Yesterday’s vote in Moldova resulted in a razor-thin majority in favour of enshrining the goal of EU membership in the country’s constitution. It appears that significant efforts may have been made by outside interests to influence the voting but, even taking this into account, Moldova appears to be a country deeply divided about the future direction it wants to take. Here, the prospects for EU membership and the cost of the steps that need to be taken for membership to become a reality play an important role.
Moldova applied for EU membership on 3 March 2022, the same day as Georgia and just a few days after Ukraine made its application on 28 February 2022. These membership applications were made just a few days after Russia launched its full scale invasion of Ukraine and were obviously a response to it. Moldova has benefited from trade preferences with the EU under Autonomous Trade Measures since 2008 and signed a Deep and Comprehensive Free Trade Agreement which entered provisionally into force in September 2014.
Up until the Russian invasion of Ukraine, the enlargement process had been losing credibility. After the last ‘big bang’ enlargement to include the countries of central and eastern Europe in 2004/2007, there was evident ‘enlargement fatigue’. Public opinion turned increasingly against further enlargement, several Member States explicitly rejected it, and the Commission was increasingly occupied with other crises. But, following the Russian aggression against Ukraine, new impetus has entered the enlargement discussions.
While negotiations with Western Balkan countries have progressed glacially, decisions on the Eastern Partnership countries were made at dizzying speed. Already at the June 2022 European Council meeting, candidate status was granted to Moldova and Ukraine while Georgia was given the prospect of candidate status subject to the fulfilment of further reforms (though negotiations have been suspended since June 2024). The Council also indicated that it was prepared to grant candidate status to Bosnia and Herzegovina subject to progress on the needed reforms identified by the Commission.
It further called for “acceleration of the accession process” in the Western Balkans and specifically, building on the revised enlargement methodology introduced in a Commission 2020 Communication, it called “to further advance the gradual integration between the EU and the region already during the enlargement process itself in a reversible and merit-based manner”. In the same month, Bulgaria lifted its veto on opening accession negotiations with North Macedonia. Bosnia and Herzegovina was given candidate status at the December 2022 European Council meeting. Currently, five Western Balkan countries (Albania, Bosnia and Herzegovina, Montenegro, North Macedonia and Serbia) as well as Ukraine and Moldova have been granted candidate status, while Kosovo and Georgia have also applied for membership and have potential candidate status.
Implications of further enlargement for the CAP
Further enlargement is primarily driven by geopolitical considerations. It will require difficult and painstaking reforms in the applicant countries, but also reform of the EU’s decision-making structures and policies to prepare for enlargement. At its meeting in June 2024, the European Council set out a roadmap for future work on internal reforms. This included an invitation to the Commission to present by spring 2025 in-depth policy reviews covering the various strands identified in its March 2024 Communication on pre-enlargement reforms and policy reviews. This will include the Common Agricultural Policy (CAP).
Even if we were to assume that the next enlargement would take place as a ‘big bang’ enlargement (which is not guaranteed given the merit-based approach taken in the new enlargement methodology), it would not be unprecedented in its size and scale. The applicant countries are all poorer, in some cases considerably poorer, than existing Member States. They will undoubtedly be net recipients from the EU budget. They also all have relatively large agricultural sectors and will be net recipients of funding under the CAP. What can be seen as distinctive in the next enlargement is the position of Ukraine, both in scale relative to the other applicant countries, but also as a significant and competitive agricultural exporter in its own right. Also relevant is its varied agricultural structure with a quarter of its agricultural land managed by agro-holdings distinctly larger than the typical farm size in the existing EU (but see caveat on this figure in the Update at the end of this post).
Within the EU, farm incomes are low on many farms due to the structure of agricultural holdings and are vulnerable to increased competition. This leads to fears that the budgetary consequences of future enlargement could result in the diversion of EU funds from existing beneficiaries in the present EU, and that access to the EU single market by Ukraine in particular might intensify competition for markets with existing EU farmers.
I recently prepared a policy brief on the CAP budget impact of further enlargement in the light of previous enlargements for the Swedish Institute for European Policy Studies. I made particular comparisons with the Iberian enlargement in 1986 and the ‘big bang’ enlargement with the accession of the countries of central and eastern Europe in 2004/2007. The Commission forecast in 1995 that the projected CAP budget cost of the ‘big bang’ enlargement would be around 12 billion ECU – in fact, CAP spending in the enlargement countries was €14 billion in 2020 (Table 1) although because of inflation we should be cautious in comparing the two figures (I use 2020 as the end date as this was the last financial year in which the UK was entitled to receive Pillar 1 payments). Budget expenditure was kept in check partly because Pillar 1 payment entitlements were calculated to minimise the transfer to the new Member States. There were also general savings in the CAP budget related to export subsidies and storage expenditure arising from reform of the CAP that further lowered intervention prices that were not foreseen in the 1995 exercise.

Note: (1) Total spending includes spending not allocated to individual Member States or benefiting countries outside the EU (amounting to €1.56 billion in 2020). It also includes spending of €0.7 billion in Croatia in 2020. Figures refer to disbursements and not commitments.
Source: DG Budget, EU spending and revenue – data 2000-2022.
Various estimates are available of the possible impact on the CAP budget of further EU enlargement (Table 2). Some of the variation is explained in the note to the table. The highest estimate shown is that of the Council Secretariat, which estimates a gross CAP budget cost of €18.1 billion for all the current applicant countries excepting Türkiye (the applicant countries would pay into the CAP budget and there would also be savings in pre-accession assistance that should be netted out). This amount compares to programmed CAP spending of €54 billion annually under the current MFF, and would represent a 34% increase in CAP spending. Note in Table 1 that the additional spending in the 2004/2007 enlargement countries represented exactly the same percentage (33%) of spending in the EU-15 countries in 2020. In purely budgetary terms, the next enlargement is not at all unprecedented.

Note: The phrase ‘current CAP rules’ is interpreted differently in different studies. For example, external convergence is not yet complete in the CAP 2023-2027. Some estimates assume these differences in Pillar 1 payments per hectare between member states will continue in the next MFF and also apply to the candidate countries. Other estimates interpret ‘current CAP rules’ to imply that full external convergence will be achieved and will also apply to new member states.
Source: Matthews SIEPS paper, 2024.
Will CAP reform reduce the cost of further enlargement?
Nonetheless, there is a widespread perception that finding the money for a further increase in the CAP budget in future MFFs may be difficult, and that further enlargement, and especially Ukrainian membership, will require a further reform of the CAP. For example, the report of the Strategic Dialogue on the Future of EU Agriculture noted that:
The income support policy needs to be changed to meet current and future challenges, promote employment and to support the ongoing transition of agri-food systems towards more sustainable, competitive, profitable, and diverse futures. This is also essential in order to make the CAP fit for purpose in the context of the EU’s enlargement process (emphasis added).
In my SIEPS policy brief, I argue that this is a misplaced argument. There may well be good arguments to change the ways Member States can use the CAP money they receive (as determined by the rules set out in the CAP legislation) but this is not relevant to the way CAP funds are allocated between Member States (which is determined in the MFF negotiations). The basis for allocating Pillar 1 funds between countries is their relative agricultural area (more specifically, their Potentially Eligible Area for direct payments). The basis for allocating Pillar 2 funds is less transparent but there is a strong cohesion rationale. The budgetary cost of enlargement would only be affected if (a) payments to farmers under the EU CAP budget were reduced across the board, or (b) if alternative criteria are introduced into the MFF regarding how CAP funds are allocated between Member States. How those CAP funds are used within countries is not directly relevant.
The full argument is spelled out in my SIEPS policy brief which can be downloaded here. I was interviewed on the subject by Julia Dahm for the German agricultural news media Agrifood.Table where the interview appeared in German. I conclude this post by reproducing the interview in English, with the kind permission of Julia Dahm and the publisher Table.Media.
JD: When new countries joined the EU in the past, the agriculture sector has always been a contentious topic. But for current candidate countries, especially Ukraine, it seems especially central. How much bigger is the potential impact on the sector compared to previous EU enlargements?
AM: This enlargement is not actually that much out of line with previous ones. The relative increase of the EU’s agricultural area it would bring, for example, is similar to what we saw with the Eastern enlargement of 2004 and 2007.
The one big difference is that Ukraine is a very strong agricultural exporter. There is a fear of competition on European markets that did not exist before to the same extent. Nevertheless, I would argue that this is not an unprecedented enlargement.
JD: Still, many worry about the Common Agricultural Policy (CAP) – namely, that Ukraine would absorb a large share of the subsidies.
AM: Indeed, Ukraine would receive significant transfers if we were to stick by the current rules for allocating the CAP budget between Member States. That is, based on their agricultural area eligible for direct payments. And, given Ukraine’s relatively low level of development in terms of infrastructure, we could also expect significant funds from Pillar II to go there.
JD: The Strategic Dialogue proposes more support for smaller farms, for example by capping direct payments per entity. Could this help limit the share going to Ukraine, with its large agricultural holdings?
AM: No. Whether we prioritise general farm income, small farms or environmental services for CAP funding is an important debate, but it does not change how much CAP money Ukraine, or any other country, receives. It only changes how the money is distributed within the country.
The sum that each Member State gets is pre-allocated when the EU’s multiannual budget is decided, regardless of how we intend to use that money. Currently, as I said, this allocation for Pillar 1 is purely based on agricultural area. The only way to change how much Ukraine would get from the CAP is by changing these allocation criteria.
JD: Many have argued moving from area-based payments towards incentives for public goods would help prepare for Ukraine’s accession.
AM: The same argument applies: To affect the cost of Ukraine joining, you would have to bring in these criteria at the stage of allocation to countries. For example, by saying member states deserve more if they have more environmentally ambitious CAP plans.
But even then: Who is to say that this would mean Ukraine gets less, that they would do less well using environmental criteria?
JD: How about bringing a focus on small farms into the allocation criteria?
AM: You could base a country’s allocation on its amount of agricultural land that is in small farms. But I do not think this is a good idea, because it would create perverse incentives. Farms might artificially split up into smaller holdings. And Member States, in charge of controlling these things, might turn a blind eye or even encourage it, because their own CAP allocations depend on it. It could also discourage the needed consolidation of smaller farms into larger holdings depending on where the threshold is set.
And, while this strategy might curb Ukraine’s share, the same would be true for some existing Member States. However you try to change the allocation criteria, some existing EU members would stand to lose from it and would push back.
The only way to avoid this would be by explicitly discriminating against Ukraine: agreeing with Kyiv that the country will get a lower share of CAP funds than it would normally be entitled to.
JD: Is that fair?
I think no. Kyiv will have to implement a lot of EU regulations to be able to join – more than any enlargement countries in the past. This is very costly. In this context, I think we need to be very careful about saying that we are not going to extend full support to them once they become a member.
We should also bear in mind that Ukraine’s agriculture sector is not only made up of highly competitive “agroholdings” that might not need the CAP support. A large share of land is managed by bigger family farms more comparable in size to many European ones. And there are millions of subsistence farmers.
Nevertheless, I could see a situation where Ukraine might accept differential treatment on the CAP as part of its accession negotiations.
JD: Under which circumstances?
AM: Ukraine’s overriding objective will be to become an EU member. If the issue of the CAP budget were to lead to such opposition from the public or member states that the accession process would be at risk, Kyiv might choose to make this concession.
Additionally, the country will likely receive large amounts of financial support for postwar reconstruction. This could help balance out reduced CAP support. Of course, ultimately, it will be up to Ukraine to decide and I would expect them to insist on equality of treatment.
JD: In terms of timeframe: Will the next CAP reform already have to prepare the funds for Ukraine accession?
AM: It is very likely that there will be a transition period – say, ten years – of phasing in CAP funds for Ukraine after it joins. The same has been done in the past. So, while the topic will begin to make an appearance in the next MFF, particularly through the need to make provision for pre-accession assistance, it is mostly something to be factored into longer-term calculations.
This post was written by Alan Matthews.
Update 22 October 2024. This figure of a quarter of agricultural land managed by agro-holdings in Ukraine may well exaggerate their importance. The figure is derived as the share of agricultural land managed by registered agricultural enterprises over 5,000 ha in size shown in the Ukrainian Statistical Yearbook 2021 (source is Table 2 in Elsa Régnier, Aurélie Catallo (IDDRI), The Ukrainian agricultural sector: and overview and challenges in light of possible European enlargement). But not every large farm should be classified as part of an agro-holding within a narrow legal definition. Also, the figures in the Statistical Yearbook exclude land managed by unregistered family farms and rural households.
Photo credit: Wheat fields in Lviv Oblast, Ukraine, © Raimond Spekking / CC BY-SA 4.0 (via Wikimedia Commons)