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European Commission

MEMO

Brussels, 22 October 2014

Draft budget 2015: Commission amends its proposal

The approach for financing the agriculture crisis measures following the Russian embargo is consistent with the budgetary rules, the political circumstances and the serious shortage of payments that we are facing.

The proposed approach:

Is based on the principle of active management of available funds

In 2014, we have a surplus of EUR 465 million. Its integration in the 2015 budget is reducing the appropriations requested to the budgetary authority for the European Agriculture Guarantee Fund (EAGF) both in commitments and payments (non-differentiated appropriations). While the commitment appropriations may be given back to the margin (becoming EUR 734 million), the payment appropriations (EUR 448 million only because agriculture expenditure increased by EUR 17 million), can be allocated to various programmes which need more payments in 2015 (mainly Heading 1a for EUR 240 million and Heading 4 for an amount of EUR 152 million) where we expect a backlog or we risk to pay late interests. If we don't reallocate these payments, then the DB 2015 will be by the same amount below the Payments ceiling (DB 2015 was presented in June with payments up to the ceiling).

Implements the decision taken in the MFF negotiations to establish the agricultural crisis reserve

For the crisis measures, we propose to use the specific reserve for crisis in the agriculture sector, agreed in the MFF 2014-2020 when the principle of financial solidarity in the farming sector by reducing direct aids in order to establish the agricultural crisis reserve was agreed. Using instead the surplus (additional Assigned Revenue) for the crisis measures and keeping the crisis reserve in its integrity is not coherent neither with the MFF nor with the imminent needs we have for payments. This is not fair when many policies are in need for additional payments. The crisis reserve (EUR 433 million) is already budgeted in the DB 2015. It will only be used for the estimated cost of the measures that have been adopted until now; ie for a total of EUR 344,3 million, leaving therefore still an available amount of EUR 88,7 million for possible measures in the future and there also other means to have additional amounts (redeployment or additional revenues or an amending budget). The legal service has given its full backing for the use of the crisis reserve.

Is not putting "agricultural" money at risk

In case there are further needs, we can always take additional measures in the course of the year to face unexpected situation and are financed through redeployment. These additional availabilities come from higher than expected financial corrections (assigned revenues) or from under-implementation of some other budget lines. In case of a major crisis and in the absence of any other availabilities, the Commission could still even present an Amending Budget as there is still a margin under Heading 2 of the financial framework (for payments, it will need to recourse to the Contingency Margin if Budget 2015 with payments up to the ceiling).

The crisis reserve is financed by the so-called “financial discipline” mechanism implying that direct aid is reduced proportionally in order to finance the crisis reserve. But using the crisis reserve does not mean that these measures will be automatically financed by the farmers. Unused amounts of the crisis reserve are reimbursed to the farmers at the beginning of the following year. Furthermore, will be reimbursed any further availability within the EAGF up to the amount of the financial discipline– we do so now in 2014. Accordingly, even if the crisis reserve is used, farmers could be reimbursed of all or part of it depending on the under-implementation of the EAGF credits and on additional assigned revenues that will be collected during the year and we have quite positive estimations already at this stage (we expect revenues from clearance of accounts).

Is fully in line with the principle of sound financial management

Not using the crisis reserve for its intended purpose would require additional credits to be budgeted. The ultimate consequence will always be that the Commission would have to request more commitment and payment appropriations compared to the use of the crisis reserve. That would mean putting an unnecessary additional burden on MS by calling additional resources that may eventually not be needed.


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