A review of EU member states’ agricultural support programmes has been published by Professor Alan Matthews of Trinity College Dublin, on the website CAPreform.eu. The analysis of these programmes, which are additional to the EU budget, has concluded that when “looking at budget transfer to agriculture, both national as well as EU expenditures… for every two euro contributed by the EU budget, national exchequers contribute a further euro both in co-financing EU expenditures as well as through state aid expenditures”.
Many of these national expenditures are similar in nature to EU support measures and would fall under EU rural development programmes if the budget allocation were larger. However, given that EU funding is multi-annual and member state funding is determined on an annual basis, member state expenditures tend to be “more sensitive to current economic conditions”.
In terms of member state expenditures, the most important categories of support in 2011 were “Investment in agricultural holdings”, “livestock sector” supports, insurance premiums, “animal disease” measures, which targeted areas with certain handicaps, and “research and development”. The noticeable trends are:
- the reduction in member state expenditures since 2007/2008 (−21%);
- the increased support to “insurance premiums” (+€509 million), “handicaps in certain areas” (+€369 million), and “animal welfare” measures (+€242 million support);
- the reduction in expenditures in “environmental” protection measures (−€1,173 million).
According to the analysis, as a proportion of CAP expenditures, national agricultural support measures were “at a peak in 2002, at 35%, but fell to 20% for the years 2003 to 2011”. This is linked to the multiannual nature of EU allocations and the annual nature of member state allocations, which are much more sensitive to fiscal pressures.
EU member states’ aid to agriculture under the top 10 objectives 2002–11 (€ million)
|Investment in agri. holdings||1,065||1,188||1,645||1,839||1,725||1,656||1,806||1,631||1,410||744|
|Handicaps in certain areas||64||43||56||172||184||300||271||257||310||433|
|Research & development||692||719||862||677||612||584||563||468||458||408|
|Adverse climate events||148||697||1,066||305||498||632||414||367||172||384|
Member state expenditures are significant in developing new policy tools to deal with price volatility (insurance premiums) and in supporting measures to insulate EU producers from the impact of both global price volatility and climate-related disruptions (financing in response to “adverse climate events”).
The impact of policy developments at the EU level can be seen in national allocations to environmental protection measures, with national funding falling as these become more mainstream within EU programmes.
However, the main point to note is that EU expenditures on agricultural support cannot be viewed in isolation from the support extended by EU member states. In some areas, member state expenditures are particularly significant, for example, in supporting animal welfare measures, with these being linked to new policy developments at the EU level.
Member state expenditures can also take on particular importance during times of market difficulties. During the 2009 milk crisis, EU member state governments extended well over €1 billion in one-off payments in support of farmers, largely to the benefit of dairy farmers. This was nearly four times the level of the special allocation for milk producers financed through the EU budget, and twice the total additional EU expenditure in response to the crisis (see Agritrade article ‘ Policy tools critical to turning around crisis in the EU dairy sector’, 5 May 2010).
Thus, at times of crisis, member state expenditures can take on particular significance in insulating EU farmers from the effects of global price volatility. However, this can shift the burden of adjustment to non-EU producers.
The overall impact of EU and member state expenditures therefore needs to be borne in mind when assessing the external effects of the CAP on ACP countries. This is particularly the case, because in part of the 2013 CAP reforms some analysts have noted a trend towards the renationalisation of agricultural support. Member states’ programmes may well thus take on greater significance in the coming years, as the economic recovery gains momentum and greater fiscal scope for nationally financed measures re-emerges.