REPORT I. on the proposal for a Council Regulation establishing agrimonetary arrangements for the euro (COM(98)0367 - C4-0406/98 - 98/0214(CNS)) and II. on the proposal for a Council Regulation (EC) on transitional measures to be applied under the common agricultural policy with a view to the introduction of the euro (COM(98)0367 - C4-0407/98 - 98/0215 (CNS))

    23 September 1998

    Committee on Agriculture and Rural Development
    Rapporteur: Mrs Agnes Schierhuber

    By letter of 7 July 1998 the Council consulted Parliament, pursuant to Articles 42 and 43 of the EC Treaty, on the proposals for a Council Regulation establishing agrimonetary arrangements for the euro and on transitional measures to be applied under the common agricultural policy with a view to the introduction of the euro.

    At the sitting of 13 July 1998 the President of Parliament announced that he had referred these proposals to the Committee on Agriculture and Rural Development as the committee responsible and to the Committee on Budgets for its opinion.

    At its meeting of 2/3 June 1998 the Committee on Agriculture and Rural Development had appointed Mrs Agnes Schierhuber rapporteur.

    It considered the Commission proposals and the draft report at its meetings of 23/24 June, 2/3 September and 22/23 September 1998.

    At the last meeting it adopted the draft legislative resolution unanimously.

    The following were present for the vote: Colino Salamanca, chairman; Schierhuber, rapporteur; Barthet-Mayer, Ephremidis (for Querbes), Fantuzzi, Filippi, Funk, Garot, Goepel, Görlach, Hallam, Iversen, Jové Peres, Keppelhoff-Wiechert, Kindermann, Kofoed, Mayer, Mulder, Otila (for Trakatellis), des Places, Rehder, Rosado Fernandes, Santini and Sonneveld.

    The opinions of the Committee on Budgets is attached.

    The report was tabled on 23 September 1998.

    The deadline for tabling amendments is noon on 1 October 1998.

    A.I. LEGISLATIVE PROPOSAL - DRAFT LEGISLATIVE RESOLUTION

    Proposal for a Council Regulation establishing agrimonetary arrangements for the euro (COM(98)0367 - C4-0406/98 - 98/0214(CNS))

    The proposal is approved with the following amendments:

    Text proposed by the Commission[1]

    Amendments by Parliament

    (Amendment 1)

    Recital 2

    Whereas in the present monetary situation, where the gaps between exchange rates and agricultural conversion rates are moderate, it is possible to establish a simpler agrimonetary system closer to the actual monetary situation; whereas consequently the conversion into the national currency of the non-participating Member States prices and amounts fixed in euros in legal instruments relating to the common agricultural policy may be done with the exchange rate of the euro in those currencies; whereas such a provision has the further advantage of considerably simplifying the management of the common agricultural policy;

    Whereas in the present monetary situation, where the gaps between exchange rates and agricultural conversion rates are moderate, it is possible to establish a simpler agrimonetary system closer to the actual monetary situation; whereas consequently the conversion into the national currency of the non-participating Member States prices and amounts fixed in euros in legal instruments relating to the common agricultural policy may be done with the exchange rate of the euro in those currencies; whereas such a provision has the further advantage of considerably simplifying the management of the common agricultural policy while enabling farm incomes to be protected from the consequences of currency fluctuations;

    (Amendment 2)

    Recital 4

    Whereas, in cases of major currency revaluation with potential effects on prices and amounts other than direct aid, farm incomes may in certain conditions be reduced; whereas as a consequence provision could justifiably be made for temporary, degressive aid to offset the effects of revaluations, and keep pace with the development of agricultural prices in a manner compatible with the rules of the general economy;

    Whereas, in cases of major currency revaluation with potential effects on prices and amounts other than direct aid, farm incomes may in certain conditions be reduced; whereas as a consequence provision could justifiably be made for temporary, degressive aid to offset the effects of revaluations, and keep pace with the development of agricultural prices in a manner compatible with the rules of the general economy, and for setting up a procedure simple and rapid enough to prevent currency variations from leading to distortions of competition, even briefly, and disturbing the European agricultural markets;

    (Amendment 3)

    Recital 5

    Whereas specific rules adapted to the type of aid are required to offset the effects of major currency revaluations on the level of certain direct aids in national currency;

    Whereas specific rules adapted to the type of aid are required to offset the effects of significant currency revaluations on the level of certain direct aids in national currency;

    (Amendment 4)

    Recital 5a (new)

    whereas equal treatment among the farmers of the EU Member States is a fundamental principle of the CAP;

    (Amendment 5)

    Recital 7

    Whereas in the longer term the agricultural sector must adjust, like other sectors of the economy, to the monetary reality; whereas consequently a cut-off date should be set for the compensation arrangements; the setting of such a cut-off date is part of the budgetary discipline.

    Whereas in the longer term the agricultural sector must adjust, like other sectors of the economy, to the monetary reality (while bearing in mind that the agriculture of the Member States is directly linked to the CAP); whereas consequently a cut-off date should be set for the compensation arrangements; the setting of such a cut-off date is part of the budgetary discipline.

    (Amendment 6)

    Recital 9

    Whereas a Member State that is not participating in economic and monetary union must have the option of making payments for expenditure resulting from legal instruments relating to the common agricultural policy in euros rather than in national currency; whereas steps should be taken to ensure that this option does not lead to any unjustified advantage for parties making or receiving payment;

    Whereas a Member State that is not participating in economic and monetary union must have the option of making payments for expenditure resulting from legal instruments relating to the common agricultural policy in euros rather than in national currency; whereas steps should be taken to ensure that this option does not lead to any unjustified advantage or penalty for parties making or receiving payment;

    (Amendment 7)

    Recital 10a (new)

    Whereas this Regulation should be amended accordingly when the European Union is next enlarged;

    (Amendment 8)

    Article 4(6), third subparagraph

    These criteria may be amended, in the light of experience, in accordance with the procedure laid down in Article 9.

    These criteria may be amended, in the light of experience, by the Council by a qualified majority.

    Legislative resolution embodying Parliament's opinion on the proposal for a Council Regulation establishing agrimonetary arrangements for the euro (COM(98)0367 - C4-0406/98 - 98/0214(CNS))

    (Consultation procedure)

    The European Parliament,

    - having regard to the Commission proposal to the Council, COM(98)0367 - 98/0214(CNS)[2],

    - having been consulted by the Council pursuant to Articles 42 and 43 of the EC Treaty (C4-0406/98),

    - having regard to Rule 58 of its Rules of Procedure,

    - having regard to the report of the Committee on Agriculture and Rural Development and the opinion of the Committee on Budgets (A4-0320/98),

    1. Approves the Commission proposal, subject to Parliament's amendments;

    2. Calls on the Council to notify Parliament should it intend to depart from the text approved by Parliament;

    3. Asks to be consulted again should the Council intend to make substantial modifications to the Commission proposal;

    4. Instructs its President to forward this opinion to the Council and Commission.

    • [1] () OJ C 224, 17.7.1998, p.15
    • [2] () OJ C 224, 17.7.1998, p.15

    A. II LEGISLATIVE PROPOSAL - DRAFT LEGISLATIVE RESOLUTION

    Proposal for a Council Regulation on transitional measures to be applied under the common agricultural policy with a view to the introduction of the euro (COM(98)0367 - C4-0407/98 - 98/0215 (CNS))

    The proposal is approved.

    Legislative resolution embodying Parliament's opinion on the proposal for a Council Regulation on transitional measures to be applied under the common agricultural policy with a view to the introduction of the euro (COM(98)0367 - C4-0407/98 - 98/0215 (CNS))

    (Consultation procedure)

    The European Parliament,

    - having regard to the Commission proposal to the Council, COM(98)0367 - 98/0215(CNS)[1],

    - having been consulted by the Council pursuant to Articles 42 and 43 of the EC Treaty (C4-0407/98),

    - having regard to Rule 58 of its Rules of Procedure,

    - having regard to the report of the Committee on Agriculture and Rural Development and the opinion of the Committee on Budgets (A4-0320/98),

    1. Approves the Commission proposal;

    2. Calls on the Council to notify Parliament should it intend to depart from the text approved by Parliament;

    3. Asks to be consulted again should the Council intend to make substantial modifications to the Commission proposal;

    4. Instructs its President to forward this opinion to the Council and Commission.

    • [1] () OJ C 224, 17.7.1998, p.22

    B EXPLANATORY STATEMENT

    I. Introduction

    The advent of the euro as the single European currency and the associated fixing of exchange rates on 1 January 1999 make a thorough rearrangement of the agrimonetary system necessary.

    The present system is based on all prices and amounts relating to the common agricultural policy (CAP) being fixed and expressed in the unit of account, the ECU. ECUs are converted into national currencies at a specific agricultural rate, known as the 'green rate'. This artificial system is intended to cushion currency fluctuations within a given band so that they have no direct impact on agriculture. It is meant to ensure stability in agriculture.

    On 1 January 1999, with the irrevocable fixing of exchange rates among the Member States participating in economic and monetary union (EMU) (the 'ins'), this system will cease to be necessary since there will no longer be any exchange rate fluctuations requiring compensation. Prices and other amounts relating to the CAP will thereafter be fixed in euros. When the change is made, one ECU will equal one euro and there will no longer be any need for conversion since the euro will be a genuine means of payment and not just a unit of account, as the ECU is. For the ins there will no longer be an agrimonetary system.

    However, an agrimonetary system will continue to be needed for the Member States that do not participate in EMU (the 'pre-ins'). The euro will not be a legal means of payment in their territory.

    The introduction of the euro and the rearrangement of the agrimonetary system will greatly simplify the CAP. This simplification means that devaluations of the currencies of the pre-ins and the ins (for the last time on 1 January 1999 in the latter case) will have a positive impact on farm incomes in the countries concerned. On the other hand, adverse effects on incomes due to revaluations will have to be cushioned with compensatory aid.

    II. The Commission proposals

    The Commission proposes the abolition of the current agrimonetary arrangements, which are essentially based on two regulations: firstly, Regulation (EEC) No 3813/92 of 28 December 1992 on the unit of account and the conversion rates to be applied for the purposes of the common agricultural policy, and secondly, Regulation (EC) No 724/97 of 22 April 1997 determining measures and compensation relating to appreciable revaluations that affect farm incomes.

    The agrimonetary scheme is to be governed by a single regulation for the pre-ins after the introduction of the euro.

    A second regulation is needed to ensure the transition from the present system to the new scheme for all the ins.

    1. Proposal for a Council Regulation (EC) establishing agrimonetary arrangements for the euro

    This regulation will apply to the pre-ins, since agrimonetary arrangements will have to be maintained for these Member States.

    (a) Definitions

    The exchange rate for pre-ins will be determined in the foreign exchange markets, as for any other currency. There will not be a specific agricultural conversion rate for pre-ins. The term 'green rate' will therefore lapse for both participating and non-participating Member States.

    As a currency devaluation has a favourable effect on farm incomes, compensation for losses of income is granted only after a revaluation.

    The following criteria are important for compensation:

    - there must be a revaluation,

    - the revaluation must be appreciable,

    - the appreciable revaluation must amount to at least 2.6%.

    The concept of 'appreciable revaluation' has been adapted to the new situation and is based on the average for the year. The calculation of appreciable revaluations makes for considerable simplification, a revaluation being deemed appreciable when

    'the annual average exchange rate is below a threshold defined as the lowest average annual exchange rate of the preceding three years at the exchange rate of 1 January 1999'.

    (b) Conversion rates

    Prices and other amounts will be expressed in euros. They will be converted into the national currencies of the ins at the parities fixed irrevocably on 1 January 1999. For the pre-ins conversion into national currencies will be effected at the euro exchange rate.

    The cumbersome system of asymmetrical permitted margins and exceptional waiting periods will be discontinued, since there will no longer be conversion rates fixed by the authorities. Import charges and taxes on exports will be guided by the exchange rates indicated in the Customs Code.

    (c) Operative events

    With the exception of the pre-fixing of the conversion rate, the present definition of operative events for exchange rates is retained. The principle of conversion at the market rate is introduced, the intention being to be as close as possible to market reality. The new system is subject to any variations that may arise in the foreign exchange markets. To compensate for such variations, protection by means of a bank guarantee or something similar should be obtained.

    (d) Prices, other aid, direct aid

    The approach adopted to direct aid differs from that applied to prices and other aid. This distinction is necessary because the impact of revaluation on income can be calculated with accuracy and certainty in the case of direct aid, but only with great difficulty in the case of prices and other aid.

    - Prices and other aid

    In the event of an appreciable revaluation and associated loss of income the Member States concerned may grant compensatory aid. Compensation may be paid for a loss of income when the appreciable revaluation amounts to at least 2.6%. This margin was chosen to prevent overcompensation in the flat-rate calculation of aid. Within this margin, i.e. where a revaluation amounts to less than 2.6% and is already specified in the current Council regulation, there is no compensation.

    The period of observation for an appreciable revaluation corresponds to the calendar year, which means that there can no longer be several successive appreciable revaluations.

    The payment of the aid is made in three tranches, each of twelve months, the first tranche being so established that the amount calculated is that which exceeds the flat-rate income loss due to the 2.6% revaluation. The difference is offset by aid. The second and third tranches are each reduced by at least one third.

    The maximum amounts are established by the Commission by the Management Committee procedure. The maximum amount of the first tranche may be reduced or even cancelled altogether in view of the market situation during the year. Similarly, the second and third tranches of compensatory aid may be reduced or cancelled because of the market situation.

    The granting of aid is not compulsory, i.e. the Member State decides whether and to what extent it intends to grant aid. The Community participates in the amounts actually granted by the Member States by contributing 50% from the EAGGF, Guarantee Section.

    The criteria for calculating the amount of one or more tranches are to be established and may be amended, according to the Commission proposal, by a Management Committee procedure.

    However, as this is to be a Council Regulation, it should be for the Council to decide what criteria are applied as the basis for the calculation of the amounts of the tranches.

    The granting of compensatory aid applies only to losses of income due to revaluations before 1 January 2002.

    - Direct aid

    Compensatory aid may be granted if the exchange rate on the date used for entitlement to direct aid is lower than the exchange rate previously applicable. The effects of a revaluation can be determined directly and easily by comparing the new and old conversion rates. The revaluation must be at least 0.5% and entail an associated loss where direct aid is paid. No aid is granted in the event of a revaluation of less than 0.5%. Nor is aid granted in respect of amounts to which a lower exchange rate was applicable in the 24 months before the new exchange rate came into effect, i.e. if the revaluation follows a devaluation in the previous two years.

    The amount of compensatory aid covers the whole loss of income and is not granted in respect of the difference arising from the revaluation above 0.5%.

    The compensatory aid is granted in three tranches, each lasting 12 months. The Community contributes 50% of the maximum amount of the first tranche. The second and third tranches are each reduced by at least a third. The Community again contributes 50% of these amounts. The second and third tranches may be reduced or cancelled as a function of the trend in exchange rates and their effect on incomes.

    The Community contributes 50% to the financing of compensatory aid from the EAGGF, Guarantee Section, regardless of whether the Member State pays its part. However, account must be taken in this context of the regulation on the introduction of the euro under the CAP, which provides for the payment of 100% compensation to the pre-ins for any losses of income due to revaluations in 1999, regardless of whether the Member State participates in the financing. This arrangement applies to the ins if the rate for the conversion of the euro into national currencies on 1 January 1999 is lower than the previously applicable rate, i.e. if there is a revaluation.

    Compensatory aid is granted to cover losses of income due to revaluations before 1 January 2002.

    (e) Safeguard measures

    In the event of exceptional monetary practices provision is made for suitable safeguard measures, which will be determined by the Commission.

    (f) Payments in euros

    The pre-ins will be able to effect expenditure resulting from legal instruments relating to the CAP in euros rather than their national currencies. It must be ensured that the amount granted or collected after conversion into euros is not higher than the amount in national currency. To preclude unearned gains, Member States wishing to take advantage of this option must obtain the Commission's approval.

    2. Proposal for a Council Regulation (EC) on transitional measures to be applied under the common agricultural policy with a view to the introduction of the euro

    This regulation applies to all Member States, i.e. both the ins and the pre-ins. The introduction of the new exchange rate on 1 January 1999 will be treated technically and economically as a (final) modification of the green rate. It is to be possible for compensation to be paid in respect of losses of income due to conversion to the euro from 31 December 1998 to 1 January 1999. The compensation is degressive so as to minimize the period in which there is a danger of distortions of competition.

    This regulation on transitional measures makes frequent reference to the regulation establishing agrimonetary arrangements. However, it lays down specific rules on prices, other aid, direct aid and financing.

    (a) Prices and other aid

    If an appreciable revaluation of the rate for the conversion of the euro into national currency applicable on 1 January 1999 (for the ins) or of the rate of exchange of the euro into national currency (for the pre-ins) occurs and so causes a loss of income, compensatory aid may be granted.

    The term 'appreciable revaluation' is not related to the annual average, but occurs when the conversion rate applicable on 1 January 1999 is lower than the lowest conversion rate in the previous 12 months, at any time more than 12 months but not more than 24 months previously and at any time more than 24 months but not more than 36 months previously (the values in the second and third years being rated less high).

    Otherwise, 'prices and other aid' and 'financing' are governed by the same rules on compensatory aid in the event of losses of income due to an appreciable revaluation of at least 2.6% as apply under the regulation on agrimonetary arrangements.

    (b) Direct aid

    If the rate for the conversion of the euro into national currency applicable on 1 January 1999 is at least 0.5% lower than the previous rate, the ins are granted compensatory aid in the even of losses of income.

    The pre-ins are granted compensatory aid if the exchange rate applicable on the date of the occurrence of an operative event is at least 0.5% lower in 1999 than the rate previously applicable.

    The revaluation must be at least 0.5% and entail an associated loss where direct aid is paid. No aid is granted in the event of a revaluation of less than 0.5%. Nor is aid granted in respect of amounts to which a lower exchange rate was applicable in the 24 months before the new exchange rate came into effect.

    The amount of compensatory aid covers the whole loss of income and is not granted in respect of the difference arising from the revaluation above 0.5%.

    The amounts are calculated in accordance with the regulation on agrimonetary arrangements.

    The Community's contribution from the EAGGF, Guarantee Section, to the financing of compensatory aid is 100% in the first year and 50% thereafter, regardless of whether Member States participate in the financing.

    It should also be noted that the Community pays compensation regardless of whether the Member State applies to grant aid.

    III. Assessment

    Agriculture will be able to benefit from the stability of a single currency, i.e. the absence of monetary turmoil, of devaluations and revaluations, and the single currency will result in greater certainty in the internal and third-country markets and so promote trade. The danger of distortions of trade among the participating Member States due to agrimonetary factors and the change in farm incomes caused by the conversion of common prices and amounts into the currency of the country concerned will no longer arise. Consequently, measures and mechanisms introduced to cushion and compensate for these risks can be abandoned. However, there must continue to be an agrimonetary system for all the Member States, since prices and amounts denominated in euros after 1 January 1999 will need to be converted into national currencies.

    In its document the Commission has submitted to Parliament an excellent proposal concerning the future arrangement of the agrimonetary system for pre-ins and the transition to the abolition of the system for the ins. Regulation (EEC) No 3813/92 and Regulation (EC) No 724/97, on which the old system is based, are to be repealed. A new regulation on agrimonetary arrangements after the introduction of the euro and another establishing transitional measures relating to the introduction of the euro into the CAP will govern the new system.

    The Commission has succeeded in proposing a far simpler system, and on this it is to be congratulated. As the agrimonetary proposal is based on the Agenda 2000 guidelines, greater attention is paid to direct aid. The new system is realistic and much simpler than its predecessor.

    This new system will be less of a burden on the EU budget in the long term owing to the future absence of the 'dual exchange rate' effect, which was primarily due to the asymmetrical margins. During the transitional period production conditions will not yet be the same in all Member States, since certain rights will continue to have an effect, and the implications of compensatory aid will continue to entail different levels of support within the Community for a while. The Community will suffer a financial burden as a result of compensatory aid in the event of losses of income due to revaluations. This aid will, however, be degressive.

    The permitted margin of 2.6% for an appreciable revaluation in the case of prices and other aid corresponds to the present system, and its retention is to be welcomed as a means of avoiding overcompensation through the flat-rate calculation of incomes.

    The maximum amount of compensatory aid granted for losses of income in the case of prices and other aid may be changed in accordance with certain criteria to take account of the market situation. As these criteria are listed in the Council Regulation, only the Council should be able to change them, i.e. the Management Committee procedure proposed by the Commission should not apply.

    Even though the aid scheme is restricted to revaluations occurring before 1 January 2002 and it is highly unlikely that Central and Eastern European countries will accede to the EU in the meantime, the regulations should require an adjustment of the new rules in the event of enlargement.

    In its proposal the Commission establishes a simplified agrimonetary system for all pre-ins. This system is needed since there will be a rate of exchange between the euro and the national currencies. With the two regulations the Commission is responding to the demand that agriculture in the pre-ins should not suffer any disadvantages owing to their government's decision not to participate in the single currency. The rule that in the first year there will be 100% compensation from the Community for losses of income in the form of direct aid to all pre-ins without an application being required is particularly welcome.

    All the ins will automatically receive 100% compensation in the event of losses of income in the case of direct aid, provided that the rate at which the euro is converted into national currencies on 1 January 1999 is lower than the rate applicable before that date.

    22 September 1998

    OPINION

    (Rule 147)

    for the Committee on Agriculture and Rural Development

    on the Proposal for a Council Regulation establishing agrimonetary arrangements for the euro (COM(98)0367 - C4-0406/98 - 98/0214 (CNS))

    and

    on the Proposal for a Council Regulation on transitional measures to be applied under the common agricultural policy with a view to the introduction of the euro (COM(98)0367 - C4-0407/98 - 98/0215 (CNS)) (Report by Mrs Agnes Schierhuber)

    Committee on Budgets

    Draftsman: Mr Giorgos KATIFORIS

    PROCEDURE

    At its meeting of 2 September 1998, the Committee on Budgets appointed Mr Giorgos Katiforis draftsman.

    It considered the draft opinion at its meeting of 22 September 1998

    At this meeting it adopted the following conclusions unanimously.

    The following took part in the vote: Samland, chairman; Tillich, Giansily, Willockx, vice-chairmen; Bösch, Bourlanges, Colom i Naval, Dankert, Dührkop Dührkop, Elles, Fabra Valles, Garriga Polledo, Haug, Imaz San Miguel, Jöns (for Ghilardotti), Krehl, Laignel, Miranda, Müller, Pasty, Seppänen, Tomlinson, Viola (for Theato), Virrankoski, Waidelich, Wemheuer (for Tappin) and Wynn .

    1. Background

    Due to the introduction of the euro on 1 January 1999, the agrimonetary system can be enormously simplified. For all payments to farmers in the countries which will participate in the European Monetary Union, (the "Ins"), there is no further need for dual conversion rates and to compensate for financial losses due to monetary movements. However, agrimonetary arrangements will remain necessary for the payments to farmers in the countries which will not (yet) participate, (the "PreIns").

    The system of agrimonetary regulations and payments was probably the most complex system which has existed in the Community. It was a system which was differentiated for different products, which dealt with devaluations in an asymmetric way to revaluations and was modified for technical adjustments on numerous occasions. Very few people understood fully how the system worked, and many will be happy that the system can now be abandoned, at least for the largest part.

    What was even worse, especially between 1984 and 1995, was the fact that with the system of the "green ECU" an open ended financial mechanism was created which left a financial "heritage" of about ECU 8 000 million a year for the EAGGF.

    Therefore the introduction of the euro can be warmly welcomed and it is to be hoped that the countries which do not yet participate join the Monetary Union soon.

    2. The Commission's proposal

    The Commission presents two proposals which are necessary to cope with the new situation. The first proposal, establishing agrimonetary arrangements for the euro (COM(1998)367final - 98/0214 (CNS)), is required for those Member States which will not participate in the monetary union. The proposed regulation provides for compensatory aid, by the Community, in cases of appreciable revaluations. Art. 4 states that in order to obtain Community compensation the revaluation must exceed 2.6% and compensation will only be given for the portion above that percentage. Art. 6(1), first indent, stipulates that "the Community's contribution to financing shall be 50% of the amounts actually paid for the compensatory aid".

    Art. 5 provides for compensation of monetary losses in the area of direct aid if the given rate of exchange in a given year is lower than that for the previous year. But the revaluation must be more than 0.5%. Here Art. 6(1), second indent, stipulates that "The Community's contribution to financing shall be 50% of the amounts that may be granted for the compensatory aid referred to in Article 5. However, the Member States may withdraw from national participation in financing the aid".

    The second Commission proposal, transitional measures to be applied under the common agricultural policy with a view to the introduction of the euro (COM(1998)367 final - 98/0215 (CNS)), will apply to all Member States. Financial compensation might be desired for losses of income due to an unfavourable (higher) exchange rate on the 1 January 1999 as on 31 December 1998. Article 2 deals with the market measures and Article 3 deals with compensation in the area of direct aid. Although this article parallels art. 4 in the first regulation it is stated elsewhere in art. 3 that "Notwithstanding (........) the first year the Community contribution shall amount to 100% of the aid".

    3. Budgetary consequences

    The budgetary consequences are twofold and in opposite directions: the costs for the two measures, especially in the short term; and notable savings, as the need for much financial compensation for monetary movements will cease to exist. Low costs will be incurred from financing the dual rate of exchange. The Commission presents the following table in its financial memorandum:

    Table 1. Financial impact of the introduction of the euro and of the agrimonetary proposals.

    Year

    1999

    2000

    2001

    2002

    2003

    Compensatory aid

    + 136

    + 654

    + 226

    + 101

    0

    Savings on dual rate

    - 101

    - 603

    - 603

    - 603

    - 603

    Total

    + 35

    + 51

    - 377

    - 502

    - 603

    4. Appraisal and proposed amendments

    The Commission proposals are well worked-out texts which will satisfy the agricultural sector. From a budgetary point of view however, some remarks can be made:

    Firstly, the percentages mentioned in the proposal are all fixed and maximum percentages. In certain cases, e.g. when market developments are favourable, there might be no reason to provide automatically the maximum 100% compensation. In the past, and especially in the cereal sector, the maximum possible aid was given almost automatically, with overcompensation as a result. Therefore amendments are proposed to allow for lower compensation than the maximum.

    Secondly, if there is a need for compensation, this should also be recognised by the Member State whose farmers suffer a loss. This recognition should be proved by a request for aid from the Community. Art. 3(1) of the second proposal should therefore be changed. It is rather unusual to provide money if it has not been asked for.

    5. Conclusions

    The Committee on Budgets request the Committee on Agriculture and Rural Development to take the following amendments into account.

    Proposal for a Council Regulation establishing agrimonetary arrangements for the euro

    98/0214 (CNS)

    (Amendment 1)

    Article 6(1)

    1. The Community's contribution to financing shall be:

    1. The Community's contribution to financing shall be:

    - 50% of the amounts actually paid for the compensatory aid referred to in Article 4;

    - a maximum of 50% of the amounts actually paid for the compensatory aid referred to in Article 4;

    - 50% of the amounts that may be granted for the compensatory aid referred to in Article 5. However, the Member State may withdraw from national participation in financing the aid.

    - a maximum of 50% of the amounts that may be granted for the compensatory aid referred to in Article 5. However, the Member State may withdraw from national participation in financing the aid.

    Proposal for a Council Regulation on transitional measures to be applied under the common agricultural policy with a view to the introduction of the euro 98/0215 (CNS)

    (Amendment 1)

    Article 3(1)

    1. Where the conversion rate for the euro into national currency units or the exchange rate for the euro into national currency applicable on the day of the operative event in 1999 to:

    1. Where the conversion rate for the euro into national currency units or the exchange rate for the euro into national currency applicable on the day of the operative event in 1999 to:

    - flat-rate aid calculated per hectare or per livestock unit

    - flat-rate aid calculated per hectare or per livestock unit

    or

    or

    - compensatory premiums per ewe or shegoat

    - compensatory premiums per ewe or shegoat

    or

    or

    - amounts of a structural or environmental nature

    - amounts of a structural or environmental nature

    is lower than the rate applied previously, compensatory aid shall be granted. The aid shall be calculated in accordance with Article 5 of Regulation (EC) No establishing agrimonetary arrangements for the euro.

    is lower than the rate applied previously, compensatory aid, can be granted if the Member State request the Commission to do so. The aid shall be calculated in accordance with Article 5 of Regulation (EC) No establishing agrimonetary arrangements for the euro.

    Notwithstanding the second indent of Article 6(1) of the same Regulation, the first year the Community contribution shall amount to 100% of the aid.

    Notwithstanding the second indent of Article 6(1) of the same Regulation, the first year the Community contribution shall amount to maximum 100% of the aid.