The political struggle over the future EU budget (2007-2013) means that the trend to greening the Common Agricultural Policy (CAP) – proclaimed during the reform agreement of 2003 - may be reversed before it even gets going. The second, rural development pillar of CAP, which was strengthened through the reform, may now be weakened again. Unlike the subsidies in the first pillar of CAP, rural development funds and particularly agri-environmental measures have been long supported by environmentalists.

The six net contributors to the EU budget (Germany, France, UK, The Netherlands, Austria and Sweden) are determined to keep the EU budget as low as possible, despite the enlargement from EU-15 to EU-27. But even the Commission’s more ambitious budgetary proposals on rural development are vastly inadequate. While the Commission’s proposal envisages spending €96 billion on rural development – a 27% increase between 2006 and 2013 - the increase is exclusively due to EU enlargement. Even within the EU-15, the rural development budget would actually slightly decrease (by 3% between 2006 and 2013). These figures include the ‘modulation’ funds, i.e. an annual transfer of 5% of funds from the first pillar of CAP to the second pillar, which was adopted as a centrepiece of the 2003 CAP reform. One wonders what was the point of introducing modulation if funding for the second pillar is now to be reduced!

At the same time, a whole range of new issues is supposed to be funded by the second pillar:
• a major share of the costs of the nature-protection network Natura 2000
• a whole set of new forestry measures, with the second pillar of CAP effectively becoming a ‘rural and forestry development’ policy
• more emphasis on rural diversification measures
• new measures in favour of food quality, animal welfare, etc.

Decreasing the rural development budget will jeopardise the introduction of these important new measures and compromise the already existing, under-funded measures such as agri-environmental programmes.

If the pressure of net contributors leads to a reduction in the EU budget – which is almost certain to happen – rural development would be one of the most likely victims, as the first pillar spending has already been fixed by the Chirac-Schröder deal of 2002. Some scenarios thus envisage radical cuts in the rural development budget down to around €60 or 40 billion over the seven-year period. This would undermine the entire 15-year CAP reform process as well as the financing of Natura 2000, which is important to halt biodiversity decline in Europe. A whole series of EU commitments, agreements and policies could be put in question by a simple reluctance of member states to provide the needed cash or to shift funds from the first into the second pillar.

The new regulation

If the budget for rural development is under attack, the policy content is also facing a challenge. A new rural development regulation is to be adopted by the Council and Parliament in June 2005. The proposal on the table does contain good ideas, such as the new measures mentioned above, but most of these were already included in the 2003 CAP reform. Apart from that there is little if any progress on further integration of environmental objectives into the rural development policy. Agri-environmental measures, the greenest subsidies within CAP, are in fact weakened by a slightly lower degree of co-financing (actually reversing the 2003 CAP reform).

The main change, however, is that rural development subsidies will be grouped into three axes, alongside the main priorities of the policy: (1) competitiveness, (2) land management, and (3) diversification of the rural economy. Only a few subsidies in the second axis – such as the agri-environmental programmes and payments for Natura 2000 areas and areas with natural handicaps – will be conditional on farmers’ compliance with environmental criteria. Other subsidies won't.

A coherent policy would ensure that all measures contribute to the overarching goals of economic, social and environmental sustainability in an integrated way. For example, rural development subsidies for young farmers are very important for keeping people in the countryside and helping them compete on the market, but they should also encourage them to adopt sustainable and innovative methods of farming. The current proposal, however, still makes it possible for rural development funds to subsidise environmentally friendly agriculture on the one hand and deep intensification on the other hand. Rural development nevertheless remains the more promising one of the two pillars of CAP. If it becomes the main victim of the EU budget reduction, agri-environmental programmes are set to suffer.

EU lets down the organic farming sector

Nowhere are EU contradictions more clear than its approach to organic food and farming. The second pillar of CAP and agri-environmental measures have been of great support to the organic sector (while the first pillar subsidies have rather favoured intensive farming). The Commission also officially recognises the environmental, social and economic benefits of the organic sector. So for two years, the Commission worked on an Action Plan for Organic Food and Farming, which raised many expectations. But when the plan finally arrived last year, it was basically a series of recommendations with almost no budget attached, no targets and no obligations for member states. An EU research project for monitoring and evaluating the Organic Action Plan has a budget several times greater than that allocated to the plan itself! Will the new rural development regulation help? Sorry, not even one word on organic farming! And on top of that, the rural development budget is facing cuts… So dear organic farmers, good luck in 2007-2013 (and long live the Action Plan)!

Martin Konecny
Friends of the Earth Europe