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Press release

Reform of direct payments under the CAP - proposal rejected

Agriculture - 14-11-2006 - 16:26
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Parliament rejected a Commission proposal on laying down rules for voluntary modulation of direct payments, establishing common rules for direct support schemes under the common agricultural policy and establishing certain support schemes for farmers. The proposal was rejected by 64 votes in favour to 559 against and 16 abstentions. The House also adopted a report on support for rural development (see below).

The Commission proposal on the introduction of voluntary modulation goes back to a Council decision of December 2005. The background was the cuts in rural development funding which were agreed in the Council at the insistence of the 1% States, particularly Britain (around €69bn instead of €88bn), which were to be partially compensated by voluntary modulation. Parliament had immediately expressed strong reservations about this (see Declaration 9 on the Interinstitutional agreement on budgetary discipline and sound financial management (IIA)).
The Council decision also provides for the EU's total expenditure, including that on agricultural policy, to be subjected to a 'health check'. The European Parliament is to participate fully in the preparation and implementation of the results (cf. Declaration 3 on the IIA).
The Commission proposal, which partially deviates from the Council decision, contains the following essential elements:
-          Member States may cut up to 20% of all direct payments under voluntary modulation (the Council also wished to include market expenditure).
-          Modulation is not subject to any conditions, except that small recipients (i.e. those receiving less than € 5000 in direct payments) are exempt from it.
-          The funds may be used freely in accordance with the provisions of the EAFRD Regulation; the rules on minimum expenditure per axis must be complied with (this was not what the Council advocated).
-          Co-financing is not compulsory.
-          Member States must decide the rate of reduction for the whole financing period within two months.
No impact assessment has been performed.
Member States are strongly in favour of a further increase in flexibility, i.e. in particular the abandonment of the earmarking of funds for particular axes, an extension of the declaration period, the possibility of adjusting modulation rates during the financing period, greater regionalisation, etc.
The committee cannot agree to the proposal because:
-          it jeopardises the survival of many farms,
-          it distorts competition and discriminates against farmers in individual Member States in a way which violates the Treaty,
-          it entails the abandonment or renationalisation of the CAP and abandons the principle of solidarity enshrined in the CAP,
-          it disregards Community objectives in rural areas,
-          it is unbalanced and incoherent, and
-          it violates the EP's rights of participation.
In the absence of an impact assessment or reliable figures, Parliament cannot consent to such a far-reaching paradigm shift.
The rapporteur observes that, in the Reimer BÖGE (EPP-ED, DE) report, Parliament proposed that the financing problems of the CAP be solved by means of compulsory national co-financing of first-pillar expenditure. That would have made it possible to honour the pledges which the Heads of State and Government gave to farmers in October 2002 without calling into question the common agricultural policy, i.e. a policy decided jointly at European level.
The Council decision restricts the debate on the structure of agricultural expenditure in connection with the health check to modulation issues, as the statement by the Commissioner on the expansion of compulsory modulation after 2008 shows. There will evidently not be any sincere consideration of the proposals made by Parliament in the Böge report.
Individual retrospective improvements are not sufficient: rather, a comprehensive examination of all possible alternatives is needed, on the basis of which coherent and consistent measures could then be worked out.
Support for rural development
Parliament adopted a non-binding report on support for rural development recommending that Parliament approve the Commission proposal.  The House adopted the report by 565 votes in favour, 12 against and 25 abstentions.
EAFRD - December 2005 Financing Agreement
All rural development payments from 2007 - 2013 will be made out of the EAFRD (European Agricultural Fund for Rural Development) – the single fund which will replace the two current sources of rural development funding (the EAGGF Guarantee and Guidance funds).
The December 2005 European Council financing agreement did agree certain parameters for the overall Rural Development fund of €69.75 billion before modulation. At least €33.01 billion will be shared between the ten New Member States, plus Romania and Bulgaria, which are expected to join the EU on 1 January 2007. The remaining €36.74 billion will be divided up among the EU-25, with at least half (€18.91 billion) being guaranteed for the EU-15.
Within this total, some €4.07 billion will be allocated to national envelopes for certain countries - i.e. €1.35 billion to Austria, €460m to Finland, €500m to Ireland, 500m to Italy, €20m to Luxembourg, €111m to France, €820m to Sweden and €320m to Portugal. In Portugal’s case, the Council concluded that the money should not be subject to co-financing, making reference to the particular constraints that Portuguese agriculture faces, as described in Commission's report 10859/03.
The total amounts for rural development have been agreed on a considerably lower level compared to the initial Commission proposal for the Financial Perspectives.
European Commission's Proposal
The European Commission's proposal COM (2006) 237 proposes, in line with the December 2005 Financial Council Agreement, to exempt Portugal from the application of the co-financing requirement for the amount of EUR 320 million.
Commission proposal COM (2006) 237, amending Regulation (EC) No 1698/2005, is necessary in order to bring the "capping provision" in line with the December 2005 European Council Agreement as well as with the relevant provision in the Community legislation governing the Structural Funds and the Cohesion Fund for the period 2007–2013.
Capping means the maximum total spending of all structural and rural development funds in a particular Member State, as a percentage of its GDP. As the total amount of funds at a European level has been agreed by the Council on a much lower level, as compared to the initial Commission proposal, the capping provisions in the corresponding legislation have to be altered accordingly.
The committee proposes to exceptionally accept the proposal to exempt Portugal from the application of the co-financing requirement for the amount of EUR 320 million assuming that this concerns a once-off operation.  The proposed changes to the capping provisions seem to be rather technical amendments.
The committee understands the need to realign rural development legislation with the December 2005 European Council Agreement. However, budgetary decisions should normally follow legislative decisions and not the other way around. Moreover, the practice by which individual Member States are being persuaded to vote in favour of an agreement, by including particular extra amounts or preferential treatment for them (the so called Christmas gifts) is highly undesirable. Also for reasons of transparency, unity and sound financial management the practice of this kind of horse treading should be prevented.
REF.: 20061113IPR12518