With an annual budget of roughly €59 billion, the CAP strengthens the competitiveness and sustainability of agriculture in Europe by financing a range of support measures through the European Agricultural Guarantee Fund (EAGF) and the European Agricultural Fund for Rural Development (EAFRD), notably:
⇒ Direct payments provide an important support for farmers in order to help stabilise their incomes, linked to complying with safety norms, environmental and animal welfare standards.With these annual payments predominantly "decoupled" from production – i.e farmers choose what to produce on the basis of the likely return from the market, rather than on the basis of public support -they support the long-term viability of farms in the face of volatile markets and unpredictable weather conditions, and recognise the environmental contribution and public goods that farmers provide to society. These payments are fully financed by the EU, and account for over 70% of overall CAP spending. With the 2013 reform, 30% of direct payments are linked to respecting three sustainable agricultural practices which are beneficial to environmental and climate change concerns, notably soil quality, biodiversity and carbon sequestration – the so-called "Greening" measures.
⇒ Market measures provide a range of tools including measures to address the situation if normal market forces fail. For example, if there is a sudden drop in demand because of a health scare or a fall in prices because of a temporary oversupply on the market, the European Commission can activate market support measures. Such spending, also from the EAGF, is by its nature rather unpredictable, but tends to account for around 5% of overall CAP spending. This part of the budget also includes elements such as promotion of EU farm products and the EU school schemes.
⇒ Rural development programmes provide a framework to invest in individual projects on farms or in other activities in rural areas on the basis of economic, environmental or social priorities designed at national or regional level. Funded through the EAFRD, this covers projects such as on-farm investment & modernisation, installation grants for young farmers, agri-environment measures, organic conversion, agri-tourism, village renewal, or providing broadband internet coverage in rural areas. Accounting for almost 25% of CAP funding, these measures are generally co-financed by national, regional or private funds and generally extend over several years.