52009DC0548

[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 21.10.2009

COM(2009) 548 final

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL

2nd FINANCIAL REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on the EUROPEAN AGRICULTURAL GUARANTEE FUND– 2008 FINANCIAL YEAR – {SEC(2009) 1368 final}

TABLE OF CONTENTS

1. BUDGET PROCEDURE 5

1.1. Preliminary Draft Budget 2008 5

1.2. Draft Budget 2008 5

1.3. Amending Letter for 2008 5

1.4. Revenue assigned to EAGF 5

1.5. Revenue originating from temporary restructuring amounts in the sugar sector 6

1.6. Adoption of the 2008 Budget 6

1.7. Amending Budget No 3/2008 7

1.8. Part of the EAGF budget in total EU budget 7

2. CASH POSITION AND MANAGEMENT OF APPROPRIATIONS 7

2.1. Management of appropriations 7

2.1.1. Appropriations available for the 2008 financial year: 7

2.1.2. Automatic carryovers of appropriations from 2007 8

2.2. Monthly payments 8

2.2.1. Monthly payments to Member States 8

2.2.1.1. Monthly payments on the provision for expenditure 8

2.2.1.2. Decisions on monthly payments for 2008 9

3. EXECUTION OF THE 2008 EAGF BUDGET 9

3.1. Introduction 9

4. COMMENTS ON THE IMPLEMENTATION OF THE 2008 AGRICULTURAL BUDGET 10

4.1. Intervention in agricultural markets 10

4.2. Direct Aids 11

5. COMMENTS ON THE IMPLEMENTATION OF ASSIGNED REVENUE 11

5.1. Revenue assigned to EAGF 11

5.2. Temporary restructuring amounts in the sugar sector 12

6. COMMENTS ON THE IMPLEMENTATION OF THE SUGAR RESTRUCTURING FUND 12

7. BREAKDOWN BY TYPE OF EXPENDITURE 12

ANNEX 1 Annex 2 Annex 3 Annex 4 Annex 5 ANNEX 6 | BUDGETARY PROCEDURE FOR 2008 EAGF COMMITMENT APPROPRIATIONS Part OF THE EAGF BUDGET IN THE EU BUDGET 2002 TO 2008 ANALYSIS OF EAGF BUDGETARY EXECUTION – 2008 FINANCIAL YEAR ANALYSIS OF EAGF BUDGETARY EXECUTION – 2008 FINANCIAL YEAR. ASSIGNED REVENUE. C4 & C5 EAGF BUDGETARY EXECUTION BY ARTICLE AND BY MEMBER STATE – 2008 FINANCIAL YEAR EVOLUTION OF THE BREAKDOWN OF EAGF EXPENDITURE 2003 TO 2008 FINANCIAL YEARS |

Note: A detailed Commission Working Document accompanies this report. The full text of this Working Document (in English) and the annexed tables (in English) will be also available on DG Agriculture’s Europa website (http://ec.europa.eu/agriculture/fin/finrep_en.htm). |

BUDGET PROCEDURE[1]

Preliminary Draft Budget 2008

The 2008 Preliminary Draft Budget (PDB) was adopted by the Commission and proposed to the Budgetary Authority in early May 2007. The commitment appropriations proposed for the European Agricultural Guarantee Fund (EAGF) financed under Heading 2 of the Financial Framework 2007-2013, totaledEUR 42 498.99 million.

Draft Budget 2008

The Council adopted the 2008 Draft Budget in July 2007. The appropriations of EAGF were reduced by EUR 550.0 million as compared to the PDB.

Amending Letter for 2008

In October 2007 the Commission adopted the Amending Letter No 2 to the 2008 PDB, setting commitments appropriation requirements for EAGF at EUR 41 166.49 million which was lower by EUR 1 332.5 million compared to the corresponding amount in the Preliminary Draft Budget.

Revenue assigned to EAGF[2]

On the basis of the Article 34 of Council Regulation (EC) No 1290/2005 on the financing of the Common Agricultural Policy[3], revenue originating from financial corrections under conformity clearance decisions, from irregularities and from the milk levy are designated as revenue assigned to the financing of EAGF expenditure. According to these rules, assigned revenue can be used, partly or wholly, to cover the financing of EAGF expenditure. In the event where part of this revenue is not used, this part will be automatically carried over to the following budget year.

At the time of establishment of the 2008 budget, an estimation of this revenue was made both for the upcoming budget year as well as of the amount which was expected to be carried over from the budget year 2007 into 2008. This estimation was taken into consideration when the Budgetary Authority adopted the 2008 budget's appropriations. Specifically:

- revenue from the conformity clearance claw-backs and from irregularities was estimated at EUR 500.0 million and EUR 80.0 million correspondingly while the receipts from the milk levy were estimated at EUR 219.0 million. Thus, the amount of assigned revenue expected to be generated in the course of the 2008 budget year was estimated at EUR 799.0 million;

- the amount of assigned revenue expected to be carried over from the budget year 2007 into 2008 was estimated at EUR 1 138 million;

The total amount of EUR 1 937.0 million was taken into consideration by reducing the appropriations requested for the operational funds for producer organizations in the fruits and vegetables sector by EUR 467.0 million and for the single payment scheme by EUR 1 470.0 million. For these schemes the Budgetary Authority eventually granted appropriations amounting to EUR 105.0 million and EUR 27 220.0 million correspondingly.

Revenue originating from temporary restructuring amounts in the sugar sector[4]

The temporary restructuring amounts in the sugar sector are treated as assigned revenue intended to finance the sugar restructuring aid and other aids foreseen in the Sugar Restructuring Fund. For each marketing year, starting with 2006/07 up to 2008/09, these amounts relate to the sugar, inulin syrup and isoglucose quantitative quotas held by operators in each Member State and they are to be paid by the Member States into the Fund in two installments, the deadlines of which are 31 March and 30 November respectively for each year. At the time of establishment of the 2008 budget, the estimation of this revenue amounted to EUR 2 374.0 million for the upcoming budget year. At the same time, an amount of EUR 530.0 million was expected to be carried over from the budget year 2007 into 2008.

Adoption of the 2008 Budget

The European Parliament adopted the 2008 budget in its plenary session of December 2007, by increasing the amounts for EAGF proposed in the second reading of the Council by EUR 10 million.

The initially available EAGF commitment and payment appropriations amounted to EUR 40 876.5 million and to EUR 40 945.6 million correspondingly. In addition, commitment appropriations amounting to EUR 19.8 million, concerning item11 02 03 01, were transferred from the reserve, thus, making total commitment appropriations to EUR 40 896.3 million. The difference between commitment and payment appropriations is due to the fact that differentiated appropriations are used for the payments made directly by the Commission for promotion of agricultural products, for policy strategy and coordination measures for agriculture, for fisheries market measures as well as for veterinary and phyto-sanitary measures.

For Agriculture and Rural Development (policy area 05), the main expenditure areas concern interventions on agricultural markets for which commitment appropriations amounting to EUR 4 032.4 million were foreseen and direct aids for whichEUR 36 832.0 million were foreseen. Furthermore, commitment appropriations of EUR 281.7 million for Veterinary and phyto-sanitary measures (policy area 17) and of EUR 32.5 million for Fisheries market measures (policy area 11), were foreseen in the 2008 budget.

Amending Budget No 3/2008

In June 2008, the Commission proposed and the Budgetary Authority accepted an adjustment, through AB No 3/2008, of the 2008 budget’s commitment and payment appropriations, by increasing commitments appropriations by an amount ofEUR 130.0 million and payments appropriations by an amount of EUR 63.95 million for the emergency veterinary fund in policy area 17-veterinary and phyto-sanitary measures in order to finance the cost of the emergency vaccination campaign against the outbreak of the bluetongue disease in several Member States.

Part of the EAGF budget in total EU budget

The final EAGF budget's (commitment appropriations) part of the total EU budget for the period 2002–2008 appears in annex 2.

CASH POSITION AND MANAGEMENT OF APPROPRIATIONS

Management of appropriations

Appropriations available for the 2008 financial year:

Expenditure section of budget (1) | Commitment appropriations | Payment appropriations |

1. Initial appropriations for EAGF (2) | 40 896 318 768 | 40 945 600 500 |

2. Amending budget | 130 000 000 | 63 950 000 |

3. Final appropriations for EAGF of which: | 41 026 318 768 | 41 009 550 500 |

3a. Appropriations for shared management (excluding TRDI (3) EU 10) | 40 510 000 000 | 40 510 000 000 |

3b. Appropriations for direct expenditure (4) | 516 318 768 | 379 550 500 |

3c. Appropriations for TRDI EU 10 | 0 | 120 000 000 |

(1) Appropriations entered into the 2008 budget taking into account the forecasted assigned revenue for 2008 and the assigned revenue expected to be carried over from 2007 to 2008 in accordance with Article 10 of the Council Regulation (EC) No 1605/2002. (2) Initial commitment appropriations include an amount of EUR 19.828.768 transferred from the reserve concerning item 11 02 03 01. (3) TRDI: Transitional Rural Development Instrument for EU 10. (4) 80% of commitment appropriations concern DG SANCO. The rest concern equally DG AGRI and DG MARE |

Execution of appropriations available for the 2008 financial year

Measure | Execution of commitment appropriations | Execution of payment appropriations |

Shared management (excluding TRDI EU10)(1) | 42 958 379 420.35 | 42 958 379 420.35 |

Direct expenditure | 506 917 349.70 | 288 467 538.09 |

TRDI EU 10 | 0.00 | 14 087 299.00 |

Total (including Sugar Restructuring Fund) Sugar Restructuring Fund Total (excluding Sugar Restructuring Fund) | 43 465 296 770.05 1 284 099 717.06 42 181 197 052.99 | 43 260 934 257.44 1 284 099 717.06 41 976 834 540.38 |

(1) Committed amounts. Commitments and payments less assigned revenue received: EUR 38 803 889 878.22

For the financial year 2008, total actual commitment appropriations used amounted to EUR 43 465 296 770.05 while total actual payment appropriations amounted to EUR 43 260 934 257.44.

Automatic carryovers of appropriations from 2007

Carry over from 2007 to 2008 | Commitments | Decommitments | Payments | Cancelled appropriations |

Carried over appropriations | 24 884 835.15 | 1 507 033.19 | 22 760 724.02 | 617 077.94 |

The automatic carry over from 2007 to 2008 only concerned direct expenditure for non-differentiated appropriations. As indicated in the table above, an amount of EUR 24.9 million was carried over from 2007 to 2008. In 2008 an amount of EUR 1.5 million from this carry over was decommitted. The payments made amounted to EUR 22.8 million and the amounts cancelled totalled EUR 0.6 million.

Monthly payments

Monthly payments to Member States

Monthly payments on the provision for expenditure

Council Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the Common Agricultural Policy states in Article 15 that " monthly payments shall be made by the Commission … for expenditure effected by Member States' accredited paying agencies during the reference month ". Monthly payments shall be made to each Member State at the latest on the third working day of the second month following that in which the expenditure is effected.

The monthly payments are a reimbursement of net expenditure (after deduction of revenue) which has been already carried out and are made available on the basis of the monthly declarations forwarded by the Member States[5]; the monthly booking of expenditure and revenue is subject to checks and corrections on the basis of the detailed declaration[6]. Moreover, they will become final after the verification during the following exercises in the light of the clearance of accounts decisions.

Payments made by the Member States from 16.10.2007 to 15.10.2008 were covered by the system for monthly payments. Furthermore, the Commission carries out payments under direct management for a limited number of measures up to 31.12.2008.

For financial year 2008, the total net amount of monthly payments effected was EUR 38 803 889 878.22.

Decisions on monthly payments for 2008

For the financial year 2008, the Commission adopted twelve decisions on monthly payments. Furthermore, an additional monthly payment, adjusting those already granted for the total expenditure chargeable to the year, was adopted in December 2008. (For details, please see annex 4 of the Working Document accompanying this report).

EXECUTION OF THE 2008 EAGF BUDGET

Introduction

The 2008 agricultural year was marked by very sharp and remarkable decreases in the prices of many agricultural products in both the EU and world markets towards the end of the budget year. These decreases in prices concerned mainly crop and dairy products while meat prices showed a recovery. The volume of overall EU crop production increased substantially in 2008 compared to 2007, in contrast to the marginal increase in livestock production. Developments in agricultural markets as well as other factors affected both the level of EAGF expenditure and the use of available credit appropriations in certain areas of the budget.

The total implementation of the budget amounted to EUR 42 181.2 million (excluding the Sugar Restructuring Fund). As regards Agriculture and Rural Development (policy area 05), expenditure for market measures amounted to EUR 4 159.3 million and for direct aids to EUR 37 568.6 million, both sectors exceeding the available budget appropriations. This expenditure was funded by the budget's initial appropriations, by using the entire amount of assigned revenue (of EUR 1 159.5 million) carried over from 2007 and a part of the assigned revenue collected in 2008 (amounting to EUR 87.5 million out of a total EUR 1 561.6 million). Furthermore, the aforementioned total implementation amount includes the appropriations corresponding to the Fisheries market measures (policy area 11) of EUR 51.8 million as well as those corresponding to Veterinary and phyto-sanitary measures (policy area 17) of EUR 407.8 million. (For details, please see annex 3).

COMMENTS ON THE IMPLEMENTATION OF THE 2008 AGRICULTURAL BUDGET

A brief commentary on the use of the 2008 agricultural budget's available appropriations is hereby presented. The execution of this budget with the differences between this execution and the appropriations included in the initial budget and in the Amending Budget No 3/2008 are presented in annex 3.

Intervention in agricultural markets

The Budgetary Authority granted original appropriations amounting to EUR 4 032.4 million for this chapter because it took account of assigned revenue amounting to EUR 467.0 million. Payments amounted to EUR 4 159.3 million. Within this chapter of the budget, the expenditure for fruits and vegetables exceeded their original appropriations and it was covered by the revenue assigned to this sector. As regards pig-meat, the expenditure incurred over-implemented the sector's appropriations. The appropriations for the sectors of sugar and wine were under-implemented. The main reasons for these implementation patterns are briefly presented below:

Sugar

The sector's under-implementation was primarily due to incurring lower expenditure for export refunds both because of the lower export refunds rate level for this marketing year and of the lower than foreseen payments for outstanding export refund files.

Fruits and vegetables

For the operational funds for producer organizations, the Budgetary Authority granted original appropriations amounting to EUR 105.0 million because it took account of revenue of EUR 467.0 million which had been assigned to wards the financing of this scheme. Member States incurred expenditure amounting to EUR 581.6 million. The expenditure above the budget's original appropriations was covered by the aforementioned amount of assigned revenue and by transferring appropriations of EUR 9.6 million from other items of the budget.

Products of the wine-growing sector

The sector's under-implementation was due the lower expenditure incurred primarily because of the smaller volume of wine distilled for the potable alcohol sector and of the lower surfaces for which restructuring and conversion of vineyards aids, were paid compared to the volume and the areas retained in the 2008 budget.

Pig meat sector

The sector's over-implementation was primarily due to expenditure arising from the measures taken by the Commission in order to counter the difficult situation in the sector in the second half of 2007. Specifically, the Commission introduced an aid for private storage scheme and payment of export refunds for fresh and frozen pig meat to all destinations. No appropriations were foreseen in the 2008 budget for these schemes and the resulting expenditure was covered partly by the revenue assigned to market measures and partly by transferring appropriations from other items of the budget.

Direct Aids

The initial appropriations granted by Budgetary Authority for this chapter amounted to EUR 36 832.0 million. The expenditure incurred for this chapter amounted toEUR 37 568.6 million.

Approximately 75% of this expenditure concerned the Single Payment Scheme (SPS). For this scheme, the Budgetary Authority had granted appropriations amounting to EUR 27 220.0 million because it took account of the revenue assigned to it which amounted to EUR 1 470.0 million. Hence, the total available appropriations for financing the SPS amounted to EUR 28 690.0million. The expenditure incurred by the Member States amounted to EUR 28 233.8 million. The part of this expenditure (EUR 1 013.8 million), which was not covered by the appropriations granted, was covered by transfers and by the revenue assigned to this scheme.

COMMENTS ON THE IMPLEMENTATION OF ASSIGNED REVENUE

Revenue assigned to EAGF

The assigned revenue actually carried over from 2007 into 2008, amount to EUR 1 159.5 million and has been entirely used in financing expenditure of the 2008 budget year in accordance with article 10 of the Financial Regulation. This amount covered expenditure of EUR 362.7 million for the operational funds for producer organizations and of EUR 796.9 million for direct aids. (For details, please see annex 4).

As far as the assigned revenue collected in 2008, annex 4 shows that this revenue amounted to EUR 1 561.6 million and it originated from:

- The corrections of the conformity clearance procedure which amounted to EUR 984.6 million and were higher than the initially expected ones of EUR 500.0 million because 2 additional conformity clearance decisions were taken within the year.

- The receipts from irregularities which amounted to EUR 356.1 million and were higher than the initially expected (EUR 80.0 million). This was an exceptional situation because of the ad hoc corrections imposed to Member States in respect of long-outstanding irregularities in the paying agencies' accounts.

- The milk levy collections which amounted to EUR 220.9 million.

Temporary restructuring amounts in the sugar sector

Contrary to the initially estimated amount of EUR 530.0 million, the assigned revenue eventually carried over from 2007 into 2008 amounted to EUR 735.8 million because Member States paid diversification and additional aids which were smaller than the ones initially expected. After all the aid payments made to the beneficiaries of the sugar restructuring fund, the temporary restructuring amounts presented a balance of EUR 2 044.6 million which was carried forward into 2009. (For details, please see annex 4).

COMMENTS ON THE IMPLEMENTATION OF THE SUGAR RESTRUCTURING FUND

Member States made total payments for aids to the restructured sugar industry, for diversification aids as well as for aids to sugar refining which amounted to EUR 1 284.0 million. These aids were paid from the aforementioned revenue originating from the temporary restructuring amounts in the sugar sector. Specifically, as regards the payment of these aids, an amount of EUR 735.8 million was funded by the assigned revenue carried over from 2007 while the balance of EUR 548.3 million was paid from the assigned revenue collected by the Member States and paid into the 2008 budget.

BREAKDOWN BY TYPE OF EXPENDITURE

The total EAGF expenditure amounts to EUR 42 181.2 million (excluding the Sugar Restructuring Fund). Hereafter, this expenditure is presented broken down into the most significant categories along with the percentage that these represent in the total EAGF expenditure for 2008:

Export refunds

Spending on export refunds amounted to EUR 925.4 million, i.e. 2.19% of the total.

Direct aids

Expenditure for direct aids amounted to EUR 37 568.6 million, i.e. 89.06% of the total.

Storage

Expenditure for storage amounted to EUR 147.9 million, i.e. 0.35% of the total. The main products involved were products of the cereals, wine-growing, milk and pig-meat, eggs and poultry meat sectors.

Other measures

Other intervention expenditure amounted to EUR 3 553.3 million, i.e. 8.42% of the year's total. This heading covers expenditure not falling into one of the above categories.

Rural development

No appropriations were foreseen in the 2008 budget for the Guarantee Section of the ex-EAGGF[7]. At the same time, Member States were declaring recoveries of previously paid advances which amounted to –EUR 14.1 million.

The evolution of this breakdown by type of expenditure for the period 2003-2008 is presented in annex 6.

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[1] This procedure is presented in annex 1

[2] These amounts are not entered in the revenue lines of the budget (article 670 for the revenue assigned to EAGF) but they are mentioned in the budgetary comments for these articles.

[3] OJ L 209 of 11.8.2005, p.1

[4] These amounts are not entered in the revenue lines of the budget (article 680 for the temporary restructuring amounts for the sugar sector) but they are mentioned in the budgetary comments for these articles.

[5] These monthly declarations of expenditure are transmitted by the Member States by the declaration of the 10th of the month N+1.

[6] The detailed declarations are transmitted monthly by the Member States (by table 104) on the 20th of the month N+1.

[7] EAGGF: European Agricultural Guidance and Guarantee Fund