European Agricultural Guarantee Fund

Period: 2007-2013

Budget: NA

The financial system for the Common Agriculture Policy has been simplified and brought into a new single legal framework establishing two funds – the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD). These two funds replace, from 2007, the European Agricultural Guidance and Guarantee Fund.

The EAGF finances expenditure origin from application of the market and price policy. The Commission and the Member States manage these expenditures jointly.

• Direct payments to farmers under the CAP

• Refunds for export to third countries granted under the Common Organisation of Markets (CMO)

• Intervention payments to regularise agricultural markets

• Certain informational and promotional measures

It also finances measures, which are not strictly related to the management of agricultural markets. The Commission manages these expenditures centrally.

• Specific veterinary and plant health measures, inspections of food stuffs and animal feed, animal disease eradication and control programmes

• Instruments intended to provide information on the common agricultural policy including evaluation actions

• Promotion of farm production

• Measures to conserve, characterise, collect and use genetic resources in farming

• Farm survey system

Single payment scheme (SPS)

The single payment scheme introduces an annual payment with the main aim of guarantying more stable incomes for farmers. The support is based on the entitlements from the 2000 - 2002 period (except for New Member States) and is granted to farmers who hold eligible hectares. Eligible hectares normally include all types of agricultural land except land used for permanent crops. This new system cuts the link between support and production and the main difference is that the aid no longer depends on the type of production. Since 2005 or 2006, this system applies to the majority of the common market organisations. The Member States could opt for a transitional period ending 1 December 2005 or 31 December 2006.

To receive aid, the farmers must comply with the cross compliance standards, which mean they must prove that they keep their land in a good agricultural condition and they comply with public health, animal and plant health, the environment and animal welfare standards.

If the farmer fails to comply with these rules, the direct payments may be reduced by 5- 15 % and by at least 20 % in the longer run and the producer might be excluded from receiving aid.

The farmers must also set aside part of their land, except land used for organic production or for materials not intended for human or animal consumption.

The entitlements may be transferred, but only after the system is introduced and only within the Member States and in some cases only within regions.

The main reasons for the introduction of the Single Payment Scheme was to:

• Allow farmers to produce according to the market demand

• Promote environmentally and economically sustainable farming

• Simplify CAP application for farmers and administrators

• Strengthen the EU's position in WTO agricultural trade negotiations

DG Agriculture and Rural development

Council regulation (EC) No 1290/2005 on financing the CAP PDF