Mr. Tassos Haniotis:

Good morning Chairman and members of the committee. I welcome the opportunity to address, together with my colleagues, any inquiries the committee may have on the scoping notes that it is preparing on land use. We will be glad to also send the names of all of the participants after the meeting in case members have subsequent questions. My brief introductory points would like to link this to the recently agreed reform of the Common Agricultural Policy and its relevance for the committee's inquiry. In order to leave most of the time available for discussion and answer questions in detail, I will focus on the broader context of the reform, its main EU-wide elements and the flexibilities left to member states for implementation.

In terms of the broader context of the reform, concerns that characterised the recent past on price volatility have subsided to some extent. The level of prices for most agricultural products continues to be high by all historical standards or previous expectations. This is an important element in the understanding of developments in agriculture. It reflects both opportunities for agricultural products in export markets, linked to world demand prospects. Also, it challenges for their supply of these products with respect for productivity and the sustainable use of natural resources. This is especially the result of the increase in costs of production due to their link to energy, and other input prices.

Within this environment of a changing world market situation, different sets of policy parameters were analysed, and the policy challenges that these developments posed were reflected in the decision to "green" the CAP.

It is in this context that the reform orientation is relevant to the scoping paper, since these developments have brought into the forefront a dilemma faced by all farmers on how to optimise the use of natural resources and especially the use of land. Faced with high production costs linked to energy and other inputs, including fertilisers, the short-term temptation for producers is to ignore environmental concerns since markets do not compensate for the environment. From a long-term perspective, this would be detrimental to the capacity of land to support production sustainably. To address this dilemma, unlike farm policy developments in other parts of the world, the CAP reform put at the forefront of its policy design a paradigm shift of policy instruments that tried to address the need for the joint delivery of the public and the private good from agriculture. CAP reform turned land into the basic reference for the receipt of payments, land use into a condition and land use change into a policy target and long-term objective.
“Greening”, that is the mandatory requirement for farmers to respect a minimum set of practices that are beneficial to the environment and to climate change action in order to receive part of their direct payment, is central to our approach. However, this is not limited to the proposal that every farmer respect three mandatory measures linked to soil, carbon and biodiversity. It is also accompanied by a series of other measures that aim to make greening more closely linked to the specific challenges facing European agriculture from climate change adaptation and mitigation to the adoption of innovations. These are mainly measures contained in the rural development part of the reform package.
The significant boost in agricultural research, involving a doubling of the fund in the community budget, which allows for research that is linked to practical questions that farmers face on the ground and improved knowledge transfer through a mandatory farm advisory system, are all elements that try to reverse the negative trends of the past that resulted in a slowdown of productivity growth in the European Union. With this approach, price volatility is not essentially addressed as a problem to be resolved directly, which is an implicit recognition of the fact that is mainly driven by factors exogenous to agriculture, such as energy costs. Rather, price volatility is addressed as a reality to which farmers have to adjust by retaining the basic layer of income support which mitigates the effects of price volatility but shifts the target away from references of past production levels towards references reflecting future production potential, thus linking payments to land and its use.
The final decision on CAP reform reflects the reality, not just for the EU but also for global agriculture, that in a world characterised by the complex interrelationship of so many factors affecting the food sector, it is not single isolated measures, but a set of coherent policy instruments reflecting the specificity of different regions that will maximise policy efficiency. As a result, member statesare left with a wide array of flexibilities in terms of how to implement decisions related to the reform with respect to direct payment, with their choices to be notified to the Commission in most cases by 1 of August 2014. With the basic and delegated acts now in place, focus now is on the final decisions of member states in terms of the implementation of the reform.
By the end of July, we expect to have the full picture on decisions with respect to direct payments on issues ranging from the redistribution of support and the allocation of entitlements, to the flexibility of shifting funds between pillars, that is, between direct payments and rural development. Plans on rural development programmes and their link to other EU funds are at an advanced stage, or in certain cases already agreed. All of these decisions will have a bearing on land and its use.
With this brief statement, I thank committee members for their attention and welcome again the opportunity for my colleagues and myself to contribute to their deliberations.