CAP reform - does size matter in EU agriculture?

Reform of the European Union's Common Agricultural Policy has always been a matter of serious argument in Brussels, and fresh negotiations about to start will no doubt live up to this well-established tradition

Size has historically been a cause of controversy when it comes to agriculture. In the past, it was the amount of the overall budget dedicated to the sector that raised strong objections. Subsidising French and Italian farmers has long been seen as unfair in other parts of the continent, where agriculture is less significant. Britain managed to secure a rebate on its payments to the EU Budget, due to the lower share of agriculture aid it claimed to have received. But the situation has changed dramatically in the last few years. From being by far the largest area of EU expenditure in the 1980s, sucking up almost two thirds of the entire budget, the CAP has undergone a gradual slimming-down process. Today, it is just over one third of the common pot.

The next multi-annual budget will see a further reduction of funding for the CAP, while the EU Budget will instead in absolute terms. Resources destined for agriculture and rural development will be trimmed from the current amount of €413bn for the period 2007-2013 - to just €386bn up to 2020, according to official proposals from the European Commission. These reduced resources will also have to cover more policies. Direct aid to farmers will account for no more than €281bn between 2014 and 2020, €50bn less than in the previous budget. "It's like if the budget for farmers had to run with one year less," explains one Brussels official. Indeed, annual direct payments to European farmers have averaged around €48bn per year since 2007.

The remaining €105bn will mostly be spent on protecting the rural environment - but also on food safety, research on food security and support for the most deprived farmers. Up to €6bn of the overall amount has been set aside from the budget in a reserve fund - for use in emergencies, but this depends on member states agreeing to do so. This is far from guaranteed, given the ongoing hard times and austerity measures.

Things have also changed regarding who benefits from the CAP. Although France continues to receive the lion's share of CAP funding with almost a quarter of the overall amount, other Northern European states have also emerged as major recipients of subsidies. The UK gets almost 10 per cent of the entire cake, not much less than Italy - which in turn is also behind Germany and Spain when it comes to the amount of direct support its farmers receive. Therefore, if a battle is to erupt again over the size of the CAP budget - it is likely to be fought by those who want it to grow, rather than by member states who want to cut it, which has historically been the case.

But there is another size that is already creating turmoil in Brussels circles: that of farm land. So far, agricultural aid has been distributed on the basis of legacy criteria, giving priority to states which produce more and enjoy higher levels of productivity. This is designed to favour "old" member states that rely on higher levels of mechanisation. New member states from Eastern and Central Europe have more farmland, but comparatively lower levels of production. Led by Poland and Slovakia, the new member states are loudly calling for a change in aid distribution criteria - based on the size of farm land. France is once again the dominant power, whatever the criterion. Paris is ahead of the others by using both historical and size criteria. Around 17 per cent of Europe's entire farmland lies within its boundaries.

The second biggest country for farmland is Spain, followed by Poland and Germany. Italy and the UK come later. "We will never accept farmland representing an exclusive criterion to determine agricultural aid," says Italian Agriculture Minister Saverio Romano. But Italy's position appears to be weak. A group of seven new member states - Poland, Hungary, Czech Republic, Slovakia, Romania, Bulgaria and Slovenia - is united behind the pro-size reform, for what they call "a fair CAP". Other old member states will not be enormously affected by the change.

Also, Poland holds the presidency of the EU for the next four months - when key decisions are expected to be taken in this field. And if all that was not enough, the EU Budget Commissioner Janusz Lewandowski is Polish. Meanwhile, the commissioner in charge of agriculture Dacian Ciolos is Romanian. In the autumn, the Commission will unveil its detailed plans to further reform the CAP. Although, it is already clear that "a system of convergence" will be introduced to balance the level of direct support for EU farmers per hectare. When the time comes, Polish rye vodka producers are likely to have a new reason to toast.