European Commission

Fact Sheet

N E W P E R S P E C T I V E S F O RE U R U R A L D E V E L O P M E N T

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Contents

1 . E v o l u t i o n o f E U r u r a l d e v e l o p m e n t m e a s u r e s t o t h e p r e s e n t d a y 4

2 . R e v i e w o f c u r r e n t m e a s u r e s 5

3 . R u r a l d e v e l o p m e n t p o l i c y w i t h a n e w l o o k 8

4 . T h e n e w r u r a l d e v e l o p m e n t r e g u l a t i o n – t h e s t r a t e g i c a p p r o a c h 1 0

5 . E U f i n a n c i a l s u p p o r t f o r r u r a l d e v e l o p m e n t 1 3

6 . U s e f u l s o u r c e s o f i n f o r m a t i o n 1 5

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N e w p e r s p e c t i v e s f o r E U r u r a l d e v e l o p m e n t

With over half of the population in the 25 Member States ofthe European Union (EU) living in rural areas, which cover90% of the territory, rural development is a vitally importantpolicy area. Farming and forestry remain crucial for land useand the management of natural resources in the EU’s ruralareas, and as a platform for economic diversification in ruralcommunities.

The strengthening of EU rural development policy hasbecome an overall EU priority. The conclusions of theGöteborg European Council of June 2001 made this clear,stating that: “During recent years, European agriculturalpolicy has given less emphasis to market mechanisms and,through targeted support measures, become more orientedtowards satisfying the general public’s growing demandsregarding food safety, food quality, product differentiation,

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1Covering market-related CAP support systems and direct aids for farmers.2 Known as the second pillar of the CAP.

10°W20°W30°W

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10°E 20°E

20°E

30°E

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50°E 60°E

40°N

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Source: EUROSTAT and DG Agri G.02Cartography: DG Agri GI Team 04/2004

EuroGeographics for the administrative boundaries

Rural Communities at 150 Inhab./k

Predominantly Rural (> 50 % of population living in rural communes)

Significantly Rural (15 – 50 % of population living in rural communes)

Predominantly Urban (< 15 % of population livingin rural communes)

animal welfare, environmental quality and the conservationof nature and the countryside”.

Following the fundamental reform of the first pillar1 of thecommon agricultural policy (CAP) in 2003 and 2004, themajor focus for policy reform in the new financial period(2007 to 2013) will be rural development2. As part of its con-sideration of policy and financing priorities for the 2007–13period the Commission has evaluated existing rural deve-lopment measures, and conducted a thorough review of theEU’s rural development needs.

On the basis of the EU’s strategic objectives, the new direc-tion of the CAP, and experience gained so far, the EuropeanCommission is proposing revisions to the regulation thatputs in place rural development policy. These are describedin this fact sheet.

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b) ‘Agenda 2000’

By the mid-1990s the EU had a range of instruments tomeet objectives such as agricultural restructuring, territo-rial/local development and environmental integration.These were put into a more coherent framework by theAgenda 2000 reform agreement3. This offers a ‘menu’ of 22 measures. Member States choose from this menuthose measures that suit the needs of their rural areasbest. These are then included in their national or regionalprogrammes. The EU contribution to the financing ofmeasures depends on the measure and the region con-cerned. Following Agenda 2000 these measures havebeen governed by one main rural development regulation4.

Agenda 2000 established rural development policy as the2nd pillar of the CAP, to accompany the further reform ofmarket policy (the 1st pillar). The CAP is increasingly aimedat achieving the right balance between the two pillars.

1 . E v o l u t i o n o f E U r u r a ld e v e l o p m e n t m e a s u r e st o t h e p r e s e n t d a y

The EU’s rural development policy evolved as part ofthe development of the CAP, from a policy dealingwith the structural problems of the farm sector to apolicy addressing the multiple roles of farming insociety and, in particular, challenges faced in a widerrural context.

a) Earlier evolution

The original focus was on supporting physical capital(investments) in the farm and downstream sectors.Support for processing and marketing was intended tohelp the integration of the food chain from productionthrough to marketing and contribute to the furtherimprovement of agricultural structures and of the compet-itiveness of the primary sector. Gradually attention alsoturned to human capital in the form of early retirementand vocational training.

A first territorial element was added in the 1970s via thedesignation of less favoured areas (LFAs) eligible for spe-cial measures. The aim was to slow the agricultural andrural exodus, which threatened the survival of certainrural areas and the preservation of the natural environ-ment and landscape. This was later developed into awider approach integrating LFA measures with other poli-cies aimed at assisting particular regions.

3 Set of reforms to EU policies, including in agriculture, agreed at the Summitmeeting of EU heads of government in the European Council in Berlin inMarch 1999, and setting the ‘Financial Perspectives’ for the EU budget from2000–2006.

4 Council Regulation No 1257/1999 of 17 May 1999 (OJ L 160, 26.06.1999).

c) CAP reform – June 2003

The complementarity of the two pillars of the CAP hasbeen accentuated by the recent reform of the CAP, intro-ducing ‘decoupling’, ‘cross-compliance’ and ‘modulation’(the transfer of funds from the 1st to the 2nd pillar), to beimplemented from 2005 onwards. The 1st pillar concen-trates on providing a basic income support to farmers,who are free to produce in response to market demand,while the 2nd pillar supports agriculture as a provider ofpublic goods in its environmental and rural functions, andrural areas in their development. The June 2003 agree-ment leads to a strengthening of rural development policyvia:

• new measures to promote quality and animal welfare,and help for farmers to meet new EU standards;

• provision of more EU money for rural developmentthrough a reduction in direct payments (‘modulation’)for bigger farms.

The agreed modulation rate of 5 % will result in additionalrural development funds of EUR 1.2 billion a year beingmade available. The reform also includes an extension ofcurrently available instruments for rural development. So,for example, support measures for young farmers can bereinforced.

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Market policyincome support

Fi r s t P i l l a r

RD policypublic goods

S e c o n d P i l l a r

Foodproduction

Environmentalfunction

Ruralfunction

S u s t a i n a b l e a g r i c u l t u r e a n d r u r a l a r e a s

2 . R e v i e w o f c u r r e n t m e a s u r e s

The EU’s policy and spending needs for the next finan-cial perspective period (2007 to 2013) have beenexamined in a series of reviews of past and presentrural development policies.

a) The review exercise

Agenda 2000 required Member States and regions toundertake a mid-term evaluation of their rural develop-ment programmes, to be submitted to the Commissionby end-2003. The aim was to allow amendments to bemade to programmes to improve performance or to res-pond to changing needs and priorities in the programmearea.

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The European Commission was required by the 2001Göteborg Summit to produce a synthesis report, based onthe mid-term evaluations done by Member States.

The Commission has conducted a thorough analysis ofrural development policy, including an Extended ImpactAssessment (EIA) of future rural development policy. TheEIA set objectives for future policy, compared policy op-tions and outlined the results of stakeholder consultationexercises. It drew conclusions for post-2006 rural develop-ment policy, and explained its content and deliverymechanisms. The conclusions of the EIA are reflected inthe proposed new rural development regulation.

b) Priorities identified

The main areas needing consideration in future ruraldevelopment policy were encapsulated in the conclu-sions of the Second European Conference on RuralDevelopment, held in Salzburg in November 2003,“Planting seeds for rural futures – rural policy perspectivesfor a wider Europe”. These include:

• agriculture and forestry: these sectors continue to playan essential role in shaping the rural landscape and inmaintaining viable rural communities. There is a need tohelp European farmers take up their multifunctional roleas custodians of the countryside and market orientedproducers in the whole EU, including disadvantagedareas and remote regions. There is still strong justifica-tion for public support for EU rural development policyto facilitate the ongoing process of agriculturalrestructuring, the sustainable development of ruralareas and a balanced relationship between the country-side and urban areas;

• wider rural world: the development of rural areas canno longer be based on agriculture alone. Diversificationboth within and beyond the agricultural sector is in-dispensable in order to promote viable and sustainablerural communities;

• food quality and safety: European citizens attachincreasing importance to the safety and quality of theirfood, to the welfare of farm animals, and to the preser-vation and enhancement of the rural environment;

• access to public services: in many rural areas pooraccess to public services, the lack of alternative employ-ment and age structure significantly reduce develop-ment potential, particularly opportunities for womenand young people;

• covering the EU’s territory: rural development policymust apply in all rural areas of the enlarged EU in orderthat farmers and other rural actors can meet the chal-lenges of ongoing restructuring of the agricultural sector, the effects of CAP reform and changing patternsof agricultural trade;

• cohesion: EU rural development policy already makesan important contribution to economic and social cohe-sion, and this should be reinforced in the enlarged EU;

• stakeholder participation: a wide range of stake-holders with an active interest in ensuring the sustain-able economic, environmental and social developmentof Europe's rural areas should participate in devisingrural development measures. Future policy should enlistEU support for rural areas through bottom-up local part-nerships by building on the lessons learnt from theLeader approach;

• partnership: policy should be implemented in partner-ship between public and private organisations and civilsociety (in line with the principle of subsidiarity). To res-pond effectively to local and regional needs, a full dia-logue between rural stakeholders in the drawing up andsubsequent implementation, monitoring and evaluationof programmes is needed. Partnerships must have great-er possibilities to learn from each other through net-working and exchange of best practices;

• simplification: significant simplification of EU ruraldevelopment policy is necessary and urgent. Deliverymust be based on one programming, financing and con-trol system tailored to the needs of rural development.

The table that follows summarises the key messages fromthe rural development evaluations carried out in MemberStates during the previous and current programmingperiods.

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Key messages from rural development evaluations

Relating to the policy /strategy and programme approach• A better coordination between rural development programmes and other European or national support schemes, as well

as between measures within individual programmes is needed to maximise the benefits and avoid loss of potential synergies.

• The viability of rural areas can best be maintained and enhanced through territorial approaches which target multiple sec-tors in the rural economy. They should be based on strengthened local /regional coordination and management struc-tures and be open to bottom-up participation of local actors, starting from the programming phase.

• The large number of available measures may include some with partly contradictory objectives, but it allows MemberStates/regions to select a package of measures adjusted to their specific needs. This means that a realistic, precise defi-nition and quantification of programme objectives, a careful selection of measures, and a precise targeting of benefi-ciaries is a pre-condition for successful programmes. A lack of targeting increases the danger of deadweight, a focusing ofresources may increase programme effectiveness.

Relating to the delivery mechanism / implementation• Networking and exchange of good practice, both nationally and cross-border, clearly increase the effectiveness of pro-

grammes. This should be supported both at EU and national level, starting already at programming stage. Promotion ofmeasures and guidance for potential applicants also need to be improved.

• Funding provisions and delivery mechanisms should be simplified, especially avoiding different rules for different funds.At the same time simplifications regarding the definition of measures and their eligibility conditions should not lead to ablurring of programme objectives and to a loss of targeting capacity and added value at European level.

• The Commission must give clear guidance for monitoring and evaluation requirements in Member States already at pro-gramming stage. The monitoring and evaluation systems should be better adapted to each other.

Relating to individual measures• Farm investment: effective (increased income for farmers) mostly if well-targeted towards specific needs, e.g. towards

modernisation of less competitive farms; however, deadweight exists where ‘traditional’ investments for increase in pro-ductivity are made on already highly productive farms.

• Less favoured areas: a ‘significant’ proportion of the disadvantages of LFAs is compensated; a certain positive impact onpreventing land abandonment and population decline can be established, as well as clear positive effects on the en-vironment by maintaining sustainable farming. However, the effectiveness is reduced by unclear criteria for the definitionof zones so that cases of under- and overcompensation are very likely.

• Processing and marketing: the benefits of the scheme for primary producers are doubtful; some positive effects of invest-ments on hygiene and animal welfare and on employees’ health and safety. For investments regarding restructuring there is ahigh risk of deadweight or at best trigger-off effect, therefore better targeting needed.

• Agri-environment measures: there are clear positive effects regarding soil and water quality; equally on habitat protec-tion and biodiversity and on landscape protection, although it is not always possible to quantify environmental benefits.

• Young farmers: the decision by young farmers to set up is only partly influenced by aid; therefore, scheme is only partlyrelevant for encouraging the setting up of young farmers; better targeting and combination with other measures needed.

• Early retirement: in some Member States very relevant for earlier transfer of holdings and subsequent improvement ofeconomic viability of holdings.

• Training: support is very relevant and in most cases improves the trainee’s situation; coherence with other measurescould be improved.

• Forestry: clear positive impact on maintaining forest resources, but no significant impact on economic and social aspectsof rural development.

• Among the measures aiming at the wider rural economy and community, village renewal and conservation of ruralheritage was particularly successful, not least due to the high degree of participation of the local population.

Relating to Leader• Leader is marked by its very high adaptability to all different governance contexts and specific challenges for different

rural areas; it is highly responsive to small-scale activities and it changes the social fabric in rural areas. It mobilised a highdegree of voluntary efforts and fostered equal opportunities in rural areas.

An appropriate balance between these three policy axesneeds to be found. Rural development policy should, inprinciple, apply in all rural areas as adjustments to CAP mar-ket measures take effect. Land management requirementsand agri-environment measures are relevant in all areas.

a) Policy objectives

Objectives of axis 1: competitivenessWhile agriculture is increasingly losing importance as a predominant activity in a growing number of rural areas, itstill matters a great deal for the management of the EU territory, for its contribution to rural economies, and forsupplying food and public goods and services. This is whyefficiency and competitiveness remain key aims whiletaking into account the diversity of agricultural potential indifferent rural areas, especially in the new Member Stateswhose rural areas will continue to undergo far-reachingstructural change. Competitiveness requires that a reason-able balance is found between farm viability, environ-mental protection, and the social dimension of rural devel-opment.

Pursuing competitiveness means improving the eco-nomic performance of agriculture by, for example, reducingproduction costs, increasing the economic size of holdings,promoting innovation and more orientation towards themarket. Support measures for physical investments (farminvestments, processing / marketing; agricultural infra-structure) and the measures related to human capital(early retirement, young farmers, training and advisoryservices) need to be made more effective.

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3 . R u r a l d e v e l o p m e n tp o l i c y w i t h a n e w l o o k

Analysis of the evolution of the CAP and of the situa-tion of rural areas as well as the results from stake-holder consultations confirm that the focus of the EU’sfuture rural development policy should be on threemain areas:

• competitiveness of the agricultural and forestry sec-tor (axis 1): increasing the competitiveness of the agri-cultural sector through support for restructuring follow-ing CAP reform, further opening of markets and takinginto account the restructuring needs in the new MemberStates (rural areas have a significantly lower income thanthe average, an ageing working population, and a grea-ter dependency on the primary sector);

• environment / land management, agriculture andforestry – the main land users (axis 2): enhancing theenvironment and countryside through support for landmanagement (including rural development actionsrelated to ‘Natura 2000’ sites) to ensure that agricultureand forestry make a positive contribution to the country-side and the wider environment;

• wider rural development – placing agriculture andforestry in their rural context (axis 3): improving thequality of life in rural areas and promoting diversificationof economic activities through measures targeting thefarm sector and other rural actors (to address such prob-lems as poor access to basic services, social exclusion,and a narrower range of employment options), to helpmaintain the attractiveness of the EU’s diverse rural areas(remote, intermediate and peri-urban) and their culturalheritage, and to foster the links between agriculture andforestry and other sectors of the local economy.

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Increasing competitiveness must also take advantage ofthe opportunities offered through diversification of economic activities, a focus on quality and value-added products that consumers demand, including non-food products and biomass production, and on cleaner andmore environmentally friendly production techniques.

Objectives of axis 2: land management /environmentPayments under axis 2 should aim at ensuring the deliveryof environmental services by agri-environment measuresin rural areas, and at preserving land management (includ-ing in areas with physical and natural handicaps). Theseactivities contribute to sustainable rural development byencouraging the main actors (farmers, foresters) to keepup land management so as to preserve and enhance thenatural space and landscape. This means protecting andimproving the environmental resources, and ensuring thesustainable use of forestry resources. Such measures alsohelp prevent the abandonment of agricultural land usethrough payments to compensate natural handicaps orhandicaps resulting from environmental restrictions. Co-financed activities should clearly target EU prioritiessuch as combating climate change, enhancing biodiversityand water quality, or reducing the risk or impact of natu-ral disasters.

Objectives of axis 3: the wider rural economyA central objective of axis 3 is to have a ‘living countryside’and to help maintain and improve the social and eco-nomic fabric, in particular in the more remote rural areasfacing depopulation and in the peri-urban areas.Investment in the broader rural economy and rural com-munities is vital to increase the quality of life in rural areas,via improved access to basic services and infrastructureand a better environment.

Making rural areas more attractive also requires promo-ting sustainable growth and generating new employmentopportunities, particularly for young people and women,as well as facilitating the access to up-to-date informationand communication technologies. On-farm diversificationtowards non-agricultural activities, assistance for off-farmactivities, and strengthening the links between agricultureand other sectors of the rural economy play an importantrole in this.

b) Delivery/governance

Experience gained from the previous and current pro-gramming period can feed into the improvement ofinstruments for the delivery of rural development policy.Authorities at European, national, regional and local levelsneed to cooperate to identify needs, to define appropriatemeasures, and to manage EU instruments and program-mes. Specific areas for improvement include:

• a single funding and programming system that wouldobviate the need to comply with different rules for differ-ent funds (which has led to a blurring of programmeobjectives and a loss of targeting capacity and addedvalue at European level);

• clearer target setting and well defined strategies linkingobjectives (and the means to achieve them) to allow better assessment of policy outcomes and accountingfor the money the EU is spending on rural development;

• simplification of policy implementation, and a cleardemarcation of the responsibilities of the Member Statesand of the Commission;

• clear guidance for monitoring and evaluation require-ments in Member States.

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4 . The new rural development regulation– the strategic approach

The Commission’s proposal of 14 July 20045 aims toallow the EU’s rural development policy to movetowards a more strategic approach, reinforcing it andsimplifying its implementation. To ensure the sustain-able development of rural areas it is necessary tofocus on a limited number of core priority objectivesrelating to agricultural and forestry competitiveness,land management and environment and quality of lifeand diversification of activities. This would allow EUco-financing for rural development to focus on com-monly agreed EU priorities for the three policy axes,while leaving sufficient flexibility at Member Stateand regional level to find a balance between the sec-toral dimension (agricultural restructuring) and theterritorial dimension (land management and socio-economic development of rural areas).

Progress is needed in both policy content and deli-very. The large number of programmes, programmingsystems and different financial management and con-trol systems in the current programming period haveconsiderably increased the administrative burden for the Member States and the Commission, and de-creased the coherence, transparency and visibility ofrural development policy.

A first important step is therefore to bring rural devel-opment under a single funding and programming framework.

a) A new rural development fund

The new fund would operate with rules adapted to multi-annual programming such as ‘differentiated appropria-tions’and make use of organisational structures and proce-dures such as nationally accredited paying agencies andan annual clearance of accounts with which MemberStates have a long experience and which have a proventrack record. One funding and programming system forrural development would be a major simplification compared to the current situation. The streamlining and simplification of the conditions for rural developmentmeasures increases their implementation flexibility, asdoes the financial programming at axis level (allowingMember States to shift easily between measures within anaxis).

b) Strategy formulation

The basis for future rural development policy would be aCommission strategy document proposing the EU’s priori-ties for rural development, to be presented to the Counciland the Parliament. It will identify strengths and weak-nesses at EU level and core indicators to measure progressin achieving priorities. The EU strategy would be the basisfor the national strategies and programmes of theMember States which would be subject to Commissionapproval. These would propose quantified objectives andresult indicators for each of the three thematic policy axesand for the Leader axis. To ensure a balanced strategy aminimum funding for each thematic axis will be required.The proposed minimum funding percentages of 15 %, 25 %and 15 % for respectively axis 1, 2 and 3 are a safeguard toensure that each programme reflects at least the threemain policy objectives, but the percentages are set suffi-ciently low to leave Member States or regions a high margin of flexibility (45 % of EU funding) to emphasize thepolicy axis they wish in function of their situation andneeds. For the Leader axis a minimum of 7 % of the EUfunding is reserved. The Leader expenditure counts forthe three policy objectives.

c) Implementation of the programmes

A reinforced monitoring, evaluation and reporting systembased on a common EU framework agreed between theMember States and the Commission will be introduced, to

5 COM(2004)490 final: Commission proposal for a Council regulation on support for rural development by the European Agricultural Fund for RuralDevelopment (EAFRD): 14.07.2004.http://europa.eu.int/eur-lex/en/com/pdf/2004/com2004_0490en01.pdf

difficulty of maintaining agricultural activity. Detailed pro-visions and criteria for the new delimitation will be laiddown in the implementing regulation. For mountain areasand areas with specific handicaps the current criteria willcontinue to apply.

A general condition for the measures under axis 2 (atbeneficiary level) will be respect of the relevant EU andnational mandatory requirements.

The wider rural economy (axis 3)There are two groups of measures under axis 3:

• Quality of life• Economic diversification

The preferred implementation method would be throughlocal development strategies targeting sub-regional en-tities, either developed in close collaboration betweennational, regional and local authorities or by using theLeader bottom-up approach (selection of the best localdevelopment plans of local action groups – LAGs – repre-senting public-private partnerships). The horizontal appli-cation of certain measures under axis 3 would howeverremain possible.

e) Leader

The Leader model is to be continued and consolidated atthe EU level, although those Member States and regionsthat wish could apply it on a wider scale. Each programmewill contain a Leader axis to finance the implementationof the local development strategies of LAGs built on thethree thematic axes, the operating costs of LAGs, the co-operation projects between them, experimental and pilotapproaches and the capacity building and animationnecessary for the preparation of local development strategies (in new Leader territories). An EU rural develop-ment observatory will assist the Commission in the imple-mentation of the policy.

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ensure more transparency and accountability for the useof EU money. Drawing on the annual national synthesisreports on the execution of programmes and the imple-mentation of national strategies, the Commission wouldreport annually on progress in the delivery of EU prioritiesfor rural development and make any necessary proposalsfor adjusting the EU rural development strategy.

d) Axes and measures

Future policy will be built around the three thematic axes.For each axis a range of measures would be available (seetable on page 12). Conditions under which the measurescan be implemented have been streamlined and simpli-fied, in particular for Competitiveness (axis 1). Supportlevels available under each measure are set out in theCommission’s proposal.

Competitiveness (axis 1)Under this axis measures fall into three groups:

• Human resources• Physical capital• Quality

Some transitional measures are also envisaged.

Land management/environment (axis 2)Measures are in the following groups under axis 2:

• Sustainable use of agricultural land• Sustainable use of forestry land

The agri-environment measure will be compulsory.

The existing LFA measure should be redefined as far as thedelimitation of the ‘intermediate zones’ is concerned.Existing delimitation for the intermediate zones had beenpartly based on outdated socioeconomic data. The newdelimitation will be based on soil productivity and climaticconditions, and on the importance of extensive farmingactivities for land management, low soil productivitiesand poor climatic conditions giving an indication of the

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f) Summary of axes and measures

EU strategyObjective setting National strategy

RD programmes

Human resources:

Vocational training and information actionsYoung farmersEarly retirementUse of advisory services (including for meeting standards)Setting-up of farm management, relief and advisory and forestry advisory servicesPhysical capital:

Farm /forestry investmentsProcessing/marketing

Axis 1 measures Agricultural/ forestry infrastructurecompetitiveness Restoring agricultural production potential

Quality of agricultural production and products (2003 CAP reform):

Meeting standards temporary supportFood quality incentive schemeFood quality promotionTransitional measures:

Semi-subsistenceSetting-up producer groups

funding share minimum 15%EU co-financing rate maximum 50/75%

territorial application all rural areas

Sustainable use of agricultural land:

Mountain LFAOther areas with handicapsNatura 2000 agricultural areasAgri-environment/animal welfare (compulsory)Support for non-productive investmentsSustainable use of forestry land:

Axis 2 measures Afforestation (agricultural/non-agricultural land)land management Agroforestry

Natura 2000 forest areasForest environmentRestoring forestry production potentialSupport for non-productive investments

baseline (agriculture) cross-compliancefunding share minimum 25%EU co-financing rate maximum 55/80%territorial application all rural areas

Quality of life:

Basic services for the rural economy and population (setting-up and infrastructure)Renovation and development of villages, protection and conservation of the rural heritageVocational trainingCapacity building for local development strategies

Axis 3 measures Economic diversification:

wider rural Diversification to non-agricultural activitiesdevelopment Support for micro-enterprises

Encouragement of tourism activitiesPreservation and management of the natural heritage

implementation preferably through local development strategiesfunding share minimum 15%EU co-financing rate maximum 50 / 75%territorial application all rural areas

implementation Leader approach for selected territories within the scope of the 3 thematic axesfunding share minimum 7%

Leader axis reserve 3% of overall EU RD funding (excluding modulation)

EU co-financing rate maximum 55/80%

territorial application all rural areas, selected territories

Proposed EU rural development policy 2007–2013

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5 . E U f i n a n c i a l s u p p o r tf o r r u r a l d e v e l o p m e n t

On 14 July 2004, the Commission put forward a pack-age of proposals. The first important step is to bringrural development under a single funding and pro-gramming framework. The new rural developmentfund will operate with rules adapted to multi-annualprogramming.

a) Proposal for a new financial instrument

The draft regulation on the financing of the CAP envisagesthe creation of two new funds in 2007, each financing oneof the two pillars of the common agricultural policy:

• The European Agricultural Fund for Guarantee (EAFG)for Pillar 1

• The European Agricultural Fund for Rural Development(EAFRD) for Pillar 2

EAFRD financing rules would differ to a degree from thoseoffered by the EAFG. Whilst the EAFG finances its part ofthe CAP on the basis of monthly declarations, financingby the EAFRD is based on ‘differentiated appropriations’ 6

and includes pre-financing, intermediary payments andfinal payments.

6 Under a budget commitment appropriation entered in year N payments can be made until the end of year N+2.Payments which do not exhaust the commitment are automatically decommitted once N+2 has expired.

8 000

9 000

10 000

11 000

14 000

13 000

12 000

15 000

16 000

17 000

18 000

2006 2007 2008 2009 2011 2012 20132010

EU -25

EU -27

mill

ion

EU

R

EAFRD

2004 prices

current prices

b) New funds available

Under the proposal the EAFRD will have at its disposalEUR 56 billion corresponding to the current ‘Guarantee’section of the budget, EUR 33 billion from the existing‘Guidance’ section and EUR 7 billion coming from theapplication of the modulation system. This results in totalEU funding for rural development, over the 2007 to 2013period, of EUR 96 billion (at constant 2004 prices).

The graph below shows total EU rural development fund-ing available for the next period in current and constantprices. In 2013 the funding for EU-27 (including Bulgariaand Romania) will amount to EUR 14.2 billion in constant2004 prices (the lower line on the graph).

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c) Financial controls

Member States will have to ensure that the relevant man-agement and control systems have been set up in accor-dance with the various detailed requirements, inter alia:

• clear definition of the functions of the bodies concernedin the management and control and a clear allocation offunctions within each body;

• adequate separation of functions between the bodiesconcerned in the management and control, and withineach such body;

• sufficient resources for each body to carry out the func-tions which have been allocated to it;

• efficient internal control arrangements;• an effective system of reporting and monitoring;• arrangements for auditing of the functioning of the

system/systems and procedures to ensure an audit trail;• reliable accounting, monitoring and financial reporting

systems.

Under the proposed new approach, the Commissioncould reduce or suspend payments for both funds, whilstthe clearance of accounts and the conformity clearanceinstruments are used to verify the sums spent by theMember States.

The heads of paying agencies would submit accountscovering all reimbursement demands during a year. Thiswould be accompanied by a statement of assurance. Theaccounts and the statement of assurance will be the mir-ror, at Member State level, of the statement of assurancegiven by the Director-General of the Commission’sAgriculture Directorate-General.

Annual accounts would be accompanied by an auditopinion and report of an independent audit service. Thisaudit service will work in accordance with InternationalAudit Standards and rules set by the Commission.

These elements should simplify the financial manage-ment of the CAP by making the respective roles and re-sponsibilities of the Commission and the Member Statesclearer and more transparent.

d) Co-financing

EU co-financing rates would be at axis level, with a mini-mum of 20 % and a maximum of 50% (75 % in ‘convergenceregions’ 7). For axis 2 and the Leader axis the maximumrate would be 55% (80 % in convergence regions), ex-pressing the EU priority attached to these axes. For theoutermost regions the maximum co-financing rates areincreased by 5 points.

3 % of overall EU rural development funding available forthe period (excluding modulation), would be kept inreserve to be allocated in 2012 and 2013 to the MemberStates with the best performing Leader axes.

7 Member States and regions whose per capita GDP is less than 75 % of the EU average.

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6 . U s e f u l s o u r c e s o f i n f o r m a t i o n

European Commission Agriculture Directorate-General: Rural Development http://europa.eu.int/comm/agriculture/rur/index_en.htm

European Commission Agriculture Directorate-General: Rural Development“Extended impact assessment” on support to Rural Development by the European Agricultural Fund for Rural Developmenthttp://europa.eu.int/comm/agriculture/rur/publi/propimpact/text_en.pdf

KF-60-04-692-EN-C