As the Euro crisis strains financial solidarity in the EU, the transfer of billions of euros from one country’s taxpayers to another country’s farmers is politically controversial. Let us consider only member states’ receipts of direct income support under the first pillar, which total €42 billion. Member states have some discretion in programming this money, but it is safe to say that it does not create commensurate value for European citizens. When these receipts are compared with member states’ contributions toward financing the direct income support, striking imbalances emerge.
- The most important net contributors to direct income support in 2010 are Germany with €2.44 billion and Italy with €1.6 billion. Other important net contributors are the Netherlands, Belgium and the United Kingdom.
- The biggest beneficiaries , each gaining more than €1 billion, are Greece, Poland and Spain, followed by France, Ireland and Hungary. All these countries defend a large CAP budget and a strong first pillar.
- The net balance for all major net payers will further deteriorate in the coming years. In 2013 , Germany will make a net contribution of roughly €3 billion, followed by Italy with €1.9 billion, the Netherlands with €900 million and Belgium with €800 million. Importantly, France sees its net gain shrink from €868 million in 2010 to less than half in 2013.
- While the EU-12 member states increasingly benefit from direct income support, they will be much better off by shifting the money from the CAP to the EU’s cohesion funds. The EU-12 receives a share of every € spent that is three times higher for cohesion funds than for direct income support under the CAP. The ratio for Estonia is 5 to 1, for the Czech Republic, Latvia and Romania 4 to 1 or higher, and for Poland and Slowenia above 3 to 1.
How can the old-style CAP continue if it requires Germany to give away some €3 billion a year, if France’s net receipts shrink drastically and if the EU-12 has better options to attract EU funding? The closer that CAP reform negotiations come to the finish line, the more will member states look at their financial bottom line. ‘How much do we pay, how much do we get?’ That question will concern finance ministers and heads of states at least as much as the objectives and instruments the CAP funds are spent on.
So, is examination of member states’ financial net contributions a shameful exercise: hiking up national egoism and ignoring the larger benefits of European integration? Not at all. If CAP funds were spent exclusively on European public goods, such as climate change mitigation or the protection of endangered species, national bottom lines would indeed not matter. The money should be allocated wherever greenhouse gas reductions can be achieved most cheaply or where the need for wildlife protection is the greatest.
But as things stand, CAP subsidies are mostly free handouts to member states and their farming communities – they do not create commensurate value for European citizens. This applies in particular to the Single Farm Payment which farmers receive as long as they keep their land in ‘good agricultural and environmental condition’. These minimum conditions largely correspond to the legal baseline – that is, all farmers need to do is to respect the law.
Making those who pay for this waste aware of their unfavorable position actually serves European integration. The CAP absorbs more than 40% of the EU budget, depriving the EU of the renewed momentum it could gain if it became more relevant for attaining the priorities of the future. Citizens are ready to support an EU that creates real value added – by tackling climate change, promoting European infrastructure, or enhancing internal and external security. They are never going to endorse an EU that lavishes money on one politically powerful sector to the detriment of the entire economy.
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