POLICY
Agriculture and forests cover the vast majority of our territory and play a key role in the health of rural economies and the rural landscape. Farmers perform many different functions ranging from the production of food and non-food agricultural products, to countryside management, nature conservation, and tourism.
The Common Agricultural Policy (CAP) is designed to deliver a modern, sustainable and efficient agricultural sector in Europe. It aims to promote the competitiveness of the sector, to ensure an adequate and secure food supply and to preserve the environment and countryside while providing a fair standard of living for the agricultural community.
The CAP is a genuinely European policy. Instead of operating 27 separate agriculture policies and budgets, Member States pool resources to operate a single European policy with a single European budget. This naturally means that the CAP accounts for a significant proportion of the EU budget. However, this approach is both more efficient and economical than an uncoordinated national approach.
Today, European agriculture faces a variety of challenges. In recent years, agriculture prices have risen by 50%, but energy and fertiliser prices have risen by 200% and 150%, respectively. The result has been a steep long-term decline in agricultural income. The sector must also respond to the challenges of climate change and environmental degradation and pressing concerns in relation to food security, territorial balance and the pursuit of sustainable growth.
Faced with these challenges, the CAP has evolved considerably in recent years. The forthcoming reform will continue this process and will result in a more modern, greener policy, equipped to contribute actively to the goals of the Europe 2020 strategy by unlocking economic potential in rural areas, developing local markets and jobs, accompanying the restructuring of agriculture and supporting farmers’ income to maintain a sustainable agriculture sector throughout Europe.
The reformed CAP will promote smart, sustainable and inclusive growth by promoting resource efficiency in order to maintain the production base for food, feed and renewable energy across the whole EU; incentivising actions to mitigate and adapt to climate change, to protect ecosystems and fight biodiversity loss; and supporting diversification of economic activity in rural areas so as to promote balanced territorial development throughout Europe.

INSTRUMENTS
The Commission proposes to maintain the current two pillar structure of the CAP:
•Pillar I will continue to provide direct support to farmers and to support market measures. Direct support and market measures are funded entirely by the EU budget, so as to ensure the application of a common policy throughout the single market and to allow for an integrated administration and control system.
•Pillar II of the CAP will continue to deliver specific environmental public goods, improve the competitiveness of the agriculture and forestry sectors and promote the diversification of economic activity and quality of life in rural areas. Member States have flexibility in the design of the measures, based on specific national and regional needs but reflecting EU priorities. Measures in Pillar II are co-financed by Member States, which helps to ensure that the underlying objectives are accomplished and reinforces the leverage effect of rural development policy. Through higher co-financing rates for the poorer regions of the EU, Pillar II also contributes to the cohesion objectives of the EU.
Within the two pillar structure, the design of the policy will be comprehensively modernised and simplified so as to deliver a fairer, greener policy, aligned with the Europe 2020 objectives.
The main elements of the reform will include:
•A more equitable distribution of direct income support
For historical reasons, the level of direct support for EU farmers per hectare differs substantially across the EU. For example, the average direct payment per hectare of potentially eligible land and per beneficiary for the year 2013 is €94.7 in Latvia and €457.5 in the Netherlands. The EU-27 average is €269.1.
The reformed CAP will include a system of ‘convergence’ to reduce these disparities and promote a fairer distribution of financial support. This rebalancing of support is a major element of the reform aimed at a more effective use of budgetary resources through more equitable and better targeted direct payments as well as a better fit between the future distribution of rural development support and the policy objectives. This will be achieved in the following way: all Member States with direct payments below 90% of the EU-27 average will, over the period, close one third of the gap between their current level and 90% of the EU average direct payments.
The allocation of aid for rural development will also be modernised, with shares determined on the basis of a series of objective territorial and economic criteria reflecting the future economic, social, environmental and territorial policy objectives.
•Greening of direct payments
The compulsory greening of direct payments is a fundamental pillar of the reform. It will enhance the environmental performance of the sector and illustrates clearly how the reformed CAP will contribute to a wider range of the Union’s priorities.
Specifically, in future, 30% of direct payments will be made contingent on compliance with a range of environmentally-sound practices, going beyond cross-compliance.
•Support for active farmers
To ensure the efficient use of CAP resources, the benefit of direct support will be reserved to active farmers.
•Capping the level of direct payments for the largest farmers
At present, large agricultural holdings receive a disproportionate share of direct income support from the CAP. The reformed CAP will introduce a moderate and progressive process of ‘capping’ of the level of direct income support for the largest holdings, while taking due account of the economies of scale of larger structures and the direct employment these structures generate.
•A rural development policy focused on results
To maximise the synergies between rural development policy and the EU’s other territorial development funds, the European Agricultural Fund for Rural Development (EAFRD) will be incorporated in the Partnership Contracts between the Commission and each Member State. These contracts will be linked to the objectives of the Europe 2020 strategy and the National Reform Programmes. They will set out an integrated strategy for territorial development supported by all of the relevant EU structural funds, including rural development. They will include objectives based on agreed indicators, strategic investments and a number of conditionalities.
•Simplified scheme for small farmers
Many of the beneficiaries of direct support are small farmers; a simplified allocation mechanism for their support will substantially reduce the administrative burden for Member States and farmers while being neutral for the EU budget.
•Market expenditure and crisis mechanisms
Today, European agriculture faces a variety of challenges, in particular the need to react to unforeseeable circumstances, which have a sudden impact on agricultural income, or the need to facilitate the adaptations/transitions required by international trade agreements.
For these reasons, it is proposed to restructure the market measures which are currently regrouped in Pillar 1, to create and extend two instruments outside the multi-annual financial framework. An emergency mechanism to react to crisis situations (which could result from a food safety problem or sudden markets developments) will be created to provide immediate support to farmers through a fast-track procedure. The procedure for mobilising this Fund will be the same as that for mobilising the Emergency Aid Reserve.
It is also proposed to extend the scope of interventions of the European Globalisation Fund to provide transitory support to farmers to facilitate their adaptation to a new market situation resulting from indirect effects of globalisation. Furthermore, the Commission proposes to transfer the funding of food support for the most deprived persons to Heading 1 in order to regroup actions to fight poverty and exclusion and to transfer the financing of food safety together with actions concerning public health.

IMPLEMENTATION
With the creation of the European Agricultural Guarantee Fund (EAGF) and European Agricultural Fund for Rural Development (EAFRD), the legislative basis of the CAP was restructured to align the two pillars of the CAP. In the post-2013 period, it is proposed to maintain the alignment of the two funds as far as possible.
The proposal for a new article of the Financial Regulation on shared management is in line with the current management and control systems applied for the EAGF and EAFRD.
A major streamlining of EU legislation on the organisation of agricultural markets has also been undertaken with the Single Common Market Organisation (CMO, Regulation (EC) No 1234/2007) bringing together into a single regulation the provisions formerly covered by the sectoral CMOs.
For the post-2013 period, a review of all legislative bases of the CAP is being conducted to ensure that simplification is continued wherever necessary and possible.

BUDGET ALLOCATION
All figures in constant 2011 prices
Total proposed budget 2014-20 €386.9 bn
of which
•Pillar I – direct payments and market expenditure €281.8 bn
•Pillar II – rural development €89.9 bn
•Food safety €2.2 bn
•Most deprived persons €2.5 bn
•Reserve for crisis in the agricultural sector €3.5 bn
•European Globalisation Fund Up to €2.5 bn
•Research and innovation on food security, the bio-economy and sustainable agriculture (in the Common Strategic Framework for Research and Innovation) €4.5 bn