EU to Set Aside Billions for Direct Payments to Small Farmers

Summary

European Union offi­cials are plan­ning to set aside bil­lions of Euros for direct pay­ments to small farm­ers despite the desire to merge fund­ing streams into a sin­gle pay­ment. The move comes after intense lob­by­ing from agri­cul­tural inter­est groups and aims to pre­vent small farms from going out of busi­ness with­out direct pay­ments from the Common Agricultural Policy.

As nego­ti­a­tions over the upcom­ing European Union bud­get rum­ble on, offi­cials in Brussels are plan­ning to set aside bil­lions of Euros for direct pay­ments to small farm­ers in the 27-mem­ber bloc.

The announce­ment comes after intense lob­by­ing from agri­cul­tural inter­est groups, and despite the European Commission’s desire to merge sev­eral fund­ing streams into a sin­gle ​“national and regional part­ner­ships” pay­ment deliv­ered to each cap­i­tal.

The objec­tive of the bud­get reforms is to boost Europe’s defense spend­ing and eco­nomic com­pet­i­tive­ness, but came after the European Commission acknowl­edged that many small farms would go out of busi­ness with­out the direct pay­ments made through the Common Agricultural Policy (CAP).

In a peti­tion addressed to the com­mis­sion, more than 3,100 farm­ing groups said com­bin­ing the CAP into the sin­gle pay­ment would leave farm­ers at risk of los­ing out to emerg­ing pri­or­i­ties, such as energy and defence.

Despite sep­a­rat­ing direct pay­ment for farm­ers from the rest of the bud­get, European Commission offi­cials expect the over­all bud­get of the CAP to fall from its cur­rent €386 bil­lion, which rep­re­sents about one-third of the E.U. spend­ing.

Carmen Crespo, a mem­ber of the European Parliament (MEP) from the cen­ter-right Popular Party in Spain and the for­mer agri­cul­ture min­is­ter of olive oil-soaked Andalusia, defended the need to ringfence CAP pay­ments to farm­ers.

“The CAP can only con­tinue to do its job if it is sep­a­rated from cohe­sion funds,” she said at a press con­fer­ence. ​“The CAP is the true foun­da­tion of agri­cul­ture as a key strate­gic sec­tor in Europe’s trade bal­ance.”

According to El Economista, merg­ing the direct pay­ments to farm­ers and CAP into the sin­gle pay­ment scheme would have cut pay­ments to farm­ers by up to 20 per­cent. Andalusia, the world’s largest olive oil-pro­duc­ing region by a sig­nif­i­cant mar­gin, received €1.3 bil­lion from the CAP in 2024.

The move to ringfence direct pay­ments to farm­ers comes after wide­spread protests by farm­ers in 2023 and 2024 led the European Commission to pro­pose changes to the CAP, includ­ing loos­en­ing envi­ron­men­tal rules for small farm­ers.

The bud­get debate is also tak­ing place against the back­drop of ongo­ing trade nego­ti­a­tions between the United States and the European Union. 

European nego­ti­a­tions told the Financial Times they expect to sign a tem­po­rary ​“frame­work,” agree­ing to the base­line ten per­cent tar­iff rate the U.S. has imposed on nearly every coun­try since the start of April, until a deal can be reached. 

According to U.S. Department of Agriculture data, the United States imported $1.5 (€1.4) bil­lion of olive oil from Greece, Italy and Spain in 2023, the last year for which a com­plete data set exists.

President Donald J. Trump has set a dead­line of August 1^st to con­clude trade nego­ti­a­tions before imple­ment­ing a 30 per­cent tar­iff on imports from the E.U.

The Trump admin­is­tra­tion has also sent let­ters to more than a dozen other coun­tries, impos­ing new tar­iff rates set to come into force on August 1^st, includ­ing a 25 per­cent tar­iff on Tunisia.

The North African coun­try, which World Bank data show was the third-largest olive oil exporter to the U.S. in 2023, pre­vi­ously faced a 28 per­cent tar­iff.

Trump also announced the rein­state­ment of 30 per­cent tar­iffs on South Africa, which exported 35,500 kilo­grams of vir­gin and extra vir­gin olive oil to the U.S. in 2023. Algeria, which shipped nearly 20,000 kilo­grams that year, also faces the orig­i­nal 30 per­cent tar­iff.

• FT
• El Economista