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8. EU aid and incentives

8.4. The funding policy of the Common Agricultural Policy (CAP)

The Common Agricultural Policy (CAP) absorbs around 40% of the total budget of the EU for this period. Despite its heavy budgetary weight, justified in part by its being one of the few sectors whose policy is financed principally by the EU, its importance in economic terms has been reduced substantially over the last 30 years, dropping from 75% to the current 40%. The budget for direct payments assigned to Spain is equal to €29,227,900,000,000, which entails 11.56% of the total.

The financing and functioning of the CAP is regulated under Regulation nº 1306/2013 of the European Parliament and of the Council, of 17 December 2013, on the financing, management and monitoring of the Common Agricultural Policy, and repealing Council Regulations (EC) nº 352/78, (EC) nº 165/94, (EC) nº 2799/98, (EC) nº 814/2000, (EC) nº 1290/2005 and (EC) nº 485/2008, which sets up the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD)18.

In particular, the CAP for the 2014-2020 period is instrumented around two structural pillars:

  • The first pillar, instrumented through the EAGF, provides direct support to farmers and funds market measures. The direct support and market measures are covered in their entirety and, exclusively, by the EU budget, with a view to guaranteeing the application of a common policy throughout the single market and with the integrated management and control system.
  • The second pillar, instrumented through the EAFRD, improves the competitiveness of agricultural and forestry industries and promotes the diversification of economic activity and quality of life in rural areas, including regions with specific problems, i.e. it is primarily intended to support rural development. Member States must co-finance these measures.

The following is a description of the main characteristics of these two Funds:

1. EAGF

In general, the EAGF funds the following actions, managed jointly by the Member States and the Commission:

  • Measures aimed at regulating or supporting agricultural markets.
  • Direct payments to farmers established within the scope of the CAP.
  • The financial participation of the Union in the measures taken by Member States to report and promote agricultural products on the Community domestic market and in third countries.
  • The financial participation of the Union in the Union school fruit and vegetable scheme referred to in article 23 of Regulation (EU) No 1308/2013 and the measures concerning animal diseases and loss of consumer confidence referred to in article [155] of the same Regulation.

In turn, the EAFRD provides direct funding for the following expenditure:

  • Promotion of agricultural products, undertaken either directly by the Commission or through international organizations.
  • Measures, taken in accordance with Union law, to ensure the conservation, characterization, collection and utilization of genetic resources in agriculture.
  • The establishment and maintenance of agricultural accounting information systems.

The Commission provides Member States with the credit necessary to cover the expenses financed by the EAGF, in the form of monthly reimbursements.

2. EAFRD

In the field of local development, consideration must be given to Regulation nº 1305/2013, of the European Parliament and of the Council, of 17 December 2013, on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and repealing Council Regulation (EC) nº 1698/2005.

In particular, the EAFRD has three basic objectives in the context of the 2020 European Strategy

  1. Fostering the competitiveness of agriculture.
  2. Ensuring the sustainable management of natural resources, and climate action.
  3. Achieving a balanced territorial development of rural economies and communities including the creation and maintenance of employment.

In order to meet these objectives, the EAFRD has six priorities:

  • Fostering knowledge transfer and innovation in agriculture, forestry, and rural areas.
  • Enhancing farm viability and competitiveness of all types of agriculture in all regions and promoting innovative farm technologies and the sustainable management of forests.
  • Enhancing farm viability and competitiveness of all types of agriculture in all regions and promoting innovative farm technologies and the sustainable management of forests.
  • Restoring, preserving and enhancing ecosystems related to agriculture and forestry.
  • Promoting resource efficiency and supporting the shift towards a low carbon and climate resilient economy in agriculture, food and forestry sectors.
  • Promoting social inclusion, poverty reduction and economic development in rural areas.

Pursuant to the Partnership Agreement approved by the Commission for Spain, 18 Operational Programmes will be eligible for co-financing with a charge to the EAFRD, its allocation for the entire period amounting to €8,290,828,821.

According to available information, for the new 2021-2027 budgetary framework, the Commission has proposed a reform of the Common Agricultural Policy which maintains the essential elements of the current policy, but is no longer based on the mere description of the requirements that are to be met by the final beneficiaries of the aid. Rather it is now a policy aimed at obtaining specific results linked to three general objectives:

  1. Fostering an intelligent, resilient and diversified agricultural industry that guarantees food safety.
  2. Intensifying environmental care and pro-climate action, contributing to reaching the EU’s climate and environmental goals.
  3. Strengthening the socio-economic fabric of rural areas.

18 In order to confront the serious consequences of the COVID’19 public health crisis, the Commission has approved the introduction of certain exceptions to the general rules established in Regulation 1306/2013, in connection with the payment of advances to farmers in order to increase their liquidity during this period. Thus, the amount able to be advanced is increased and Member States are authorized to make direct payments prior to completion of all on-site inspections or controls.