How EU agricultural funding works – Politics

EU farm subsidies are a complex system and the rules difficult to understand, even for those in the Agriculture work. An overview with the most important questions and answers.

How much money does who get?

Agricultural subsidies are EU payments to public authorities, companies and farmers who are active in or contribute to the maintenance of agriculture. The subsidies are financed by tax money. Primarily that which is available to the EU – but the member states also make a financial contribution. The subsidies are part of the common agricultural policy (CAP) of the EU, which has existed since 1962.

That budget for the CAP is the largest item in the EU budget. Between 2014 and 2020 it was about 38 percent of the total expenditure, a total of 408.31 million euros. 387 million euros are planned for the period 2021 to 2027, 31 percent of the total budget.

The budget for agricultural subsidies is divided among the member states. France, Spain, Germany and Italy get the most. The member states are responsible for passing on the funds and for checking whether the regulations for the subsidies are complied with.

There are two so-called “pillars” into which the budget is divided. the first pillar is the larger one and is fully funded by EU funds. These are direct payments to the owners of agricultural holdings. Which farm gets how much money is calculated per hectare of agricultural land. the second pillar is co-financed by the EU member states, but is smaller overall.

In the second pillar, there is more diversity to whom and on what the money is spent. It is not generally distributed, but is earmarked and project-related. Basically, these funds should support the “development of rural areas”. Among other things, investments in modern stable buildings and machines, environmentally friendly land management, direct marketing, the development of alternative employment opportunities, agriculture in disadvantaged areas, village renewal, land consolidation and infrastructure measures, forestry, crafts and tourism are promoted.

Why are the funding structures a problem?

Agricultural subsidies are distributed according to a complex system – to the disadvantage of farmers. The funding guidelines have also become so bureaucratically complex because the EU tries with each new reform to decouple direct payments to farms from the area. Since 2003, farmers have had to comply with environmental, animal and plant protection, animal health, soil and water protection, and food safety obligations in order to receive the full production volume. The areas must be maintained in “good agricultural and ecological condition”. “Greening” has also existed since 2013, which means that in order to receive direct payments, companies must create permanent green areas, diversify cultivation more, and designate “ecological priority areas”. In addition, Member States are increasingly being given the opportunity to shift funds from the first pillar to the second. Since 2008, the second pillar has increasingly supported projects in the areas of climate change, renewable energy, biodiversity and water management.

Nevertheless, numerous associations in the field of climate, environmental and species protection criticize that the big ones benefit the most and that the distribution does not contribute to the transformation of agriculture that is needed in view of the climatic changes. Martin Häusling, agricultural policy spokesman for the Greens in the European Parliament, still sees a lot of catching up to do when it comes to the climate compatibility of European agricultural policy and calls for a reform of the subsidy system. Among other things, consideration should be given to limiting agricultural aid for large companies.

What should change with the new reform?

The CAP is renegotiated every seven years. Actually, the new regulation should have been introduced in 2020, but agreement could not be reached sooner. The EU has set itself high goals for the period from 2023 to 2027, because the measures should be reconciled with the goals of the Green Deal. However, the specifications are not legally binding.

The precise implementation is primarily in the hands of the Member States. These must draw up so-called “National Strategy Plans”. The plans are then examined and approved by the Commission. The fact that the member states are given more creative freedom could lead to a “best practice” competition, says Peter Jahr (CDU), a member of the EU Parliament’s Committee on Agriculture and Rural Development. However, critics see this as a threat to the uniformity of the common agricultural policy.

The previous principle of the two pillars remains in place, but the relationship is to change: there should be fewer direct payments to farmers and instead more money for rural development. Greening is abolished. For this purpose, so-called eco-schemes are introduced, one-year measures that can bring bonuses. This is intended to provide incentives for ecological management.

But even when the new CAP was passed, it was clear that the EU would not meet its demands for a sustainable food supply. Above all, the climate goals are missed, which actually envisage climate neutrality by 2050 and on the way there by 2030 a reduction in greenhouse gas emissions by 55 percent compared to 1990.

That is why the Commission has also launched the “Farm to Fork” strategy: it is the first serious attempt to achieve sustainability at every stage of the food value chain. It formulates remarkable goals by 2030: 50 percent fewer pesticides, 50 percent fewer antibiotics, 25 percent fewer fertilizers and 25 percent of all areas being organic. All institutions are committed to the goals in principle – but they must now be cast in law. And there is already a big argument about the new pesticide regulation: because of the war in Ukraine, many are now arguing that food security comes before climate and environmental protection.

Since when and why does the EU support farms?

The question leads back to the origins of European unification. Germany, France, Italy, Belgium, the Netherlands and Luxembourg founded the European Economic Community (EEC), the forerunner of the EU, in 1957 and set themselves the goal: their countries should no longer be dependent on imported food. In Germany in particular, agriculture produced too little food, partly because of the consequences of the war. And the employees earned too little. That should change. With the Common Agricultural Policy (CAP), which came into force in 1962, family farms in particular were to be promoted. The EEC guaranteed them reasonable prices, while imports were subject to tariffs.

The attempt to guarantee prices failed. In order to stabilize the market, in 1967 the state bought up all grain at a guaranteed minimum price for the first time. The support prices were extended to other products and increased further and further, resulting in huge surpluses: the butter mountain, the milk lake. All attempts to limit production with quotas failed. The system accommodated large, productive companies, while more and more small ones had to give up. At the same time, spending on agriculture kept hitting new records. In the 1980s they amounted to up to 70 percent of the EEC budget. In addition, the pressure on Europe to open up agricultural markets was increasing. That is why the EEC initiated the system change at the beginning of the 1990s: Instead of markets and prices, it supported income.

Environmental aspects have played a greater role since the Mac Sharry reform, named after Irish EU Commissioner Ray Sharry, in 1992. The guaranteed prices for agricultural products were reduced, and the farms received direct payments to compensate. In order to reduce the production quantities, premiums were also paid for environmentally friendly forms of production, for set-aside, and for afforestation. So, in the CAP, protecting the environment was actually a by-product of trying to slow down production.

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