Explanatory Memorandum to SEC(2000)1814 - Lettre rectificative n° 2 à l'avant-projet de budget pour 2001 partie III - Commission

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dossier SEC(2000)1814 - Lettre rectificative n° 2 à l'avant-projet de budget pour 2001 partie III - Commission.
source SEC(2000)1814 EN
date 31-10-2000
II - EXPENDITURE

Contents

1.

1. GENERAL PRESENTATION


2.

2. SUBHEADING 1a: MARKET ORGANISATIONS


AND RELATED MEASURES

3.

2.1. Changes on the agricultural markets


4.

2.2. Changes in legislation


5.

2.3. Euro-dollar parity


6.

2.4. Sectoral developments


7.

3. SUBHEADING 1b: RURAL DEVELOPMENT


8.

4. CHANGES IN THE NOMENCLATURE AND IN THE BUDGET REMARKS - DELETION OF ITEMS


9.

4.1. Changes in the nomenclature and in the budget remarks


10.

4.2. Deletion of items


11.

4.3. International fisheries agreements


III - REVENUE


I. EXPLANATORY MEMORANDUM

Introduction and summary of appropriations

In accordance with the Interinstitutional Agreement of 6 May 1999, the Commission is sending the budgetary authority this ad hoc letter of amendment to update the figures underlying the estimate of agricultural expenditure in the preliminary draft budget, as regards the market organisations and related measures (subheading 1a).

Requirements for subheading 1a are expected to be EUR932.5 million lower than initially forecast. Compared with the PDB, the situation has improved on practically all agricultural markets. This translates into major savings for arable crops (-EUR335 million), sugar (-EUR105 million), fruit and vegetables (-EUR130 million), dairy (-EUR399 million) and sheepmeat (-EUR174 million). By contrast, appropriations have to be increased for olive oil (+EUR89 million), fibre plants (+EUR97 million) and beef (+EUR82 million). This letter of amendment also takes into account legal bases adopted since the PDB was presented and also reflects positions taken by the budgetary authority during the budgetary discussion, e.g. concerning school milk, flex and hemp and promotion. The dollar parity effect accounts for roughly half of all the savings encountered. In May 2000 the PDB was established using a US$ exchange rate of 0.99 to the EUR. In line with the new Regulation on budgetary discipline in force since 1 October, this exchange rate has been updated for letter of amendment 2/2001 to a rate of 0.91. This results in direct savings of approximately EUR430 million in relation to the PDB, mainly for substantially reduced export refunds expressed in EUR. In addition, the market situation continued to stabilise in most sectors, public stocks could be reduced and, consequently, storage costs are expected to decline. For subheading 1b, after receiving the estimates by the Member States at the end of September, the Commission can confirm the figures of the PDB, i.e. the appropriations should be budgeted completely, up to the ceiling.

As provided for in the Interinstitutional Agreement, the Commission is also correcting the level and the breakdown of appropriations for the international fisheries agreements. Operational Item B7-8000 is increased by around EUR42.3 million in commitment and payment appropriations for three agreements that have been initialled and will soon be proposed to the budgetary authority (Greenland, Angola and Côte d'Ivoire). It is also proposed to keep the appropriations for the agreement with Morocco be kept unchanged given the possibility that it might enter into force at the beginning of 2001 and in order not to send a negative political signal at this important stage of negotiations for the long delayed conclusion of this agreement. Taking into account the agreements renewed during 2000, the provisional appropriations in Chapter B0-40 can be reduced by around EUR45 million in commitment appropriations and EUR43 million in payment appropriations. The overall net effect is thus a reduction of some EUR2 665 000 in commitment appropriations and EUR681 000 in payment appropriations for international fisheries agreements compared with the preliminary draft budget. By comparison, this also translates into a net increase of some EUR4 million as earlier estimates in the draft budget were some EUR7 million lower than the PDB. These earlier estimates were always explicitly given on condition that they could be modified later in the light of further negotiation results.

Besides these two familiar components of the traditional ad hoc letter of amendment, the Commission wishes to add one further item relating to the balance for 2000. Under Article 32 of the Financial Regulation, the balance from each financial year is entered in the budget for the following financial year as revenue in the case of a surplus or expenditure in the case of a deficit. The second paragraph of this Article of the Financial Regulation specifies that the estimates of this revenue or expenditure will be entered in the budget during the budget procedure, and, where appropriate, in a letter of amendment.

The Commission considers that an estimated balance of EUR900 million can be included as revenue in the PDB 2001. This additional revenue results mainly from the increase in recoveries from traditional own resources during the year as well as from an initial estimate of the overall impact of the adjustments of the VAT bases and GNP data following the modifications announced by the Member States. These adjustments have to be entered into the Commission's account by 1 December 2000.

Thus, EUR900 million will be entered provisionally in the budget under Article 300 (Surplus available from the preceding financial year). After the closing of accounts for the 2000 financial year, the difference compared with the estimate included in the present letter of amendment will be entered in the 2001 budget by means of a supplementary or amending budget, in accordance with the third paragraph of Article 32 of the Financial Regulation.

12.

Summary table


Effect of the letter of amendment on the financial perspective

>TABLE POSITION>

(*) Including EUR163 million for staff contributions to the pension scheme, in accordance with footnote 2 to the financial perspective and the financial framework for the EU21 attached to the IIA of 6 May 1999.

(**) The Commission acknowledged technically established savings (économies de constatation) worth EUR16 883 million, to be added to the margin.

13.

II - EXPENDITURE


HEADING 1: EAGGF GUARANTEE

GENERAL PRESENTATION

Under the Interinstitutional Agreement on budgetary discipline and improvement of the budgetary procedure signed by the European Parliament, the Council and the Commission on 6 May 1999, the Commission may, if it deems it necessary, present the budgetary authority with an ad hoc letter of amendment to update the figures underlying the estimate of agricultural expenditure in the preliminary draft budget. This letter of amendment must be sent to the budgetary authority by the end of October. The aim is to ensure that the agricultural budget is based on the most up-to-date economic data and legislative framework.

For the Commission, the presentation of a letter of amendment in the autumn is an important factor in its efforts to make the budget as realistic as possible, and should help ensure that the 2001 budget is adopted smoothly.

As in the past, the Commission has carefully updated all its estimates of agricultural expenditure, line by line. Besides taking into account market factors, the letter of amendment also incorporates legislative decisions adopted in the agricultural sector since the preliminary draft budget was drawn up, in particular the decisions taken by the Ministers of Agriculture in July 2000.

As for market organisations and related measures (subheading 1a), the revision of expenditure leads to a reduction of the appropriations proposed in the preliminary draft. This is due to the relatively sound market situation in most sectors and the increase in the value of the dollar against the euro. Requirements are estimated at around EUR38 670 million, some EUR930 million (-2.4%) lower than in the preliminary draft, leaving a margin of approximately EUR1 360 million below the ceiling in the financial perspective for subheading 1a.

In accordance with the recent Council Regulation on budgetary discipline, the letter of amendment is based on the euro-dollar rate recorded between 1 July and 30 September 2000. The rate comes to 0.91 (EUR1 = $0.91) and is significantly lower than the rate used for the preliminary draft (EUR1 = $0.99). This results in savings of around EUR430 million compared with the preliminary draft. Movements in the exchange rate thus account for almost half of the reduction in appropriations requested in the letter of amendment in relation to the preliminary draft.

As for rural development (subheading 1b), the Commission still proposes that the appropriations in the 2001 should be equivalent to the ceiling in the financial perspective. This is in line with the Member States' statements of 30 September 2000, in which they give their estimates of expenditure under the 2001 budget.

The following table sums up the budgetary forecasts for the various chapters of the EAGGF Guarantee Section.

>REFERENCE TO A GRAPHIC>

14.

SUBHEADING 1a: MARKET ORGANISATIONS AND RELATED MEASURES


Changes on the agricultural markets

Since the preliminary draft budget was presented, the situation has improved in most sectors, primarily the animal sectors with the exception of beef/veal (-EUR534 million overall for the animal sectors). Considerable savings are also expected for arable crops (-EUR335 million), sugar (-EUR105 million) and fruit and vegetables (-EUR130 million). As stated above, some of these movements are connected with the rise in the value of the dollar against the euro, leading to a narrowing of the gap between world and Community prices and thus to a reduction in export refunds and some aids.

However, the expenditure forecast for olive oil has increased as production is relatively high (+EUR89 million). The increase is easy to explain in the fibre plants sector (+EUR97 million), since EUR69 million of it is accounted for by a transfer from the arable crops chapter following a decision by the Council (Agriculture) in July 2000 to defer implementation of the reform of the flax and hemp scheme by one year. Finally, the Commission expects a slight increase in requirements in the beef/veal sector (+EUR82 million), mainly for the eradication of BSE, 'mad cow disease'.

The other changes are not so pronounced and chiefly concern non-Annex I products (-EUR29 million, following a reduction in the rate of export refunds), food programmes (+EUR35 million, mainly as a result of the Council Decision in July 2000 on the school milk programme) and, finally, agri-monetary aids (-EUR53 million).

15.

Changes in legislation


Although its decision on the 'prices package' for the 2000/2001 marketing year had little impact (+EUR9 million), the Council of Ministers (Agriculture) adopted a number of important decisions in July 2000. The impact of these decisions is incorporated in this letter of amendment.

First, there is the reform of the school milk programme (B1-312), which is estimated to cost an extra EUR41 million compared with the preliminary draft.

The Council also took a decision on the reform of the flax and hemp sector (B1-140). This will enter into force from the 2001/02 marketing year (i.e. a year later than proposed by the Commission). The Council has decided to allocate EUR88 million for the 2000/01 marketing year (impact on the 2001 budget). Compared with the preliminary draft, which is based on the Commission's reform proposal, there is a net increase in requirements of EUR9 million (+EUR78 million in Chapter B1-14 (Fibre plants) and -EUR69 million in the arable crops chapter following the one year's delay in incorporating aid for fibre flax and hemp). Finally, the Council of Ministers (Agriculture) has decided to extend the special scheme for nuts by one year (B1-1507: +EUR24 million).

The letter of amendment incorporates the effects on the 2001 budget resulting from the fact that the Council has not, at this stage, adopted the reforms in the cotton and banana sectors. In the case of cotton, the failure to adopt the reform increases requirements by EUR68 million. However, for bananas, the failure to adoption the reform leads to a net saving of EUR30 million.

More detailed information is given in the section on sectoral developments.

16.

Euro-dollar parity


The adoption of the new Council Regulation on budgetary discipline (Regulation (EC) No 2040/2000 of 26 September 2000) leads to a fundamental change in the rules concerning the exchange rate to be used in drawing up the agricultural budget. While the rate used in the past remained the same throughout the whole budgetary procedure and budget implementation (this rate was equivalent to the average exchange rate for January-March in the year preceding the budget year), Article 8(1) of the new Regulation states that the rate to be used is the average rate over the most recent three-month period ending at least 20 days before adoption by the Commission of the budget document. In the case of this letter of amendment, this means the period between 1 July and 30 September 2000. The average exchange rate recorded is EUR1 = $0.91, which is significantly lower than the rate used for the preliminary draft (EUR1 = $0.99). This leads to a reduction of around EUR430 million in the level of appropriations requested.

Should there be any supplementary and amending budgets, Article 8(2) of the new Regulation states that the exchange rate to be used is the rate actually recorded.

17.

Sectoral developments


The comments below set out, chapter by chapter, the main details of the changes in appropriations in the letter of amendment compared with the preliminary draft.

18.

Chapter 10 - Arable crops (appropriations - EUR335 million)


appropriations in preliminary draft budget: EUR18 361 million

appropriations after letter of amendment: EUR18 026 million

The requirements estimated at the time the preliminary draft budget was drawn up are now some 1.8% lower. There has been a reduction of EUR242 million for market costs and EUR93 million for per hectare aid.

Market expenditure benefits from the higher exchange rate between the dollar and the euro. The resulting saving is estimated at around EUR300 million and relates both to expenditure on export refunds and to the cost of public storage as a consequence of losses on sales and the cost of depreciation.

However, the appropriations requested for export refunds are not much different from what was entered in the preliminary draft (-EUR25 million) since the volume of exports has been raised from 25.5 million to 30 million tonnes. It is assumed that some of the exports will take place without refunds. Refund rates for common wheat and barley are lower, but they are higher for maize.

Substantial savings are recorded in the cost of public storage (-EUR279 million) owing to the downward revision of stocks at the start of the year (8 million as against 17 million tonnes) and less buying-in (11 million as against 17 million tonnes) because of the increase in the volume of exports.

Finally, expenditure on production refunds for starch is increased by EUR62 million from EUR299 million to EUR361 million following the considerable drop in world prices for maize.

There is an overall reduction of EUR93 million in requirements for direct aid. There are two main reasons for this drop. First, following the Council's decision in July 2000 to postpone reform of the flax and hemp sector by one year, the per hectare aids for fibre flax and hemp will not be incorporated in the general scheme for arable crops until 2001/02 and will affect the 2002 budget. This reduces expenditure on major crops in 2001 by about EUR69 million. Second, the Commission has updated expenditure estimates following the reports by the Member States on applications for premiums. This reduces foreseeable expenditure by EUR24 million. The Commission is unable to update the figures of four Member States because of incomplete statements. The figures from the preliminary draft have been retained for these Member States.

19.

Chapter 11 - Sugar (appropriations -EUR105 million)


appropriations in preliminary draft budget: EUR1 831 million

appropriations after letter of amendment: EUR1 726 million

In the sugar sector estimated expenditure is EUR105 million less than the appropriations in the 2001 preliminary draft budget, in particular because of the upturn in world prices. To calculate refund rates, a world price of USD 235/tonne has been used instead of the USD 170/tonne in the preliminary draft. This gives a refund rate of EUR439 instead of EUR525 a tonne.

As the volume of exports outside the WTO i ceiling (equivalent to imports of ACP sugar) remains unchanged, price movements result in a saving of EUR131 million. However, the volume of other sugar exports has been revised upwards (+237 000 tonnes), increasing requirements by EUR13 million.

Again as a result of price movements, there has been a drop in the appropriations required for refunds for the use of sugar and isoglucose in the chemical industry (-EUR14 million).

However, estimated expenditure on the reimbursement of storage costs has increased (+EUR24 million) following an upward revision in stocks from 94.1 million tonnes a month to 101.6 million tonnes a month.

Chapter 12 - Olive oil (appropriations +EUR89 million)

20.

appropriations in preliminary draft budget: EUR2 384 million


appropriations after letter of amendment: EUR2 473 million

The appropriations for olive oil have been increased, mainly because of the rise in production levels. In the preliminary draft requirements were based on the assumption that all the producer Member States would have reached their national maximum guaranteed quantity. According to the final production statements, Italy has exceeded its maximum guaranteed quantity, with a production figure of 700 000 t as against a maximum quantity of 543 000 tonnes). However, the reduction in production aid is not proportional since, under the stabiliser mechanism, 80% of the quantities not used in the previous marketing year are carried over; this applies to Italy in respect of this marketing year. Overall, the increase in appropriations for production aid comes to EUR76 million.

As production is higher than envisaged in the preliminary draft, the Commission has increased its request for appropriations for private storage from EUR13 million to EUR24 million.

21.

Chapter 13 - Dried fodder and grain legumes (appropriations -EUR1 million)


appropriations in preliminary draft budget: EUR385 million

appropriations after letter of amendment: EUR384 million

From past experience, the Commission has reduced the volume of sun-dried fodder from 0.25 to 0.20 million tonnes. All other factors are the same as in the preliminary draft.

Chapter 14 - Fibre plants and silkworms (appropriations +EUR97 million)

22.

appropriations in preliminary draft budget: EUR758 million


appropriations after letter of amendment : EUR855 million

In the case of fibre flax and hemp (B1-140), the preliminary draft budget was based on the Commission's proposal for a substantial reform of the sector: incorporation of the premium in the per hectare aid scheme for arable crops, while the additional premium is still covered by the sector. It is planned that the reform should enter into force from the 2000/01 marketing year, i.e. with full effect on the 2001 budget.

The Council (Agriculture) adopted the reform at its meeting of July 2000. It decided to postpone the reform by one marketing year and allocate EUR88 million as a transitional measure for the 2000/01 marketing year. The Commission therefore proposes that this amount should be entered in the letter of amendment for 2001. The rise in expenditure compared with the preliminary draft (EUR78 million in B1-140) is partly offset by a reduction of EUR69 million for direct aids (B1-1044 and B1-1054) in the arable crops chapter.

Estimated requirements for cotton (EUR766 million) are EUR19 million higher than in the preliminary draft budget, as the Council has still not come to a decision on the reform. The preliminary draft was based on the Commission's reform proposal to increase the percentage reduction of the guide price from 50% to 60% when the MGQ i is exceeded. If the reform had been adopted, requirements would have been only EUR698 million, given the increase in the value of the dollar and the higher world price for ginned cotton.

23.

Chapter 15 - Fruit and vegetables (appropriations -EUR130 million)


appropriations in preliminary draft budget: EUR1 714 million

appropriations after letter of amendment : EUR1 584 million

The Commission has reduced the appropriations earmarked for export refunds by EUR10 million to take account of the lower rates adopted in July 2000.

For the processing of tomatoes, the amount of production aid for the 2000/01 marketing year was not known when the preliminary draft was presented. The Commission therefore used the figure for the 1999/2000 marketing year. The average weighted aid rate for 2000/01 comes to EUR85.6/tonne as against EUR107.7/tonne the previous marketing year, leading to a saving of EUR56 million. This reduction in aid is the result of higher world prices.

Compensatory aid for bananas intended to compensate Community producers for the loss of income resulting from opening up the Community market and the consequent fall in prices has been revised downwards (-EUR30 million). The expenditure forecast when the preliminary draft for 2001 was drawn up assumed that the banana reform would be adopted and would already have an impact on bananas marketed in 2000, leading to a reduction in wholesale prices and a corresponding increase in compensatory aid.

The production aid for fruit-based products has also been cut because of higher world prices, especially when they are expressed in euros (-EUR19 million).

When the preliminary draft for 2001 was drawn up, the Commission estimated that EUR15 million remaining for the modernisation programmes would be used in 2001. However, at present it does not appear that there will be any significant expenditure in 2001 (-EUR15 million).

Expenditure on aids for nuts, on the other hand, has been revised upwards. This is the result of the faster rate of clearance in 2000 of amounts due under earlier programmes (-EUR10 million) and an upward revision (+EUR24 million) following the decision by the Council (Agriculture) to continue to pay producers from the 2001 budget for programmes which should normally have expired in 2000.

Chapter 16 - Products of the vine-growing sector (appropriations +EUR10 million)

24.

appropriations in preliminary draft budget: EUR1 143 million


appropriations after letter of amendment: EUR1 153 million

The new figure for requirements is very close to the appropriation entered in the preliminary draft; requirements are slightly higher than estimated at the time for the storage of wine and must (+EUR2 million), public (+EUR5 million) and private storage(+EUR3 million) of alcohol and aid for the use of must (+EUR4 million) and slightly lower for distillation (-EUR4 million). Estimated requirements for refunds (EUR35 million), the grubbing-up programmes (EUR14 million) and restructuring (EUR380 million) remain unchanged.

Expenditure in the vine-growing sector varies considerably from one year to the next because of the changeable nature of harvests in terms of both quantity and quality.

The wine production figure for 1999/2000 used for the preliminary draft has been substantially increased (from 173 to 184 million hl). However, the initial data supplied by the Member States indicate that the production of wine in 2000/01 should be lower; the figure used in drawing up the preliminary draft budget has even been revised downwards (from 174 to 171 million hl).

The result is that probably less wine will have to be withdrawn from the market (and distilled). However, expenditure in 2001 will still be considerably affected by the large volume of existing stocks which will increase the amount available.

25.

Chapter 17 - Tobacco (appropriations -EUR2 million)


appropriations in preliminary draft budget: EUR1 002 million

appropriations after letter of amendment EUR1 000 million

Expenditure has been relatively stable since the reform of the tobacco sector. The only two instruments which still exist are premiums, granted under a system of production quotas for each variety, and the Community fund for research and information.

The reduction of EUR2 million in estimated expenditure between the preliminary draft and the letter of amendment relates to premiums. It is linked to the dip in quotas between varieties and the rise in the value of the drachma against the euro (the 'dual rate effect').

Chapter 18 - Other plant sectors (requirements +EUR12 million)

26.

appropriations in preliminary draft budget: EUR312 million


appropriations after letter of amendment : EUR324 million

A number of measures are financed from this Chapter: production aid for seeds, aid per hectare for hops and intervention measures and income support under the common organisation of the market in rice.

The appropriation for seeds is raised by EUR3 million because of an increase in quantities receiving aid (350 000 tonnes as against 339 200 tonnes in the preliminary draft).

The expenditure forecast for rice has also risen by around EUR9 million. There are two reasons for this change:

- first, per hectare aids have dropped by EUR4 million, mainly as a result of the reduction in the area eligible (394 927 ha as against 408 034 ha in the preliminary draft),

- second, appropriations for storage have risen by EUR13 million, mainly as a result of the increased depreciation at the start and the close of the financial year (+ EUR14 million).

27.

Chapter 20 - Milk and milk products (appropriations -EUR399 million)


appropriations in preliminary draft budget: EUR2 744 million

appropriations after letter of amendment : EUR2 345 million

The situation on the milk market has improved since the preliminary draft was drawn up. In view of its buoyancy, especially for skimmed milk powder, the Commission has been able to reduce several rates of refund and aid. It has also been able to revise its assumptions regarding intervention.

A reduction in the refund rates for skimmed milk powder and 'other products' has led to savings of EUR67 million and EUR122 million respectively.

As regards intervention in the form of aid for the use of skimmed milk, a fall in the rate of aid and a slight reduction in quantities attracting aid has led to savings of EUR53 million for skimmed milk powder for use as feed for calves and EUR64 million for skimmed milk processed into casein.

As for public intervention for skimmed milk powder, stocks at the start of the year (3 265 tonnes as against 127 000 tonnes) and purchases (5 000 tonnes as against 90 000 tonnes) were far lower than expected, reducing requirements by EUR69 million. As regards public intervention for butter, the higher volume of sales (43 000 tonnes as against 13 000 tonnes) has produced a saving of EUR42 million. The savings on intervention have also been helped by a fall in the rate of depreciation on entry. The Commission has thus taken on board the Court of Auditors' criticism that this rate of depreciation was too high.

However, a further EUR15 million is required to take account of the judgment of 27 January 2000 by the Court of Justice, evaluating the damages for the SLOM producers who refused to accept the offer of flat-rate compensation made to them.

Chapter 21 - Beef/veal (appropriations +EUR82 million)

28.

appropriations in preliminary draft budget: EUR5 925 million


appropriations after letter of amendment: EUR6 007 million

The main additional requirements should be for the exceptional support measures and compulsory slaughter in connection with BSE, 'mad cow disease' (+ EUR134 million) and, to a lesser extent, the special premium for male bovine animals (+EUR22 million). These additional requirements will be partly offset by the reduction in requirements for refunds (--EUR66 million).

Requirements for export refunds should be substantially lower as the level of refunds for most products is lower than assumed in the preliminary draft.

Estimated requirements for the premium schemes are close to those forecast in the preliminary draft. A slight increase in the requirements for 2001 is expected for the special premium for male bovine animals as account is taken of the latest information submitted by the Member States showing an increase in the number of animals. However, requirements have fallen for the slaughter premium since fewer animals have been slaughtered in the first half of 2000 than estimated in the preliminary draft.

As regards the measures to eradicate BSE, the requirements in the preliminary draft for the voluntary slaughter programme in the United Kingdom have been substantially increased to EUR346 million, a rise of EUR131 million, because of a combination of the rise in the number of animals expected, the amount paid per head and the amounts outstanding. The previous estimate of EUR10 million for the compulsory selective slaughter programme has been increased to EUR13 million because of the remaining uncertainty and implementation of this measure in 2000. The total cost of measures linked to BSE comes to EUR359 million in 2001. The total cost of market measures linked to the crisis is now estimated at EUR4 159 million for the period 1996-2001, including EUR237 million in the 2000 budget and EUR359 million in this letter of amendment for 2001.

29.

Chapter 22 - Sheepmeat and goatmeat (appropriations -EUR174 million)


appropriations in preliminary draft budget: EUR1 794 million

appropriations after letter of amendment: EUR1 620 million

Virtually all expenditure in this chapter is on the ewe premium and it is because of the reduction in requirements for this premium that the requirements for this chapter are lower than in the preliminary draft. The expenditure forecasts are based mainly on developments in market prices and the volume of eligible livestock.

The premiums for a given agricultural year are paid over two different budget years. Expenditure in the 2001 financial year covers some 70% of the premium for the 2000 marketing year (second advance and balance) and 30% of the premium for the 2001 marketing year (first advance).

The preliminary draft was based on a forecast market price of EUR3 350/tonne for the 2000 and 2001 marketing years. Because of recent price trends and more favourable forecasts, the Commission considers that an average price of EUR3 560 a tonne can be assumed for the 2000 marketing year. The requirements for the premium, calculated in line with the difference between the base price and the market price, will therefore be lower than calculated in the preliminary draft because of this foreseeable increase in the market price. For the 2001 financial year, the Commission is assuming a level of EUR3 400 a tonne, which is more consistent with the average level over a long period.

As a rule, the forecast for eligible livestock is based on the most recent data concerning the actual use made of the entitlement to a premium. In April 2000 the Commission had only incomplete information for the 1999 marketing year. The premiums paid in respect of 1999 are now known and conclusions can thus be drawn about the volume of livestock on which the forecasts are to be based. From this data, the Commission estimates that 73.2 million animals may be eligible for premiums in 2000 and 2001, i.e. 650 000 more than assumed in the preliminary draft.

Given the improvement in the market situation described above, requirements for private storage have also fallen sharply (from EUR5 million to EUR1 million).

30.

Chapter 23 - Pigmeat, eggs and poultrymeat (appropriations -EUR43 million)


appropriations in preliminary draft budget: EUR213 million

appropriations after letter of amendment : EUR170 million

Expenditure in this sector consists of export refunds; it also includes intervention in respect of private storage of pigmeat.

The difference in relation to the preliminary draft is entirely accounted for by a fall in refund rates following a recovery on the internal market. Requirements for refunds are EUR33 million lower for pigmeat and EUR10 million lower for poultrymeat.

31.

Chapter 30 - Non-Annex I products (appropriations: -EUR29 million)


appropriations in preliminary draft budget: EUR444 million

appropriations after letter of amendment: EUR415 million

This chapter covers products obtained by processing agricultural products such as cereals, sugar, milk products and eggs into spirits made from cereals, chocolate products, preparations for dietary or kitchen use, pasta, refined bakery products, cakes and biscuits, etc.

The refund rates for these processed products have been reduced, particularly in the case of skimmed milk and sugar (see the comments for these sectors). Because of this reduction, the quantities receiving refunds can be increased, as set out in the table below.

>REFERENCE TO A GRAPHIC>

Chapter 31 - Food programmes (appropriations +EUR35 million)

32.

appropriations in preliminary draft budget: EUR292 million


appropriations after letter of amendment : EUR327 million

The new school milk scheme adopted by the Council in July 2000 provides for a 75% rate for the co-financing of the aid instead of the 50% proposed by the Commission. The Council has also decided that the new scheme will enter into force on 1 January 2001, which means that the agricultural budget for 2001 will still have to finance a substantial proportion (estimated at 50%) of the old programme with a co-financing rate of 95%. Finally, the list of eligible products has been extended. This gives an increase in requirements estimated at EUR41 million for 2001, bringing the appropriations in the letter of amendment to EUR89 million.

The Commission proposes that the appropriations for distribution to deprived persons should be kept at their traditional level of EUR200 million. The purpose of this measure is to supply products from public stocks to the deprived. As these stocks are relatively low, there appears to be no need to enter a higher level of appropriations.

Requirements for the free distribution of fruit and vegetables have been revised downwards (-EUR5 million) to take account of the smaller quantities withdrawn and distributed.

The appropriations for refunds in connection with food aid have been reduced by EUR3 million in line with the reduction of some of the refund rates for the sectors concerned.

Finally, the Commission has entered EUR2 million to finance the audit provided for in the fourth subparagraph of Article 4(1) of Council Regulation (EC) No 2802/98 on a programme to supply agricultural products to the Russian Federation. Because of the delays encountered by this supply programme it has not been possible to start this audit. The EUR2 million entered will not exceed the allocation of EUR20.4 million granted by the budgetary authority for the monitoring, audit, control and evaluation of the programme.

Chapter 32 - Most remote regions (appropriations +EUR16 million)

33.

appropriations in preliminary draft budget: EUR230 million


appropriations after letter of amendment: EUR246 million

The new estimate reveals additional requirements for the supply of products to the Canary Islands (+EUR15 million) and, to a lesser extent, Madeira (+EUR1 million). This increased estimate is based on the outturn of the supply scheme for 2000 which reveals a high rate of implementation of the balances, particularly under the Poseican programme.

34.

Chapter 33 - Veterinary and plant health measures (appropriations -EUR4.5 million)


appropriations in preliminary draft budget: EUR110 million

appropriations after letter of amendment: EUR105.5 million

The appropriations earmarked for veterinary measures are EUR4.5 million lower because of the change in requirements for Article 330 (Animal disease eradication and monitoring programmes).

The Commission entered EUR10 million in the preliminary draft as the Community's contribution to the financing of the BSE tests. The entry was made in the reserve Chapter B0-40 pending the Member States' information on the precise scope of this operation.

According to their reports, it now appears that EUR5.5 million will be enough for the Community's co-financing of the programmes eligible. The Commission therefore proposes:

- to wind up the reserve of EUR10 million and

- provide an extra EUR5.5 million for Article B1-330, increasing the appropriation from EUR45.2million to EUR50.7 million.

Chapter 38 - Promotion measures (appropriations +EUR2 million)

35.

appropriations in preliminary draft budget: EUR64.5 million


appropriations after letter of amendment: EUR66.5 million

The increase in requirements in the letter of amendment covers the EUR2 million for promotion measures within the European Union, e.g. for live plants and flowers, which was not provided for in the preliminary draft.

36.

Chapter 39 - Other measures (agri-monetary aid) (appropriations -EUR53 million)


appropriations in preliminary draft budget: EUR470 million

appropriations after letter of amendment: EUR417 million

First, there is the aid adopted under the old system in force before introduction of the euro. In its preliminary draft, the Commission estimated the corresponding expenditure at EUR88 million. This amount was planned for the payment of aid in Italy following the substantial revaluation of the lira in 1997. The estimate was based on the assumption that Italy would pay the second tranche under the 2001 budget. However, Italy has brought forward its payments and already paid part of this tranche in 2000, which has already required an increase in appropriations for 2000. Even when account is taken of payment of part of the third tranche in 2001 and the small amount of expenditure remaining for Ireland, EUR16 million less is required for this type of aid.

The second type of aid was granted after the introduction of the euro and the simultaneous abolition of 'green rates'. Recent information suggests that the estimate of expenditure given in the preliminary draft is still valid. The letter of amendment provides EUR256 million.

The third type of agri-monetary aid relates to the new system which is limited to the Member States which are not taking part in the euro and is intended to offset the lower prices and/or direct aid (in national currency) resulting from the rise in the value of their currency against the euro. Estimated expenditure falls from EUR117 million in the preliminary draft to EUR81 million in the letter of amendment as the United Kingdom, the main beneficiary of this aid, has waived payment of aid in the environmental and structural sectors and the second tranche of aid in respect of the sheepmeat premium. The level of compensation in respect of aid for the main crops should be lower following the fall in the value of the pound sterling against the euro since the preliminary draft was drawn up.

37.

SUBHEADING 1b: RURAL DEVELOPMENT


Chapter 40 - Rural development (appropriations unchanged)

appropriations in preliminary draft budget: EUR4 495 million

appropriations after letter of amendment: EUR4 495 million

In accordance with the new rules on rural development, the Member States sent their estimates of expenditure for 2001 to the Commission by 30 September 2000. Overall, these estimates exceed the ceiling in the financial perspective for subheading 1b in 2001. The Commission therefore proposes entering appropriations corresponding to this ceiling in the 2001 budget. It should be noted that the Commission had already entered appropriations up to the level of the ceiling in its preliminary draft.

While the Commission has not therefore changed its position regarding the overall level of appropriations, it has updated the breakdown of appropriations between the various measures in line with the Member States' reports.

38.

CHANGES IN THE NOMENCLATURE AND IN THE BUDGET REMARKS - DELETION OF ITEMS


The following changes mainly result from the decision by the Council of Ministers (Agriculture) in July 2000 to postpone the reform of the flax and hemp sector by one year. The changes in the remarks and the creation of the new lines proposed in the preliminary draft should not therefore occur in the 2001 budget but in the 2002 budget. For 2001 there will thus be a return to the old nomenclature applicable to the 2000 budget.

The Commission also proposes to add a remark to Article B1-319 concerning Council Regulation (EC) No 2802/98 on a programme to supply agricultural products to the Russian Federation. As stated above under Chapter B1-31, the Commission has entered EUR2 million to finance the audit provided for in this Regulation and considers that the budget remarks should be extended. It is again pointed out that the EUR2 million entered will not exceed the allocation of EUR20.4 million granted by the budgetary authority for the monitoring, audit, control and evaluation of the programme.

39.

Changes in the nomenclature and in the budget remarks


Articles B1-1044 and B1-1054:

- New heading: 'Aid for producers of non-textile flax seed'

- The second paragraph of the remarks is deleted

Article B1-319:

- The following remark is added: 'The appropriations entered in this article are intended to finance the audit of the programme to supply agricultural products to the Russian Federation. This audit is provided for in the fourth subparagraph of Article 4(1) of Council Regulation (EC) No 2802/98. The audit will be completed by the end of 2001.'

40.

Deletion of items


- Article B1-1401 - Processing aid for long flax fibre

- Article B1-1403 - Processing aid for short flax fibre and hemp fibre.

41.

HEADING 4 - EXTERNAL ACTION


International fisheries agreements

The Commission proposes to amend the preliminary draft budget by proposing the following amounts:

Item B7-8000: EUR191 253 000 in commitment appropriations (as against EUR149 000 000 in the preliminary draft budget) and EUR197 853 000 in payment appropriations (as against EUR155 600 000 in the PDB) for agreements in force.

"Reserve" Chapter B0-40: EUR78 382 000 in commitment appropriations (as against EUR123 300 000 in the PDB) and EUR73 766 000 in payment appropriations (as against EUR116 700 000 in the PDB).

The overall net effect is thus a reduction of nearly EUR2.7 million in commitment appropriations and EUR681 000 in payment appropriations compared with the preliminary draft budget. In comparison with the 2000 draft budget, this also translates into a net increase of some EUR4 million compared with the estimates made at the time.

The major reasons for the proposed changes in the allocations of appropriations are:

a) Following conclusion of negotiations with Greenland and the initialling of a fourth financial protocol, the Commission proposes entering in Item B7-8000 slightly higher amounts than previously planned for Greenland. The same is true for the Côte d'Ivoire for which appropriations for 2000 have also been slightly increased. On the other hand, appropriations have been slightly decreased as regards the agreement with Angola.

b) A small amount planned for Equatorial Guinea is moved from Item B7-8000 to Chapter B0-40 since the former agreement has been prolonged for one year only instead of the longer period originally planned. This agreement will thus need to be renegotiated in 2001.

c) Due to the uncertainties encountered in relation to negotiations regarding new agreements with countries such as Argentina, Mozambique and Russia or in the South Pacific, it is proposed that the 'reserve' Chapter B0-40 be reduced by some EUR7 million in commitment appropriations and EUR4.9 million in payment appropriations.

d) The Commission proposes that appropriations earmarked for the agreement with Morocco remain on Item B7-8000 since an agreement can still be expected to be in force in early 2001. The Commission has recently had high-level contacts with the Moroccan King and the Moroccan Prime Minister that appear to have resulted in a breakthrough. Technical negotiations will resume soon.

In accordance with the provisions of the Interinstitutional Agreement, the Commission expects to transmit in November to the budgetary authority an update of the prospects for negotiating or renegotiating agreements in support of the amounts entered in the letter of amendment.

42.

III. REVENUE


Foreseeable balance from 2000

Under the first paragraph of Article 32 of the Financial Regulation of 21 December 1977 (OJ L 356 of 31 December 1977, with subsequent amendments), the balance from each financial year is entered in the budget for the following financial year as revenue in the case of a surplus or expenditure in the case of a deficit.

The second paragraph of this Article specifies that the estimates of this revenue or expenditure will be entered in the budget during the budget procedure, and, where appropriate, in a letter of amendment submitted pursuant to Article 14 of the Regulation.

The Commission considers that an estimated balance of EUR900 million can be included as revenue in the preliminary draft budget for 2001, mainly as a result of the increase in recoveries from traditional own resources during the year as well as from an initial estimate of the overall impact of the adjustments of the VAT bases and GNP data following the modifications announced by the Member States. These adjustments have to be entered into the Commission's account by 1 December 2000.

A provisional amount is entered under Article 300 (Surplus available from the preceding financial year).

After the closing of accounts for the 2000 financial year, the difference compared with these estimates will be entered in the 2001 budget by means of a supplementary and/or amending budget, in accordance with the third indent of Article 32 of the Financial Regulation.

>TABLE POSITION>

43.

GENERAL STATEMENT OF REVENUE


TITLE 3

SURPLUSES AVAILABLE

CHAPTER 30 - SURPLUS AVAILABLE FROM THE PRECEDING FINANCIAL YEAR

44.

300 - SURPLUS AVAILABLE FROM THE PRECEDING FINANCIAL YEAR


>TABLE POSITION>

45.

Remarks: unchanged



STATEMENT OF EXPENDITURE

SECTION III - COMMISSION


Changes in the nomenclature and in the budget remarks

Articles B1-1044 and B1-1054:

- New heading: 'Aid for producers of non-textile flax seed'

- The second paragraph of the remarks is deleted

Article B1-319:

- The following remark is added: 'The appropriations entered in this article are intended to finance the audit of the programme to supply agricultural products to the Russian Federation. This audit is provided for in the fourth subparagraph of Article 4(1) of Council Regulation (EC) No 2802/98. The audit will be completed by the end of 2001.'

46.

Deletion of items


- Article B1-1401 - Processing aid for long flax fibre

- Article B1-1403 - Processing aid for short flax fibre and hemp fibre.