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SPEECH/03/155

Dr. Franz FISCHLER

Member of the European Commission responsible for Agriculture, Rural Development and Fisheries

Budget aspects of the reform proposal

Committee on Budgets of the EP

Brussels, 25 March 2003

As you are all aware, last July, in connection with the MTR, we put forward a package of measures intended to help us more easily meet the goals of Agenda 2000.

  • we want to make farming in the EU more competitive;

  • we want to make farming much more market-oriented and at the same time sustainable;

  • and we need to reinforce rural development.

The proposed legislation

At the Brussels summit last October the heads of state and government reached an agreement on how direct payments and guarantee expenditure should be limited in future, and in December in Copenhagen the enlargement of the European Union was finally sealed.

Then, in January, the Commission adopted its legislative proposal to reform the CAP, the goal of which is to improve long-term prospects for sustainable farming. This proposal confirms the stance taken by the Commission in its July communication, while also taking account of interim developments, in particular the new budget restrictions.

The budget impact of the proposal

I would like to start by commenting on the budget impact of the reform proposal on the EU 15, before going on to look at how it will affect the accession countries.

The reference scenario for such an analysis is the status quo, with the existing base areas and ceilings for livestock premiums fully or almost fully taken up. Compared to this, the reform measures proposed for certain specific market sectors and the decoupled income payments will, according to our calculations, yield net savings for the EU-15 of €337 million for financial year 2006 and some €186 million by 2010 and in subsequent years.

  • The extra annual costs for new aid, particularly in the milk sector, will amount to some €1.6 billion.

  • Decoupling will lead to savings of just over €1.5 billion. This is due to the fact that in the reference period the base areas for certain arable crops and the ceilings for livestock premiums have not been completely taken up.

The tables in Annexes C-1 and C-2 of the January reform proposals demonstrate the impact of the various elements of the reform proposals for the EU-15.

Impact for the EU-10 (accession countries)

Although, formally, the proposal affects only the EU-15, its financial impact for the new Member States (EU-10) cannot be ignored. Especially given the conclusions of the Brussels European Council last October, which, among other things, set the level of the future financial perspective for the EU-25 as regards heading 1a of the budget for the period up to 2013.

For the EU-10, the budget impact of the proposal mostly concerns the milk sector and a number of arable crops.

In contrast to the assumptions made at the Copenhagen European Council last December, our proposal will lead to an additional cost of some €88 million in 2010. This amount will then rise every year in accordance with the planned rate of introduction of the reforms, reaching an amount of €241 million in 2013.

Impact on the EU-25

Taking the aggregated result for the EU-25, our proposals can be seen to be largely neutral in their budget impact, with an estimated saving compared with the current situation of €98 million for 2010 and extra costs of €55 million by 2013.

Degression and Modulation

Estimates of the cost of the CAP reform put expenditure in the EU-15 after 2009 well over the ceiling set for heading 1a at the October 2002 European Council.

In order to introduce the reforms and still be able to keep within the financial ceiling for heading 1a, it has been necessary to introduce a new financial mechanism.

For this, the Commission is proposing a system of degression and modulation that initially proposes to reduce the percentage of direct aid in the EU-15, although the first €5 000 for each producer would remain untouched.

Producers receiving aid of between €5 000 and €50 000 would see a 50% reduction.

The proposal also intends to boost rural development through modulation. This entails a 1% modulation rate, beginning in financial year 2007 and rising to 6% by the years 2012 and 2013. It would release an estimated €1 481 million for rural development.

The net reduction in farm spending under heading 1a will keep budget spending under the ceiling set at the Brussels summit. The degression percentages for each year are set at levels that will ensure expenditure remains within the ceiling, with a safety margin of €300 million. This margin is not intended to cover the costs of any additional reform proposals (such as sugar, tobacco or olive oil), since no such proposals have so far been tabled and their budget impact cannot therefore be known.

The degression part of the scheme starts with 1% for financial year 2008 and reaches 13% for financial year 2013 (19% minus the modulation rate of 6% = 13%). The resultant net savings, which should ensure that the ceiling for the financial perspective is not breached (including the margin) will be €276 million for 2008, rising to €1 862 million by 2013. This figure equates broadly to the sum of the net costs incurred by the reform proposals for the milk sector by 2013 some €1 490 million and the safety margin for that year about €340 million.

Let me now turn briefly to fisheries policy and the crisis in the white fish sector in Europe. As you know, a number of cod stocks are threatened with collapse. We therefore proposed a plan to replenish cod stocks and presented it to Parliament and the Council. In December 2002 the Council adopted an interim recovery plan and this spring a new long-term plan will follow. Both the interim plan and the long-term plan will result in drastic restrictions, however. This means that fishing will no longer be profitable for quite a number of fishermen. In order to create a financial incentive for increased scrapping of vessels, as part of the CFP reform we have set up a scrapping fund which will require €32 million for 2003.

In connection with the crisis in the white fish sector, in its resolution of 12 March Parliament called for an additional €150 million to alleviate the social consequences for the fishing industry and dependent industries. I must appeal again to the Member States to shoulder their responsibility and include in their programmes more resources for social measures. To date the following Structural Funds resources have been earmarked for such measures:

  • Belgium: €800 000;

  • Denmark: €1.6 million;

  • France: €3.5 million; and

  • the Netherlands: €1.3 million.

By contrast, the United Kingdom, Ireland and Germany have not earmarked any resources whatsoever for such measures.

Further points:

  • Last December the Council also decided to set up regional consultation bodies. The budgetary resources for this will this year amount to €400 000, and they will have to be increased by a further €100 000 from 2004 onwards.

  • The reform also includes improving scientific advice, and for this we have already obtained approval for €2.3 million for 2003.

  • In view of enlargement, from May 2004 onwards the Commission is applying for the amounts under budget heading 1 (common organisation of the market in fishery products) to be increased by €3 million and under heading 3 (fisheries monitoring and information policy) to be increased by €5 million. Under budget heading 2 we have provisionally programmed €69 million for 2004. The detailed negotiations on the distribution of resources among the new Member States will not be concluded until the end of 2003, however.

  • Under budget heading 4 (external measures) the amounts for the Baltic states will naturally decrease, because after accession we will no longer have to purchase additional fishing rights.

  • Under heading 5, three auxiliary staff for the Directorate-General for Fisheries have been approved for 2003 and five additional posts for 2004.

  • As regards concluding fisheries partnership agreements, the agreement with Angola is due for renewal in 2004. We are currently also conducting negotiations on a new agreement with Russia and exploratory talks with Lybia. In 2004 we expect to need additional funding of approximately €17 million for the extension of existing agreements and for new negotiations.

Thank you very much.

Annexes

ANNEX C - 1

ESTIMATES OF EXPENDITURE - C. FINANCIAL IMPACT
I. Market measures 1
MIO EUR
2004200520062007200820092010201120122013
EU-15

1. Cereals

. Export refunds- wheat0,0-9,0-10,0-10,0-10,0-11,0-11,0-11,0-11,0-11,0
- barley1,0-36,0-42,0-46,0-48,0-46,0-47,0-47,0-47,0-47,0
- rye17,5-3,8-2,8-2,822,425,429,429,429,429,4
- other0,0-22,2-28,2-27,6-27,4-27,4-27,4-27,4-27,4-27,4
. Public storage- wheat-0,8-3,1-1,8-1,8-1,3-3,0-1,7-1,7-1,7-1,7
- barley-0,6-2,0-28,6-9,1-5,2-15,7-9,5-9,5-9,5-9,5
- rye-20,7-144,7-176,2-190,5-217,5-240,7-255,7-255,7-255,7-255,7
- other-2,00,00,00,00,00,00,00,00,00,0
. Production refunds for starch0,0-43,5-48,2-35,4-33,9-33,9-33,9-33,9-33,9-33,9
. Premiums for potato starch0,00,00,00,00,00,00,00,00,00,0
. Other 20,0-1,0-1,0-1,0-1,0-1,0-1,0-1,0-1,0-1,0
. Total cereals-5,6-265,3-338,8-324,2-321,9-353,3-357,8-357,8-357,8-357,8
2. Dried fodder
. Production aid for dried fodder-73,54-172,67-212,71-252,74-292,78-316,8-316,8-316,8-316,8-316,8
3. Rice
. Export refunds0,0-24,0-34,0-34,0-34,0-34,0-34,0-34,0-34,0-34,0
. Public and private storage0,0-41,0-69,0-79,0-129,0-339,0-502,0-502,0-502,0-502,0
. Other 30,0-15,0-20,0-20,0-20,0-20,0-20,0-20,0-20,0-20,0
. Total rice0,0-80,0-123,0-133,0-183,0-393,0-556,0-556,0-556,0-556,0
4. Milk and milk products
. Export refunds- butter/butteroil3-61-104-99-105-109-113-113-113-113
- skimmed milk powder14-31125251613131313
- cheese0-14-16-13-18-25-28-28-28-28
- other milk products0-65-79-91-87-145-158-158-158-158
. Public storage- butter-8-41-218316336363636
- skimmed milk powder-1-11013101010101010
. Internal aids- butter-14-109-154-189-183-175-175-175-175-175
- skimmed milk powder-6-28-21-41-15-21-21-21-21
- casein-5-33-2205-16-22-22-22-22
. Private storage - butter01777718-2-2-2-2
- cheese0000000000
. Other 4-1-4-3-4-5-7-7-7-7-7
. Total milk and milk products-18-342-373-337-319-385-467-467-467-467
5. Beef and veal
. Export refunds000-20,8-38,2-54,7-54,7-54,7-54,7-54,7
6a Total market measures -97,1-860,0-1 047,5-1 067,7-1 154,9-1 502,8-1 752,3-1 752,3-1 752,3-1 752,3
(1 + 2 + 3 + 4 + 5)
6b Promotion measures0,00,0-18,0-33,0-41,0-43,0-43,0-43,0-43,0-43,0
6 Total market and promotion measures EUR-15 (6a + 6b)-97,1-860,0-1 065,5-1 100,7-1 195,9-1 545,8-1 795,3-1 795,3-1 795,3-1 795,3
7. Market measures CC-10 0,0-71,0-121,0-153,0-185,0-217,0-217,0-217,0-217,0-217,0
- cereals0,00,0-10,0-12,0-12,0-12,0-12,0-12,0-12,0-12,0
- dried fodder0,00,00,00,00,00,00,00,00,00,0
- rice0,00,00,00,00,00,00,00,00,00,0
- milk and milk prod.0,0-71,0-111,0-141,0-173,0-205,0-205,0-205,0-205,0-205,0
- beef and veal exp. ref.0,00,00,00,00,00,00,00,00,00,0
8. Market and promotion measures EU-25 (6 + 7)-97,1-931,0-1 186,5-1 253,7-1 380,9-1 762,8-2 012,3-2 012,3-2 012,3-2 012,3
1 Cereals, dried fodder, rice, milk and milk products, beef and veal export refunds
2 Food aid
3 Food aid, aid for rice to Réunion
4 Food aid, school milk, milk levy.

ANNEX C 2

II. Direct aids to producers 1
2004200520062007200820092010201120122013
EU-15

1. Single farm payments

028 025,628 90129 780,830 76031 739,331 739,331 739,331 739,331 739,3
2a. Direct aids
. basic cop area payments0-16 092,5-16 092,5-16 092,5-16 092,5-16 092,5-16 092,5-16 092,5-16 092,5-16 092,5
. drying aid supplementary payment0-67,9-67,9-67,9-67,9-67,9-67,9-67,9-67,9-67,9
. durum wheat supplementary payment0-1 109,1-1 109,1-1 109,1-1 109,1-1 109,1-1 109,1-1 109,1-1 109,1-1 109,1
. grain legumes aid0-72,4-72,4-72,4-72,4-72,4-72,4-72,4-72,4-72,4
. production aid for seeds0-110,0-110,0-110,0-110,0-110,0-110,0-110,0-110,0-110,0
. suckler cow premium0-2 136,8-2 136,8-2 136,8-2 136,8-2 136,8-2 136,8-2 136,8-2 136,8-2 136,8
. additional suckler cow premium0-99,9-99,9-99,9-99,9-99,9-99,9-99,9-99,9-99,9
. special beef premium0-2 090,3-2 090,3-2 090,3-2 090,3-2 090,3-2 090,3-2 090,3-2 090,3-2 090,3
. beef slaughter premium0-2 178,8-2 178,8-2 178,8-2 178,8-2 178,8-2 178,8-2 178,8-2 178,8-2 178,8
. beef extensification premium0-1 068,0-1 068,0-1 068,0-1 068,0-1 068,0-1 068,0-1 068,0-1 068,0-1 068,0
. additional payments to beef producers0-493,0-493,0-493,0-493,0-493,0-493,0-493,0-493,0-493,0
. sheep and goat premium0-1 435,3-1 435,3-1 435,3-1 435,3-1 435,3-1 435,3-1 435,3-1 435,3-1 435,3
. sheep and goat suppl. premium0-402,7-402,7-402,7-402,7-402,7-402,7-402,7-402,7-402,7
. add. paym. sheep + goat producers0-72,0-72,0-72,0-72,0-72,0-72,0-72,0-72,0-72,0
. dairy premium00,0-675,7-1 350,1-2 025,8-2 025,8-2 025,8-2 025,8-2 025,8-2 025,8
. additional payments to milk producers00,0-303,6-607,2-910,8-910,8-910,8-910,8-910,8-910,8
. payments to starch potato producers0-194,8-194,8-194,8-194,8-194,8-194,8-194,8-194,8-194,8
. area aid for rice0-128,9-128,9-128,9-128,9-128,9-128,9-128,9-128,9-128,9
. dried fodder income payments00,00,00,00,00,00,00,00,00,0
. additional beef and sheep premiums0-5,9-5,9-5,9-5,9-5,9-5,9-5,9-5,9-5,9
in remote islands and regions
. total direct aids (a)0-27 758,3-28 737,6-29 715,6-30 694,9-30 694,9-30 694,9-30 694,9-30 694,9-30 694,9
2b. Direct aids
. protein area supplementary aid010,410,410,410,410,410,410,410,410,4
. area aid for quality durum wheat0127,6127,6127,6127,6127,6127,6127,6127,6127,6
. area aid for rice0182,3182,3182,3182,3182,3182,3182,3182,3182,3
. area aid for nuts080,080,080,080,080,080,080,080,080,0
. area aid for energy crops067,567,567,567,567,567,567,567,567,5
. payments to starch potato producers097,497,497,497,497,497,497,497,497,4
. total direct aids (b)0,0565,2565,2565,2565,2565,2565,2565,2565,2565,2
3. Total direct aids (1+2a+2b) EU-150,0832,5728,6630,4630,31609,61609,61 609,61 609,61 609,6
4. Total direct aids CC-100,086,0104,0120,0140,0254,0305,0356,0406,0458,0
5. Total direct aids EU-25 (3+4)0,0918,5832,6750,4770,31863,61914,61 965,62 015,62 067,6
III. TOTAL (I + II)
MIO EUR
2004200520062007200820092010201120122013
Total (I + II) EU-15-97,1-27,5-336,9-470,3-565,663,8-185,7-185,7-185,7-185,7
Total (I + II) CC-100,015,0-17,0-33,0-45,037,088,0139,0189,0241,0
Total (I + II) EU-25-97,1-12,5-353,9-503,3-610,6100,8-97,7-46,73,355,3
1 Measures amended, abolished or introduced by the MTR proposals.

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