Monday, July 18, 2011

Real term cuts in CAP budget

Now that more information is becoming available about the CAP budget 'freeeze', it is evident that what is really envisaged are real term cuts. The envelope for the CAP post 2013 is €371.7bn in 2011 constant figures (€281.8bn of that is first pillar and €89.9bn second pillar). This compares to €417bn in the current financial perspectives. There is yet much to be decided in terms of how policy will be revised in the light of these budgetary constraints.

A system of 'reverse modulation' was envisaged whereby money could be shifted back from the second to the first pillar, but after protests by environmental lobby groups this was axed at the last minute. 30 per cent of direct support will be made contingent on adhering to greening measures that go beyond current cross-compliance requirements.

There will be a slow convergence process to address the differences in direct payments received by member states, i.e., those that have will not see it disappear immediately. The long-term aim is to ensure that all member states reach 90 per cent of the EU average, but significantly this will take account of differences in wage levels and input costs. The main beneficiaries of this approach are likely to be the Baltic States, Portugal and Romania. Poland and Bulgaria will gain only marginally.

There has been some backing down on the capping of support to major agricultural holdings which will now take account of the 'economies of scale of larger structures and the direct employment these structures generate.' How these might be measured could in itself be controversial. Any savings would be retained in national envelopes and recycled into budgetary allocations for rural development, but influential, large-scale farmers will still lobby hard on this topic.

Environmental groups took the view that the proposed measures did not represent effective steps towards ecological sustainability and a green economy.

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