agency (proposal presented in December 2000 under the 2nd Erika package), with EUR1.7 million in 2002, improvements to safety, environment-friendly mobility and the competitiveness of combined freight transport by promotion of intermodality.

Trans-European networks (EUR602.0 million; +1.5%)

The trans-European transport network projects (road, air, rail, maritime and inland waterway networks, combined networks, traffic management and navigation satellites - Galileo) are financed from line B5-700 (Financial support for projects of common interest in the trans-European transport network). A special effort will be made for projects whose main objective is to clear bottlenecks.

The allocation proposed for Article B5-710 (Financial support for energy infrastructures) is exactly what was scheduled in the financial programming 2000-06 drawn up following the adoption of the legal base for the trans-European networks (TEN) with an overall allocation (all sectors together) of EUR4 600 million for 2000-06.

Energy: industries and internal market (EUR31.5 million; -5.7%)

2002 is the final year of the five-year framework programme (1998-2002) covering the Carnot, Etap, Altener, Sure, Synergy and Save projects; the recasting of this programme will start this year in order to concentrate on a number of priority objectives.

Nuclear inspections (EUR17.7 million; -11.5%)

The three main budget lines concerned (B4-2000 On-the-spot inspections, B4-2020 Sampling and analyses, and B4-2021 Specific safeguards for large-scale plutonium-processing plants) are the same as in 2001. The reduction proposed for this chapter is accounted for by nuclear cooperation with the countries of central and eastern Europe under the Euratom Treaty (B7-523), for which the main operations are scaled down as part of the rationalisation of activities in this field.

Research related to Energy and Transport (EUR238.8 million; +2.4%)

In the transport sector, this Activity concerns the key action "sustainable mobility and intermodality" within the specific research programme "competitive and sustainable growth". The general objective of this Activity is to find a better long-term balance between the growing demand for mobility and the necessary compliance with environmental, social, economic and safety constraints. It will help to break the link between economic growth and the increase in the volume of transport, to reduce the negative impact of the various modes of transport and encourage more sustainable utilisation. Special attention will be paid to intermodality and the best way of integrating the advantages of the different modes of transport in order to provide, for both passengers and freight, door-to-door services which meet users' needs. This should ensure better management of mobility. These appropriations will also help finance the research activities needed to implement the GALILEO project.

The research priorities are:

* Management systems for modal and intermodal transport

* Infrastructures and interfaces with means and systems of transport

* Socio-economic scenarios for the mobility of persons and goods.

The appropriations proposed for 2002 (EUR82.5 million including the support and management expenditure included in Chapter 01 ABB) are entered on the line "Competitive and sustainable growth" (B6-6130/6131).

In the energy sector, the appropriations for this Activity are to finance actions to devise sustainable energy systems and services for Europe, which will result in a more secure and more diversified supply of energy, the availability of high-quality, low-cost energy services, enhanced industrial competitiveness and a lesser impact on the environment.

The budget lines covered by this Activity are B6-6150/6151 (Energy, environment and sustainable development" and the amounts proposed for 2002 come to EUR161.6 million, including the support and management expenditure included in Chapter 01 ABB.

3.7. Environment

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The strategic objectives of the Community environment policy are:

* to improve the quality of life through a high level of protection of natural resources, effective risk assessment and management and implementation of Community legislation;

* to foster resource-efficiency in production, consumption and waste-disposal measures;

* to integrate environmental concerns into other policies and sectors of the economy.

* to promote sustainable development within the Union that takes account of the economic, social and environmental needs both of our citizens and of future generations;

* to address global challenges, notably combating climate change and the conservation of bio-diversity;

* to ensure that all policies and measures are based on a multi-sectoral approach, involve all stakeholders in the process and are communicated in an effective way.

The political priorities for 2002 are: adoption of the 6th Action Programme on the Environment, sustainable development, integrating environmental concerns into other policies, improved implementation of legislation, launching the LIFE III programme and, internationally, climate change, enlargement, preparation of the Rio 10 + 10 world summit and the Mediterranean environment.

Community environment policy is increasingly being implemented by incorporation into other Community policies. However, the definition and monitoring of environment policy and the LIFE programme are financed by appropriations entered under Title B4-3.

Management and support expenditure for Policy Area Environment (EUR78.8 million; +6.3%)

Additional human resources are planned to reinforce multiple policy initiatives and activities concerning the sustainable use of resources.

Environmental international affairs (EUR6.0 million; +25.0%)

This Chapter of the ABB nomenclature covers only one current budget article: "Contribution to international environmental activities" (B7-811). The allocation of appropriations increases slightly due to the fact that the thrust of the appropriations will be used for part-financing of actions undertaken in cooperation with international organisations responsible for sustainable development and the environment, membership fees and similar contributions which themselves remain relatively stable.

Environmental programs and projects (EUR146.2 million; +127.0%)

For the Financial Instrument for the Environment (LIFE III) a proposal extending the Regulation to cover the period 2000-04 was not presented until mid-2000. Because of this delay, it has been proposed that there be only one call for proposals for 2000 and 2001 together, which requires only EUR60 million in commitment appropriations to be added in 2001 to the EUR120 million already available in 2000. In this way, the total amount of EUR630 million decided for the period 2000-04 will be divided over four instead of five calls for proposals. The appropriation for the second call for proposals in 2002 (including the support and management expenditure included in Chapter 01 ABB) comes to EUR146 million: EUR70 million for both Nature protection (B4-3200) and Environmental protection (B4-3201) and EUR6 million for operations in third countries (B7-810).

In addition to these measures, there is the programme to combat marine pollution (EUR1 million in Article B4-307), a programme of measures in connection with civil protection (EUR1.5 million in Article B4-308) and two proposed programmes: one for a Community framework for cooperation to promote sustainable urban development (EUR2.9 million in Article B4-305) and the other for subsidies for non-governmental organisations operating in the environment sector (EUR4 million in Article B4-306). It is not proposed to repeat the pilot project for coastal protection in 2002.

Environmental policy development (EUR35.8 million; +5.9%)

Commitments totalling EUR14.8 million are proposed for the preparation and monitoring of legislation and other general action based on the sixth Community Action Programme on the Environment (B4-304), including nuclear safety and radiation protection.

Item B4-3101 contains a subsidy to the European Environment Agency of EUR21 million in 2002 in comparison with EUR19 million in 2001. The Agency provides the European Union and the Member States with the necessary information to define and carry out their environmental policy by identifying, preparing and evaluating appropriate environmental measures and legislation. It ensures that information is disseminated and coordinates and develops the European environment information and observation network.

3.8. Indirect Research

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The policy area "Indirect research " consists of shared-cost action managed by the Research Directorate-General. These activities are financed by the fifth Research and Technological Development Framework Programme. As other policy areas are involved in the implementation of the fifth framework programme, a summary table is included at the end of this policy area.

Management and support expenditure for Policy Area Indirect Research (220.3; +7.3%)

Research on life sciences (EUR600.4 million; +4.9%)

The objective of the specific programme "Quality of life and management of living resources" (Items B6-6110/6111) is to establish a link between the ability to discover and the capacity to produce, to satisfy the needs of society and live up to the expectations of the public. The programme focuses its efforts on fields such as food, nutrition and health, control of infectious diseases, the cell factory, environment and health, sustainable management of agriculture and the ageing population.

The amounts proposed for 2002 total EUR634.1 million, an increase of 5%, including the administrative expenditure included in Chapter 01 of the ABB nomenclature. This is what was programmed for this specific programme and ensures that the full amount provided for in the legal base is entered in the budget.

Research on growth and durable competition (EUR611.2 million; +8.5%)

Support for research activities which contribute simultaneously to competitiveness and sustainability is the main objective of their specific programme. In this context the role of industry is not only to identify the areas of collaboration but also to group projects together and integrate them, in particular multi-sector projects, in the value-added chain, so that technological assimilation and innovation is more effective throughout Europe.

The appropriations proposed in 2002 total EUR646.3 million, including the administrative expenditure included in Chapter 01 of the ABB nomenclature, and are entered under the current Items B6-6130/6131 (Competitive and sustainable growth). The increase over 2001 corresponds to the financial programming for this specific programme.

Research on preserving the ecosystem (EUR444.0 million; +9.9%)

This activity is in two main parts: the environment and energy.

The appropriations for the environment part of the programme are intended to promote the environmental sciences and technological and socio-economic research. The budget items concerned are B6-6140/6141 (Preserving the ecosystem - Environment and sustainable development), with EUR325.9 million proposed for 2002, including the administrative expenditure included in Chapter 01 of the ABB nomenclature.

The appropriations for the energy part are to finance actions to devise sustainable energy systems and services for Europe, which will result in a more secure and more diversified supply of energy, the availability of high-quality, low-cost energy services, enhanced industrial competitiveness and a lesser impact on the environment. The budget items concerned are B6-6150/6151 (Preserving the ecosystem - Energy), with EUR151.3 million, including the administrative expenditure included in Chapter 01 of the ABB nomenclature.

In line with the expenditure schedules for this specific programme, the amounts proposed for 2002, for both the above parts, total EUR477.2 million, an appreciable increase over 2001 (+8%); they will provide better cover for certain key actions and the infrastructures and generic activities which received relatively smaller allocations in past years.

International role of research (EUR137.7 million; +11.9%)

This activity is designed to promote international cooperation in RTD, reinforce Community capacities in science and technology, generally support scientific excellence in a wider international framework and contribute to the implementation of the Community's external policy, in particular with a view to the accession of new members.

It is implemented in two separate forms: one concerned with international cooperation differentiated according to five groups of target countries, and another to finance the training of researchers by two systems of grants to enable young non-EU researchers to work in EU laboratories and vice versa for young European researchers.

EUR150.1 million is proposed in 2002, including the administrative expenditure included in Chapter 01 of the ABB nomenclature, and corresponds to Items B6-6210/6211 (Confirming the international role of Community research). The increase in relation to 2001 (+10%) is in line with the expenditure schedule for this specific programme.

Research on human potential and mobility (EUR328.2 million; +7.4%)

The objective of this activity is to maintain and develop the knowledge potential available to the EU by supplying more support for the training and mobility of researchers, engineers and technicians and by improving access to research infrastructures. An additional aspect of this action is to strengthen the socio-economic knowledge base in order to get a better understanding of the crucial problems facing European society.

The increase in the appropriations for this programme (EUR351.7 million, an increase of 8%, including the administrative expenditure included in Chapter 01 of the ABB nomenclature) is in line with the fifth framework programme. The items concerned are B6-6410/6411 (Improving the human research potential and the socio-economic knowledge base).

Nuclear research (EUR182.3 million; -15.7%)

This area covers the shared-cost research activities provided for under the Euratom framework programme. The appropriations are to finance actions which help exploit the full potential of both nuclear fusion and nuclear fission on a sustainable basis by making existing technologies even safer and more economical and by exploring promising new concepts.

The amounts proposed for this activity are in Items B6-6510/6511 (Nuclear research (Euratom) - Nuclear fission safety) and B6-6520/6521 (Nuclear research (Euratom) - Fusion) and total EUR218.5 million, including the administrative expenditure included in Chapter 01 of the ABB nomenclature, 14.4% down on 2001. This decline corresponds to the schedules in the legal base.

Research policy definition and coordination (no appropriations)

The management and support resources (entered in Chapter 01 ABB) earmarked for this Activity will be used for:

- Initiatives to be taken by the Commission to provide support for the creation of the European research area and, in particular, to promote coordination and coherence between national policies and Community policy on RTD.

- European research area: for increased coordination of national and regional programmes, coordination of national policies by benchmarking, networking of centres of excellence and creation of virtual centres of excellence, strengthening of the role of the regions in the European RTD effort and direction of the European RTD evaluation network; for high-level scientific or technological analyses and evaluations to explore new research areas suited to Community action.

- Preparation and follow-up of the Framework Programme decision-making process and the annual report produced pursuant to Article 173 of the Treaty.

- Coordination of RTD actions with the other Community policies and the initiatives to be taken by the Commission to explore as closely as possible the strategic links between RTD and market realities.

- Relations with international bodies and programmes.

- Cross-cutting actions designed to achieve the best possible synergy between Structural Fund measures and RTD actions.

- Continuous monitoring by the Commission of the framework programmes and their specific programmes and their evaluation by independent expert groups.

- Communication and dissemination of information to the outside world.

The summary table below sets out the specific programmes making up the fifth framework programme of research, with an indication of the policy areas concerned:

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3.9. Direct Research

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The main mission of the Joint Research Centre, as the Commission's "scientific arm", is to provide support for the process of formulating EU policy, the principal objectives being to provide scientific and technical support for the design and implementation of Community policies, provide realistic instruments for control of the effectiveness of political decisions and facilitate better understanding of emerging issues.

Apart from the revenue generated by services supplied to outside bodies and contributions to shared-cost activities, JRC research activities are in principle funded entirely by the Community budget.

Management and support expenditure for Policy Area Direct Research (EUR213.1 million; +1.2%)

Staff and resources (Title B6-1): they are to cover expenditure (including socio-medical infrastructure) on the staff carrying out JRC activities and general administrative expenditure for the various JRC sites. The amount proposed is EUR211.9 million, a 1.2% increase on 2001, and covers 51 fewer staff than in 2001. An additional EUR1.2 million is allocated indirectly for services supplied to the JRC by the Legal Service, SCIC and the SDT.

Directly financed research (direct actions) (EUR37.6 million; -6.9%)

Direct scientific and technical support action for Community policies - EC Framework Programme (Title B6-2) and Direct Action - EAEC Framework Programme (Title B6-3), with a proposed EUR37.6 million. This is 6.9% down on 2001. It is in line with the schedules in the legal base.

Decommissioning (EUR8.8 million; +23.9%)

In addition to the fifth Framework Programme appropriations, EUR8.8 million has been earmarked for Item B4-3400 (Weight of the nuclear past from activities carried out by the JRC under the Euratom Treaty).

3.10. Information Society

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Management and support expenditure for Policy Area Information Society (EUR118.4 million; +2.8%)

Telecommunication policy and information society (EUR41.3 million; +21.8%)

This Activity covers measures relating to the introduction and development of the information society, which is both a key area for the competitiveness of European firms and a development that will gradually change society. A number of programmes have been established to meet this challenge:

- Community Telecommunication Policy (B5-302) is concerned with the definition and implementation of policy on telecommunications (EUR6 million proposed in 2002, a considerable increase on the EUR3.5 million in 2001), the aim being to develop the internal market in these fields and draw up a regulatory framework, as well as selecting indicators for benchmarking as part of e-Europe;

- Information Society (B5-331) covers general activities relating to the promotion of the information society in Europe. On 1 December 1997 the Council adopted a multiannual Community programme in this field designed to raise public awareness, to help the information society take root in Europe and to take on board its global dimension. An appropriation of EUR2.5 million is proposed for 2002;

- Promotion of European Digital Content (B5-334) concerns a new proposal to stimulate the development and use of European digital content, to encourage its presence on the global networks and to promote linguistic diversity in the emerging information society. The objectives are to create favourable conditions for the commercialisation, distribution and use of European digital content, to stimulate the use of Europe's content potential, in particular public sector information, and promoting multilingualism in digital content, in particular though linguistic customisation. An appropriation of EUR27.5 million is proposed for 2002, compared with EUR20 million in 2001;

- Action on illegal and harmful content on Internet (B5-821) concerns the multiannual Community action plan on promoting safer use of the Internet. The Commission is proposing, as in 2001, an appropriation of EUR6.5 million for this line in 2002.

Research on information society technologies (EUR874.2 million; +0.7%)

The specific research programme "User-friendly information society" (B6-6120/6121) is a priority for the future development of the EU. This integrated programme, reflecting the convergence of telecommunications, the media and information technologies and the impact of content, integrates into a dynamic approach both the research and development aspect and the dissemination and utilisation of the new information technologies aspect.

The appropriations proposed for 2002 total EUR944 million, a 0.85% increase over 2001, corresponding to the schedules for the programme.

Trans-European Networks for Telecom (EUR36.4 million; +5.5%)

Article B5-720 is intended to finance the establishment of trans-European telecom networks by launching projects of common interest in the field of basic networks (in particular satellites and mobile networks), generic services and telematic applications in areas of general interest. The appropriation proposed for 2002 is compatible with the indicative financial programming for the trans-European networks.

3.11. Fisheries

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This Policy Area includes all the activities covered by the Common fisheries policy (CFP) which is an exclusive competence of the Community. All fisheries activities are concerned, as well as the processing and marketing of these products.

DG FISH is in charge of drafting regulations, ensuring management tasks and representing the Community during international negotiations. It also ensures that the relevant provisions of Community law are rightly applied in the fisheries sector.

The major challenge for the CFP is to establish a balance between available fishing resources and their use. The implementation of the CFP reform should start in 2002 as the Commission has just launched the consultation process with its Green Paper.

The Policy Area covers five operational Activities: Specific actions in support of the CFP (including conservation of fisheries resources, control and dialogue with fisheries sector), relations and agreements with third countries and international organisations, common market organisation of the fisheries market, fisheries research and structural measures for Fisheries through the FIFG. The bulk of appropriations are devoted to the "Financial Instrument for Fisheries Guidance" (FIFG). However, the FIFG operations are mainly implemented by the Member States as a part of decentralised management (some EUR557 million).

Management and support expenditure for Policy Area Fisheries (EUR34.9 million; +0.9%)

Fisheries markets (EUR32.2 million; -1.5%)

The Commission is proposing that the current Regulation on the fisheries programme for the outermost regions (B1-3240) be extended to 2002. The Commission will present the proposals for this measure by June 2002 following the current evaluation of this programme and in line with the results of the debate on the reform of the common fisheries policy. The appropriation proposed for 2002 is slightly lower as less use is expected to be made of the measure (-EUR1 million). On the other hand, expenditure on intervention for fishery products (B1-261) should be slightly higher in view of the transitional measure following reform of the common organisation of the fisheries market, in particular the aid granted to professional organisations on implementation of an operational plan for a fisheries marketing year.

International organisations and Fisheries agreements (EUR272.4 million; 0.0%)

The proposed appropriations within this Activity are unchanged compared with the 2001 budget at EUR273.4 million, including management and support expenditure, counted under ABB Chapter 01. This area thus continues to be a priority area within the common fisheries policy as well as within the area of external action. A fairly large part of the appropriations are to be allocated on the basis of agreements forecast to be in force at the beginning of the year (agreements with countries such as Mauritania) or for agreements that should enter into force in 2002 with countries like Angola, Gabon, the Republic of Guinea, São Tomé, the Seychelles and Mauritius.

Regarding the failed fisheries agreement with Morocco, the programmed amount of EUR125 million is placed in the reserve for the time being. The amount corresponding to the restructuring programme to be proposed, which would be related to the FIFG Regulation, would be set aside in heading 4, while other international agreements could be increased.

Specific actions in support of the Common Fisheries Policy (EUR64.5 million; +5.9%)

This activity consists of specific measures in support of the internal aspects of the common fisheries policies, in particular fisheries inspection and surveillance, support for resource management (systematic collection of basic data, studies and pilot projects), and strengthening the dialogue with the industry and the sectors concerned.

The importance of conserving fishery resources will become even more apparent in the years ahead, given the decline in fish stocks, which has already led to substantial reductions in TACs and quotas. EUR23 million (+9.5%) is allocated to Article B2-904 (Support for the management of resources - collection of basic data, studies and pilot projects) in view of the measures to be undertaken as a result of the current state of stocks and measures to implement the 2000-2005 multiannual programme relating to a financial contribution from the Community towards the expenditure incurred by the Member States in collecting data, and for financing studies and pilot projects for carrying out the common fisheries policy.

The allocation for the Control Activity in 2002 is up by 4% (EUR40.5 million) in view of the increasing costs and activities involved in the inspection and surveillance of fishing by the Commission as a result of problems concerning the state of stocks (B2-902). The Commission proposes rolling over the appropriation of EUR35 million for the three-year programme (2001-2003) relating to the Community financial contribution to Member States' expenditure (B2-901).

The appropriation of EUR1.15 million for Article B2-903 (Strengthening the dialogue with the fishing industry and groups affected by the common fisheries policy) is to cover the costs incurred by European fishing associations in organising preparatory meetings ahead of the meetings of the Advisory Committee on fisheries and to finance communication measures with all those involved in the fishing industry. The Commission is proposing an 7% increase to boost the direct dialogue with the groups affected by the future of the common fisheries policy and conduct a sustained information campaign to explain this policy; this is likely to be stepped up throughout the revision of the common fisheries policy in 2002.

Fisheries research (EUR43.7 million; +41.9%)

This activity is part of the specific programme "Quality of life and management of living resources", key action "Sustainable management of agriculture, fisheries and forestry", the objective of which is to develop the knowledge and technologies for the production and exploitation of natural resources, covering the entire production chain, with due allowance for the highly competitive international context and the need to adjust to changes in the common fisheries policy, and to supply the scientific bases for Community regulations and standards.

The appropriations to finance this activity are in Items B6-6110/6111 (Quality of life and management of living resources) and the amounts proposed total EUR43.7 million, an increase of 37% over 2001, corresponding to the balance of the multiannual allocation for this specific programme (1999-2002).

Financial Instrument for fisheries (EUR558.2 million; -2.2%)

By and large, FIFG appropriations are predetermined within the overall framework for the Structural Funds, as decided by the Berlin European Council in 1999. This overall framework is presented in the part devoted to the presentation by financial perspective headings (heading 2).

The FIFG is financing:

* Objective 1, to promote development and the structural adjustment of the less developed regions (together with the ERDF, the EAGGF Guidance section and the ESF); and

* Structural measures in the fisheries sector outside Objective 1 regions.

In addition, nearly EUR3 million is available for Innovative Actions at the Community level such as studies, pilot project and experience-sharing, as well as for technical assistance actions such as preparation, motoring, evaluation and control measures. Technical assistance includes management and support resources for the FIFG assessed on the basis of the expected needs.

Activities promoted by the FIFG include:

* Fleet renewal and modernisation of fishing vessels,

* Small-scale coastal fishing,

* Protection of marine resources in coastal waters.

As there is only one single fund involved, resources for FIFG outside Objective 1 regions are predetermined, whereas the specific level of appropriations devoted to the FIFG for objective 1 derives directly from the amounts entered into the programmes negotiated with the Member States. FIFG share in Objective 1 might still be marginally altered depending on the finalisation of on-going negotiations.

Appropriations for the FIFG amount to EUR559.6 million, including management and support expenditure counted in ABB Chapter 01, slightly less than in the 2001 budget. This could be explained by the slight change in the relative share applied to FIFG for objective 1. The 2001 budget was established on the basis of the relative share of FIFG during the previous period 1994-99 while the PDB for 2002 is based on the current share of the programmes already adopted which happens to be lower than that of the previous period.

In addition to the implementation of these budget lines for the new period, the winding-up of the previous programming period will remain an important task in 2002 but it will only require payment appropriations. Final balance payments on former objective 1 programmes should score better than final balance payments on former objective 5a programmes, which could be delayed.

Following the failure of the negotiations with Morocco on a fisheries agreement, this activity would also finance the proposals for the restructuring of the Spanish and Portuguese fleets which the Commission might present in accordance with the conclusions reached at Nice and at the Council (Fisheries) meeting in December 2000.

3.12. Internal Market

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The aim of this Policy Area is the completion of the internal market. The Activities involved relate to the preparation, follow-up and updating of the legislation ensuring the smooth operation and progress of the internal market. Implementation of these initiatives is based on the Commission's prerogatives on the institutional front and the specific powers conferred on it by the Treaty (Interinstitutional Agreement of 6 May 1999).

Management and support expenditure for Policy Area Internal Market (EUR66.3 million; +6.1%)

The proposed commitment appropriations of EUR14.2 million entered in B5-3001 and B5-3001A for 2002 should make it possible to:

* establish an ongoing dialogue with economic operators and citizens to make it easier for them to know their rights and exercise them; in this way, the single market will serve both economic operators and citizens and the Commission will get the feedback it needs to update legislation;

* ensure more effective application of the rules, and simplify national and Community law to eliminate sectoral obstacles to the integration of markets and the main distortions affecting the market by constant monitoring and evaluation of the functioning of the Internal Market;

* ensure genuine freedom of movement of goods, people, services and capital, thus contributing significantly to competitiveness, economic growth and job creation in the Union; the means used to achieve this should include general and sectoral studies, quantitative analyses and follow-up of the transposition of directives; in 2002, priority will be given to financial services.

Free movement of goods (EUR0.0 million; 0.0%)

Article B5-311 provides a slot for any balancing subsidy needed for the Office for Harmonisation in the Internal Market. However, no balancing subsidy is proposed for 2002. The Office's revenue from fees for registering trademarks is more than enough to cover estimated expenditure.

3.13. Regional policy

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The Policy Area includes the cohesion policies regarding Member States and their regions, covered by two activities, on one hand by the ERDF activities and other regional interventions and on the other hand, by the Cohesion Fund. It also includes structural pre-accession assistance to the applicant CEECs through the activity ISPA.

The appropriations are mainly implemented by the Member States as a part of decentralised management (EUR20 573 million). It applies to all the main programmes (Community Support Frameworks and Single Programming Documents) but also to the Community Initiatives of the Structural Funds. The new innovative actions will also be managed in a decentralised way in the future through short-term programmes, as the Commission will stop individual project management. While being approved by the Commission and committed individually project by project, the Cohesion Fund projects are also decentralised in their management. The Commission directly manages only technical assistance projects and pre-accession facility ISPA. The latter is still in its initial launching phase, requiring an intense hands-on management by the Commission.

Management and support expenditure for Policy Area Regional policy (EUR81.6 million; +9.2%)

Additional human resources are foreseen to reinforce financial management. Other areas to be reinforced include the implementation of ISPA and a more policy driven approach to programme management.

Other costs for management and support are mainly estimated on the basis of ceilings defined by the relevant regulations for technical assistance defined as a percentage of the predetermined operational appropriations (i.e. 0.25% for the Structural Funds and 2% for ISPA).

General operational support and coordination for DG Regional Policy (EUR21.0 million; -1.4%)

This activity includes the financial interventions related to the design, co-ordination and evaluation of structural policies, as well as information and communication activities. The appropriations are stable in comparison with 2001.

ERDF and other regional interventions (EUR17 799.4 million; +6.9%)

By and large, commitment appropriations for this Activity are ERDF appropriations predetermined within the overall framework for the Structural Funds, as decided by the Berlin European Council in 1999. This overall framework is presented in the part devoted to the presentation by financial perspective headings (heading 2).

The ERDF is the major player in the financing of

* Objective 1, to promote development and the structural adjustment of the less developed regions (together with the ESF, the EAGGF Guidance section and the FIFG); and

* Objective 2, to promote the economic and social conversion of areas in structural difficulty (together with the ESF).

The specific level of appropriations devoted to the ERDF for objective 1 and objective 2 derives directly from the amounts entered into the programmes negotiated with the Member States. ERDF share in Objective 1 might still be marginally altered depending on the finalisation of some negotiations. For objective 2, negotiations are not yet finalised with some countries. The breakdown of allocation between the ESF and ERDF has been assessed on the basis of the relative share of the programmes currently decided and will have to be revised afterwards.

The ERDF also finances two Community initiatives:

* INTERREG Community initiative for the promotion of cross-border, trans-national and interregional cooperation; and

* URBAN Community initiative for economic and social regeneration of cities and urban neighbourhoods in crisis, with a view to promoting sustainable urban development.

Innovative action programmes and technical assistance projects are also eligible for ERDF support.

In addition to the implementation of these budget lines for the new period, the winding-up of the previous programming period will remain an important task in 2002 but will only require payment appropriations. The overall issue of payments is addressed in the presentation by financial perspective headings (heading 2).

Activities promoted by the ERDF include in particular:

* Productive investments to create and safeguard sustainable jobs,

* Investment in infrastructure,

* Establishment and development of trans-European networks,

Commitments for this Activity amount to some EUR17 799.4 million, of which some EUR17 784.4 million for the ERDF as such, the remaining EUR15 million being the contribution to the International Fund for Ireland. The quite substantial increase in the allocations (+6.9%) compared with last year could be explained by the change in the relative share applied to ERDF for objectives 1 and 2. The 2001 budget was established on the basis of the relative share of ERDF during the previous period 1994-99 while the PDB for 2002 is based on the current share of the programmes already adopted which happens to be higher than that of the previous period. Re-entry of 2000 unused appropriations for objectives 1 and 2 as for the two Community initiatives is another major reason for this increase.

Cohesion Fund (EUR2 789.0 million; +2.7%)

The Cohesion Fund provides project finance assistance to Spain, Greece, Portugal and Ireland, to implement environmental and transportation infrastructure projects.

The commitment appropriations for the Cohesion Fund amount to EUR2 789 million, in accordance with the financial perspective. The amount remains at the same level as in 2001 after deflator adjustment (+2.7%).

ISPA (EUR1 087.0 million; +2.5%)

Within the framework of the pre-accession strategy, ISPA will support the applicant countries of Central and Eastern Europe to catch up with the Community standards on transportation infrastructure and environmental investments.

EUR1 109 million is proposed in commitment appropriations, including the BA line, in accordance with the corresponding ceiling of the financial perspective. The amount remains at the same level as in 2000, after deflator adjustment (+2.7%).

3.14. Taxation and Customs Union

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Management and support for Policy Area Taxation and Customs Union (EUR52.8 million; +5.0%)

The proposed commitment appropriations of EUR3 million entered for Items B5-3001 and B5-3001A for 2002 should cover the following requirements:

- Development of a tax policy to ensure that discussion of the code of conduct adopted by the Council continues in the Taxation Policy Group, with a view to continuing to observe the overall approach to fiscal matters, in connection with the euro. Account is also taken of the support needed to eliminate tax barriers to the operation of the single market and analyse the efficiency of national tax systems.

- As regards VAT, the Commission's main objective under its new strategy is to simplify, modernise and apply legislation more uniformly and strengthen administrative cooperation. The aim is to adjust the current VAT system in the short to medium term to facilitate the smooth operation of the internal market.

- Coordination of customs laboratories and management of the ECICS base (European inventory of chemical substances).

International aspects of taxation and customs (EUR1.5 million; +7.1%)

The strategic programme for Community customs "Customs 2002" (B7-860 and B7-860A) seeks cooperation with the applicant countries and other countries in central and eastern Europe in the customs and taxation sector. It provides assistance for applicant countries to modernise their administrations, particularly as regards control of the external frontier, by applying Community rules and improving measures to combat fraud. Cooperation with third countries (in particular in the Mediterranean area) is another priority for promoting the harmonisation of legislation and alignment on the Community's customs and taxation systems. Assistance is also provided for third countries to modernise their administrations.

Customs policy (EUR23.8 million; +0.8%)

The activities planned for 2002 fall under the internal (B5-303) part of the Customs 2002 programme and the smooth operation of the internal market. They relate to continued simplification and rationalisation of customs legislation, improving the operational implementation of the legislation, improving the quality and uniformity of services provided to businesses throughout the single market, deepening training activities for both customs officials and economic operators, promoting cooperation with non-member European and Mediterranean countries and the fight against fraud.

Among new developments, it is intended to foster initiatives that Member States may propose to implement, singly or jointly, to improve the overall efficiency of customs administrations in carrying out their tasks. In particular, this involves the development and maintenance of IT systems (in particular the new computerised transit system - the NCTS - and the list of chemical products) needed to implement customs legislation and development of a strategy for information technology.

Taxation policy (EUR11.4 million; +50.0%)

The purpose of the Fiscalis programme (B5-305) is to tighten up taxation systems. In particular, various measures are planned as regards excise duties, development of energy taxation and evaluation of the conditions for using an instrument of taxation to promote alternative sources of energy. This programme also incorporates computerisation projects in the field of indirect taxation, multilateral controls and exchanges of officials.

Computerisation in the field of excise duties (EMCS - B5-306), for which the legal basis is being prepared, consists in putting in place a European computerised system to control the movements of products subject to excise duties.

3.15. Education and Culture

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Management and support expenditure for Policy Area Education and Culture (EUR100.4 million; +2.2%)

Education (EUR253.6 million; +1.1%)

The main Community activity conducted in this field is the Socrates programme (B3-1001), for which EUR1 850 million is scheduled for seven years (2000-06). This second stage of the Socrates programme was adopted at the beginning of 2000. For 2002, EUR250 million (including the support and management expenditure included in Chapter 01 ABB) is proposed. The objectives of the programme are:

* to strengthen the European dimension in education at all levels and to facilitate wide transnational access to educational resources in Europe;

* to promote a quantitative and qualitative improvement of the knowledge of the languages of the European Union, in particular those languages which are less widely used and less widely taught;

* to promote cooperation and mobility in the field of education;

* to encourage innovation in the development of educational practices and materials including, where appropriate, the use of new technologies.

Preparatory actions in areas of education and vocational training (B3-1000) are intended to improve cooperation and include the e-Learning initiative.

Regarding cooperation with third countries in the Education and professional training sector (B7-830), the allocation proposed for 2002 (EUR2.7 million) should allow the Commission to extend the cooperation to other developed countries (now restricted to the USA and Canada).

Vocational training (EUR184.3 million; +6.3%)

The main activity planned concerns the second stage of the Leonardo da Vinci programme (B3-1021), which was adopted in the first half of 1999. The financial reference amount for the Leonardo da Vinci programme (2000-06) is EUR1 150 million. For 2002, EUR157 million is proposed (including the support and management expenditure included in Chapter 01 ABB). The programme is intended to improve the quality and increase the impact of initial and continuing possibilities for vocational training, with a view to developing personal abilities and skills, while looking to encourage innovation in the training field (including university/industry cooperation). The following measures have been designed to achieve these objectives: mobility projects (placements, exchanges, study trips), pilot projects focusing on language skills, transnational multidisciplinary activities and the production, updating and dissemination of reference documents.

For the work of the European Centre for the Development of Vocational Training in Thessaloniki (B3-1025) a Community subsidy of EUR13.8 million for 2002 has been entered, which represents an increase of 4.5% compared with the 2001 budget allocations. Also the proposed commitment appropriation for the promotion of European pathways in work-linked training, including apprenticeship (B3-1020), at EUR1.5 million, represents an increase of 15.4%.

This ABB Chapter also encompasses the grant for the European Training Foundation in Turin (B7-664 and B7-033). The financial support to the Foundation is broken down according to the origin of appropriations from external actions (support to MEDA, TACIS and CARDS countries) and pre-accession aid (PHARE countries). Whereas the overall amount remains unchanged, the PHARE share is reduced on the basis of an estimation of the assistance supplied to each geographical group of countries.

Culture and language (EUR35.5 million; -19.1%)

The appropriations which the Commission proposes for this ABB Chapter are lower than in the 2001 budget, which also financed the European Year of Languages.

The appropriations for 2002 for the new Framework programme in support of Culture (B3-2008) total EUR32.5 million, including the support and management expenditure entered in Chapter 01 ABB. The programme, which was adopted during the first half of 2000 and allocated EUR167 million, will last for five years and is designed to achieve the objectives deriving from Article 128 of the EC Treaty:

* promotion of cultural dialogue and of mutual knowledge of the culture and history of the European peoples;

* promotion of creativity and the transnational dissemination of culture and the movement of artists, creators and other cultural operators and professionals and their works;

* the highlighting of cultural diversity and the development of new forms of cultural expression;

* sharing and highlighting, at the European level, the common cultural heritage of European significance;

* taking into account the role of culture in socio-economic development;

* the fostering of intercultural dialogue and mutual exchange between European and non-European cultures;

* explicit recognition of culture as an economic factor and as a factor in social integration and citizenship;

* improved access to and participation in culture in the European Union for as many citizens as possible.

Audiovisual policy and sports (EUR78.1 million; -3.9%)

The main activity in the audiovisual sector is implementation of the MediaPlus and Media Training programmes, which were adopted in December 2000 and January 2001 and allocated EUR350 million and EUR50 million respectively for the period 2001-2005.

The appropriations proposed for these measures in 2002 come to EUR70 million and EUR8 million, including the support and management expenditure for MediaPlus (EUR5.6 million) entered in Chapter 01 ABB.

Through these two instruments, the Media programme aims at:

* meeting the needs of the audiovisual industry and encouraging its competitiveness by improving the continuing vocational education of professionals in the industry;

* encouraging cooperation and the exchanges of know-how by networking the partners involved in training;

* improving the competitiveness of the European audiovisual industry on the European and international markets, by supporting the development, distribution and promotion of European audiovisual works, taking due account of the development of new technologies;

* respecting Europe's linguistic and cultural diversity;

* exploiting Europe's audiovisual heritage, and in particular its digitisation and networking;

* developing the audiovisual sector in countries and regions with smaller audiovisual production capacities and/or with a limited geographical and linguistic area;

* building up the production and distribution sector, especially the small and medium-sized businesses.

The other appropriations are mainly for the general monitoring of the audiovisual sector with a view to establishing an information infrastructure, statistics, participation in the European Audiovisual Observatory and implementation of the "Television without frontiers" directive (B3-2017). It is proposed to create a new budget line (B3-2018) for pilot projects (EUR1.1 million) in relation to the "Audiovisual i2i" programme. This programme is an integral part of the "Innovation 2000 initiative" (i2i), inaugurated in 2000 by the EIB group and designed to underpin the development of a knowledge-based economy driven by innovation. The idea is to contribute to the high cost of guarantees in the audiovisual sector, which firms have to pay in order to receive risk capital provided for the EIB group in the framework of the "Audiovisual i2i" programme.

The preliminary draft budget for 2002 also provides EUR2.6 million to cover the European Union's contribution to the costs of the World Anti-Doping Agency (B7-823).

Dialogue with the citizens (EUR21.3 million; -14.8%)

There will be a reduction of 10% of the level of grants in the current Chapter A-30 and the grant for town twinning will be kept at the same level as in the PDB for 2001.

EUR2.5 million is earmarked to finance European integration in universities (B3-304).

For Article B3-309 (Special annual events), it is proposed that the allocation of EUR1.25 million be rolled over to finance preparations for the special Olympic Games in Ireland in 2003.

A new budget line B3-305 (Action for civil society) is proposed with EUR5.5 million (including management and support expenditure counted in ABB chapter 01). Measures to be financed from this line were previously carried out under line B3-300.

Youth (EUR71.9 million; +2.4%)

The Youth for Europe programme (2000-06) was adopted during the first half of 2000 (B3-1010). An overall amount of EUR520 million was planned. The programme is intended for young people who are neither at school or university and is designed to enable them to gain experience of informal education through personal involvement in voluntary schemes or participation in transnational exchanges. The intention is to promote the building of Europe, to extend the influence of the Union and to foster the spirit of initiative and creativity in individual and collective projects, in which the young persons will be involved from the very beginning. The programme also covers measures for training and cooperation between youth leaders, a youth information aspect and studies on youth issues.

3.16. Media and Communication

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Management and support expenditure for Policy Area Media and Communication (EUR77.7 million; +5.4%)

For representation offices, an overall rise of 1.2% is expected, with an increase in local staff to adjust to the actual outturn, offset by a reduction for office buildings and infrastructure.

Information networks (EUR51.9 million; +22.7%)

EUR18 million is proposed to finance the Prince programme (B3-306) in 2002 (including the BA line included in Chapter 01 ABB). This substantial increase (+127%) will boost information on enlargement and preparations for the Intergovernmental Conference planned for 2004.

EUR20.6 million is provided for general information (B3-300) and EUR14.7 million for information outlets (B3-301), including the BA lines in Chapter 01 ABB). The sharp drop for line B3-300 in relation to 2001 (-EUR5.5 million) is accounted for by the transfer of some measures to the new line B3-305.

Audiovisual productions and studios (EUR5.5 million; +3.8%)

Expenditure on studios (A-421) has to increase to adapt the hardware to technical developments.

Communication (EUR14.8 million; +3.5%)

The proposed budget for communication work (B3-303) is EUR16 million (including the BA line included in Chapter 01 ABB). This represents a small increase of 3.2%.

3.17. Health and Consumer Protection

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Management and support expenditure for Policy Area Health and Consumer Protection (EUR100.7 million; +4.7%)

Additional human resources are envisaged for public health and consumer protection activities.

Consumer policy (EUR21.7 million; 0.0%)

The European Parliament and Council Decision of 25 January 1999 establishing a general framework for Community activities in favour of consumers (1999-2003) has three main objectives:

- a more powerful voice for the consumer throughout the EU;

- a high level of health and safety for EU consumers;

- full respect for the economic interests of EU consumers.

The total allocation for the programme is EUR112.5 million. Commitment appropriations scheduled for 2002 amount to EUR22.5 million (including the support and management expenditure entered in Chapter 01 ABB), the same as for the other years of the programme.

Public Health (EUR52.1 million; +16.8%)

In May 2000 the Commission proposed a new framework programme merging all existing eight programmes in the field of public health under one legal base. For 2002 an allocation of EUR46.5 million is proposed for Item B3-4308, including the support and management expenditure entered in Chapter 01 ABB.

The proposed programme has three main objectives, each with specific actions:

* Improving health information:

- developing and operating a health monitoring system

- developing and using mechanisms for analysis, advice, reporting, information and consultation on health issues.

The intention is to put in place a comprehensive information system which will allow policy-makers (and the public) to identify and analyse key health data. This will facilitate better and more effective public health provision in the Member States;

* Responding rapidly to health threats:

- enhancing the capacity to tackle communicable diseases

- strengthening the capacity to tackle other health threats;

An effective rapid response capability is needed to avoid threats to public health, for example arising from communicable diseases. The integration of the EU based on the principle of free movement increases the need for vigilance:

* Addressing health determinants:

- strategies and measures on lifestyle-related health determinants;

- strategies and measures on socio-economic health determinants;

- strategies and measures on health determinants related to the environment.

- There are many ways of improving the health status of the population and reducing premature deaths in the EU by tackling the underlying causes of ill health through effective health promotion and disease prevention measures.

This new programme is the follow-up to eight existing programmes:

- Public health, health promotion, information on health, health education and public health training;

- Combating cancer;

- Health aspects of drug abuse, prevention of drug dependence;

- Combating AIDS and certain other transmissible diseases;

- Injury prevention;

- Rare diseases;

- Programme on pollution-related diseases;

- Health surveillance.

Pending adoption of the new framework programme, the Council decided to extend to 31 December 2002 six action programmes in the public health sector which were due to expire on 31 December 2000 or 2001. This decision concerns all the programmes mentioned above apart from the injury prevention and rare diseases programmes which expire at the end of 2003.

In line with the White Paper on Food Safety, the Commission has presented a proposal setting up a European Food Safety Authority. EUR7.5 million is proposed so that this Authority can actually start operating in the first half of 2002. If necessary, the transfer of appropriations to Item B3-4309, the line containing the subsidy for the new Authority, may be proposed in 2002 for activities which are currently managed by the Commission but which will be devolved to the Agency.

Animal and plant health (EUR568.5 million; +246.2%).

This chapter includes a series of interventions in the field of veterinary and plant health, and in particular the measures to be taken in the context of BSE and Foot and Mouth Disease.

The resources to be used in the context of BSE monitoring show a substantial increase and new appropriations are proposed for the eradication of FMD. All other appropriations are set at the same level as last year.

A provisional amount of EUR114 million for BSE monitoring is foreseen for the co-financing of the test, on the basis of EUR15 per test, on animals at risk and on slaughtered bovine animals more than 30 months old. These provisions will be reviewed by the Commission in the letter of amendment to be presented in October 2001.

The emergency veterinary fund is allotted EUR250 million under the specific line for the co-financing of the cost incurred by the Member States for the eradication of FMD. In addition, EUR150 million is earmarked (B0-40) as part of the provision created to cope with additional BSE and FMD needs. This allocation is, however, only indicative (not binding). In 2001 only EUR41 million is allocated for repayments in connection with previous epidemics.

A more precise assessment of the overall amounts needed for the complete eradication of FMD is not possible at the date of establishing the Commission's proposal of the PDB for 2002 (first half of April 2001) because too many elements are unknown.

Given this uncertainty, it is proposed that a reserve be created, which will also be earmarked for veterinary measures to eradicate FMD. The Commission is confident that the proposed amounts are adequate if two conditions are met: a) that the efforts deployed by the UK authorities will, in the medium term, succeed in eradicating the disease; b) that the epidemic on the continent will not worsen (a couple of cases in France and Ireland and the outbreak in the Netherlands).

Moreover, it has to be recalled that, because of the particular procedures applied in the framework of veterinary expenditure, repayments to the MS of costs incurred in 2001 will be, as a rule, completed during a number of years starting from 2002.

In addition, depending on the implementation of the 2001 budget and on the development of the disease, the Commission will already consider the possibility of covering some of this expenditure in the 2001 budget.

3.18. Justice and Home Affairs

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Requests for appropriations in this policy area are much the same as in the 2001 budget .

Several cooperation programmes will close at the end of 2002, before being thoroughly overhauled. The Commission is planning the integration of the various programmes for the area of freedom, security and justice, which could lead to the presentation of framework programmes for asylum and immigration policy and judicial cooperation in the civil sector or programmes based on Title VI of the EU Treaty.

This overhaul will also depend on the mid-term review (end 2001) of the "scoreboard" established at the Tampere European Council in 1999.

Another feature of the preliminary draft budget for 2002 is a new line for budgetary support for the various initiatives presented by the Member States.

Since the Treaty of Amsterdam entered into force, the right of initiative is shared between the Commission and the Member States under Title VI of the EU Treaty and, until 2004, under Title IV of the EC Treaty.

Overall, operations in the Justice and Home Affairs sector have a relatively low impact on the budget, but they are extremely sensitive politically.

Management and support expenditure for Policy Area Justice and Home Affairs (EUR29.5 million; +13.0%)

Additional human resources are planned for the activities within this Policy Area.

Justice and Home affairs (EUR33.6 million; -2.7%)

The bulk of the appropriations for the ABB Chapter Justice and Home Affairs are in Article B5-820 (Training, exchange and cooperation programmes). They are slightly higher than in 2001 and should cover the continuation of the programmes DAPHNE (2000-2003) on measures to prevent violence against children, adolescents and women, adopted in January 2000 (B5-802), for judicial cooperation (GROTIUS general and penal II), police cooperation (OISIN), the fight against trafficking in human beings (STOP), the fight against organised crime (FALCONE), or crime prevention (HIPPOKRATES) and the launch of new programmes, such as the action programme on administrative cooperation in the visa, asylum and immigration fields (ARGO) and the establishment of a European judicial area in civil matters.

Free movement of people (EUR56.2 million; -0.1%)

The Activity Free movement of people is structured in budget terms around the European Refugee Fund, adopted in September 2000 for the period 2000-2004, involving both structural measures (B5-810) and emergency measures in the event of a sudden influx of refugees (B5-811). The appropriation proposed for the Fund in 2002 (a total of EUR45 million for the two types of measure) is the same as in 2001, in line with the multiannual programming agreed.

The preparatory actions in the field of external relations (B7-667) will continue with the same level of funds (EUR10 million). These interventions aim at giving financial support to the countries of origin of refugees and complement existing geographical instruments in the Policy Areas External Relations and Development (in particular the assistance to uprooted people).

3.19. External relations

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Management and support expenditure for Policy Area External Relations (EUR423.8 million; +7.9%)

For delegations, the proposal is an increase of 10% (from EUR248.5 million to EUR273.3 million for title A-6). [1] The Commission will continue its deconcentration exercise to the delegations in order to improve the management of external aid programmes. Therefore, 114 posts (plus 4 for the Financial Control) will be moved from the headquarters to delegations in 2002. In this context, the effort for reinforcing the IT and telecom infrastructure will also be continued, as well as some needed investment in security. The Management and Support appropriations related to delegations, and the correlative number of staff in the establishment plan and support staff, have been split between the following Policy Areas: External Relations, Trade, Development and Relations with ACP. countries, Enlargement.

[1] The budget 2001 is a 7,7% increase of the budget of 2000.

The lines for grants in part A have been reorganised (except A-3014 and A-3028), leaving only one line under which expenditure will be implemented after an open call for proposals. This will make it possible to have the best results from the appropriations available for the grants. A linear cut of 10% has been applied on all grants.

Multilateral relations and general external relations (EUR42.3 million; +9.3%)

The commitment appropriations for the Rapid Reaction Facility (B7-671) are increased to EUR25 million. 2002 will be the first full year of operation. The principle of an increase of appropriations is in line with the legal basis although the absolute levels, for reasons of budgetary stringency, has yet to reach the indicative levels of the legal basis. This activity also covers measures against anti-personnel landmines, for which the Commission confirms the same amount as in 2001 (EUR12 million, including management and support expenditure, counted under ABB Chapter 01).

Common foreign and security policy (EUR35.0 million; -2.8%)

The Commission proposes EUR35 million in commitment appropriations, i.e. a minor reduction in absolute terms of EUR1 million compared with the 2001 budget for the chapter as a whole. Furthermore, the specific budget article for the European Union special representatives is proposed to disappear following the logic of the Council's decision of 30 March 2000 to finance the EUSRs through the administrative part of the budget relating to the Council. Operational expenditure can still be financed under the relevant operational budget lines in the CFSP budget chapter.

Human Rights and Democratisation (EUR98.8 million; -13.6%)

The overall allocation for this activity is reduced by 7.8% in 2002. The whole structure of the chapter is rationalised: one single budget line replaces the existing instruments, with the view to allow a more flexible and consistent management of this activity.

The goals pursued by the Commission are those stated in the two regulations on human rights and democratisation (Regulations 975/99 and 976/99 of 12.4.99): promotion of human rights and fundamental freedoms, conflict prevention and support to democratisation, institutional building. The fight against sexual tourism is also integrated within the scope of this single budget line.

Relations with non-EU OECD countries (EUR36.0 million; +10.1%)

As for the Community's contribution to the Korean Peninsula Energy Development Organisation (KEDO, budget line B7-6600), the previous agreement (EUR15 million per year) expired at the end of 2000. The 2001 budget plans EUR17.5 million for this budget line: however, the Commission is expected to sign the new agreement, covering the period from 2001 onwards, with an annual Community contribution of EUR20 million.

Regarding the other instrument in this activity, one single budget line, Cooperation and trade relations with industrialised countries (B7-665), covers EU cooperation with developed countries (USA, Canada, Japan, Australia, among others): the Community intervention will mainly be through cooperation agreements. The Commission proposes to slightly increase the allocation of this budget line.

Relations with Eastern Europe, Caucasus and Central Asian Republics (EUR424.6 million; +3.2%)

This Activity covers relations with the Eastern European and Central Asian Partner States eligible for the TACIS programme which includes the main line B7-520, cross-border cooperation B7-521, rehabilitation in the Caucasus B7-522 as well as special nuclear safety provisions B7-524. For coherence and transparency purposes, the Chernobyl Shelter Fund line B7-536 is transferred to the geographical chapter under the new line B7-525.

The Tacis allocation has been reduced for several years without a reduction of needs, tasks and priorities. The legal basis sets a reference amount of EUR3 138 million for 2000-2006, which is less than the amount originally programmed (EUR4 000 million). In 2002, the overall amount for the TACIS Activity is the same as in the 2001 budget - EUR443 million. Because of the political priority shift to the Balkans and the limited resources of Heading 4, the renewal of the allocation at that level reflects the growing importance of the region to the EU with the prospect of enlargement. If we add EUR24 million in macroeconomic aid and Euratom cooperation, the regional allocation amounts to EUR470 million.

The EU-NIS Partnership and Cooperation Agreements - PCAs (two-way cooperation) are gradually entering into force. The PCAs are valid for an initial period of ten years from entry into force. All of them specify that financial cooperation with the partner countries shall take place in the form of grant-aided technical assistance covered "within the framework of Tacis as foreseen in the Community's relevant Council Regulation".

The new Regulation introduced innovations and modifications to achieve better impact, effectiveness and efficiency. The programme will concentrate on a limited number of significant initiatives in the following areas: institutional, legal and administrative reform; private sector and economic development; the social consequences of transition; infrastructure networks; environment protection and management of natural resources; development of the rural economy.

The programme will continue to give higher priority to the regional cooperation, linking up with other programs such as INTERREG and PHARE. Tacis will still consist mainly of technical assistance, but up to 20% of the budget may be used for investment, with priority given to cross-border cooperation, SMEs, environment and infrastructure networks.

The support for nuclear safety is reflected in a proposed second Community contribution to the European Bank for Reconstruction and Development (EBRD) for the Chernobyl Shelter Fund. The contribution would amount to EUR100 million to be disbursed over 4 years on the Tacis appropriations for 2001-2004. This contribution is kept in a budget line other than the line for Cooperation in the nuclear field (B7-524) because it requires a specific Council Decision, even if the funds originate from the Tacis allocation. The amount for cooperation in the nuclear field (B7-524) is the same as in 2001 - EUR53 million.

Relations with Western Balkans (EUR708.4 million; -3.5%)

This Activity covers all cooperation and reconstruction activities undertaken by the EC in the Western Balkans.

The new CARDS regulation, which was adopted by the Council in December 2000, consolidates the legal and budgetary basis for the EC's activities covering Albania, Bosnia Herzegovina, Croatia, FYROM and the FRY (Serbia, Kosovo and Montenegro). The new regulation sets a reference amount of EUR4 650 million for 2000-2006, which is less than the amount originally programmed by the Commission (EUR5 500 million).

Compared with the new 2001 budget structure of Chapter 54, there is no change in 2002:

- the main Article B7-541 regroups the assistance for all the Balkan countries except the FRY.

- for questions of visibility, and because it is managed by the European Agency for Reconstruction, the Kosovo allocation remains separate (B7-546) as well as Article B7-542 which covers the other parts of the FRY. A maximum of 8% of the funds managed by the Agency can be allocated to its running costs.

- Article B7-547 covers the annual contribution to the OHR and the UNMIK administrative budget, whose legal basis was adopted in May 2000.

- B7-548 covers the macro-financial assistance to countries of the region which, despite being part of the ECFIN Activity, falls under the EUR4 650 million budget for the CARDS Regulation.

The CARDS assistance is implemented through institution building and investment. The assistance may take the form of financing the supply of equipment, local infrastructure, financial schemes, project preparation, supervision and evaluation.

The Commission operates two main types of programme: national and multi-beneficiary. The national programmes may include interventions of a regional dimension as well as activities of a cross-border nature between two countries. The State authorities are encouraged to develop reform and development programmes, which will identify priorities for reform and steps for implementing them.

The Commission may develop a limited number of multilateral programmes where economies of scale or the appropriateness of a special delivery mechanism would justify a multilateral approach.

When programming the assistance, the Commission takes due account of project proposals submitted in the context of the Stability Pact for South Eastern Europe.

A total of EUR728 million is proposed for this Activity in 2002, excluding macroeconomic aid but including management and support expenditure counted in ABB Chapter 01, a 4.1% reduction compared with the 2001 budget (EUR759 million). This includes EUR25 million for the UNMIK and OHR. Taking into account the EUR100 million programmed for macro-financial assistance, the total assistance to the region amounts to EUR828 million (EUR839 million in 2001).

For Kosovo, the amount of EUR180 million is almost the same as in budget 2001 (EUR175 million) which is in fact a 100% decrease if we take into account the frontloading of EUR175 million in 2000 of the 2001 programme. Indeed, EUR440 million has been committed for 2000 alone.

For the rest of the FRY, the proposed assistance of EUR220 million is slightly lower than in 2001 (EUR240 million), but this amount does not include the macro-financial assistance. As a reminder, the amount programmed in 2001 was only possible with the mobilisation of the flexibility instrument.

In terms of management performance, it is worth noting that the work performed by the European Agency for Reconstruction in Kosovo has proved to be a valuable implementation means and its mandate has been extended to the rest of the FRY.

Relations with the Middle East and South Mediterranean (EUR788.8 million; -3.3%)

The main event for the Mediterranean region, at least in budgetary terms, has been the adoption, in 2000, of the MEDA II programme (B7-410), with an indicative amount of EUR5.35 million (2000-2006).

The Mediterranean is also one of the six priorities for 2002 decided by the Commission. The importance of the region for the European Union is evident, and all the principles defined in Barcelona remain valid. There is no doubt about the need to reinvigorate the whole process: in particular, the EU must establish closer relations with its immediate neighbours in order to assist them in achieving stability and democracy.

The MEDA programme needs to be improved, from various viewpoints: procedures, implementation, and efficiency. The slight reduction, in financial terms, of the allocation for the entire region (MEDA, the financial protocols, Palestine) should be no surprise: indeed, even if this has been retained as a priority, the Commission has put the stress on the rationalisation of the procedures and the management of the programme, rather than the financial amount.

As a consequence, the amount proposed for the Mediterranean region (including Turkey, Cyprus, Malta and the contributions to the European Training Foundation), in 2002, is EUR887 million (including management and support expenditure, counted under ABB Chapter 01), which corresponds to a reduction of 3.3% compared with the previous year; the situation is different for the payment appropriations, which increase by 19% (to EUR547 million from EUR459 million): indeed, an adequate level of PA in necessary in order to decrease the current level of outstanding payments.

Even with the proposed reduction in commitment appropriations, the EU has all the means to meet its political and financial commitments. In particular, the Community interventions under the MEDA programme will be along the following axes: acceleration, on a durable basis, of the socio-economic development of our Mediterranean partners; increase of the level of employment and reduction of the gaps between the population; the development of cooperation and regional integration, as well as the progress of the civil society.

As mentioned, the MEDA Programme remains the key financial instrument in the context of the Barcelona Process (this has been confirmed by the Conclusions of the 4th Euro-Mediterranean Conference of the Ministers of Foreign Affairs in Marseille, November 2000). The adoption of the MEDA II programme and the progressive reform of programme management should lead to a simplified and deconcentrated implementation (in this context, it is important to recall the phasing-out of the existing Technical Assistance Offices and the reinforcement of Commission delegations).

Another significant element will be the concentration of the MEDA programme on a smaller number of priorities that are directly related to the implementation of the association agreements or for their preparation.

The readiness of beneficiary countries to implement economic reforms will be, in this context, a key factor in determining countries' eligibility for MEDA funds.

The main areas for Community intervention will be education, health, fight against unemployment, improvement of the infrastructures, support to privatisation programmes and structural adjustments, projects in rural development, protection of natural resources (in particular water).

The MEDA programme will also continue to contribute to the financial assistance to the Mediterranean candidate countries, Cyprus, Malta and Turkey. Whereas Cyprus and Malta already have their specific pre-accession instruments (and are entitled to MEDA funding in the framework of the regional cooperation), the pre-accession strategy for Turkey is under preparation: apart from the two 'European strategy' regulations, Turkey still receive most of its annual contribution from the MEDA programme.

The Union will also implement financial and technical cooperation with the West Bank and Gaza Strip (Chapter B7-42) under a programme expiring at the end of 2003. This assistance aims at triggering sufficient private sector investment flows into the region, thereby benefiting the living conditions of the Palestinian population of the West Bank and Gaza Strip. This is an essential contribution to the survival of the peace process, and within it, of the Palestinian Authority.

The financial support supplied by the Commission results in a wide range of interventions, in areas such as infrastructure, production, urban and rural development, training and education, health, the environment, services, foreign trade, institutional and administrative development, human rights and the development of civil society.

Another set of actions in the Mediterranean area concern cooperation with the Gulf Cooperation Council (GCC), and financial assistance to Yemen and Iran (Chapter B7-43).

Whereas the objective of economic cooperation with the GCC is to facilitate trade relations, including the free trade negotiations, encourage investment, support market access and EU influence in this strategic part of the world, the financial aid to Yemen and Iran should aim at supporting the economic, social and political transformation, as well as the cooperation in specific areas (e.g. refugees, drugs control).

Relations with Latin America (EUR279.5 million; -13.4%)

Among priority actions to be implemented in 2002, the Commission has chosen the fight against poverty as the general goal for its intervention in Latin America: the Commission has more specifically earmarked the sectors of health and education.

The EU financial and technical cooperation will aim at promoting sustainable development in the region, in close cooperation with the governments of the beneficiary countries.

Apart from interventions in the aforementioned sectors, EU action will contribute to institution building and the improvement of the socio-economic context: the protection of the environment, food security and the development of the rural sector are also part of the global strategy vis-à-vis the developing countries of Latin America.

With respect to economic cooperation, it will be beneficial to the economic activity as a whole, operating as a multiplication effect. The main interventions will be in the scientific and technological field (training and transfer of know-how), the development of the institutional framework, as well as the support to enterprises (in terms of training, networks, commercial links).

One relevant action is represented by the follow-up of the Rio Summit of June 1999, where the Heads of State and Government of Latin America, the Caribbean and the EU expressed the need for a strategic partnership. This strategy encompasses the following three axes: reinforced political dialogue, financial and economic relations and cooperation in key sectors.

The Commission proposes a decrease in the overall allocation for Latin America, which is the combined result of the tight financial resources, the insufficient implementation record of the previous year (one of the worst performances in implementation), as well as the amount of the outstanding commitments.

However, the proposed 2002 allocation should enable the continuation of the EU's efforts in the most affected countries: in this context, the PRRAC reconstruction programme for Central America (post-Mitch) should continue to be one of the highest priorities in the region, together with the EU interventions for Venezuela.

The level of the administrative and technical assistance will increase in order to cover the additional expenditure borne by the deconcentration exercise (management of the programmes in the delegations, phasing-out of Technical Assistance Offices).

Particular attention will be devoted to the payment appropriations, whose level must ensure the fulfilment of the Community's financial obligations.

Relations with Asia (EUR411.3 million; -4.2%)

The overarching goal of EU intervention in Asia is poverty alleviation, with the ultimate objective of raising the quality of life in the whole region.

As for activity in Latin America, the main strategic axes of intervention to the benefit of Asian developing countries are basic education and health.

As regards technical and financial cooperation, the Commission intends to promote development in poorer countries such as Bangladesh, Cambodia, North Korea, Laos, Pakistan, Vietnam and others.

This means, in particular, strengthening education systems development and support education sector reform in order to improve universal access to quality education services. This strategy is increasingly implemented through sector-wide approaches. As a result, EU assistance evolves from supporting specific activities to co-financing a policy with the partner country and other donors, on the basis of objectives set by the government and in the framework of a coherent public sector expenditure programme.

Regarding the health sector, EU intervention aims at breaking the vicious cycle between poverty and ill health. Poverty causes ill health and the poor have a particular disease pattern and burden which, in turn, causes poverty. All this needs to be eliminated by an improvement of the health system allowing easier access of the poor to quality health care, to promote a healthy social and ecological environment.

With respect to economic cooperation, the main streams of the mutually beneficial activities are: the improvement of the scientific and technological potential, and of the economic, social and cultural environment in general; the improvement of institutional structures needed for economic, legal, regulatory and social reform; and support to undertakings through trade facilitation and business networking.

In order to achieve these goals, the Commission will adopt a coherent cooperation approach for Asia, by combining a horizontal (or sectoral) approach with a regional or country-specific one.

Reflecting to a large extent the approach adopted for other regions, the administrative and technical support for the programmes and projects will be radically changed, with the acceleration of the deconcentration process towards the EU delegations in the region: this will imply an increased proximity between the EU technical and administrative support and the final beneficiary of the financial assistance.

3.20. Trade

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Management and support expenditure for Policy Area Trade (EUR59.1 million; +4.1%)

The management and support expenditure includes part of the expenditure and human resources related to delegations (see comments in Policy Area External Relations - Management and support expenditure).

Trade policy (EUR7.5 million; +17.2%)

The Union's trade relations aim at contributing to the harmonious development of the world economy and trade, via a common policy comprising in particular economic and commercial measures concerning trade in goods and services, intellectual property, public procurement and investments.

The Commission proposes an amount higher than the 2001 budget allocations in order to manage the new round of multilateral negotiations on services within the framework of the WTO/GATS that is likely to start in the near future as well as for increasing the capacity to assist Less Developed Countries with technical assistance.

Anti-dumping strategy (no appropriations)

The EC attaches great political importance to a fair trading environment. This Activity is therefore staff intensive given the complex nature of anti-dumping investigations, something which is reflected in the costs for human resources and management and support. There are, however, no financial interventions planned under this Activity. If need be, the budget line for external trade relations, including access to the market of non-Community countries (Article B7-850) could finance some operational expenditure although this then would be done in the framework of the 'Trade policy' activity.

3.21. Development and Relations with ACP Countries

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This is one of the main Policy Areas related to external relations. It should, however, also be pointed out that in addition to the regular budget appropriations, the Commission proposes some EUR2 600 million under the European Development Fund (EDF) for ACP countries. This figure actually corresponds to more than 60% of the appropriations of Heading 4 if the two amounts were to be compared. Therefore, the level of human resources necessary in this Policy Area must also take into account work on the EDF expenditure, not only its dimension but also the complexity of the operations in the field of the EU/ACP conventions.

Management and support for Policy Area Development and relations with ACP countries (EUR195.1 million; +9.0%)

The increase in management and support expenditure is mainly due to the increase in the establishment plan staff. The management and support expenditure includes also part of the expenditure and human resources related to delegations (see comments in Policy Area External Relations - Management and support expenditure).

Development Cooperation policy and Sectoral Strategies (EUR694.6 million; -4.0%)

During the preparation of the PDB 2002, the Commission has continued its efforts aiming at rationalising the broad range of EC interventions. This is particularly relevant with respect to this activity, since the risk of overlapping measures is higher than in other fields.

The Commission has confirmed its preference for the use of geographical programmes, instead of specific thematic interventions, in all the cases where an integrated geographical approach enables the deployment of more coordinated measures, with resulting gains in terms of efficiency and synergy. This may for instance be manifested in the case of food aid where the proposed available overall appropriations are formally proposed to be reduced by 4.6% without undermining the main objectives of this policy. In reality, the Commission estimates that this minor reduction is compensated by measures available through the geographical approach. The EU's contribution to the Food aid Convention will not be affected by the reduction. The horizontal instruments are therefore maintained for all the operations that cannot be financed through the geographical envelopes: among these, a large share is represented by the interventions in favour of the ACP countries that cannot be financed by the EDF. It is worth remembering that the 2001 budget funds a one-off UN conference (Article B7-668) for EUR6 million, which in part explains the reduced allocation for 2002.

Relations with Sub-Saharan Africa, the Caribbean, Pacific and Indian Ocean (EUR44.0 million; 0.0%)

Most of the budget lines included in this ABB Chapter relate to the European Development Fund (EDF). Since the EDF is not part of the general budget of the European Community, no financial interventions are planned for these budget lines.

The only budget line with financial interventions is dedicated to the assistance to ACP banana producers (B7-8710), for which the same amount as in 2001 (EUR44 million) is proposed for 2002.

Relations with the overseas countries and territories (EUR122.9 million; +1.5%)

Most of the budget lines included in this ABB Chapter relate to the European Development Fund (EDF). Since the EDF is not part of the general budget of the European Community, no financial interventions are planned for these budget lines.

Article B7-320 covers the reconstruction and cooperation programme with South Africa. The amount proposed in 2002 is part of a multiannual programme. The legal basis was adopted in June 2000 and covers the period up to 2006.

The cooperation programme with South Africa focuses on the fight against poverty and the integration of disadvantaged communities into society (including gender issues). Special attention is also given to the environmental dimension of development and to the strengthening of institutional capacities. Development cooperation will, in particular, aim at creating employment, improving living conditions, delivering basic social services and supporting the democratic process.

EU cooperation will also support the adjustment efforts occasioned by the establishment of the free-trade area.

3.22. Enlargement

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Management and support expenditure for Policy Area Enlargement (EUR130.3 million; -9.8%)

The management and support expenditure includes part of the expenditure and human resources related to delegations (see comments in Policy Area External Relations - Management and support expenditure).

Financial instruments for Eastern European pre-accession countries (EUR1 606.5 million; +4.0%)

This Activity essentially covers the PHARE programme for pre-accession aid to the applicant Central and Eastern European Countries (CEECs). The Activity covers the main PHARE Article (B7-030) and Cross-border cooperation (B7-031), cooperation in the nuclear field (B7-032), and the contribution to the European Training Foundation (B7-033). After including the management and support expenditure, counted under the ABB chapter 01, the total amount is EUR1 664 million, which represents a 2.7% increase on the EUR1 620 million in the 2001 budget.

The total appropriations available have evolved in line with inflation between 2001 and 2002 and are determined explicitly by the Berlin financial perspective.

The Commission's Annual Policy Strategy has made enlargement one of its priorities for 2002, which is a crucial year for the accession of the most advanced candidate countries. The efforts made during the last years will have to be consolidated and focused on concluding negotiations with those applicant countries that meet all of the accession criteria. The PHARE programme focuses on accession by setting two priority aims: the reinforcement of administrative and judicial capacity (i.e. institution building) and the investments related to the adoption and application of the acquis.

The Accession Partnerships, approved by the Council for each of the applicant countries, are the tool to identify the priority areas for action necessary to prepare for accession, and hence the areas on which PHARE should focus. They thus provide the basis for PHARE programming decisions with the country's own National Programme for the Adoption of the Acquis (NPAA). Around 30% of PHARE should be devoted to institution building and around 70% for investments aimed at addressing sectoral, regional and structural imbalances in the economies of the candidate countries. In view of accession preparation it is envisaged to use part of the appropriations to cover a part of the cost of translation antennas to be set up in the candidate countries; their main tasks will be to ensure the revision of translations in the candidate's language of the acquis (secondary law) and prepare the recruitment of linguist staff once candidate countries join. In the course of 2000 Commission departments reviewed in depth the implementation of PHARE, leading to a communication to the Commission in October 2000. The main conclusions were that the accession-driven approach should be retained with a special emphasis on delivering the past reforms and move to Structural Funds.

PHARE is operated in a decentralised way, whereby the national funds established at the candidate countries finance ministries are in charge of the implementation. Since decentralisation and deconcentration took effect in 1999 the performance of the PHARE programme has improved in terms of contracting and payment and the outstanding commitments have reached a normal level for this type of programme.

It is proposed that the pilot project on the impact of enlargement (B5-3003) be retained in 2002 with an allocation of EUR5 million.

Financial instrument for candidate Mediterranean countries (EUR65.4 million; -5.2%)

This Activity groups together the financial interventions in favour of the candidate countries of the Mediterranean region, namely Cyprus and Malta (EUR20.4 million) and Turkey (EUR45.0 million).

However, the financial assistance to Mediterranean candidate countries (which, in total, amounts to around EUR200 million) is not included in heading 7 "pre-accession aid", since a revision of the ceiling of the Financial Perspective would be necessary. For the time being, the pre-accession aid under this Heading is only for PHARE countries, since its three instruments (PHARE, ISPA and SAPARD) cannot be used for Turkey, Cyprus and Malta.

The reduced allocation for the Mediterranean countries is due to the front-loading operated in 2000 (EUR12 million, out of the total EUR15 million projected for Turkey's custom union in 2000-02, was committed in 2000).

3.23. Humanitarian Aid

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Management and support expenditure for Policy Area Humanitarian Aid (EUR25.0 million; +3.6%)

Humanitarian aid (EUR677.0 million; +0.7%; including the humanitarian aid reserve)

The Community humanitarian aid targets non-discriminatory assistance, geared primarily towards help and protection for people in third countries, in particular the most vulnerable groups of people and primarily those in developing countries, victims of natural disasters as well as wars or armed conflicts. This aid also comprises preparatory and preventive actions.

The appropriations proposed for the 2002 financial year are unchanged compared with the 2001 budget at EUR473 million (Chapter B7-21). An additional EUR213 million is included in the «Emergency aid reserve». This reserve can, however, only be used for non-foreseeable needs.

3.24. Fight against Fraud

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Management and support expenditure of Policy Area Fight against fraud (EUR42.2 million; +14.5%)

Regulations 1073/99 and 1074/99 of the European Parliament and the Council of 25 May 1999 and Commission Decision of 28 April 1999 (1999/352/EC, ECSC, Euratom) created the legal framework for the Office. In particular, the provisions of these Regulations relating to the financing of the Office have been implemented through the creation of a specific budget heading A-360: European Anti-Fraud Office (OLAF), in part A of section III (Commission) of the general budget of the European Union for 2000 (with a detailed breakdown of all administrative expenditure in Annex III) and the listing of the posts attributed to the Office in a separate establishment plan.

The plan for OLAF envisages a substantial reinforcement of resources provided for in its establishment plan from a 1999 figure of 119 (the staff complement of the former UCLAF which was transferred to OLAF on its creation) to 300 in 2001. This allocation is maintained, at this stage, for 2002.

According to the Commission communication (COM(2000) 358 final-The fight against fraud: for an overall strategic approach) which defines the new orientations for anti-fraud work at Community level, and Regulations 1073/99 and 1074/99, the priorities, in terms of staff allocation, in 2002 as in 2001, are to be focused on the following areas:

- intelligence gathering and analysis,

- judicial support and follow up to investigations

- legal support and evaluation of legislation,

- computer support structure,

- investigations and related operational activity notably in the anti-corruption field

- administrative infrastructure.

The aim is to build the Office, as a platform of services for the Member states and the institutions.

Finally, the budget of the Office covers the expenditure of the Members of the Supervisory Committee. The staff of the secretariat of this Committee is included in the establishment plan of the Office.

The total request for appropriations for OLAF for 2002 on budget line A-360 is EUR39 724 000. This represents an increase of EUR5 233 000 over the budget for 2001, equivalent to an increase of +15 %. The overall costs directly related to the 76 posts granted by the budget authority in 2001 represent the main part of the increase in 2002. All the other titles of the budget are decreasing in real terms in spite of additional outside staff to supply the Office software for its Computer and Intelligence operations and new seconded national experts to reinforce the strong cooperation with the Members States.

Fight against Fraud (EUR6.1 million; +22.0 %)

Given the objectives for anti-fraud work at Community level, laid down in Article 280 of the Treaty, as well as in Regulations 2185/96, 1681/94 and 1831/94 (on the various areas of expenditure) and Regulations 1073/99 and 1074/99 (on the investigative responsibilities and independence), the Office conducts inspections and investigations where the financial interests of the European Union are involved. Moreover, the Office is going to lead, during the incoming year, a new operational programme for the protection of the euro against counterfeiting ( PERICLES)

The core activities are:

- collection and analysis of information and intelligence (including all related support activities with the Member States and with third countries);

- investigations (including all operational support and coordination activities);

- follow-up to investigations (including judicial and financial follow-up);

- legislative initiatives and evaluation of legislation (including new initiatives under Article 280 of the Treaty).

The budget line B-5910 (General measures to combat fraud) is used to cover technical assistance support actions to the Member States. This concerns in particular subsidies to the national administrations to reinforce the exchange of information, between Member States and with the Office and to purchase equipment intended for use specifically in anti-fraud work.

In order to improve the quality of the actions undertaken in this domain, targeted training actions are also undertaken, in cooperation with and under the operational responsibility of the national administrations.

For 2002, an amount of EUR6.1 million is proposed. This amount includes EUR1.2 million in the reserve line for PERICLES, where the legal basis is awaited.

3.25. Commission's Policy Coordination and Legal Service

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Management and support expenditure for Policy Area Commission's policy coordination and legal service (EUR176.0 million; +5.9%)

The expected expenditure on outside lawyers for litigation is slightly higher because of the growing number of cases. On the other hand, appropriations for the S series of the Official Journal (notices of public supply and works contracts, Article B5-304) decreases as part of the continuous efforts to cut publication costs, in particular by eliminating the paper version in 1998 and launching a CD ROM version and free access via the Internet despite the growing number of notices to be published.

It is worth noting that, following the ABB approach, the expenditure relating to Legal Service staff and buildings occupied by the Legal Service has been reattributed to the departments benefiting from its services (in ABB Chapter 01 of the relevant Policy Areas), in proportion to the services provided.

Measures for the citizen (EUR12.8 million; -0.8%)

Grants under Article A-301 will be maintained at the same level as in the 2001 budget and other grants will be reduced by 10% (except A-3020 "Our Europe" association).

Coordination and relations with the other institutions (EUR7.0 million; no appropriations in 2001)

The only budget line included in this ABB chapter is the new line for the contribution to political parties, for which EUR7.0 million is proposed in 2002.

3.26. Commission's Administration

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Following the ABB approach, the following expenditure has been reattributed to all Policy Areas, in proportion to their human resources (the management and support expenditure of Policy Area Administration relates only to staff working for this Policy Area):

* For remunerations, the proposal is an increase by 5.2% of expenditure. This rise is mainly the result of the adjustment of salaries (2.7% in 2001 and 2002 and an expected correction of 0.2% of the adjustment of 2000), the payment for a full year of the 400 posts allocated in 2001, the payment for 6 months of the 257 new posts located at headquarters, and the adjustment between Title A-1 and Title A-7 as a result of the TCE exercise. Appropriations equivalent to 25 LA at SCIC has been transferred to A-4000. The establishment plan is proposed to be reduced by 25 LA (and increased by 25 A as a result of the TCE exercise planned for 2002).

* For buildings, the rise will be 4.35%, mainly to accommodate the new officials.

* For office equipment (including telecom and IT infrastructure), there will be a global decrease of 4.7% (mainly resulting from a reduction in office supplies, postal charges and telecom fees).

* There will be also a decrease of the appropriations for interpreting in Luxembourg in order to adjust to actual needs.

Management and support expenditure for Policy Area Commission's administration (EUR546.3 million; +0.8%)

For recruitment, the necessary measures will have to be introduced in 2002 in order to balance the staff of the Institution with citizens of the candidate countries. The appropriation for recruitment will increase by 18%. This task will be transferred to the Interinstitutional Recruitment Office as soon as it is operational.

For the European school, there will be a decrease of 10.4%, as the special action for teachers leaving after 9 years will come to completion.

OPOCE

The budget of OPOCE will increase by 2.5%, excluding enlargement.

However, OPOCE will need to make the necessary preparations in order to be able to publish the "acquis communautaire" in the languages of the candidate countries on the day of their accession. EUR2.5 million is already required for this task in 2002.

For work on the consolidation of European law (A-343), there is also a proposal to double the amount in order to complete the task already in December 2002 instead of December 2003. This amount will be no longer be necessary in 2003.

This speed-up of consolidation is necessary in order to allow the speed-up of codification. OPOCE will subcontract a part of this task to the Collège de Bruges for EUR5 million.

Article B5-304 finances the publication in the S series of the Official Journal of the European Communities of notices of public supply and works contracts communicated by the Member States. The Commission is proposing commitment appropriations of EUR24.2 million for this line in 2002, against 24 million in 2001 and 29 million in 2000. This proposal is the result of significant efforts over a number of years to cut publication costs, in particular by eliminating the paper version in 1998 and launching a CD ROM version and free access via the Internet despite the growing number of notices to be published. The number of notices published is estimated at 185 000 in 2002 as against 161 000 in 2000.

SCIC

SCIC is presently reassessing its degree of externalisation. As part of this effort, SCIC proposes to change the ratio between freelance interpreters (conference auxiliaries) and staff. This has lead to the transfer of EUR2.43 million between Title A-1 and Title A-4.

SCIC is also preparing for enlargement with additional training in the languages of the new candidate countries and an increase in the freelance budget for the new languages of the candidate countries.

It is worth noting that, following the ABB approach, the expenditure relating to SCIC staff and buildings occupied by SCIC has been reattributed to the departments benefiting from its services (in ABB Chapter 01 for the relevant Policy Areas), in proportion to the services provided.

SDT

With respect to enlargement, the main task of the SDT will be to set up pre-accession translation field offices in order to translate existing Community law (acquis communautaire). These offices will have to be operational at the beginning of July 2002. One official per office will be paid by Title A-6.

SDT has also launched a study in order to reassess the role of free-lance translators and staff translators.

As for SCIC, following the ABB approach, the expenditure related to SDT staff and buildings occupied by SDT, has been reattributed to the departments benefiting from its services (in ABB Chapter 01 for the relevant Policy Areas), in proportion to the services provided.

3.27. Budget

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Management and support expenditure for Policy Area Budget (EUR52.7 million; +1.4%)

Expenditure in this Policy Area mainly includes banking fees and other financial charges which are assumed to remain stable. Expenditure on budgetary communication systems and publications is assumed to be slightly higher.

3.28. Audit

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Management and support expenditure for Policy Area Audit (EUR19.0 million; +5.8%)

Expenditure on internal financial communication systems and publications is assumed to be slightly higher than in 2001. Further costs arise from the meetings of the financial controllers of the Member States.

Centralised ex-ante financial control will continue until the proposal for the recasting of the Financial Regulation is adopted as part of the reform of the Commission. Financial Control's priority is to maintain an appropriate and effective centralised ex-ante control throughout the transitional period of the reform in line with the Commission's undertakings to the budgetary authority. During this period, Financial Control will be responsible for ensuring that the financial transactions proposed by the authorising departments are consistent with the financial rules (regularity, quality of financial management) and the relevant sectoral rules.

Since the amendment of Article 24 of the Financial Regulation is approved, the new Internal Audit Service will be established as an administrative structure independent of Financial Control. Internal Audit is an independent, objective assurance and consulting activity and, as such, contributes to the efficient and effective performance of all Commission activities. The action is carried out at Commission level by the Internal Audit Service (IAS) and, at the level of individual departments, by their internal audit capabilities.

3.29. Statistics

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Management and support expenditure for Policy Area Statistics (EUR78.2 million; +2.4%)

Production of statistical information (EUR39.4 million; +4.5%)

This policy area accommodates activities under the Council Regulation of 22 December 1998 on the Community statistical programme (1998-2002). It identifies three main priorities:

* Economic and Monetary Union;

* competitiveness, growth and employment;

* enlargement.

The work programme for 2002 will focus on:

* Enlargement: statistics required for accession negotiations and the integration of the applicant countries in the European statistical system;

* The euro and the macroeconomic environment: the development of short-term monitoring of EMU by means of euro-indicators with implications for quarterly accounts, prices, external trade, labour market and other statistical sectors;

* Sustainable development: cross-cutting indicators in fields such as the environment, agriculture, food safety, public health and consumer protection;

* Structural indicators and benchmarks for employment, innovation, economic reform and social cohesion for the annual summary report requested at the Lisbon European Council;

* Social agenda: indicators for income, poverty and social inclusion as well as education, vocational training and culture;

* Area of freedom, security and justice: the growing political dimension accorded to notions of the right of asylum and to migration will require a special statistical effort;

* Regional statistics;

* Enterprise, research, innovation and information society;

* Cooperation with third countries other than the applicant countries.

The level of commitment appropriations proposed for "Policy on statistical information" (B5-600) for 2002 is EUR34 million, including the support and management expenditure (EUR4.6 million) included in Chapter 01 ABB, compared with EUR32.6 million in the 2001 budget. EUR10 million is proposed for the new EDICOM II programme concerning a set of actions relating to the trans-European network for the collection, production and dissemination of statistics on the trading of goods within the Community and between the Community and non-member countries.

3.30. Pensions

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Management and support expenditure for Policy Area Pensions (EUR701.7 million; +11.0%)

Pensions expenditure (Chapter A-19) [2] increases by 11.3% to reach EUR688 million. This increase is mainly the consequence of the growing number of officials reaching retirement age. The raise is also the result of the increase of the higher level of remuneration of officials going into retirement and is the extrapolation of a trend which has been observed in the previous year.

[2] The Policy Area "pensions" also includes some lines from Chapter A-10 relating to Commissioners' pensions as well as Chapter A-12 relating to allowances linked to termination of service at the Commission.

If the early retirement scheme is adopted, appropriations will be transferred from Title A-1 to Item A-1218.

4. Revenue - Analysis by Title

Financing of the budget

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4.1. General assessment

The 2002 preliminary draft budget (PDB) is financed in accordance with the new Council Decision (2000/597/EC, Euratom) on the system of the European Communities' own resources, which was adopted by the Council on 29 September 2000.

The new Decision will enter into force following ratification in all Member States and take effect from 1 January 2002.

The application of the new Decision will entail the following changes compared with the previous Own Resources Decision in force (94/728/EC, Euratom):

- The percentage of traditional own resources retained by Member States to cover their collection costs will increase to 25%.

- The maximum rate of call of the VAT resource will be reduced from 1.00% to 0.75%.

- The UK correction to be inserted in the PDB 2002 will be calculated according to the new calculation method, which implies, inter alia, neutralising the windfall gains of the United Kingdom resulting from the increase in the percentage of traditional own resources retained by Member States.

- The share of Austria, Germany, the Netherlands and Sweden in the financing of the UK correction to be inserted in the PDB 2002, will be reduced to one fourth of its normal value.

- The European system of accounts 1995 (ESA 95) will also replace the previous version ESA 79 in the budgetary and own resources area. [3]

[3] The concept of gross national product (GNP), which is referred to in the present document, has been replaced by the concept of gross national income (GNI) in ESA 95. In the new Own Resources Decision GNP is therefore defined as being equal to GNI for the purposes of own resources.

The revenue estimates for 2002 are set out in the table above and compared with the figures in the 2001 budget.

In 2002 the volume of own resources (Title 1 in the revenue section of the budget) needed to finance the appropriations for payments is the equivalent of 1.05% of GNP. The overall ceiling on own resources in 2002 is fixed by the Own Resources Decision at 1.27% [4] of the total GNPs of the Member States.

[4] In order to maintain unchanged the amount of financial resources at the disposal of the Communities a technical revision will be carried out in December 2001 to adapt the ceiling to the new European system of national accounts (ESA 95) mentioned above.

The first two own resources are resources of agricultural origin (agricultural duties and sugar levies) and customs duties, including duties on products covered by the European Coal and Steel Community (ECSC) Treaty. A 25% flat-rate deduction is made at source by the Member States to cover collection costs.

The third resource results from the application of a uniform rate to Member States' VAT bases. The uniform rate derives from a maximum rate (0.75% in 2002), which is subsequently reduced in order to take account of the UK correction. Furthermore, in accordance with the Council's Decision, all the Member States' VAT bases are restricted (capped) to 50% of their GNP. Greece, Spain, Ireland Luxembourg, Portugal and the United Kingdom will have their bases capped this year.

The fourth resource, the additional resource, results from the application of a uniform rate to the sum of all Member State's GNPs and is calculated in such a way as to cover the balance of total expenditure not covered by the other resources.

The system for the correction of budgetary imbalances agreed in Fontainebleau in 1984 remains in force, with appropriate adjustments to allow for the capping of the VAT bases, the introduction of the additional resource, the increase in the percentage of traditional own resources retained by Member States as well as future enlargements. The correction for the United Kingdom is financed on the basis of the GNP scale, the United Kingdom being excluded from the financing of its own correction and the financing shares of Austria, Germany, the Netherlands and Sweden being restricted to one fourth of their normal share.

4.2. Revenue forecasts for 2002

4.2.1. Traditional own resources

Agricultural duties and sugar levies

The forecasts for 2002 are EUR1 121.7 million and EUR770.9 million respectively, before the 25% deduction retained by Member States to cover collection costs. They are calculated on the basis of the Commission's estimations and proposals for prices and related measures for 2002. In 2002 both agricultural duties and sugar levies are estimated to be lower than the previous year.

The forecast decrease for agricultural duties relating to the 2001 budget (EUR1 180.0 million) is mainly due to the combined effect of

- a lower forecast for duties collected on cereals as a result of a lower intervention price and a weaker euro relative to the US dollar,

- a forecast increase in the duties collected on bananas as a result of the reform in this sector, which partly offsets the lower duties on cereals, and

- the implementation of reduced tariffs on agricultural products in general granted to the Central and Eastern European countries (CEEC).

The expected decrease for the sugar levies (EUR1 006.3 million in 2001) is principally due to the proposed abolition of the sugar storage levies.

Customs duties

The forecasts for customs duties are based on the provisional weighted average tariff for 2000 (1.71%), which is calculated from the provisional figure for imports from outside the EU and the customs duties on these imports in 2000. The expected impact of the WTO-bound tariff reductions in 2001 and 2002 amounts to a reduction of the weighted average rate by 0.17 percentage points. The weighted average rate, thus forecast, is then multiplied by the forecast imports from outside the Community in 2002. Imports from outside the EU are expected to increase by 9.4% in 2001 and by 9.9% in 2002.

The forecast of customs duties for 2002 amounts to EUR15 765.9 million, before deduction of collection costs. This represents an increase by 15.4% compared with the EUR13 657.5 million in the 2001 budget and an increase of 4.1% compared with the revised forecast of EUR15 147.5 million entered in the proposed SAB 4/2001.

4.2.2. Value Added Tax (VAT) bases

For most Member States, the VAT bases are forecast on the basis of the semi-definitive VAT bases for 2000. For the other Member States, the latest bases officially communicated to the Commission, i.e. those for 1999, have been used. The bases are then multiplied by the forecast rate of increase of a representative aggregate consisting of private final consumption, general government net purchases of goods and services, and general government gross fixed capital formation in order to arrive at the forecast for 2002.

The new growth forecasts for the part of the economy subject to non-deductible VAT and the movement in exchange rates in countries outside the euro zone has produced a figure for the 2002 EU VAT base which is 5.79% above the VAT base adopted for 2001. Compared with the revised forecast of the VAT base entered in the proposed SAB 4/2001 it represents an increase of 4.60%.

The Community VAT base for 2002 is thus estimated at EUR44 160.0 million at the 1% rate, according to the latest economic forecasts adopted in April 2001. The VAT base will be capped at 50% of their respective GNP for Greece, Spain, Ireland, Luxembourg, Portugal and the United Kingdom. The capped Community base would thus amount to EUR43 316.6 million at the 1% rate.

It should also be noted that the maximum rate of VAT rate is set at 0.75% of the VAT base in 2002. The uniform call-in rate comes to 0.54468%.

4.2.3. Gross National Product (GNP) bases

The GNP bases are forecast on the basis of either the semi-definitive GNP bases at market prices for 2000, if these were available, or on the latest bases officially communicated to the Commission, i.e. those for 1999. The bases are then multiplied by the forecast rate of increase of GNP in order to arrive at the forecast for 2002.

The new forecasts of economic growth and the movement in exchange rates in countries outside the euro zone as well as the effects of the changeover to the new version of the European system of national accounts (ESA 95) has produced a figure for 2002 which is 5.52 % above the GNP base adopted for the 2001 budget. Compared to the revised forecast of the GNP base entered in the proposed SAB 4/2001 it represents an increase of 7.03 %. The Community GNP base at the 1% rate is estimated at 92 492.4 MioEUR in 2002, according to the latest economic forecasts adopted in April 2001. The rate that will have to be applied to finance the part of the budget not covered by the other resources, including the three reserves, is estimated at 0.65002%.

4.2.4. Other revenue

The surpluses from past years (Title 3) comprise:

- the balance from 2001 which will be treated in accordance with the Financial Regulation; at the stage of the PDB a token entry (p.m.) is proposed,

- the VAT own resources balances for the previous year and corrections to the VAT balances for earlier years. The balance consists of the difference between the provisional payments and the amount due by reference to the actual bases communicated to the Commission by 31 July of the following year. The balance can be positive or negative. At the stage of the PDB a token entry (p.m.) is proposed,

- the balance of the additional resource for the previous year and corrections to the balances for earlier years. The balance comprises the difference between provisional payments and the amount due in accordance with the figures on actual gross national product sent to the Commission by 1 October of the following year. The balance can be positive or negative. At the stage of the PDB a token entry (p.m.) is proposed.

Title 4 comprises the deductions from staff remunerations, which are the proceeds of the tax on salaries and pensions, and staff contributions to the pension scheme.

Title 5, Revenue accruing from the administrative operation of the institutions, consists mainly of bank interest.

Title 6 consists of revenue deriving from contributions by third parties to certain Community programmes (Chapter 60), the repayment of miscellaneous expenditure (Chapter 61), revenue in respect of services supplied against payment (Chapter 62), and the contributions by the EFTA States under the Agreement on the European Economic Area (Chapter 63).

This title also records any repayment of Community financial assistance, which cannot be re-used. The amount of the European Coal and Steel Community (ECSC) levy earmarked for administrative expenditure is also entered in this title.

Any delay in the payment of own resources by the Member States gives rise to interest, which is entered in Title 7, together with the fines which the Commission may impose on firms and groups of firms for not respecting bans or not carrying out their obligations under the rules on competition or transport. At the stage of the PDB a token entry (p.m.) is proposed.

Title 8 records capital repayments and interest payments on loans granted by the Commission, notably those under financial protocols. Community financial operations from borrowed funds and the contribution from the general budget, in the form of both guarantees and appropriations for interest subsidies, are dealt with in a separate chapter.

Finally, the miscellaneous revenue appears in Title 9. The reason for the big percentage increase compared to the budgeted revenue under this title for 2001 is that the budgeted revenue has been more closely aligned on the actual outturn of the last years.

4.3. Correction of budgetary imbalances

The amount to be entered in the 2002 budget for the correction of budgetary imbalances is provisionally estimated at EUR4 625 854 876.

This is the compensation for 2001.

As regards earlier years,

- the final calculation of the correction for 1997 is entered in SAB 4/2001 in conjunction with its financing in 1998;

- the final calculation of the correction for 1998 will be made early in 2002 in conjunction with its financing in 1999;

- the Commission has proposed an update of the 1999 correction to be entered in SAB 4/2001; the final calculation of the correction for 1999 will be made early in 2003 in conjunction with its financing in 2000;

- the Commission has proposed an update of the 2000 correction to be entered in SAB 4/2001; the final calculation of the correction for 2000 will be made early in 2004 in conjunction with its financing in 2001.

The EUR4 625 854 876 for 2001 is calculated on the basis of the expenditure figures in the 2001 budget, including the first four SABs for the year. The revenue figures are based on the revised forecast of the 2001 VAT and GNP bases adopted at the meeting of the Advisory Committee on Own Resources on 27 April 2001. The calculation of the correction is shown in the table below.

The correction for 2001 to be entered in the 2002 budget is EUR604 608 571 lower than the correction for 2000 entered in the 2001 budget (EUR5 230 463 447) and EUR199 286 134 higher than the proposed update of the correction for 2000 (EUR4 426 568 472) to be entered in SAB 4/2001. It should be noted that the calculation of the correction for 2001 is based on the new Own Resources Decision (2000/597/EC, Euratom) and its accompanying calculation method, whereas the update of the 2000 correction is calculated in accordance with the previous Own Resources Decision (94/728/EC, Euratom) and its accompanying calculation method.

The reason for the increase of the correction for 2001 compared with the revised estimate for the 2000 correction in SAB/2001 is the combined effect of

- the estimated increase in total allocated expenditure from EUR72 690.9 million to EUR81 950.7 million for 2001,

- the estimated decrease in the UK share of total allocated expenditure from 10.2% to 9.4% for 2001,

which is partly offset by

- the estimated decrease in the United Kingdom's share of the uncapped VAT payments from 19.4% to 18.9%

- the increase in the so-called UK advantage [5], and

[5] The "advantage" is the benefit that the UK derives from the own resources system in force as compared with the previous ones (due to the introduction of the GNP resource and the capping of the VAT bases).

- the deduction of the TOR windfall gains [6].

[6] These windfall gains correspond to the benefit that the UK derives from the increase in the percentage of traditional own resources retained by Member States as a compensation for their collection costs.

TABLE

Reference compensation pursuant to Article 4 of Decision 2000/597/EC, Euratom

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ANNEX 1

4.4. Budgetary impact of the European Economic Area Agreement

Under the agreement establishing the European Economic Area the EFTA countries (with the exception of Switzerland) take part in a wide range of Community policies covered by heading 3 of the financial perspective in exchange for a financial contribution to operating appropriations calculated by applying a "proportionality factor". This proportionality factor is equal to the sum of the ratios obtained by dividing the gross domestic product at market prices of each EFTA country by the gross domestic product at market prices of all the EC Member States plus that of the EFTA country concerned.

The rate for 2000 is currently estimated at 2.128%. These financial contributions will not be formally entered in the budget; each heading relating to activities in which the EFTA countries take part will indicate the EFTA contribution as a memorandum item. A summary table lists the budget headings concerned and the amount of the EFTA contribution for each heading (see table). The total EFTA contribution in Part B will come to EUR88 million in commitment appropriations. The EFTA countries will also share in the administrative expenditure directly linked with implementation of these policies. The figures concerning the contributions by the EFTA countries are still to be discussed with them and must therefore be regarded as provisional.

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ACTIVITIES (without administrative support (part A of the budget))

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