The agreement reached by EU Heads of State and Government on Tuesday 21 July allows for saving most of the money for the Common Agricultural Policy (CAP), as the budget is maintained at the same level from 2021-2027, in constant euros.
The 2021-2027 budget foreseen amounts to € 258.594 billion (constant 2018 euros) for the 1st Pillar of the CAP (market expenditure) and € 77.85 billion for the 2nd Pillar (rural development). Under the EU's post-2020 economic recovery plan, €7.5 billion will be added to the 2nd Pillar budget. “A total of €343.95 billion (2018) will finance CAP actions over the next seven years”, analyses the Farm Europe think-tank, which notes that the sector will have to face “more challenges with less budget”.
Loss of €40 billion. In current euros (assuming an inflation of 2% per year over the period 2021-2027), the 2021-2027 CAP budget is maintained overall in relation to the 2014-2020 period. However, expressed in constant 2018 euros, the CAP budget shows a loss of €39 billion (-10.2%), i.e. “slightly more than a full year of first pillar aid”, Farm Europe points out.
Just under half of this decrease can be linked to the cost of Brexit, as the UK was a net contributor to the CAP for about €2.7 billion/year. “Therefore, including the recovery plan, European farmers are being asked to finance some €20 billion of other European policies”, says Farm Europe.
The distribution of the €77.85 billion under the 2nd pillar provides for additional allocations in relation to the CAP distribution key: 100 million for Belgium, 650 million for Germany, 300 million for Ireland (and the same for Greece), 500 million for Spain, 1.6 billion for France, 100 million for Croatia, 500 million for Italy, 50 million for Cyprus, 250 million for Austria, 200 million for Slovakia, 300 million for Portugal and 400 million for Finland.
In addition, the European Council defined certain parameters of the future CAP reform which will apply from 2023 (and until 2027): - while 30% of the EU budget is to be linked to climate actions, a target of 40% is set in the leaders' agreement for the CAP as a whole. However, no guidance is given as to the ‘green architecture’ of the new CAP (unlike in 2013 where the European Council had clarified what greening should be); - on the convergence of direct payment levels between Member States, it is foreseen that, over the period, 50% of the gap to 90% of the EU average will have to be closed, with aid/ha not falling below national averages in the EU of €200/ha in 2022 and €215/ha in 2027; - capping of direct payments will be done on a voluntary basis at a possible level of €100,000 of basic direct payments per beneficiary, whereby wage costs can be excluded; - the crisis reserve will have to be endowed with €450 million (in current euros) at the beginning of each year and will be fed primarily by clearances, budgetary margins and, as a last resort, by ‘financial discipline’ (reduction of direct payments). Unspent amounts will be transferred from one year to the next.
Budget transfers from the 1st to the 2nd pillar of the CAP will be up to 42%, with 25% to finance any action chosen from the 2nd pillar, 15% to finance only environmental actions and 2% for measures in favour of young farmers.
Conversely, transfers from the 2nd to the 1st pillar may be up to 25% and may be increased to 30% for Member States whose direct aid is less than 90% of the European average.
The maximum basic European co-financing of second pillar measures is set at a level of 43%, 10 points lower than at present. It is 80% for the outermost regions and 85% for less developed regions. For environmental measures, non-productive investments and LEADER, it can go up to 80%. For measures financed via a budget transfer from the first to the second pillar of the CAP, EU co-financing may be up to 100%.
After the negotiations at the European Council, the French President, Emmanuel Macron, considered that “the agreement reached makes it possible to protect” farmers' incomes “for seven years”.
Link to the European Council conclusions: https://bit.ly/30CSJeY (Original version in French by Lionel Changeur)