INTERPLAY BETWEEN THE EUROPEAN COMMISSION AND THE MEMBER STATES – REVIEW OF SUBSIDY WITHDRAWALS BY THE NEW MEMBER STATES

The administration of the relevant part of EAGGF Guarantee expenditure, which accounts for more than 50% of the budget of the European Communities follows shared management arrangements. Shared management means that member states pay and control the expenditure for agricultural and rural development subsidies and the Commission is responsible for the administration of payments and for auditing the control system of member states. The communication on the expenditure effected by accredited paying agencies takes place via a comprehensive financial reporting system and monthly EAGGF Committee meetings. These meetings provide scope for the reconciliation of any disagreement concerning the monthly advances reimbursed by the Commission to member states and also give an overview on actual budget implementation. The new member states which joined the European Union on 1 May 2004 have started to apply the comprehensive financial reporting system following an intensive cooperation period in the form of training seminars provided to them by the Commission for setting up the reporting systems of paying agencies. The first expenditure from the EAGGF Guarantee Section was executed in July 2004 and reported to the Commission during the following month. The pioneer new member states were the Czech Republic, Slovakia and Poland, followed by Hungary, Estonia and Slovenia a month later. Until the end of August approximately 6 million Euros have been withdrawn from the Fund, used in a fifty-fifty percent split for export restitutions for milk and milk products, beef and veal, live animals and eggs to countries outside the European Union and for other market intervention measures, such as supply of food from intervention stocks for distribution to the most deprived persons in the Community, production refunds on sugar used in the chemical industry, aid for skimmed milk processed into casein and school milk. By the end of the 2004 financial year (15 October 2004) some other new member states, Lithuania, Latvia and Cyprus also intend to start paying agricultural subsidies to their beneficiaries. The total estimated value of expenditure to be withdrawn from EAGGF Guarantee by the new member states in the 2004 financial year and charged therefore to the 2004 budget is circa an additional 14 million Euros. Therefore, the aggregated amount of the subsidy withdrawn by the EU-10 countries charged to the 2004 budget will be ca. 20 million Euros, which is a minor amount compared to the budget appropriations included in the 2004 budget for EAGGF Guarantee as a whole. A speeding up of subsidy withdrawals is necessary for new member states to make the best use of benefit from CAP. It is possible to achieve this goal by the withdrawal of subsidies for direct aids. Direct aids can be paid to farmers in the framework of the Single Area Payment Scheme from the first day of the 2005 financial year (16 October 2004) in case of new member states (except Malta and Slovenia). The advances to member states will be reimbursed in January 2005 and charged therefore to the 2005 budget. As it was the case for earlier enlargements of the European Union, the first months of subsidy withdrawals are being used mainly to get acquainted with the administration and to test the operation of the paying agency systems. However, this period should be considered strictly as an interim phase and significant effort should be made by the national agricultural administrations to widen the “penetrability” of the subsidy handling, that is to increase the amount of subsidy withdrawn from the EU by the paying agency systems already operating in the new member states to benefit from the Common Agricultural Policy of the European Union