CAP Reform Profile - Germany
Last updated: 26 February 2009.
Germany’s official position is focused on the maintenance of direct payments at current levels until 2013 at the very least. At present, the German government will not accept a decrease in direct payments or an increase in the rate of modulation in order to increase funding for Pillar 2 measures. Germany is against the proposal to increase milk quotas and would prefer a milk fund to be introduced and funded through Pillar 1. The view of environmental bodies and NGOs differs significantly to the more conservative outlook of the government and the main farmers union, the DBV.
The key aspects of the German position on future CAP reform are provided below. Statements from the main actors are reviewed. The main issues arising from the EU Budget Review for Germany are also discussed.
Much of this article refers to the position as advanced by Horst Seehofer. He resigned as the German Minister for Agriculture on 27 October 2008 in order to assume the role of Minister of Bavaria, following the state elections held on 28 September. His successor is Ilse Aigner (43), also from the CSU (Christian Social Union). She was a rapporteur for the agrarian budget from 2002 to 2005, but is considered to have limited experience of agricultural policy, as her main focus to date has been education and research. She is known to be in favour of a more innovation friendly policy concerning GMOs. She can be expected to follow the position adopted by Seehofer, as outlined below. This article will be updated to reflect any changes to the German position that may result from the change in Minister.
1 A Summary of the German Position on the Future Reform of the CAP
In accordance with its coalition agreement, the German government, fronted by the then Federal Minister of Agriculture Horst Seehofer, state that reliability is the most important principle that should apply to debates about the future development of agricultural policy. Minister Seehofer, a member of the conservative Bavarian Christian Social Union (CSU), did not see the Health Check as a fundamental reform of CAP but rather, as a fine-tuning of the most recent reform completed in 2003. This is very much in line with the scope of the CAP Health Check, as set out by Mariann Fischer Boel, the current EU Commissioner for Agriculture.
Seehofer viewed the following aspects of the Commission’s May 2008 Health Check proposals in a largely positive light:
- Further de-coupling of direct payments (for those Member States that have not implemented full decoupling yet);
- Regionally standardised single payment;
- Simplifications to cross compliance;
- The suspension of obligatory set-aside.
Whilst accepting these proposals in broadly positive terms, Seehofer was against introducing significant changes to the CAP before 2013. In particular, degression (i.e. direct payments decreasing in size over time) and progressive modulation met with his disapproval. The German government wants to prevent a reduction to the size of direct payments. They are therefore against the capping of direct payments based on the size of the payment received by the beneficiary and are not in favour of an increase to the rate of compulsory modulation. Underlying this position is the desire of the German government to avoid any changes to the current pattern of the redistribution of CAP funds within Germany as well as across the EU.
A key issue for Germany is the phasing out of milk quotas. In order to facilitate structural change in milk production, Ministers at both the Federal and the Länder levels of government wanted to see the introduction of supporting measures to assist farmers during a transition period as milk quotas are raised and then removed. The Ministers argued that new perspectives are necessary for those regions and enterprises where there are few, if no, alternatives to dairy production. The increase of milk quota, proposed by the European Commission, was seen as the wrong way to support the sector. Thus, Germany considered the proposal made by the Commission in the Health Check as problematic and would prefer to maintain a common milk policy in the future.
In contrast to the view of the mainstream agrarian governmental coalition, environmental groups (such as NABU, BUND and WWF) and the Green Party were convinced that the Health Check was a step towards a more sustainable European agricultural policy. However, they stress that the proposed measures were not sufficiently far-reaching. They consider the strengthening of Pillar 2 through an increase in compulsory modulation as the most important aspect of the Health Check, clearly in contrast to the view of the government. In the future, they argue, payments should be granted for the provision of public goods.
The response of politicians and stakeholders to the eventual Health Check compromise was rather mixed. In particular, there were conflicting views between different Länder, political parties and stakeholder groups on two key elements of the Health Check: progressive modulation and the milk fund. See this news item for more information.
As a net contributor to the EU budget, Germany’s focus for the 2008/09 EU Budget Review is mainly on the efficient use of financial resources as well as on recognising the budgetary limits that are likely to be imposed by any future EU financial framework. Because of this, setting priorities for European spending is seen as a fundamental task.
The German government has stressed that the EU will continue to need a Common Agricultural Policy with an appropriate budget. For the post-2013 period, it argues that further CAP reform is needed. At this point, the elimination of classic elements such as price support and production quota should be sought. Instruments should be adapted to deal with new conditions, such as the growing global demand for agricultural commodities. The future design of European agricultural policy should also take on board the outcomes of the burgeoning debate on the justification for public intervention in agriculture.
2 The Key Issues Shaping the CAP Reform Debate in Germany
2.1 Statements of the German Government and Agrarian Stakeholders
The coalition agreement of the current German government – composed of the Social Democrats and the Christian Democratic Union under the lead of the conservative chancellor Angela Merkel – highlights that the most important aim of German agricultural policy is to strengthen all kinds of agrarian enterprises. In particular, the government is seeking to improve agrarian competitiveness. It states that all farming enterprises should be granted equal market opportunities irrespective of their size, production profile and legal form. The coalition explicitly rejects the capping of direct payments.
In terms of financial resources for both Pillar 1 and 2 the government states: ‘For reasons of planning certainty and dependability, the Federal Government upholds the unanimous decision reached by the European heads of government and state in October 2002 on financing Pillar 1 of EU agricultural policy. Financing for Pillar 2 must be adequately safeguarded and the balanced development of the two Pillars must be secured.’
The Federal Government aims to underpin the role of agriculture – in terms of food security, the supply of commodities, maintaining the landscapes and the stability of rural regions – with fair and dependable governance. Reliability is a key word used in the coalition agreement.
Strengthening the competitiveness of German farmers and expanding the export of German agricultural commodities are the maxim of this mainly conservative agrarian coalition.
Seehofer highlighted in public speeches that the abolition of obligatory set-aside provides an opportunity to increase production. He viewed this as a positive development, and argued that less bureaucratic and more efficient instruments should replace it; furthermore, he suggested more precise instruments could result in better environmental outcomes. This is in line with the general direction of policy of the German government. Seehofer also focused on enhancing the export orientation of German agribusiness.
In comparison with his predecessor, Renate Künast, a member of the Green Party, a significant shift in policy focus has taken place. In the recent past – before the so-called ‘agrarian turnaround’ of 2001 – an alliance between the DBV (the German Farmers Union ) and the Federal ministry of food, agriculture and consumer protection (BMELV ) has formed. Environmental concerns were much more dominant under Künast than they were under Seehofer or are now under Aigner. The minister and the farming lobby now make similar arguments. Strengthening the competitiveness of German farmers and expanding the export of German agricultural commodities are the maxim of this mainly conservative agrarian coalition.
Minister Seehofer essentially wanted to provide reliability for German farmers as they plan the development of their businesses. This means making limited policy changes, and as such, the German government refuses to enter a debate about a substantial reform of the CAP at present. Many of the Health Check proposals were therefore rejected, although some are seen to be less critical. For example, the further decoupling of direct payments is seen as a step towards the more equal competition in the EU. The government’s position on modulation, cross compliance, the ‘new challenges’ and milk quotas are summarised below.
2.2 A Higher Rate of Compulsory Modulation
The AMK (Ministerial Conference on Agriculture ), which consists of the ministers of all the German Länder, emphasises that farmers need a stable agricultural policy in order to make planning decisions. Given this, the Länder – as well as the federal minister and the DBV – strictly rejected the Commission’s proposal to increase the rate of compulsory modulation. They make two counter-arguments. First, that a higher rate of modulation will result in the weakening and decreased liquidity of agrarian enterprises. Second, that there is a lack of financial resources in some Länder to co-finance the extra amounts raised through modulation. They emphasised that any reduction to direct payments – either in the form of modulation or in the form of capping – is not going to be accepted by the German government or the farmer’s lobby before 2013.
2.3 Expanding the Role of Cross Compliance
Both the German government and the farmer’s lobby highlight the importance of simplifying cross compliance. In particular, the integration of new Regulations or Directives within the list of Statutory Management Requirements was not seen as acceptable. The AMK demanded significant simplifications with respect to controls – instead of the integration of new standards and regulations. In particular, it was argued that the less important aspects of Annexes III and IV of Regulation 1782/2003 should be deleted without replacement – although the areas of concern were not actually specified.
2.4 The Use of Article 68
The DBV is strictly against reducing direct payments. Therefore, they reject the use of Article 68 (previous Article 69).
2.5 The ‘New Challenges’
The Minister, as well as the AMK and the DBV, acknowledged the relevance and importance of the so-called new challenges; namely risk management, climate change, water management, bio energy and biodiversity. They argued that the role of agriculture in terms of it being a cause and/or solution to these issues should be thoroughly evaluated. Previous efforts and measures should also be taken into account.
Despite this general acknowledgment, any increase in financial means to meet these challenges is rejected outright. Instead of increasing financial support via a higher modulation rate, it is argued that Pillar 2 measures should be modified in order to meet the ‘new challenges’ without any further financial backing.
Instead of increasing financial support via a higher modulation rate, it is argued that Pillar 2 measures should be modified in order to meet the ‘new challenges’ without any further financial backing.
2.6 Milk Quotas
The reform of the milk market is a big issue for the government as well as for stakeholders like the DBV. All relevant institutions refused an increase to milk quotas, as proposed by the European Commission. An increase is not seen as a suitable way to achieve a “soft landing” for the sector. They argued against the proposal because they believe higher milk quotas would result in lower prices and put economic pressure on farms. In order to phase-out milk quotas, it is argued that a well-balanced supporting program is also needed, as well as new policy initiatives for those regions and farms which have no alternatives to milk production. The expansion of the 'new challenges' to include the dairy sector in the final compromise were a notable concession in this regard.
In order to ease the potential hardships created by the phasing-out of milk quota, the European Commission suggested using Article 68. The AMK regarded this as an unsuitable proposal. Instead of reallocating financial resources, either within Pillar 1 through Article 68 or from Pillar 1 to Pillar 2 through modulation, the Länder demanded a ‘balanced’ and ‘sophisticated’ concept and called for the Commission to identify a way to provide additional financial support. More precisely, they demanded the creation of a new ‘milk fund’, to be covered by Pillar 1 money, to be used to help milk farms situated in structurally weak regions to cope with policy induced changes. This position was also supported by the farmers’ lobby.
The AMK, the BMELV and the DBV are focusing their efforts on maintaining and saving Pillar 1 than rather than on the further development and upgrading of Pillar 2. While they point out the necessity of Pillar 2 measures and the need to further develop rural regions, they put much more emphasis on Pillar 1, which is much more important in terms of its budgetary size. This becomes clear again regarding the AMK’s arguments against an obligatory insurance system. In terms of risk management the AMK considers such a system as a second best solution. The Länder argue that direct payments are the very best instrument to buffer risks. They state that a crisis management system at the European level could only be a reasonable policy solution in the case of particularly extreme events.
3 Counter-Arguments of Other Public Agencies, Environmental Groups and the Green Party
In order to conclude this overview on Germany’s position on the current CAP reform, we glance at the most important counter-arguments made outside of the well-established agrarian coalition. The positions of the most important environmental associations (WWF, BUND, NABU) as well as the Federal Nature Conservation Agency (the Bundesamt für Naturschutz (BfN)) and the Green Party are summarised briefly.
These organisations agree that the Health Check is a step towards a more sustainable European agricultural policy. However, they stress that the proposed measures were not sufficiently far-reaching. They considered the strengthening of Pillar 2 through an increase in compulsory modulation as the most important aspect of the Health Check. In the future, they argue, payments should be granted for the provision of public goods. Consequently, they favoured the European Commission’s proposal to increase compulsory modulation and to develop the role of Pillar 2 in delivering environmental benefits.
The BfN supports the concentration of European agricultural policy in meeting environmental and nature conservation goals. The statutory agency attaches importance to the preservation of European biodiversity. The increased use and funding of rural development measures is regarded as the right approach. In order to meet future challenges a real shift in the balance between Pillar 1 and Pillar 2 is essential – in particular the BfN highlight the adjustments to land use that are likely to be necessary with respect to climate change.
The Green Party take issue with Minister Seehofer’s position. From their point of view, under the cloak of ‘reliability’ the Minister is conducting classical “clientele policy”.
The Green Party take issue with Minister Seehofer’s position. From their point of view, under the cloak of ‘reliability’ the Minister is conducting classical “clientele policy”. They call for a stronger connection linking payments to the social and ecological efforts made by farmers. They want to tie direct payments to social and ecological criteria. The Green Party therefore argues that Pillar 1 payments should be legitimised in a fundamentally new manner.
In addition, the parliamentary group of the Greens is asking for a modification to the co-financing regulation. Due to a lack of national funds a number of Member States will find it difficult to find the financial resources required to co-finance rural development expenditure. In order to meet the new challenges, they argue the co-financing rules should be modified.
4 Differences between the Eastern and the Western German Federal States
In order to better understand the German position it is important to take German federalism into consideration as well as the different agrarian structures in eastern and western Länder.
In 1990 German reunification led to large problems for agriculture and rural areas. Before this, living conditions in (West) Germany were relatively equal but with the reunification a large proportion of the population faced a significantly worse situation than in other parts of the country. In many of the 'new' states the economy collapsed. The agricultural sector faced severe problems caused by the restructuring of land ownership. In the 'old' states the reduction of subsidies to benefit the new states had the largest impact. The reunification caused an imbalance between the East and West, especially in the rural areas. The difficult situation in the East was further hampered through the out-migration in rural areas.
This helps to explain the position taken by the Länder. The capping of direct payments and the use of progressive modulation is not acceptable to the eastern Länder, which are typically characterised by much larger farm sizes. They argue that this would result in an unbalanced burden for those enterprises situated in already structurally weak regions.
5 Future Development of the EU Budget
Germany is a net contributor of EU budget. Therefore, the German government is focused mainly on the efficient use of financial resources, and recognises the budgetary limits that are likely to be imposed by any future EU financial framework. Because of this, it is argued that the EU has to set priorities for its spending policies. The German government states: “In order to gain the long-term acceptance of tax-payers, we must also ensure that excessive net contributions are avoided in future EU financial systems.” In order to ensure the efficient use of European funds the government supports the use of impact assessments, the systematic evaluation of budget-related policies and the need to put in place functioning control systems.
In accordance with these considerations the German government presented the following guidelines for the Budget Review:
- Limit spending, maintain budgetary discipline.
- Allocate national contributions fairly.
- Focus on the future.
- Avoid a priori commitments – political priorities must first be identified before future financial frameworks are agreed.
- Take subsidiarity seriously and pay attention to European value added.
- Improve the efficiency of EU policies, make use of the results of evaluation.
- Strengthen budgetary transparency.
- Simplify the own resources system.
Concerning a budget for a future CAP, the German government states that the EU will continue to need a Common Agricultural Policy in order to maintain a diverse agricultural sector. It is argued that an attempt should be made to further simplify and harmonise CAP instruments. The German government is focused on the elimination of traditional elements (e.g. price support and production quota). Furthermore, the spread of private-sector solutions to resolve production and revenue risks should be expanded. The efficiency and transparency of the CAP, and thus also its acceptance among the public, would be considerably enhanced by such an approach.
This results in the following priorities for the future Common Agricultural Policy:
- Enhancing the international competitiveness and economic performance of rural regions, creating jobs, especially in innovative sectors (e.g. quality production, non-food crops);
- Adjusting technical and social infrastructure as required;
- Ensuring environmentally friendly and ecologically compatible land use as well as conserving and linking the environmental and recreation functions of rural areas.
According to the German government, a reform process geared towards greater market orientation will have to continue and intensify after 2013 in order to meet the demands of society and changing market conditions.
Publications, Press Releases and Key Speeches of BMELV and Minister Seehofer
Statements of Environmental Groups and the Green Party
Joint statement of associations regarding the Health Check: Notwendige Therapie nicht verschieben! Diagnose der EU-Agrarpolitik unbestritten: Gemeinsame Stellungnahme der Verbände zum Health Check 2008 der EU-Agrarpolitik
29 Oct 2008
Melanie Kröger and Simone Schiller, IfLS
The German Reform Profile was written by Dr Melanie Kröger and Dipl.-Ing. Agr. Simone Schiller from the Institute for Rural Development Research (IfLS) at the Johann Wolfgang Goethe University of Frankfurt/Main.
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