Explanatory Memorandum to COM(2011)481 - Amendment of Council Regulation (EC) No 1698/2005 as regards certain provisions relating to financial management for certain Member States experiencing or threatened with serious difficulties with respect to their financial stability - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2011)481 - Amendment of Council Regulation (EC) No 1698/2005 as regards certain provisions relating to financial management for certain ... |
|---|---|
| source | COM(2011)481  |
| date | 01-08-2011 |
· Reasons and objectives for the proposal
The sustained financial and economic crisis is increasing the pressure on national financial resources, as Member States are reducing their budgets. In this context ensuring a smooth implementation of rural development programmes is of particular importance as a tool for providing financial assistance to the real economy.
Nonetheless, the implementation of the programmes is often challenging as a result of the liquidity problems resulting from budget constraints. This is particularly the case for those Member States which have been most affected by the crisis and have received financial assistance under a programme from the Balance of Payments (BoP) mechanism for non EURO countries or from the European Financial Stabilisation Mechanism (EFSM) for the EURO countries. To date, six countries have requested financial assistance under these mechanisms and have agreed with the Commission a macro-economic adjustment programme. Hungary has received financial assistance from 2009 but has exited the support mechanism in 2010. The remaining five countries are Romania and Latvia under the BoP and Portugal, Greece, and Ireland under the EFSM, hereafter called "programme countries.
In order to help these Member States to continue the implementation of the programmes on the ground and disburse funds to projects, the current proposal contains provisions that allow the EAFRD contribution rate applicable to the rural development programmes of these MS to be increased up to a maximum of 95% of eligible public expenditure in the regions eligible under the Convergence objective, the outermost regions and the smaller Aegean Islands and 85% of eligible public expenditure in other regions as long as they are under the support mechanisms. This will provide additional financial resources to the Member States and will facilitate the continuation of the implementation of the programmes on the ground.
· General context
The deepening of the financial crisis in some of the Member States is undoubtedly affecting substantially the real economy due to the amount of debt and the difficulties encountered by the Governments to borrow money from the market.
The Commission has been very active in putting forward proposals on how best to react to the current financial crisis and to its socio-economic consequences. In particular in the framework of its recovery package, the Commission proposed in December 2008 a number of regulatory changes to increase the EAFRD contribution rate applicable to the expenditure incurred by the rural development programmes within the year 2009. Greece, Latvia and Hungary among the countries above indicated, benefited of this facility.
· Provisions in force in the policy sphere of the proposal
Council Regulation (CE) No 1698/2005 on support for rural development by the European agriculture Fund for Rural Development (EAFRD) defines the common rules applicable to the programming process as well as arrangements for programme management, monitoring, and evaluation of projects.
Rural development programmes shall be re-examined and adapted for the remainder of the programming period, in case this would be neccesary to ensure consistency with the Community strategic guidelines, the national strategy plan and Regulation (CE) No 1698/2005, in line with Articles 18 and 19 of that Regulation.
Article 26 i of Council Regulation (EC) 1290/2005 provides that the interim payments shall be calculated by applying the co-financing rate for each priority to the certified public expenditure pertaining to it.
· Consistency with other policies and objectives of the Union
Not applicable.
· Consultation of interested parties
The proposal is consistent with other proposals and intitiatives adopted by the European Commission as a response to the financial crisis .
· Procurement and use of expertise
Use of external expertise has not been necessary.
· Impact analysis
The proposal will allow the Commission to approve higher EAFRD contribution rates for the countries concerned, for as long as they are under the support mechanisms.
There is no need for an additional budget as the total financial allocation from the Funds for the countries and the programmes over the 2007-2013 programming period will not change.
Contents
· Summary of the proposal
· It is proposed to modify article 70 of Council Regulation 1698/2005 in order to allow the EAFRD contribution rate applicable to the rural development programmes of the MS concerned to be increased up to 95% of eligible public expenditure in the regions eligible under the Convergence objective, the outermost regions and the smaller Aegean Islands and 85% of eligible public expenditure in other regions, for as long as they are under the support mechanisms.
Following the adoption of a Council decision granting assistance to a Member State under the support mechanisms, the MS will submit to the Commission a proposal of modification of its rural development programme increasing the EAFRD co-financing rates. Payments submitted after approval of this modification will benefit of the higher support. This will be a temporary measure which will be terminated once the Member State exits the support mechanism.
In accordance with the general principles applicable under Regulation (EC) No 1698/2005, the increased co-financing rates may only apply for payments to be made after the respective rural development programmes, including the new financial plans, have been approved by the Commission.
· Legal basis
Council Regulation (CE) No 1698/2005 of 20 September 2005 on support for rural development by the European agriculture Fund for Rural Development (EAFRD) defines the common rules applicable to the programming process as well as arrangements for programme management, monitoring, and evaluation of projects. The proposal to modify Regulation (CE) No 1698/2005 should be based on Articles 42 and 43 of the Treaty on the Functioning of the European Union.
· Subsidiarity principle
The proposal complies within the subsidiarity principle to the extent that it seeks to provide increased support through the EAFRD for certain Member States which experience serious difficulties or are threatened with such difficulties notably with problems in their economic growth and financial stability and with a deterioration in their deficit and debt position, also due to the international economic and financial environment. In this context, it is necessary to establish at the European Union level a temporary mechanism which allows the European Commission to reimburse certified expenditure under the EAFRD, using a higher co-financing rate.
· Proportionality principle
The proposal conforms to the proportionality principle:
The current proposal is indeed proportionate since it goes a long way in providing increased support from the EAFRD to the Member States in difficulties or threatened with severe difficulties caused by exceptional occurrences going beyond its control and falling under the conditions of Council Regulation (EU) 407/2010 (establishing the European financial stabilization mechanism), or in difficulties or seriously threatened with difficulties as regards its balance of payments and falling under the conditions of Council Regulation (EC) 332/2002. For Greece, the Inter-creditor Agreement concluded together with the Euro Area Loan Facility Act entered into force on 11 May 2010. It foresees that the availability period would expire on the third anniversary of the date of the agreement.
· Choice of instruments
Proposed instrument: regulation.
Other instruments would not be appropriate for the following reasons:
The Commission has explored the scope for manoeuvre provided by the legal framework and considers necessary, in the light of the experience up to now, to propose modifications to the Council Regulation 1698/2005. The objective of this revision is to further facilitate the co-financing of projects thereby accelerating both their implementation and the impact of such investments on the real economy.
There is no impact on commitment appropriations since no modification is proposed to the maximum amounts of EAFRD financing provided for in the Operational Programmes for the programming period 2007-2013. For the period in question, the Commission will be reimbursing certified expenditure at a higher co-financing rate. This will immediately translate in additional payments to the Member States concerned for the expenditure declared to the Commission from the date of entry into force of this Regulation, following the revision of the rural development programmes.
On the basis of the forecasts of expenditure sent to the Commission to date by the Member States concerned, an additional EUR 90 million from the 2011 budget if the proposal is approved in time, and EUR 470 million from the 2012 budget might be necessary to be paid out in case the Member States decide to use the maximum co-finance rate allowed.
In the light of Member State's request to benefit from the action and taking into account the evolution in regard to the submission of interim payments, the Commission will in 2012 review the need for additional payment appropriations and if necessary propose the relevant actions to the Budgetary Authority.