Massive Pillar 2 Cuts Proposed by EU Council President

President of the European Council Charles Michel. Photo (c) European Union

Cuts of E7.5 Billion to rural development in Pillar 2, but a small increase in Pillar 1 Direct payments, all as part of a reduced overall CAP budget have been proposed by President of the European Council Charles Michel. How will EU Leaders react at next week’s summit? 

Updated 10.57 CET 15/02/2020

NEW text of the European Council MFF Conclusions 14/02/20

Michel has proposed a budget (the Multiannual Financial Framework, or MFF) budget of just over E1 trillion (E1.094 trillion) for the seven upcoming years 2012-2027. This falls short of the EU Commission’s preference by about E40 Billion, and sets the scene for a tense summit of EU Leaders which starts on 20th February.

MEPs from across the political spectrum in the European Parliament have also expressed a desire to spend more overall, and are threatening to pull the plug on the MFF vote.

The cash shortfall post Brexit, as well as the extra ambition of the EU’s flagship Green Deal and its Just transition fund are placing extra pressure on the EU to somehow do more with less.

Member States such as France and Spain tend to want to retain CAP spending, while the Netherlands and Germany typically want to tighten it, while  Central and Eastern States want to disperse funding more towards balanced regional development and on external convergence (direct payments equalization between newer and older EU member states).

More broadly, wealthier western member states tend to want to spend a small percentage of their overall income – typically 1% – in this case led by Germany, the Netherlands, Austria Sweden and Denmark. The Michel proposal sets the MFF at 1.074% GNI (Gross National Income). By comparison, the European Parliament wants a budget of 1.3% GNI, while the Commission is targeting 1.11%. 

This proposal by Michel, while totaling similarly, is significantly different from a CAP perspective to that of the Finnish presidency. This proposed a CAP budget increase of 2.1% compared to the Commission’s proposal, including reigniting the stalled external convergence progress and a proposed increase in rural development spending.

Instead, this Valentine’s Day proposal is a boon for adherents of business-as-usual, increasing funds to the income support direct payments Pillar 1, while decreasing support in Pillar 2, where the more targeted agri-environmental and climate actions are, as well as Horizon Europe (3rd level research) and rural development. However, the Irish Times reports that the proposal allows for greater transfer of Pillar 1 to Pillar 2 by member states.

As Politico’s Eddy Wax noted on twitter, there is at least some symmetry: “the €7.5 Just Transition Fund (which just happens to be the exact amount lost from pillar 2…)”. He adds:  “Total CAP budget is down €5B compared to Finnish proposal — But it is much closer to the Commission’s 2018 proposal —Overall the CAP would lose €53B compared to current EU27 level”.

Indeed Finland, by contrast, proposed putting E10B more per year into Pillar 2. This was in addition to current CAP spending, which was to be left intact. This was in a context of the Rural Development Pillar 2 fund being cut in the Commission’s overall 2018 proposal by 28%, which was more than twice that of Commission’s proposed Pillar 1 cuts, at 11%

Just how EU leaders will manage increased climate ambition with tighter purse strings and many regional considerations should make for an interesting few days from the 20th. But with such variation in CAP proposals, from the Finnish proposal to here, ag and rural policy wonks will be keeping an eagle eye on the details.

Click through to Eddy Wax’s tweet to hear not just figures but a poem appropriate to the day, or read his synopsis here (paywall). Click here for Alan Matthews analysis