Commission presented a proposal for financial discipline to ensure that CAP spending remains within budget limits

The European Commission has tabled a proposal for "Financial Discipline" to ensure that spending remains within budget limits. The proposal aims to introduce a linear cut in CAP Direct Payments in order to ensure that the ceiling for the CAP's first pillar in the forthcoming year is respected.

The European Commission tabled a proposal which includes a threshold to exempt the first €5,000 of farmers' Direct Payments from any reduction, and foresees a reduction of just under 5% (4.98%) in all Direct Payments – or an overall reduction of €1,471.4 million, and aims at reaching a "Financial Discipline" to ensure that spending remains within budget limits. Recently, EU Agriculture Ministers reached an agreement on a general approach on the four main proposals for regulations within the framework of reform of the common agricultural policy (CAP).

This proposal relates to applications for Direct Payments in 2013, to be submitted by farmers in May 2013, and usually paid out in December 2013 (from the 2014 budget), but will not apply for Bulgaria, Romania and Croatia because the system of CAP Direct Payments is still being phased-in. The proposal for “Financial Discipline” comes after knowing that the forecast for expenditure on CAP Direct Payments & Market measures for 2014 is higher than the provisional ceiling for 2014 agreed by EU heads of government.

CAP Direct Payments and Market measures are frequently known as the "First Pillar" of the CAP and are financed through the European Agricultural Guarantee Fund (EAGF). Compared to the Commission proposal of €42.36 billion in 2011 prices, the ceiling for 1st Pillar spending agreed by the February 7/8 European Council amounts to € 41.58 billion in 2011 prices, corresponding to € 44.13 billion in current prices. The financial discipline mechanism applies after taking into account the financial transfers to Rural Development, as well as the financing of the new agricultural crises reserve.