TTHHEE FFIINNAANNCCIINNGG OOFF TTHHEE CCOOMMMMOONN AAGGRRIICCUULLTTUURRAALL PPOOLLIICCYY [613141]

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TTHHEE FFIINNAANNCCIINNGG OOFF TTHHEE CCOOMMMMOONN AAGGRRIICCUULLTTUURRAALL PPOOLLIICCYY
Popa Diana
University of Oradea, [anonimizat] , Oradea, University street no. 1, [anonimizat], Facu lty of Sciences
Economics
This article describes the European fund of Guidanc e and Guarantee in Agriculture, by means of which the
measures of Common Agricultural Policy (PAC) are fi nanced, policy that i sone of the first and the mos t
important common policies adopted by the European U nion. The necesity of simplification of the PAC is also
analysed. The regulation of the Council in 21 june 2005 establihes a unique legal frame for the financ ing of the
expenses in relation with the agricultural common p olicy, instituting two new funds: The European Agri cultural
Fund of Guarantee (FEAGA) and The European Agricult ural Fund for rural Development (FEADER)
Key words: financing, common agricultural policy, measure, rural development
The Common Agricultural Policy (PAC) is among the f irst and the most important policies adopted by the
European Union – at that time, The European Economi c Community. Its genesis was a reaction at the
alimentary problems that followed the Second World War. From the very beginning we have to say that th e term
“common policy”, in a very exact mode, reflects the characteristics of PAC, that is, that for approxim ately 90%
of the agricultural products, the decision doesn’t belong to the states which are members but to the E uropean
Union.
Broadly speaking, there are two reasons which led t o the appearance of this policy. The first reason w as the
necessity of the “fluidization” of the European com merce with agricultural products, and mostly the de sire of
the exploiting states to assure of their products’ disposal. The second reason was a certain fear of t he situation in
which the force of labor generated by agriculture, as a consequence of the mechanization, could not be absorbed
in the same rhythm by the other sectors of the econ omy, case in which the agricultural income would be smaller
in comparison with the other ones.
We will see how the economical situation and the po litical desire gave birth to the common agriculture . Its first
reflection is in the Agreement from Rome (1957). Du ring those 50 years, the Common Agricultural Policy went
through a continuous process of accommodation, suff ering important reforms, practically being stimulat ed by
the social and economical changes.
The measures of the common agriculture policy are f inanced from the communitarian budget, through the
European Fund of Agricultural Orientation and Guara ntee (FEOGA). The creation of this fund was foresee n
from the beginning, in the CEE Agreement (Article 4 0). In fact, the fund was constituted in 1962 toget her with
other 6 common market associations, legally being b ased on the CEE Regulation 25/1962, being changed
through the CEE Regulation 728/1970 and through the CEE Regulation 1258/1999.
The constitution of FEOGA represents the concretiza tion of the financial solidarity principle settled at Stresa,
which deals with the common subsidization of the co mmon measures, in fact, this means that, in part, s ome
countries subsidize some other countries’ agricultu res. In general, the countries which are net contri butors want
the reform of the actual system of PAC, for the red uction of the agricultural costs. Since 1962, the f oundation
principles of PAC were the unification of the marke t, the financial solidarity. The total transfer of competences
to the Community and the costs of the common agricu ltural policy is sustained by the budget of the Com munity,
theoretically without the member states to establis h o correspondence between what they pay and what t hey get.
1
Tending to respond to the pressures exerted by the main countries which are net contributors to the
communitarian budget, the PAC reform made in 1999 h ad the following objectives: the limitation of the
subsidization cost of PAC, the preparation of the i nternational commercial negotiation but also the pr otection of
the environment and the taking into consideration o f the “multifunctionality” of agriculture that puts the basis of
the rural development policy. In terms of subsidiza tion, the discussions that took place in Berlin wer e about the
best methods of costs control of PAC.
The debates about the PAC reform, part of the “2000 Agenda”, were mostly about the different modalitie s of
framing the costs of the common agricultural policy . Theoretically speaking, these are already limited after the
mechanism of the agricultural directory line, which is, from now on, extremely big in comparison to th e real
agricultural costs, thus not being anymore constrai ning. In fact, the Fontainbleau Committee adopted i n 1984 the
budgetary discipline principle.
Facing the necessity of limiting the costs, the 199 9 reform introduced the term of eco-conditioning of the
supports (the application of which is up to the mem ber countries) and mostly the possibility of a modu lation 2 of
supports between exploitations. The product of a mo dulation ca co-finance the supports for rural devel opment

1 M. Lechantre&D. Schajer „Le budget de l’Union euro pene”, La documentation Francaise, Paris, 2003, pag e 70
2 Modulation means to draw a part of the supports gi ven beyond a certain sum, in order to be used for o ther objectives, thus
permitting in a way the agricultural auto-financing of certain measures and the redistribution of supp orts from one sector of
PAC to others.

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(in 2001 only in France and in Great Britain the mo dulation was put into practice, and in 2002 its sus pending
too place) 3.
The PAC reform defined at the European Committee fr om Berlin transferred the rural development of the
structural policy to FEOGA – as a warranty. A littl e bit more than 32 thousand millions of Euro is des tined for
rural development in the financial perspectives bet ween 2000 and 2006, which means a little bit more t han 10%
of PAC costs. This policy has the objective to corr ect certain negative effects of the market policies in matters of
environment and rural development, or the utilizati on of labor force. There are 2 main categories whic h can be
distinguished between the 22 measures of rural deve lopment, reflecting 9 domains of action: measures o f
attendance resulted from the 1992 reform (protectio n measures of the environment, in favor of forestat ion and
measures of anticipated seclusion) and the new mode rnization measures or the diversifying of the agric ultural
exploitations, the installment of the young agricul turists, their formation, and actions of promotion.
The measures for rural development make the object of a pluriannual programming for the 2000-2006 peri od,
similar with the one that exits for the structural funds, in the rural plans of development, regional or national,
presented by the member states. Meanwhile, this plu riannual programming offering a unique frame of act ion is
destined to assure a better coherence between diffe rent structural actions, financed among the new obj ectives of
structural funds, the communitarian initiatives and common agricultural policy.
In its present form, the agricultural policy is con structed around two main pillars : the first one – and the initial
one – is the one of common market organizations, an d the second one, which developed in the last decad e, is the
one of rural development.
In the Fund of Agricultural Orientation and Guarant ee, there are two lines of distinctive financing: the
guarantee section and the orientation section.
The Guarantee Section finances:
− The functioning of the common market organizations
− The measures of rural development from the first ca tegory, of the concomitant measures, as well as the
measures of rural development, but which do not res pond to the First Objective of the Regional Policy.
− Veterinary measures (having as an objective the hea lth and conditions of animal husbandry) and
phytosanitary measures.
− General measures of evaluation and informing.
The Orientation Section finances measures of rural development in the area s which are under the incidence of
the First Objective of the Regional Policy, that is :
− Investments in agricultural exploitations and in ac tivities of processing and trading of agricultural
products
− The rejuvenation of the agricultural population
− Activities of professional formation
− The development stimulation of non agricultural act ivities.
This section finances also the Leader+ program.
Leader+ is a communitarian program which has as an objective the encouraging of partnerships and the c hange
of the best practices at a European level, for the promotion of a durable agriculture. The concept of durable
agriculture refers to the administration of natural resources on rational basis, which lead to their p reservation in
good conditions on a long term. The program offers co-financing for the following actions:
− The elaboration of pilot strategies of territorial development (from downwards upwards)
− The cooperation between rural territorial collectiv ities
− Networking
− Technical assistance
The projects which have the following objectives ha ve a priority:
− To use in the most efficient way the natural and cu ltural resources and thus to enhance the value of t he
local specific
− To improve the life standard in the rural areas
− To bring value to the products which are specific f or one area, especially by promoting them on
markets by collective actions
− To use recent information and techniques for improv ing the competence of the products and services in
the rural areas
The expenses foreseen for the period between 2000 a nd 2006 are more than 5 thousand millions of Euro, from
which approximately 2 thousand millions are finance d from the Orientation Section of FEOGA. The rest o f the
money will come from public and private contributio ns.
FEOGA-orientation represents, together with the Eur opean Fund of Regional Development, the Social Euro pean
Fund, and the Financial Instrument for Orientation in the field of Fishing, one of the four Structural Funds

3 Marc Lechantre&David Schajer Le budget de l’Union europeenne , La documentation Francaise, Reflexe Europe, Paris,
2003, p. 72-73.

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which finances the economical and social reorganiza tion of the areas which are less developed in the E uropean
Union.
The allocated FEOGA funds are consumed on the basis of multi-annual development programs, presented by
the member states at the beginning of each financia l exercise. Thus, for the period between 2000 and 2 006, the
programs had to be handed in until the 3 rd of January 2000. The selection of the projects pr oposed by the final
beneficiaries is made at a decentralized level, by the competent national or regional authorities from each
member state. At the section of projects, an obliga tory criterion taken into consideration is that the se should
contain measures of ecological agriculture. The fun ds which have not been used at the end of a financi al year
are not carried forward, and in the case of 75% abs orption, the funds for the next year are diminished with a
third from the unused sums. An important aspect to underline is that, unlike th e market measures, the
rural development measures request the co financing of the member states.
FEOGA is managed by a Committee which has a consult ative role, made up of representatives from all the
member states and of the Board. At the level of the member states, the operative structures which mana ge the
agricultural financial transfers are the Payment Ag encies. In a Member State there can be more than on e
Agencies, on the condition that it has an interroga tory role and it is a partner in the dialogue with the
Committee. The payments to the beneficiaries can be done according to some complex procedures of testi ng the
eligibility of the financing operations. The Paymen t Agencies transmit budget statements to the Commit tee
monthly, and the entire justificative documentation yearly. After the Committee verifies the documents , it makes
a regularization of payments that is it orders the repayment or the retrieve of some sums. The Committ ee makes
the yearly financial report and sends it to the Boa rd and Parliament in order to be validated, not lat ter than July
every year.
The exercise after the adhesion of the ten states w hich were integrated in the EU in 2004 and the adhe rence of
Romania and Bulgaria in 2007 pointed out differentl y from country to country the difficulty of applyin g PAC
and the “demonstration” of mechanisms in a union wi th 27 members. Under the circumstances, the problem of a
reform was taken into consideration, in fact the si mplification of PAC.
Thus, the regulations of the Committee on the 21 of June 2005 put in order the unique legal status for financing
the expenses regarding the common agricultural poli cy. In this respect, it brings two new funds, parts of the
general budget of the European Communities: the Eur opean Agricultural Fund for Guarantee (FEAGA), and the
European Agricultural Fund for Rural Development (F EADER). The two funds function on a system which is
similar maintaining some particularities. The finan cing of the measures being done in part during the divided
administration, the regulation specifies the condit ions which permit the committee to assume responsib ilities
regarding the material for general execution and cl arifies the obligations for cooperation of the memb er states.
The regulation defines the conditions for approval and withdrawal of approval for the payer organizati ons and
the coordinator organizations among the member coun tries. It is also specified the determination of th e
certifying organisms, public or private juridical e ntities, named by the member countries and charged with the
certification of management systems, of supervising and control systems, put into order by the approve d payer
organisms, as well as their yearly accounts. The me mber states are asked to take any necessary measure to
assure an efficient protection of the financial int erests of the Community. Moreover, the expenses of the
approved payer organisms can make the object of a c ommunitary financing and the payments will be done
integrally to the beneficiaries.
FEAGA finances in the divided administration betwee n the member countries and the Committee:
− Fixed refunding in the divided administration for t he export of the agricultural products towards othe r
countries
− Interventions destined for the adjustment of the ag ricultural markets
− Direct payments towards the agriculturists foreseen in the common agriculture policy
− Some informing and promoting actions taking into co nsideration the agricultural products on the
internal market of the Community and in other count ries.
In a centralized manner, this fund finances:
− The financial contribution of the Community for the punctual veterinary actions, for the control actio ns
in the veterinary domain, in the field of alimentar y products and alimentary products for animals, in the
eradication actions and actions of supervising the animal diseases, as well as in the phyto-sanitary
actions.
− Systems of agricultural investigations
− The maintaining and the putting in order of the inf ormational agricultural accounting systems.
− The established measures according to the communita ry legislation, destined for the keeping,
maintaining, characterization, collection, and util ization of the genetic resources in agriculture.
− The promotion of the agricultural products done eit her directly by the Committee or by an internationa l
organization 4.
The necessary credits for the expenses financed by the FEAGA are given by the Committee of the member
states under monthly reimbursement. They are done o n the bases of a declaration of expenses and accord ing to

4 www.europa.eu „Un cadre legal unique pour le financement de la politique agricole commune”

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the information given by them. In a case of a lack of conformity between the fund commitments and the
communitary rules, the Committee can decide to cont inue or to suspend the payments. The Committee
establishes the available net stock for the expense s FEAGA and puts into action a system of alert and of monthly
supervising of these expenses. Every month it prese nts to the Parliament and to the Committee a report in which
it examines the evolution of expenses in comparison with the objectives fixed at the beginning of the exercise
and appreciates the foreseen evolution for the runn ing exercise. In case of irregularity or negligence the
recovered sums are given to the payer organizations which puts them at FEAGA’s disposal under the form of
monthly effective cashing.
FEADER finances uniformly the programs of rural dev elopment in the case of a divided administration,
executed according to the regulation proposed by th e Committee (COM (2004)490).

Tabelul 1: the maximum limits of agricultural expen ses for budgetary exercises
2000-2006 – millions of Euro, the prices from 1999
2007-2013 – millions of Euro, the prices from 2004

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Pilonul 1:
common
organizations
of market 36620 38480 39570 39430 38410 37570 37290 43120 42697 42279 41684 41453 41047 40645
Pilonul 2:
Rural
deveopment 4300 4320 4330 4340 4350 4360 4370 12343 12542 12491 12462 12871 12820 12764
Total 40920 42800 43900 43770 42760 41930 41660 55463 55239 54770 54146 54324 53867 53409
Source: Financial perspectives of the European Union for 20 00-2006, and for 2007-2013
www.europa.eu.int/comm/budget

The budgetary obligation regarding this fund will b e done on a yearly basis under the form of a pre-fi nancing of
intermediary payment and the payment of a sum. The intermediary payments will be done at the level of each
program of rural development, according to the budg et on hand and under certain conditions among which we
mention the transmission to the Committee of a decl aration of expenses and a payment application attes ted by
the payment organism chosen. In case of non-conform ity of this declaration of expenses with the commun itary
norms, the Committee can reduce or suspend the paym ent.
In case of irregularity, the communitary financing will be totally or partially suspended. In case tha t the funds
are already given to the beneficiary they will be r ecuperated by the chosen payer organism. The suspen ded or
recuperated sums can be used by the member state fo r an operation named in the same rural development
program.
Regarding the payment of the stock, it is done afte r receiving the final execution report validated in the
regulation proposal for FEADER and in the decision of proper purification. The lack of transmission of these
documents determines the elaboration of the stock o bligation.
The Committee will supervise a good financial admin istration of the communitary funds, more exactly wi ll the
help of a purification procedure of the accounts in two times: accounting purification or purification of
conformity. The member countries have to put at the disposal of the Committee all the necessary inform ation of
a good functioning of the funds. Moreover, the Comm ittee can organize controls on the spot, besides th e
controls done by the member countries according to the national regulations.
In October 2006, the Headquarters of Agriculture an d Rural Development of the European Committee
elaborated a work document for a plan of action ded icated to the simplifying of PAC, which have been
discussed intensely. This plan of action is an exer cise concentrated on “technical simplification” or “policy
simplification”. Probably the most audacious projec t is the one for “simplification of agricultural po licy” which
practically talks about the reduction of complexity of this policy by improving the support given to a griculture
and the improvement of the instruments for policy o f rural development.
As a first step in this direction, a project is alr eady in practice, project in which a single Common Organization
of Market will be proposed, that will replace and h omogenize step by step the 21 common organization o f
market that are already pat of the Common Agricultu ral Policy. Proposals for this new common organizat ion of
market will not include on a first level the sector s which are already reformed or in course of reform ing, sugar,
wine, the sector of fruits and vegetables, the sect or of bananas which are already engaged in a radica l reforming
process.

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The main changes probably will aim the change of re gulations which regard the horizontal competition a nd the
regulation of the state support in the agricultural field. There will be changes regarding the regulat ions for
marketing standards as well, in order to harmonize them with the international marketing standards.
The desideratum of PAC’s “simplification” is not an easy goal to achieve. The experience of previous r eforms
proved it very well; any change in this policy was followed by a pretty difficult and long decisional process.
Probably, the new economical conditions created by the external pressures and the fact that the Europe an Union
has 27 members, will stimulate the decisional proce ss 5.
References:
1. M. Lechantre&D. Schajer „Le budget de l'Union Euro péenne”, La Documentation Française, Paris,
2003
2. P. Prisecaru coordonator „Politici comune ale Uniun ii Europene”, Editura Economic ă, Bucure ști, 2004
3. coordonator L. Ghica “Enciclopedia Uniunii Europene ” , Editura Meronia, Bucuresti, 2007
4. www.europa.eu

5 Daniela Giurc ă “A New Change of Common Agricultural Policy – opport unity or restriction for Romania?”