The development of the common European agricultural policy

Since the introduction of the EU's Common Agricultural Policy in 1962, it has already undergone a large number of reforms. We present the most important ones here.

European agricultural policy began in 1962 with the goal of promoting agricultural productivity and has undergone many transformations since then. The original focus of increasing productivity was broadened in the mid-1970s to include strengthening competitiveness on the world market, and was supplemented in the early 1990s with the theme of promoting sustainability. Money for the common agricultural policy makes up and accounted for 40% to 70% of the EU budget. This large sum led to positive changes, e.g. increased productivity and increased innovation, but also triggered undesirable developments such as "butter mountains" or "milk lakes", the destruction of agricultural structures in developing countries or the increase of large farms. After the direct control of markets through agricultural subsidies was abandoned in the early 1990s, the phase of direct payments and area payments began in 1992 and has remained the central core of agricultural subsidies to this day. 

The most important changes and reforms are explained below.

1962: Introduction of the CAP

The EU's common agricultural policy is created. It is intended to ensure the supply of food to the population, contribute to the conservation of natural resources and enable farmers to maintain a fair standard of living.

1992: MacSharry reform

The first turning point of the CAP was the agricultural reform in 1992, which was named after the then Agriculture Commissioner Ray MacSharry. The reason: although the CAP was able to meet its goal of food supply, increasing production surpluses arose due to the setting of support prices, which were often far above world market prices, and an unlimited purchase guarantee. To counteract this, the Council changed the focus of funding from supporting individual products to supporting the entire market. Support prices of products, such as beef or grain, were gradually reduced by up to 33 percent. The resulting loss of income was compensated by paying direct aid to farmers on a per-hectare basis. For the first time, environmental concerns were also incorporated into the Common Agricultural Policy to a greater extent.

1999: Agenda 2000

The reform of the CAP continued in 1999. Agenda 2000, for example, decided to gradually reduce support prices once again and to increase direct payments to farmers in return. Voluntary environmental conditionality was also introduced: EU member states could link the payment of direct payments to compliance with environmental regulations. Another important change was the expansion of the structure of agricultural policy into broader rural support in the second pillar of the CAP, with the aim of promoting the development of agriculture in the long term. New elements here included, for example, investments in modern stables and machinery, the development of alternative livelihoods, and support for agriculture in disadvantaged areas.

2003: The decoupling of subsidies

The agricultural reform in 2003 set another milestone: to ensure the stability of farmers' incomes, direct payments were decoupled from production. The EU thus pursued four main objectives:

  • a stronger link between European agriculture and global markets
  • preparing for EU enlargement
  • greater adaptation to new societal needs in terms of environmental protection
  • to improve the compatibility of the CAP with the needs of third countries.

Since the reform in 2003, farmers have had to comply with regulations relating to environmental, animal, plant, soil and water protection, animal health and public health protection under the so-called "cross compliance" system in order to receive direct payments in full. In addition, farmed land must be maintained in good agricultural and environmental condition.

2008: Health check

The "Health Check" adopted by the Council on November 20, 2008, included a review of the 2003 reform. The Health Check resulted in a revision of a large number of measures. For example, a cut in direct payments of up to ten percent was set for 2012. This money saved in the first pillar went instead to the second pillar, where it was increasingly used for projects in the areas of climate change, renewable energies, biodiversity, water management, dairy farming, and innovation and research.

2013: Rewarding social performance

In order to strengthen competitiveness, promote sustainable agriculture and innovation, and provide even greater support for the growth of rural areas, the CAP was reformed again in 2013. The reform covered the funding period from 2014 to 2020, focusing the CAP more on rewarding societal benefits and continuing to provide farmers with security in the event of market crises. In addition, the integration of environmental requirements was further advanced. In this way, the European Commission and the Council responded to changing societal demands and challenges, such as globalization, the protection of biodiversity, climate and natural resources, and demographic changes in rural areas.

New elements were introduced into the CAP, such as the so-called "greening" of direct payments. Since then, farmers have received direct payments only if they provide environmental services, such as maintaining permanent grassland, diversity in crop rotation, and the provision of "ecological priority areas" on arable land.
In the process, direct payments have been restructured into a system of seven components:

  • a "basic premium"
  • a "green" payment to promote environmental public goods
  • an additional support for young farmers
  • a redistribution premium, which provides support to farmers for the first hectares farmed  
  • an additional income support in areas subject to natural constraints
  • aid linked to production
  • simplified schemes in favor of small farmers
  • In addition, from 2015, EU member states will have the possibility to shift funds intended for financing from the first to the second pillar and from the second to the first pillar. A maximum shift of 15 percent of the funds from the first to the second pillar is envisaged, and a maximum of 25 percent for the shift from the second to the first pillar.

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