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4.1.4. EAGGF - Guarantee section
Article 34 (40) (3) of the EC Treaty.
The European Agricultural Guidance and Guarantee Fund finances the common agricultural policy or CAP. Set up in January 1962, it split in 1964 into two sections: the Guarantee Section, much larger than the Guidance Section, has the purpose of funding expenditure resulting from application of the markets and price policy. Under Articles 2 and 3 of Regulation 729/70 such expenditure consists partly of refunds for exports to third countries granted under the common organisation of the market and partly of intervention payments to regularise agricultural markets. However, following reform of the CAP the Guarantee Section of the EAGGF has since 1993 had to finance all or part of measures which are not strictly speaking to do with the management of agricultural markets, such as set-aside of land, income support, environmental protection, action to combat fraud etc. The Agenda 2000 decisions, transferring to the EAGGF Guarantee Section all structural and rural measures at present in force outside Objective 1 regions, are the latest development in this direction.
The EAGGF forms an integral part of the Community budget, so the budget procedure determines its funds in the same way as other Community expenditure.
1. Development and distribution of the Fund
Tables I.4 and II (*4.1.9.) show that France is the largest beneficiary of the EAGGF Guarantee Section, followed by Germany, Spain and the United Kingdom. From Table 1 (*4.1.9.) it is clear that the agricultural sectors in Sweden, the UK and Ireland receive the greatest support from the EU, since EAGGF Guarantee spending accounted for between 59 and 86% of their net value added or NVA in 1998. But in terms of Guarantee Section spending per agricultural work unit or AWU, Denmark heads the list, followed by Belgium and the UK (Table I.6, *4.1.9.).
Table III (*4.1.9.) shows the distribution of Guarantee Section spending by sector in 1998, broken down by type of expenditure (refunds, intervention payments through prices and direct aids). The first three areas of expenditure are arable crops (cereals, oil-seed and proteins), beef and milk products.
The results obtained by implementing budgetary discipline have been spectacular. This trend was in line with the financial perspective, under the Delors I and II packages, which required agriculture to take a steadily decreasing slice of the Community budget. Thus the percentage of this section fell from 67% of the Community budget in 1988 to 45.1% in 1999. The financial perspective for Agenda 2000 has practically frozen this percentage. For the period 2000-2006 the agricultural guideline will account for 44.1% of Community spending.
Table III (*4.1.9.) also shows the trend in Guarantee Section spending by type of spending and by Member State. All Member States now obtain most of their benefits from direct aids. France benefits most from refunds, followed by the Netherlands and Germany. The countries that benefit least from refunds are Portugal, Greece, Austria and Sweden.
2. Nature of EAGGF Guarantee Section expenditure
a. Spending in this section under the common organisations of the market (COMs) has the following characteristics:
b. In addition to these characteristics such spending may be classified in terms of the economic nature of the measures put in place for the COMs.
To carry out the Fund's activities the Commission receives assistance from the EAGGF Committee comprising the representatives of the Member States. The Court of Auditors and Parliament's Committee on Budgetary Control provide a retrospective review. The Brussels European Council of February 1988 was of major importance in reaching agreement on a number of significant measures, including the following.
a. Budgetary discipline
b. Early warning system
c. Monetary reserve
d. Obligatory scheme to finance the depreciation of surplus stocks
ROLE OF THE EUROPEAN PARLIAMENT
The October 1993 interinstitutional agreement enabled Parliament to somewhat increase its impact on compulsory expenditure. Parliament decides on the total amount of EAGGF appropriations and how they are allocated by product and activity, though the Council has the final word. Parliament's main contributions to the operation of the EAGGF include its firm support for the amendment of Regulation 729/70 on the funding of the CAP, as a way of preventing the disputes arising from dialogue exclusively between the Member States' national departments and those of the regions concerned .Parliament's Committee on Agriculture and Rural Development argues that there is a need to set up a conciliation body in each Member State, with representatives of the regions on it, to facilitate dialogue between the regions and the Member State. Parliament takes the view that the Commission's estimates of expenditure for the budget are not precise enough, and it therefore intends to take a closer look at this area of the EAGGF Guarantee Section to monitor the level of discrepancy between estimated and actual spending. In this connection the debates on the agricultural section of Agenda 2000 have had a major impact on the future of the CAP, stabilising agricultural spending and, at the same time, reducing the Commission's margin for manoeuvre within the guideline.
 Consultation procedures: CNS94143 and CNS94144