Wine sector: Commission adopts new exceptional support measures

Wine news continues to be marked in this July by the effects of Covid-19 pandemic. The European Commission adopted an additional package of exceptional measures to support the wine sector, including the temporary authorisation for operators to self-organise market measures, the increase of the European Union’s contribution for wine national support programmes.

 

full note available on FE Members’ area 

CAP Budget 2021-2027 : In response to the crisis, meet more challenges with less budget

Loss of 40 billion in constant euros, Maintained in current euros,
Less for the recovery, 40% of the budget to be oriented on climate & environment

 21 July 2020

After a 4-day marathon European Council, the Heads of State and Government gave the European Union a budget of €1074.3 billion for the period (in 2018 constant euros) reinforced by a recovery budget of €750 billion (€390 billion in grants and €360 billion in loans).

For the CAP, the agreed budget amounts to €258.594 billion (in 2018 constant euros) for the 1st Pillar and €77.85 billion for the 2nd Pillar. Under the recovery budget, €7.5 billion will be added to the 2nd Pillar budget.

In total, €343.95 billion (2018) will finance CAP actions over the next 7 years.

If in current euros, and assuming inflation at 2%/year over the period, the CAP 2021-2027 budget is broadly stable compared to the previous period (2014-2020); expressed in 2018 constant euros, it is down by €39 billion (-10.2%), i.e. slightly more than a full year of first pillar aid.

A little less than half of this decrease can be linked to the cost of Brexit for the CAP, the UK was a net funder of the CAP for about €2.7 billion/year.

Therefore, including the recovery plan, European farmers are being asked to finance some €20 billion of other European policies.

Compared to the Commission’s latest proposals, the budget for the first pillar remains more or less the same, the budget for the second pillar increases by €2.8 billion over the period, but the allocation for the recovery is halved, from €15 billion to only €7.5 billion.

The use of the remaining €7.5 billion is not subject to any particular guidelines from the Heads of State. The negotiations linked to the Omnibus Recovery package will be crucial to ensure that recovery actions are more targeted and relevant as the envelope is constrained.

In the context of a decreasing budget, and even more so for the 2nd pillar, the distribution of the €77.85 billion of the latter provides additional allocations at the rate of 100 million for Belgium, 650 for Germany, 300 for Ireland, 300 for Greece, 500 for Spain, 1 600 for France, 100 for Croatia, 500 for Italy, 50 for Cyprus, 250 for Austria, 200 for Slovakia, 300 for Portugal and 400 for Finland.

In addition, the European Council defined, in parallel with the CAP budget, certain parameters for the future CAP reform which will apply from 2023 (and until 2027):

  • While 30% of the European budget (including recovery) is to be linked to climate actions, a target of 40% is set for the CAP as a whole. However, no direction is given to the green architecture of the new CAP (unlike in 2013 where the European Council had clarified what greening should be).
  • Convergence of direct payments levels between Member States: over the period, 50% of the gap to 90% of the EU average will have to be closed, with aid/ha not falling below national averages in the EU of €200/ha in 2022 and €215/ha in 2027.
  • The capping of direct payments will be done on a voluntary basis at a possible level of EUR 100 000 of basic direct payments per beneficiary, whereby wage costs can be excluded.
  • The crisis reserve will have to be endowed with €450 million (in current euros) at the beginning of each year and will be fed primarily by clearances, budgetary margins and, as a last resort, by financial discipline. Unspent amounts will be transferred from one year to the next, with no increase in the reserve beyond the €450 million. It should be noted that this amount is lower than the current reserve (480 million in current euros) and that its capped mechanism already undermines the credibility of its action.
  • Budget transfers from the 1st pillar to the 2nd pillar will be up to 42% at the choice of the Member States, with 25% to finance any action chosen from the 2nd pillar, 15% to finance only environmental actions and 2% for measures in favour of young farmers.
  • Transfers from the second pillar to the first pillar may be up to 25% and may be increased to 30% for Member States whose direct aid is less than 90% of the European average.
  • The maximum basic European co-financing for 2nd pillar measures is set at 43%, 10 points lower than at present. It is 80% for the outermost regions and 85% for less developed regions. For environmental measures, non-productive investments, EIP and Leader actions, it may be as high as 80%. For measures financed via a budget transfer from the first to the second pillar, EU co-financing may be up to 100%.

CAP reform negotiations: Comenvi withdrawal & agreement on the transitional regulation

The month of June was marked by the following events:

  • At the level of the European Parliament, ComEnvi has decided to withdraw from the ongoing joint AGRI-ENVI work on the CAP Strategic Plan Regulation. On the other hand, on the work of the “Farm to Fork” Strategy the two committees will work together, with Anja Hazekamp (GUE-NGL for ComEnvi) and Herbert Dorfmann (EPP for ComAgri) being the appointed rapporteurs.
  • The co-legislators reached an agreement on the transitional regulation, including a period – extended to two years, despite the Commission‘s reluctance. The latter initially threatened to withdraw its proposal for a regulation and has since been looking for ways to insert into this regulation or via the “recovery” omnibus a means of communicating on 40% of the CAP budget devoted to the environment in 2022.
  • The Council has met twice. Delegations pointed out the need for a budget that meets the requirements of the F2F and Biodiversity strategies of the Green Deal, as well as the need to take into account the sustainability efforts already undertaken in the Member States and the diversity of starting points. The German Presidency succeeds the Croatian Presidency, while important work remains to be undertaken on the new governance model and green architecture.

full note available on FE Members’ area 

Negotiations for the EU Budget: Commission unveils 2021 budget & disagreement confirmed at the European Council

The month of June was marked by the persistence and confirmation of the divergences between Member States on the future MFF and the associated Recovery Plan, notably on the size of the envelope but also on rebates and the ratio between loans and grants.

ComAgri members welcomed the proposal for an upgraded MFF (in current euros) compared to the Commission’s 2018 proposal, despite the decline in constant euros.

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Agricultural risk and crisis management tools: New resources, new challenges

The European Commission has presented an ambitious European Recovery Plan and a new Multi-annual Financial Framework for the period 2021-27. The new proposals provide new resources for the agricultural sector compared to the initial proposal of May 2018, although the total amount of support decreases at constant prices by €34 billion (2018 value) compared to the period 2014-2020.

Among the key elements of these proposals for the sector compared to the 2018 proposal is “an increase of EUR 4 billion for the Common Agricultural Policy (…), in order to strengthen the resilience of the agri-food sector(s) (…) and to provide the necessary room for manoeuvre for crisis management”.

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NEW BREEDING TECHNIQUES: German Green MPs favour the use of biotechnologies & Italians sign agreement

In June, the news was marked by the position taken by German Green MPs in favour of the use of biotechnologies and the inclusion of this subject in the party’s draft basic program.
In Italy, scientists and farmers signed an agreement for the preservation of genetic diversity and the improvement of the productivity of cultivated species, an agreement open to the use of modern plant breeding techniques.

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MEASURES & IMPACTS RELATED TO THE COVID-19 CRISIS: new package of exceptional measures for the wine sector and promotional programs

Pushed by the European Parliament, the Commission has finally adopted a new package of exceptional measures for the wine sector. It also launched two calls for proposals for promotion programmes for fruit and vegetables, wine, milk and dairy products, potatoes and live plants. On the other hand, it issued a refusal to the request to extend exceptional aid – such as for private storage – to the veal and poultry sectors. 

The Council endorsed the Regulation, which allows rural development funds to be granted to farms as part of economic recovery, enabling this measure to enter into force. The ministers also continued to call for aid for the sectors most affected, in particular for the creation of a compensation fund for the wine sector. 

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Agri-Fisherie Council: welcomed progress… but still a lot of work ahead

Delegations held an exchange of views on the Presidency progress report. European Agriculture Ministers broadly welcomed the report, saying that it accurately reflects the state of play in negotiations on the CAP reform package, while simplifications introduced for the New Delivery Model (performance clearance & average unit amounts) were going in the right direction. There is still a long way to go in the process with further technical work required over the coming months to improve the system of reliable indicators, performance review, implementation of eco-schemes, control systems & penalties (conditionality for small-holders), definition of eligible hectares, sectoral interventions & voluntary coupled support (level & scope of sectors).

 

full note available on FE Members’ area 

Wine sector: crisis envelopes still insufficient

Wine news continues to be marked in this June by the Covid-19 pandemic and the response at European and national levels to respond to the crisis.

The European Parliament has approved one set of exceptional market measures; the other, slammed before as insufficient, is still on hold.

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THE EUROPEAN RECOVERY PLAN: HOW IT SHOULD BE DESIGNED TO BETTER SUPPORT AGRICULTURE

The European Commission has presented an ambitious European Recovery Plan and a new Multi-Annual Financial Framework for the 2021-27 period.

The new proposals bring in new resources for the agriculture sector as compared to the initial proposal of May 2018, although the total amount of support falls in 2018 constant prices by €34 billion as compared to the 2014-2020 period.

The key elements for the sector are:

  •   “A €15 billion reinforcement for the European Agricultural Fund for Rural Developmentto support rural areas in making the structural changes necessary in line with the European Green Deal and achieving the ambitious targets in line with the new biodiversity and Farm to Fork strategies”
  •   “An increase of €4 billion for the Common Agricultural Policy (…), to strengthen the resilience of the agri-food (…) sector(s) and to provide the necessary scope for crisis management”

The focus of this paper is on putting forward Farm Europe’s proposals on how best this well-needed resources can be put to use.

– The rural development additional resources should be committed between 2022 and 2024. This should be amended to allow the new resources to be committed as from 2021, as the whole point is to without undue delay help the sector to recover from the current crisis and prepare for the future. The new resources should be part of the 2021 budget and not wait for the implementation of the CAP reform which will not occur before 2023.

– The second proposal Farm Europe wishes to make is to dedicate the €15 billion reinforcement to supporting dual-purpose investments in farms. Those investments should reduce the environmental footprint and at the same time improve the economic situation of farmers.

Examples are investments in digital or smart farming tools and systems, and on production of bio methane from livestock effluents. Those investments squarely qualify for the objectives set-out by the Commission to prepare the sector “making the structural changes necessary in line with the European Green Deal and achieving the ambitious targets in line with the new biodiversity and Farm to Fork strategies”.

– Another proposal is to reinforce the co-financing rates for those investments. The Commission reduced the co-financing rates for rural development actions by 10% in its CAP reform proposal. But the dire economic and financial situation of many farmers and countries calls for a higher rate of community financing to make sure the uptake is optimal. Farm Europe thus proposes that community co-financing should raise to 75%.

Those investments should benefit from the bulk of the new resources, and at least €10 billion be ring-fenced to that purpose.

– The new resources should also contribute to further support crisis management tools, like climatic insurance, mutual funds and income insurance. The EU, with very few exceptions, is poorly equipped with these tools, and the new funds could provide the right incentives to bolster the interest of farmers in using the existing legislative provisions. The main obstacle to the development of crisis management tools in the EU seems to be the cost. The new funds could provide the resources to increase community co-financing and thus render these tools more attractive.

– The €4 billion new resources for the CAP Pillar I are clearly earmarked for crisis management. This makes it possible to finally create and adequately fund a Crisis Reserve, as Farm Europe has put forward in previous papers and initiatives, and the European Parliament Comagri has proposed. €1.5 billion should be committed to the new Crisis Reserve as from 2021. The Crisis Reserve should have the

mandate and the resources to quickly redress markets, intervening at early stages and without delay with a wide range of emergency measures.

– The remaining resources should be used to support the sectors that are already suffering from the Covid-19 impact. Support actions should be agreed to swiftly rebalance hard hit markets, e.g. in the wine, beef and sheep and goat sectors.

It is of crucial importance to swiftly mobilize the additional resources as from 2021. It would be unwise and contrary to the key objective of the European Recovery Plan to wait for the adoption of the CAP reform, and the subsequent presentation of the Strategic Plans. That process would mean simply and squarely two years lost whilst the crisis hits harder.

Farm Europe believes that the European Commission Recovery Plan, although still coming short on the budget for the sector, offers a unique opportunity to shape the response to the Covid-19 crisis and prepare the sector for the European Green deal – provided it is well designed.