It has long been recognised that greater price and income volatility would accompany the move to a more market-oriented Common Agricultural Policy (CAP). Already in the run-up to the Fischler Mid-Term Review (MTR) in 2003 which led to the decoupling of direct payments, the Commission published a working document on risk management tools for agriculture, with a special focus on insurance, in 2001. The Council MTR agreement mandated the Commission to study specific measures to address risks, crises and natural disasters that agriculture may face. This led to a Communication from the Commission in 2005 on risk and crisis management in agriculture which discussed different instruments that could be implemented in the CAP.
The index of the real income of factors in agriculture per annual work unit (better known as index of agricultural income or Indicator A) has increased by 18% in EU15 countries and 35% in EU28 countries from 2005 to 2014 as evident from Eurostat statistics. It is clear from the figure below that compared to 2005, agricultural incomes more than doubled in Estonia and Slovakia in 2012-2014, while it was just decreasing in Cyprus, Ireland, Luxembourg, Malta and Slovenia.
Agricultural income in the European Union by member state, 2005-2014 (2005=100)
Source: Own composition based on Eurostat 2015 data.
Without going very much into detail, it is apparent that agricultural income has been increasing in each period in the majority of the cases.
Deal done! The European Council has agreed on MFF for the rest of the decade. Worth waiting for.
Although this is not the final agreement as the European Parliament still has to confirm the Council decision, it is highly unlikely that the EP risks the hard-fought agreement reached at the Council. Therefore, the playing arena for agriculture in the next seven years is set in the final conclusions published by the Council.
In general, the deal reached limits the maximum possible expenditure for a European Union of 28 Member States (with Croatia’s accession this year) to €960 billion in commitments, corresponding to 1.0%
Many criticisms have been made since the vote. The agro-lobby is talking about a melt-down of the urgently needed reforms and greening, reacting on the COMAGRI proposal to allow farmers to ‘opt out’ of mandatory greening requirements and still get at least 70% of the direct payments as well as watering down every single measure with so called ‘equivalents’.
Environmental campaigners also criticised the vote, alleging that the debate was dominated by agricultural interests.
If one takes a short look to the operating budgetary balance of the Member States, it becomes evident that Poland, Greece, Hungary, Spain and Portugal are the greatest recipients of the current system, while Germany, France, Italy, the United Kingdom and Netherlands are the biggest contributors in absolute terms.
The issue is highly relevant these days as only 6% of agricultural holders in the EU are below the age of 35, while one third are over 65. However, Member States show a great diversity in this issue as Poland has the highest share of young farmers in Europe (12%), while Portugal has the lowest (2%), according to Eurostat data.
COPA-COGECA is largely against the greening proposals tabled by the Commission last year, saying that they make farmers do a lot more for less money, thereby leading to higher costs, higher food prices and more dependence on imports. They would also increase bureaucracy, of course. Therefore, the farmers’ organisation produced a list of six alternative measures to tackle the problem of greening in a farmer-friendly way: crop diversification (of rotated crops), a certification scheme (food), permanent grasses, replacement of EFAs by uncultivated land, break crops, protein crops.
In this post I examine the future for national envelopes and partial coupling in the light of the Commission’s draft regulation on direct payments after 2013.
As part of the December 2005 heads of government agreement on the 2007-2013 financial perspective it was agreed that there would be a midterm ‘budget review’ in 2008-09 which would look at all areas of the EU budget. including the two hottest political potatoes – the large share of funds going to the CAP and the British budget rebate. The review began with a big public consultation led by the then Budget Commissioner Dalia Grybauskaite, who pulled no punches in describing the budget as largely out of tune with Europe’s current and future challenges.