PURPOSE: to amend Regulation (EC) No 1698/2005 on support for rural development by the EAFRD, to include, inter alia, the abolition of set-aside.

LEGISLATIVE ACT: Council Regulation (EC) No 74/2009 amending Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD)

CONTENT: the Council adopted, by qualified majority, a legislative package resulting from the "Health Check" of the reformed Common Agricultural Policy conducted during the second half of 2008. The Estonian and Slovak delegations voted against the four acts, the Latvian delegation voting against the "Direct Support" Regulation and the Regulation and Decision on Rural Development, and the Czech delegation abstaining on the whole package. (Please also refer to the following procedures: CNS/2008/0103 , CNS/2008/0104 , and CNS/2008/0106 .)

The purpose of these measures is to simplify the single farm payment scheme and improve its effectiveness, to bring agricultural production more into line with global markets, and through rural development programmes to be better able to meet the new challenges of climate change, renewable energies, water management and preservation of biodiversity with innovation underpinning these 4 points, as well as those in the dairy sector.

The main elements of the legislative package can be summarised as follows:

1) Farm payments:

Compulsory modulation , i. e. transfer of a percentage of funds earmarked for farm payments to the Rural Development Fund. In order to reinforce the financing of the new challenges faced by agriculture, the amount of this transfer will be increased in two ways:

for the EU 15, the current 5% transfer rate will be raised by 2% in 2010 and by a further 1% each of the following three years so as to reach 10% in 2013. In addition, a further "progressive modulation" rate of 4% will apply to farm payments above EUR 300 000 from 2009 (budget year 2010) onwards; for the new Member States compulsory modulation will only apply in the year when the level of direct payments will be at least equal to the level paid in the EU 15.

The exemption for the first EUR 5 000 of farm payments will continue to apply.

Cross compliance rules : the list of environmental, health and animal welfare requirements which are conditional for payment of the full amount of farm payments has been adjusted so as to correspond better to the work of the farmer and to the farm. Moreover the standards for maintaining land in good agricultural and environmental condition have been strengthened as regards protection of the landscape (which was necessary as a consequence of the abolition of the set aside requirement) and water management.

The Council and the Commission have undertaken to continue to work towards further simplification of the cross compliance rules for farmers as well as for the national administrations.

Minimum thresholds applicable to the amount of farm payments : in order to reduce the administrative cost incurred in disbursing small amounts of farm payments, farm payments will be subject to minimum thresholds per farm payment amount or per eligible area size. However, the fixed standard thresholds (EUR 100 and 1 hectare) may be adjusted according to the particular situation of the individual countries (in the case of Hungary, for example, Hungary will have the flexibility to set the threshold up to EUR 200 or down to 0.3 hectare, while France may increase the threshold up to EUR 300 or 4 hectares).

Choice of regional or historical reference basis for farm payments : in order to allow Member States more flexibility in the distribution of farm payments and to target better those payments, the new rules allow them to gradually level out the amounts of farm payments within their territory, and to change the basis for distribution of farm payments from a historical basis to a regional basis. In the framework of the discussion on the future of the CAP after 2013, the Council and the Commission are committed to examining thoroughly the possibilities for development of the farm payment system and addressing the differing level of farm payments between Member States.

Most farm payments will be decoupled between 2010 and 2012:

aid for arable crops, durum wheat, olive groves and hops as well as for some payments for sheep and goat, and beef and veal on 1 January 2010; for other payments for beef and veal (with the exception of suckler cows), rice, nuts, seed, protein crops and starch potato cultivation on 1 January 2012 at the latest; for the processing of dried fodder on 1 April 2012, and for the processing of potato starch and flax and hemp on 1 July 2012.

All these aids will be integrated into the single farm payment scheme.

The Commission will draw up a report by 31 December 2012 on the implementation of the "Health Check", particularly with regard to progress on decoupling.

Specific support measures, especially for sectors in difficulty as well as for insurance and mutual funds ("Article 68 support") : Member States will be allowed to use up to 10 % of their national single farm payment ceilings to grant targeted support to farmers in clearly defined cases. This support may concern specific types of farming important for the protection or enhancement of the environment, measures to improve the quality of agricultural products or their marketing as well as for the practice of enhanced animal welfare and for agri-environment purposes.

It may also be used to address specific disadvantages in the beef and veal, sheep meat and goat meat, dairy, and rice sectors in economically vulnerable or environmentally sensitive areas, or, in the same sectors, for economically vulnerable types of farming. However, support of this kind is subject to several conditions, in particular excluding any increase in coupled aid compared to the previous situation.

Moreover, the specific support may take the form of a financial contribution towards the payment of crop, animal and plant insurance premiums covering financial loss caused by adverse climatic events and animal or plant diseases or pest infestation, or to mutual funds for animal or plant diseases or environmental incidents.

The new Member States not yet participating in the single farm payment scheme may continue to apply the single area payment scheme , which was due to expire in 2010, until the end of 2013.

2) Market management : the compulsory set-aside scheme for arable land is abolished. To compensate for the protection it offered for special landscape features such as buffer strips along water courses , provisions under cross-compliance have been strengthened in this respect. In addition, milk quotas are increased by 1% annually from 2009 to 2013, to prepare for the expiry of the milk quota regime in 2015. In the case of Italy, a 5% increase will take place as from 2009 in a single instalment in order to allow Italy to address the situation of excess quota production in its country.

The Commission will assess the situation in this sector in two reports to be presented by the end of 2010 and 2012. Further decisions regarding the dairy sector include the abolition of the aid for the private storage of cheese and the maintenance of the aid for the private storage of butter.

Public intervention : the measures for butter and skimmed milk powder will be continued in a simplified form. For soft wheat, a new ceiling is introduced, with purchase by tender beyond that ceiling. For durum wheat, rice, barley and sorghum, the intervention mechanism will be maintained as a market management instrument, but with ceilings set at zero, as in the case of intervention for maize.

For long and short fibre hemp and flax , new aid amounts have been fixed. They will remain in force until the total decoupling of this aid in 2012.

The restructuring of the tobacco sector will be supported by rural development funds.

The energy crop aid is abolished since this specific support is no longer warranted in view of the strong demand for such products on international markets and the introduction of binding targets for the share of bio-energy in total fuel by 2020. The EUR 90 million saved will be made available to the new Member States.

3) New challenges under rural development programmes : the additional funds generated by the increase in modulation (EUR 3 billion) are to be used by Member States to address the challenges in the areas of climate change, renewable energy, management of water and biodiversity as well as to finance innovation in the areas mentioned above or accompanying measures for restructuring in the dairy sector. Co-financing for resources stemming from modulation and allocated to those priorities under rural development programming will be at a rate of 75% (or 90% for regions falling under the "convergence" objective).

ENTRY INTO FORCE: 01/02/2009.

APPLICATION: from 01/01/ 2009, with the exception of certain points which shall apply from 01/01/2010.

Regulation 2009/74
OJ L 030 31.01.2009, p. 0100

SP(2008)7295

Results of vote in Parliament

The European Parliament adopted, by 510 votes to 134 with 13 abstentions, a legislative resolution approving, subject to amendments, the proposal for a Council regulation amending Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD).

The report had been tabled for consideration in plenary by Luis Manuel CAPOULAS SANTOS (PES, PT) on behalf of the Committee on Agriculture and Rural Development.

The main amendments – adopted in the framework of the consultation procedure – are as follows:

Financial operations : according to MEPs, any financial contribution shall be paid directly to the farmer.

Revision of national strategy plan : each Member State should revise its national strategic plan. They should consult the regional and municipal authorities are responsible for carrying out CAP measures.

Operations having certain priorities : the preservation and sustainable use of biodiversity must form part of the strategic priorities. In addition, agri-environment measures in the area of inland fisheries must again be supported from rural development resources. Lastly, Member States shall ensure that synergies are achieved with similar operations funded from other Community resources, in particular from the Structural Funds, and, where appropriate, shall develop integrated approaches with regard to strategies, measures and financing.

Innovation and transfer of knowledge from applied research : a new article stipulates that from 1 January 2010, Member States shall provide in their rural development programmes, in the light of their specific needs, types of operation targeting the transfer of innovation from applied research to the rural economy. From the same date, for these types of operation, the aid intensity rates may be increased by 10 percentage points.

Infrastructure relating to the development and adjustment of the agriculture and forestry sectors : Parliament requests that the aid provided for in Regulation (EC) 1698/2005 may, inter alia, cover operations relating to access to agricultural areas and wooded land, re-parcelling and improvement of land, provision of energy, access to information and communication technologies, and water management. In addition, support may be provided for the conservation of valuable agricultural crops and animals in terms of cultural history in the context of specific operations.

Start-up aid : given the difficulties young farmers face in setting up in business, the maximum amount of aid should be increased. Start-up aid may be granted in the form of a single premium the amount of which shall not exceed EUR 50 000 or of an interest subsidy the capitalised value of which shall not exceed EUR 50 000. Where the two forms of aid are combined, the total amount shall not exceed EUR 75 000.

Priority: renewable energies : 'Non-agricultural' renewable energies, which help to replace fossil fuels, must be taken into account.

Priority: water management : water management should include measures to improve capacity to manage water in the event of floods.

New priority : Parliament proposes that the discontinuation of milk quotas should be added as a fifth priority. This must be accompanied by action to increase competitiveness (in particular farming investment support), encourage alternative income sources (diversification) and preserve the countryside in unfavourable locations too (e.g. compensatory allowance or pasture premium).

T6-0551/2008

Debate in Parliament

2900

CES1670/2008

2898

A6-0390/2008

A6-0390/2008

CDR0162/2008

The Committee on Agriculture and Rural Development adopted a report drafted by Luis Manuel CAPOULAS SANTOS (PES, PT), and amended the proposal for a Council regulation amending Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD).

The main amendments – adopted in the framework of the consultation procedure – are as follows:

Revision of national strategy plan : Members state that, in general, regional and municipal authorities are responsible for carrying out CAP measures. Measures should be applied within the internal context of each Member State and region, taking into account regional diversity. To achieve this, regional authorities should be consulted.

Operations having certain priorities : the preservation and sustainable use of biodiversity must form part of the strategic priorities. In addition, a gri-environment measures in the area of inland fisheries must again be supported from rural development resources. Lastly, Member States shall ensure that synergies are achieved with similar operations funded from other Community resources, in particular from the Structural Funds, and, where appropriate, shall develop integrated approaches with regard to strategies, measures and financing.

Innovation and transfer of knowledge from applied research : from 1 January 2010, Member States shall provide in their rural development programmes, in the light of their specific needs, types of operation targeting the transfer of innovation from applied research to the rural economy. From the same date, for these types of operation, the aid intensity rates may be increased by 10 percentage points.

Infrastructure relating to the development and adjustment of the agriculture and forestry sectors : the aid provided for in Regulation (EC) 1698/2005 may, inter alia, cover operations relating to access to agricultural areas and wooded land, re-parcelling and improvement of land, provision of energy, access to information and communication technologies, and water management.

Start-up aid : given the difficulties young farmers face in setting up in business, the maximum amount of aid should be increased. Start-up aid may be granted in the form of a single premium the amount of which shall not exceed EUR 50 000 or of an interest subsidy the capitalised value of which shall not exceed EUR 50 000 . Where the two forms of aid are combined, the total amount shall not exceed EUR 75 000.

Priority: renewable energies : 'Non-agricultural' renewable energies, which help to replace fossil fuels, must be taken into account.

Priority: water management : water management should include preventive measures, including quantitative management ones.

New priority : Members propose that the discontinuation of milk quotas should be added as a fifth priority. This must be accompanied by action to increase competitiveness (in particular farming investment support), encourage alternative income sources (diversification) and preserve the countryside in unfavourable locations too (e.g. compensatory allowance or pasture premium).

PE413.986

2892

PE409.506

PE412.016

The Council held a policy debate on the Health Check of the CAP, as reformed in 2003-2004. (See Council doc. 9656/08 ). The debate was structured by a Presidency questionnaire relating to 4 important aspects of the proposal: modulation, market management mechanisms, dairy quotas and cross-compliance.

Regarding the increase in the rate of compulsory modulation proposed by the Commission, several delegations wanted to continue exploring the other options for the funding needed to meet the new challenges. Some Member States reiterated their preference for keeping a strong Pillar I, while others considered that Pillar II already took on board the new challenges. The co-financing of funds derived from modulation also raises questions from a number of Member States.

The discussion on market management mechanisms showed that maintaining a real safety net was a common objective. Nevertheless, a number of delegations expressed doubts regarding the abolition of intervention and the mechanism of buying-in under a tendering procedure.

Several delegations wished to maintain aid for private storage in the dairy sector, as well as intervention for pigmeat.

The "soft landing" principle for the phasing out of milk quotas is accepted by a majority of delegations, but on the other hand there is not yet any consensus on how to achieve it.

A number of delegations thus considered the level of the proposed annual increases (5 times 1 %) inadequate. The report envisaging a reassessment of the situation by the end of June 2011 was welcomed by some Member States, while others thought an immediate decision should be taken. The concern to provide for suitable accompanying measures was expressed by several Member States, especially in vulnerable areas.

All delegations welcomed the effort made to simplify the cross-compliance rules and pressed for the process to continue, making the rules more transparent both for operators and for the authorities monitoring their application.

A large number of delegations felt that good agricultural and environmental practices (GAEP) should remain indicative, in order to take account of the specific situations in the individual Member States.

The Council instructed the preparatory bodies to continue their technical and political proceedings with a view to reaching agreement on this matter in November 2008.

2884

PE407.829

The Council held a policy debate on the proposed legislative package for the "Health Check" of the CAP since the 2003 reform. The debate focused on two questions drawn up by the Presidency, one on the proposal for further decoupling, and the other on the proposal for specific support measures under a revised version of Article 69 of Regulation 1782/2003.

- Most delegations welcomed the proposal for further decoupling , which is in the spirit of the 2003 reform, In their opinion, decoupling provides the necessary impetus to allow farmers to respond to market signals. However, several delegations considered that for certain vulnerable sectors coupled or partial coupled payments may still be necessary at least over a transitional period. In this context they highlighted the risks of land abandonment, loss of biodiversity and/or serious irreversible social impacts. With regard to the specific support provided for under a " revised Article 69 " (new Article 68 in the proposal), several delegations reiterated their request for this to be simpler and more flexible so that each member state can choose how to target the support appropriately. Other delegations underlined the importance of ensuring that the measures would not distort trade or competition or reintroduce coupled payments and that to this end the measures envisaged should only be transitional.

- Delegations also had concerns about the proposed restrictions on the financing of this measure. Some delegations considered that there were other possible financing solutions such as using unused funds earmarked for direct payments, reclassifying some of the measures under rural development, and increasing the ceilings imposed). Some delegations also criticised the proposal on mutual funds to provide financial compensation to farmers as a result of animal or plant disease crises and considered that the current text set out in Article 44 of the Single CMO Regulation (Regulation 1234/2007) was a more satisfactory tool.

The future French Presidency indicated its intention to take forward its preparatory work, with the aim of reaching political agreement in November. To that end, it will table policy debates Council level on this item, in July and September 2008.

2881

PURPOSE: to amend Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD).

PROPOSED ACT: Council Regulation.

CONTENT: this proposal follows the Commission Communication "Preparing the Health Check of the CAP reform" of 20 November 2007. It should be noted that this proposal is closely linked to the following procedures: CNS/2008/0103 , CNS/2004/0104 , and CNS/2008/0106 .

It is recalled that in recent months, there has been a sharp rise in the price of many agricultural commodities to exceptional levels. Their steady increase in 2006 and 2007 had already supported the conclusion that any remaining supply controls of the CAP (namely, dairy quotas and set-aside) should be removed. The Commission proposes further to break the link between direct payments and production and thus allow farmers to follow market signals to the greatest possible extent. Among a range of measures, the proposals call for the abolition of arable set-aside and a gradual increase in milk quotas before they are abolished in 2015, and a reduction in market intervention. These changes will free farmers from unnecessary restrictions and let them maximise their production potential. The Commission also proposes an increase in modulation, whereby direct payments to farmers are reduced and the money is transferred to the Rural Development Fund. This will allow a better response to the new challenges and opportunities faced by European agriculture, including climate change, the need for better water management, and the protection of biodiversity.

The main points of the proposals are as follows:

Abolition of set-aside : the Commission proposes abolishing the requirement for arable farmers to leave 10 percent of their land fallow. This will allow them to maximise their production potential. However, under the proposals for cross compliance and Rural Development, Member States are given the appropriate tools to ensure that the present environmental benefits of set aside can be retained.

Phasing out milk quotas: milk quotas will be phased out by April 2015. To ensure a 'soft landing', the Commission proposes five annual quota increases of one percent between 2009/10 and 2013/14.

Decoupling of support : the CAP reform "decoupled" direct aid to farmers i.e. payments were no longer linked to the production of a specific product. However, some Member States chose to maintain some "coupled" – i.e. production-linked - payments. The Commission now proposes to remove the remaining coupled payments and shift them to the Single Payment Scheme, with the exception of suckler cow, goat and sheep premia, where Member States may maintain current levels of coupled support (as it exists currently) in order to sustain economic activity in regions where other economic alternatives are few or do not exist.

Moving away from historical payments: farmers in some Member States receive aid based on what they received in a reference period. In others, payments are on a regional, per hectare basis. As time moves on, the historical model becomes harder to justify, so the Commission is proposing to allow Member States to move to a flatter rate system.

Extending SAPS : ten of the 12 newest EU members apply the simplified Single Area Payment Scheme. This is supposed to expire in 2010, but the Commission proposes extending it to 2013.

Cross Compliance : aid to farmers is linked to the respect of environmental, animal welfare and food quality standards. Farmers who do not respect the rules face cuts in their support. This Cross Compliance will be simplified, by withdrawing standards that are not relevant or linked to farmer responsibility. In particular, the proposals aim at withdrawing certain Statutory Mandatory Requirements that are considered not relevant or linked to farmer responsibility, and to introduce into Good Agricultural Environmental Conditions requirements that retain the environmental benefits from set aside and address issues of water management.

Assistance to sectors with special problems : currently, Member States may retain by sector 10 percent of their national budget ceilings for direct payments for environmental measures or improving quality and marketing of products in that sector. The Commission wants to make this tool more flexible. The money would no longer have to be used in the same sector; it could be used to help farmers producing milk, beef, goat and sheep meat in disadvantaged regions; it could be used to support risk management measures such as insurance schemes for natural disasters and mutual funds for animal diseases; and countries operating the SAPS system would become eligible for the scheme.

Shifting money from direct aid to Rural Development : currently, all farmers receiving more than EUR 5,000 in direct aid have their payments reduced by 5 percent and the money is transferred into the Rural Development budget. The Commission proposes to increase this rate to 13 percent by 2012. Additional cuts would be made for bigger farms (an extra 3 percent for farms receiving more than EUR 100,000 a year, 6 percent for those receiving more than EUR 200,000 and 9 percent for those receiving more than EUR 300,000). The funding obtained this way could be used by Member States to reinforce programmes in the fields of climate change, renewable energy, water management and biodiversity.

Intervention mechanisms : market supply measures should not slow farmers' ability to respond to market signals. The Commission proposes to abolish intervention for durum wheat, rice and pig meat. For feed grains, intervention will be set at zero. For bread wheat, butter and skimmed milk powder, tendering will be introduced.

Payment limitations : 46.6% of the total direct payment beneficiaries in the EU-25 receive less than EUR 500. This number essentially includes small farmers, but it also includes in certain Member States recipients whose value of payment is below the administrative cost of managing it. In order to simplify and reduce the costs of administration of direct payments, it is proposed that Member States shall either apply a minimum amount of payments of EUR 250 or apply a minimum size of eligible area per holding of at least 1 hectare or apply both. Nevertheless, special provision is made for those Member States whose agricultural sector is mainly composed of very small holdings.

Other measures : a series of small support schemes will be decoupled and shifted to the SPS. For hemp, dried fodder, protein crops and nuts this would happen immediately. For rice, starch potatoes and long fibre flax, there would be a transitional period. The Commission is also proposing to abolish the energy crop premium.

Budgetary impact: proposals for modulation in the Single Payment Scheme and Rural Development are neutral with the respect to the EU budget, as it is a simple compulsory transfer between the second and the first pillar of the CAP. For national budgets the increased modulation could lead to additional national expenditure in view of the necessary co-financing needed in Rural Development. This would mean that some Member States have the possibility of returning to the (higher) level of national expenditure originally provided for before the decision on the Financial Framework 2007–2013. As regards the transfer of measures into the Single Payment Scheme there could be moderate financial consequences for the EU-budget, but most of the transfers are also budgetary neutral. The expiry of the dairy quota will bring additional pressure on butter under all options. These proposals, by initiating a gradual process of a quota phasing-out, are more beneficial for the sector and for the long-term developments of the CAP. However, the need for some limited additional expenditure on butter exports cannot be excluded. Whether this materialises will depend on factors that are at this stage unknown (Doha Development Agenda, world market developments). Therefore the present proposals include a review clause in 2012 that would allow developments in dairy markets to be assessed to determine if additional measures will be needed to avoid any increase in the budget. Some savings are foreseen as a consequence of abolition of existing measures. However, the biggest budgetary effect of the soft-landing on the milk quota is a loss of budgetary revenue due to the decrease in milk levy.

COM(2008)0306
EUR-Lex

SEC(2008)1885
EUR-Lex

SEC(2008)1886
EUR-Lex

PURPOSE: to amend Regulation (EC) No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD).

PROPOSED ACT: Council Regulation.

CONTENT: this proposal follows the Commission Communication "Preparing the Health Check of the CAP reform" of 20 November 2007. It should be noted that this proposal is closely linked to the following procedures: CNS/2008/0103 , CNS/2004/0104 , and CNS/2008/0106 .

It is recalled that in recent months, there has been a sharp rise in the price of many agricultural commodities to exceptional levels. Their steady increase in 2006 and 2007 had already supported the conclusion that any remaining supply controls of the CAP (namely, dairy quotas and set-aside) should be removed. The Commission proposes further to break the link between direct payments and production and thus allow farmers to follow market signals to the greatest possible extent. Among a range of measures, the proposals call for the abolition of arable set-aside and a gradual increase in milk quotas before they are abolished in 2015, and a reduction in market intervention. These changes will free farmers from unnecessary restrictions and let them maximise their production potential. The Commission also proposes an increase in modulation, whereby direct payments to farmers are reduced and the money is transferred to the Rural Development Fund. This will allow a better response to the new challenges and opportunities faced by European agriculture, including climate change, the need for better water management, and the protection of biodiversity.

The main points of the proposals are as follows:

Abolition of set-aside : the Commission proposes abolishing the requirement for arable farmers to leave 10 percent of their land fallow. This will allow them to maximise their production potential. However, under the proposals for cross compliance and Rural Development, Member States are given the appropriate tools to ensure that the present environmental benefits of set aside can be retained.

Phasing out milk quotas: milk quotas will be phased out by April 2015. To ensure a 'soft landing', the Commission proposes five annual quota increases of one percent between 2009/10 and 2013/14.

Decoupling of support : the CAP reform "decoupled" direct aid to farmers i.e. payments were no longer linked to the production of a specific product. However, some Member States chose to maintain some "coupled" – i.e. production-linked - payments. The Commission now proposes to remove the remaining coupled payments and shift them to the Single Payment Scheme, with the exception of suckler cow, goat and sheep premia, where Member States may maintain current levels of coupled support (as it exists currently) in order to sustain economic activity in regions where other economic alternatives are few or do not exist.

Moving away from historical payments: farmers in some Member States receive aid based on what they received in a reference period. In others, payments are on a regional, per hectare basis. As time moves on, the historical model becomes harder to justify, so the Commission is proposing to allow Member States to move to a flatter rate system.

Extending SAPS : ten of the 12 newest EU members apply the simplified Single Area Payment Scheme. This is supposed to expire in 2010, but the Commission proposes extending it to 2013.

Cross Compliance : aid to farmers is linked to the respect of environmental, animal welfare and food quality standards. Farmers who do not respect the rules face cuts in their support. This Cross Compliance will be simplified, by withdrawing standards that are not relevant or linked to farmer responsibility. In particular, the proposals aim at withdrawing certain Statutory Mandatory Requirements that are considered not relevant or linked to farmer responsibility, and to introduce into Good Agricultural Environmental Conditions requirements that retain the environmental benefits from set aside and address issues of water management.

Assistance to sectors with special problems : currently, Member States may retain by sector 10 percent of their national budget ceilings for direct payments for environmental measures or improving quality and marketing of products in that sector. The Commission wants to make this tool more flexible. The money would no longer have to be used in the same sector; it could be used to help farmers producing milk, beef, goat and sheep meat in disadvantaged regions; it could be used to support risk management measures such as insurance schemes for natural disasters and mutual funds for animal diseases; and countries operating the SAPS system would become eligible for the scheme.

Shifting money from direct aid to Rural Development : currently, all farmers receiving more than EUR 5,000 in direct aid have their payments reduced by 5 percent and the money is transferred into the Rural Development budget. The Commission proposes to increase this rate to 13 percent by 2012. Additional cuts would be made for bigger farms (an extra 3 percent for farms receiving more than EUR 100,000 a year, 6 percent for those receiving more than EUR 200,000 and 9 percent for those receiving more than EUR 300,000). The funding obtained this way could be used by Member States to reinforce programmes in the fields of climate change, renewable energy, water management and biodiversity.

Intervention mechanisms : market supply measures should not slow farmers' ability to respond to market signals. The Commission proposes to abolish intervention for durum wheat, rice and pig meat. For feed grains, intervention will be set at zero. For bread wheat, butter and skimmed milk powder, tendering will be introduced.

Payment limitations : 46.6% of the total direct payment beneficiaries in the EU-25 receive less than EUR 500. This number essentially includes small farmers, but it also includes in certain Member States recipients whose value of payment is below the administrative cost of managing it. In order to simplify and reduce the costs of administration of direct payments, it is proposed that Member States shall either apply a minimum amount of payments of EUR 250 or apply a minimum size of eligible area per holding of at least 1 hectare or apply both. Nevertheless, special provision is made for those Member States whose agricultural sector is mainly composed of very small holdings.

Other measures : a series of small support schemes will be decoupled and shifted to the SPS. For hemp, dried fodder, protein crops and nuts this would happen immediately. For rice, starch potatoes and long fibre flax, there would be a transitional period. The Commission is also proposing to abolish the energy crop premium.

Budgetary impact: proposals for modulation in the Single Payment Scheme and Rural Development are neutral with the respect to the EU budget, as it is a simple compulsory transfer between the second and the first pillar of the CAP. For national budgets the increased modulation could lead to additional national expenditure in view of the necessary co-financing needed in Rural Development. This would mean that some Member States have the possibility of returning to the (higher) level of national expenditure originally provided for before the decision on the Financial Framework 2007–2013. As regards the transfer of measures into the Single Payment Scheme there could be moderate financial consequences for the EU-budget, but most of the transfers are also budgetary neutral. The expiry of the dairy quota will bring additional pressure on butter under all options. These proposals, by initiating a gradual process of a quota phasing-out, are more beneficial for the sector and for the long-term developments of the CAP. However, the need for some limited additional expenditure on butter exports cannot be excluded. Whether this materialises will depend on factors that are at this stage unknown (Doha Development Agenda, world market developments). Therefore the present proposals include a review clause in 2012 that would allow developments in dairy markets to be assessed to determine if additional measures will be needed to avoid any increase in the budget. Some savings are foreseen as a consequence of abolition of existing measures. However, the biggest budgetary effect of the soft-landing on the milk quota is a loss of budgetary revenue due to the decrease in milk levy.

COM(2008)0306
EUR-Lex