Commission Conclusions on EU Budget Review: The Door for Serious CAP Reform Remains Open

On October 19, the European Commission has finally released its conclusions on the budget review originally due for 2008/09. It compares poorly to the draft document that leaked quite exactly one year earlier. While the draft dedicated almost 3 pages to the CAP, this has shrunk to little more than one page in the official communication. More importantly, the text has been toned down. Compared to the leaked communication by DG Agri, however, the budget review conclusions offer a gleam of hope: serious reform is still on the table.

The official Communication (p. 11/12) raises three key points:

1) First pillar/farm income

  • "The allocation of direct payments is based on reference values now over a decade old, and the levels of direct payments to farmers vary considerably from one Member State to another. Whilst some variation can be justified, there is a strong case for progressively bringing payments levels closer together. Moving away from historical references would also avoid a culture of dependency which may hold back the use of incentives to ensure that results are delivered."
  • "Further targeting the CAP on the EU's broader policy priorities with the greening of direct aids to support more demanding environmental practices and positive improvements to boost innovation and competitiveness in the countryside, in addition to the crosscompliance concept."
  • "Reliance on the market, coupled with the development of forms of insurance compatible with the WTO "green box", and other tools for the management of risks linked to sudden shifts in incomes, combined with better competitive conditions in the food supply chain."

2) Second pillar/rural development

  • "Rural development should aim at fostering a competitive agricultural sector and innovation in areas like production processes and technological progress; economic diversification in rural areas; preserving the environment and natural resources; addressing climate change, both mitigation and adaptation; helping water management and resource efficiency; and offering specific support to the most disadvantaged in the rural economy – including those facing issues such as desertification."
  • "Better synergy between rural development and other EU policies, to help deliver policies in areas such as research, employment and network infrastructure, including integration with a common strategic framework and the National Reform Programmes under Europe 2020."

3) Degree of reform ambition

  • "Reform of the CAP could therefore be pursued with different degrees of intensity. It could restrict itself to ironing out some current discrepancies, such as more equity in the distribution of direct payments between Member States and farmers. It could make major overhauls of the policy in order to ensure that it becomes more sustainable, and reshapes the balance between different policy objectives, farmers and Member States, in particular by introducing a more targeted approach to priorities. A more radical reform would go further, moving away from income support and most market measures, and giving priority to environmental and climate change objectives rather than the economic and social dimensions of the CAP."

This clearly falls short of highlights of the October 2009 budget review draft (p. 17-19):

  • "While it is too early to define the detailed contours or the exact intensity of the future reform of the CAP, it is clear that it should be driven by two objectives. First, it should resolutely pursue the modernisation of the CAP, enabling it to respond to new challenges and concentrating spending where it adds most value. Second, it must stimulate a further significant reduction in the overall shape of the EU Budget devoted to agriculture, freeing up spending for new EU Priorities."
  • "Market intervention mechanisms could be rolled back further."
  • "A larger responsibility of current CAP spending could be assigned to the member states, or direct aids could be co-financed by national contributions."
  • "Financing should be provided at a level where it creates real EU added value and the EU budget should be primarily targeted to the provision of public goods."

    Any observer not acquainted with the political workings of the EU would have expected that the Commission would come down with more ambitious reform proposals for the CAP now than it had considered in 2009. Hasn't the EU, in the meantime, focused its mind on the grand Europe 2020 strategy and grappled with burgeoning public deficits? The weakness of the final conclusions demonstrates the strength that the agricultural lobby wields not only in DG Agri but with respect to a top-level, Barroso-driven document.

The timidity of the Commission turns almost comic in the header of the accompanying press release: ‘Its main findings are that the current rules for the EU budget make it slow to react to unforeseen events while too many complexities hinder its efficiency and transparency.’ Shouldn’t the main finding of this all-out, several-year review relate to spending priorities rather than procedural issues?

The phrase from the publication to keep in mind, and in the debate, is: ‘A more radical reform would go further, moving away from income support and most market measures, and giving priority to environmental and climate change objectives rather than the economic and social dimensions of the CAP.’ Let us hope that the EU will summon up the energy to go that far.

This article can also be viewed on Valentin's blog here.

Post a comment


21 Oct 2010


Valentin Zahrnt


Valentin Zahrnt is a Research Associate and Resident Scholar at the European Center for International Political Economy based in Brussels.