Annual Activity Report

Transcription

1 2011 Annual Activity Report Directorate General for Agriculture and Rural Development agri_aar_2011_final Page 1 of 85

2 Table of Contents PART 1. POLICY ACHIEVEMENTS KEY MESSAGES OF THE DIRECTOR GENERAL IMPACT OF POLICY Introduction Interventions on the agricultural markets (ABB 02) Direct aid (ABB 03) Rural development (ABB 04) SAPARD/IPARD (ABB 05) External relations (ABB 06) Audit (ABB 07) Policy strategy and coordination (ABB 08) Administrative support for DG AGRI (AWBM 01)...23 PART 2. MANAGEMENT AND INTERNAL CONTROL SYSTEMS INTRODUCTION TO DG AGRICULTURE AND RURAL DEVELOPMENT THE FUNCTIONING OF THE ENTIRE INTERNAL CONTROL SYSTEM Introduction Compliance with the requirements of the control standards Effectiveness of implementation of the prioritised control standards Conclusion INFORMATION TO THE COMMISSIONER PART 3. BUILDING BLOCKS TOWARDS THE DECLARATION OF ASSURANCE (AND POSSIBLE RESERVATIONS TO IT) BUILDING BLOCKS TOWARDS REASONABLE ASSURANCE Building block 1: Assessment by management Shared management: EAGF and EAFRD expenditure Description of the management and control system Findings and indicators Recovery cases Fraud prevention and detection Management's analysis and indicator on cost-effectiveness of controls Conclusion Shared management EARDF organic farming Shared management EAGGF Guidance Section expenditure...63 agri_aar_2011_final Page 2 of 85

3 Decentralised management SAPARD/IPARD expenditure Description of the management and control system Findings and indicators Building block 2: Results from audits during the reporting year Internal Audit reports and opinion Relevant IAS audit reports ECA reports Building block 3: Follow-up of previous years' reservations and action plans for audits from previous years Reservation regarding serious deficiencies in the IACS in Bulgaria, Romania and Portugal Follow-up of any weaknesses reported by the IAS and IAC and in the previous Synthesis report Building block 4: Assurance received from other Authorising Officers in cases of crossed sub-delegation Completeness and reliability of the information reported in the building blocks RESERVATIONS Serious deficiencies in the IACS in Portugal and Bulgaria Rural development expenditure Deficiencies in the supervision and control of certified organic products OVERALL CONCLUSIONS ON THE COMBINED IMPACT OF THE RESERVATIONS ON THE DECLARATION AS A WHOLE PART 4. DECLARATION OF ASSURANCE agri_aar_2011_final Page 3 of 85

4 PART 1. POLICY ACHIEVEMENTS 1.1 Key messages of the Director General The Commission' political vision and priorities were outlined in the Europe 2020 strategy 1 for smart, sustainable and inclusive growth and further translated in the Commission Work Programmes (CWP). For the Directorate General for Agriculture and Rural Development (hereinafter DG AGRI), contributing to the Europe 2020 reform process was one of its main tasks in the past year. In particular, in the first half of 2011, DG AGRI contributed substantially to the preparatory work leading to the adoption, on 29 June 2011, of the Commission proposal for the multi-annual financial framework (MFF) This document paved the way for more detailed sectoral proposals, including those in the field of agriculture. Then, as a priority initiative of the CWP 2011, the College adopted in October 2011 a comprehensive legislative package on the Common Agricultural Policy (CAP) towards The set of proposals, which for the fist time are to be adopted by ordinary legislative procedure, is designed to make the CAP a more efficient and effective policy for a more competitive and sustainable agriculture and thriving rural areas. The legal proposals have been based on a thorough impact assessment that has evaluated alternative scenarios for the evolution of the policy on the basis of extensive quantitative and qualitative analysis. In line with the other Commission policy initiatives for the period after 2013, the reformed CAP will make a decisive contribution to Europe It will tackle climate change, support employment and growth, promote innovation and enhance both the economic and ecological competitiveness of agriculture. Key points include inter alia better targeting of income support, greening of direct payments, improved instruments to address market developments and promote a more competitive and balanced food chain, a new framework for rural development and additional investment in research and innovation. At the same time, the reform is meant to create a simpler and more efficient CAP, either through straightforward simplification elements, such as the proposal for a small farmers scheme and the streamlining of crosscompliance, or by designing measures and instruments that are as simple as possible while still being effective tools to achieve the overarching policy objectives of the reform. In addition to the preparation of the MFF and the CAP reform, DG AGRI continued to work on other priority areas. With the publication of a Green Paper on promotion and information for EU agricultural products 4, the Commission has launched a debate on the strategy for the future, with a view to ensuring greater awareness of the strengths of European agriculture in internal and external markets, to create the greatest possible added value for Europe, and enable consumers throughout the world to enjoy a taste of Europe. A summary of responses to the Green paper has been published by the European Commission in December Communication from the Commission "EUROPE 2020: A strategy for smart, sustainable and inclusive growth", COM(2010) 2020 of 3 March Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions "A budget for Europe 2020", COM(2011)500 final of 29 June "Green Paper on promotion measures and information provision for agricultural products: a reinforced valueadded European strategy for promoting the tastes of Europe", COM(2011) 436 of 14 July agri_aar_2011_final Page 4 of 85

5 In the area of rural development, the implementation of the rural development programmes during the programming period has progressed well. As 2010 was the mid-point of the programming period , in June 2011 the Commission finalised the report on the implementation of the national strategy plans and the EU strategic guidelines for rural development 5. The majority of the programmes for period have been closed. In the area of international affairs, DG AGRI continued to conduct trade negotiations, including the advancement of developing country concerns, in international fora and in bilateral talks. The highlights of 2011 include contribution to the G20 initiative on price volatility, negotiations towards the accession of Russia to the WTO, entry into force of the Korea FTA, the conclusion of several GIs agreements with Moldova, Georgia and Switzerland/Liechtenstein; the opening of GI negotiations with China, and the launch of a programme to aid rural development in the European neighbourhood following the Arab spring. DG AGRI also continued to oversee relations with enlargement countries and negotiate the terms of EU accession in the field of agriculture. Accession negotiations with Croatia on Chapter 11 Agriculture and Rural Development were finalised and the Accession Treaty was signed on 9 December DG AGRI contributed to the Commission's recommendations on the opening of negotiations with Montenegro, the granting of candidate status to Serbia, and the screening report on agriculture for Iceland. DG AGRI pursued simplification and reduction of administrative burdens, in addition to the preparation of the proposals for the CAP towards An external study on administrative burden reduction associated with the implementation of certain rural development measures 6 was finalised and will contribute to DG AGRI's further efforts in this area. Following the entry into force of the Lisbon Treaty 7 in 2009, DG AGRI has throughout 2010 and 2011 prepared proposals to ensure alignment of agricultural legislation to the Lisbon Treaty. Negotiations between the European Parliament and Council on these proposals were stepped up in 2011 with DG AGRI playing an important role as facilitator between the two institutions. Last but not least, DG AGRI is committed to high standards of sound financial management and maintains its efforts to further improve the financial management of the CAP in co-operation with Member States. During 2011, DG AGRI continued to follow these developments closely, including for some areas of rural development expenditure which are most likely affected by a higher incidence of error. 5 COM(2011) 450 final of 20 July "Study on administrative burden reduction associated with the implementation of certain Rural Development measures". More information can be found on 7 Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon, 13 December agri_aar_2011_final Page 5 of 85

6 1.2 Impact of policy Introduction The mission of the DG AGRI is to promote the sustainable development of Europe's agriculture and to ensure the well-being of its rural areas. This is reflected in the three general objectives set up for the work of the DG: To promote a viable and competitive agricultural sector which respects high environmental and production standards, ensuring at the same time a fair standard of living for the agricultural community. To contribute to sustainable development of rural areas, in particular through: o Improving the capacity of the agricultural sector to meet new challenges; o Contributing to preserving the environment and the countryside; o Improving the quality of life in rural areas; o Helping EU agriculture, forestry and rural areas to contribute to climate change mitigation and to adapt to its possible consequences. To promote the European agricultural sector in world trade. A series of indicators have been developed to monitor the implementation of policy. Indicators relating to the three general objectives are presented in tables Further details on these indicators as well as an overview of indicators for each of the main activities of the DG are available in Annex 6. Main events in 2011 for each of these activities are presented in sections to agri_aar_2011_final Page 6 of 85

7 Table 1.1 Impact indicator concerning the general objective to promote a viable and competitive agricultural sector Impact indicator GENERAL OBJECTIVE Indicator Target Milestones (if any) Current situation To promote a viable and competitive agricultural sector which respects high environmental and production standards, ensuring at the same time a fair standard of living for the agricultural community Farmers' income developments Keeping the ratio to other economic sectors Farm income developments 8 : 2011: +6.7 % : % 2009: % 2008: -3.4 % 2007: +10 % 2006: +3.8 % Labour cost index, total business economy 9 : 2011: +2.6 % : +1.9 % 2009: +2 % 2008: +4.5 % 2007: +3.6 % 2006: +3.2 % 8 Change in agricultural income, measured as real net value added per annual work unit, compared to previous year. Figures (including for the years before 2010) updated by EUROSTAT early EUROSTAT data, total labour costs. To be noted that all data have been adapted on the basis of a new classification of activities by EUROSTAT at the beginning of First estimate by EUROSTAT. 11 Percentage change from 3 rd quarter 2010 to 3 rd quarter 2011 (latest data available). agri_aar_2011_final Page 7 of 85

8 Table 1.2 Impact indicators concerning the general objective to contribute to sustainable development of rural areas GENERAL OBJECTIVE Impact indicators Indicator Target 12 Milestones 13 (if any) Current situation To contribute to sustainable development of rural areas, in particular through: Increase in Gross Value Added (GVA) in supported holdings Increase : 25.9 billion Total GVA in primary sector: 180 billion 14 Share of the target realised by : 14 % 16 Improving the capacity of the agricultural sector to meet new challenges Contributing to preserving the environment and the countryside Improving the quality of life in rural areas Helping EU agriculture, forestry and rural areas to contribute to climate change mitigation and to adapt to its possible consequences Maintenance of high nature value areas (changes in High Nature Value (HNV) areas) Increase in production of renewable energy Increase : ha Increase : ktoe Employment creation (net additional Jobs created full time equivalent jobs created) : Utilised agricultural area of HNV: ha 17 Share of the target realised by 2010: 47 % ktoe from agriculture ktoe from forestry 20 Share of the target realised by 2010: 18.3 % 21 Employed people in primary sector: 13 million 23 Share of the target realised by 2010: 27.4 % 24 Share of greenhouse gas emissions from agriculture To reduce 9 % (current situation) 11 % (1990) 12 Some targets have been updated by the MS through RDP modifications. Source: Mid term evaluation Milestones not available. Work is under way to define clear milestones for the next MFF. 14 Baseline from Eurostat national accounts Situation in 2010: 185 billion. 15 Aggregation based on the Annual Progress Report 2010 submitted by the MS in July The GVA indicator can be subject to strong annual variations due to external factors such as the financial and economical crisis (some MS have reported negative GVA changes). 17 Baseline from the JRC HNV study Data based on the Mid-term Evaluations 2010 submitted by the MS by the end of It reflects the 6 RDPs that submitted quantified data. 19 Baseline from Eurostat energy statistics Baseline from EurObserER (primary sources: EBB & EBIO) Data based on the Mid-term Evaluations 2010 submitted by the MS by the end of It reflects the 9 RDPs which submitted quantified data. 22 This indicator refers to the net additional full time equivalent jobs created directly in supported projects and indirectly in the programme area. 23 Baseline from Eurostat National accounts Situation in 2010: 12.4 million. 24 Data based on the Mid-term Evaluations 2010 submitted by the MS - end of It reflects the 27 RDPs which submitted quantified data. agri_aar_2011_final Page 8 of 85

9 Table 1.3 Impact indicators concerning the general objective to promote European agriculture in world trade Impact indicators GENERAL OBJECTIVE Indicator Target Milestones (if any) Current situation To promote the European agricultural sector in the world trade Value of trade flows in agricultural products between the EU and the rest of the world To increase Export (in million): 2011: : : : EU-27 Unit value of exported products To increase Unit Value (in /t): 2011: : : : : Proportion of subsidised exports in percentage of total export Lower than current situation 2011: (EU-27): 0.2 % (EU-27): 0.4 % 2009 (EU-27): 0.9 % 2008 (EU-27): 1.2 % 2007 (EU-27): 1.9 % 25 Trade data is not static. Therefore some of the data for the previous years has also been slightly modified due to updates sent by the Member States. 26 Idem. agri_aar_2011_final Page 9 of 85

10 1.2.2 Interventions on the agricultural markets (ABB 02) With the progressive shift from price support to direct aids which are decoupled from production, farmers are encouraged to respond to market signals rather than to quantityrelated policy incentives. Market measures and risk management tools provide a safety net that helps farmers to survive during times of market crises or extreme weather events. Although still an essential part of the CAP, interventions on agricultural markets (export refunds, intervention etc.) have become less significant in budgetary terms and their use is reserved for cases where some kind of action by public authorities is required in order to stabilize the market, either as a safety net for producers or in order to achieve reasonable prices for consumers. In accordance with the objective to foster competitiveness, the volume of public stocks in intervention has steadily decreased over the years and it is approaching zero. Export refunds were limited to certain products in the beef, pigmeat and poultry and eggs sectors with an estimated expenditure of 161 million for these three sectors. The general expenditure trend is accordingly downwards (expenditure million in 2006, million in 2000). However, exceptional difficulties in 2011 required the Commission to take urgent measures to respond to market disturbances. Indeed, during the first semester of 2011, the meat sector also experienced a disturbance resulting in sharp increase in feed prices. The opening of private storage for pigmeat in February 2011 allowed stabilising this market, which had been affected by the dioxin crisis in Germany. Due to particular pressure on margins in the pigmeat and beef sectors, the Commission took the initiative to analyse these sectors thoroughly together with stakeholders and Member States and to present its conclusions to the Council. An emergency aid package for fresh vegetable growers worth 227 million was agreed by the Commission in response to the E-Coli outbreak in May-July This allowed the Commission to pay 100 % of the demands for compensation from the different Member States thus providing a safety net to help producers at times of market difficulties. The promotion policy mission is to support the European agricultural sector by promoting EU agricultural products on the internal market and in third countries through organising and co-financing, together with the Member States and their professional organisations, promotion actions, information campaigns and trade missions. In 2011, 46 (out of 73) information and promotion programmes targeting both the internal market (26) and third countries (20) were adopted by two Commission Decisions. Their total budget for 3 years amounted at 135 million. In order to address, without delay, the consequences of the E-Coli crisis within the fresh fruits and vegetables sector, the Commission decided to accept programmes in this sector, targeting both the internal and third markets. In this framework by a third Commission Decision, 14 (out of 17) complementary promotion programmes were accepted for co-financing, for a total 3- years budget of 34 million. As a starting point for the promotion's regime reform, the Commission launched a Green Paper 27 in order to consult stakeholders and other interested parties. The 173 contributions received were analysed and subsequently presented during a conference organised by the Polish presidency end of November Moreover, two promotional 27 "Green Paper on promotion measures and information provision for agricultural products: a reinforced value added European strategy for promoting the tastes of Europe", COM(2011) 436 of 14 July More information about the conference on agri_aar_2011_final Page 10 of 85

11 events in third countries were organised in 2011: a high level mission to China in March 2011 and a promotional campaign in South Korea in autumn Considering the active participation of Member States (24 and 26 respectively) in 2011, the School Fruit and the School Milk schemes target ever wider proportion of school pupils thus contributing to a better and more balanced diet and to healthier eating habits in the EU. The objectives of the CAP also include stabilising the markets and ensuring that supplies reach consumers at reasonable prices. Over the years, the scheme for the distribution of food to the most deprived persons of the Union helped to achieve both objectives. Following political agreement between the Council and the European Parliament, the current scheme will be phased out after the completion of the 2013 annual plan. Lastly, the proposals on the reform of the CAP include proposals on the common organisation of the markets in agricultural products (single CMO) 29 and on the fixing of fixing certain aids and refunds related to the single CMO 30. The existing systems of public intervention and private storage aid are proven safety net mechanisms to help producers at times of market difficulties. However, a new clause was introduced for all sectors to enable the Commission to take exceptional measures to respond to market disturbances such as the measures taken during the E-Coli crisis Direct aid (ABB 03) Decoupled direct aid payments stabilise farm incomes and, thus, contribute to the economic viability of farms. In addition, the obligation to keep land in good agricultural and environmental conditions and the inclusion of environment, food safety, animal health and welfare standards ("cross compliance") plays an important role in maintaining a sustainable farming sector and meeting consumers' expectations. Direct payments continue to contribute significantly to agricultural entrepreneurial income (family farm income). The latest available data showed that direct payments on average accounted for almost half of the family farm income in Under the direct aid schemes, support is granted to more than 7 million farmers. DG AGRI pursued the monitoring and implementation of the Single Payment Scheme (SPS) and Single Area Payment Scheme (SAPS). In total, over 36 billion were paid in financial year 2011 to farmers. Following a publication of a regulation with a general authorisation for all Member States for granting advances of all direct payments in respect of calendar year , over 10 billion were paid in advances. This general approach allowed the Commission to provide the Member States with early information; it also enlightened greatly the administrative burden linked to the preparation of these advances, thus simplifying the whole process. In this framework, the first semester of 2011 was devoted to the monitoring of the implementation of the specific support measures, notified in 2009 by 24 Member States in accordance with Article 68 of Council Regulation (EC) No 73/ In the 29 Proposal for a Regulation of the European Parliament and of the Council establishing a common organisation of the markets in agricultural products (Single CMO Regulation), COM(2011) 626 final of 12 October Proposal for a Council Regulation determining measures on fixing certain aids and refunds related to the common organisation of the markets in agricultural products, COM(2011) 629 final of 12 October Commission Implementing Regulation (EU) No 784/2011 of 5 August 2011 on advances to be paid from 16 October 2011 of the direct payments listed in Annex I to Council Regulation (EC) No 73/2009 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers. 32 Council Regulation (EC) No 73/2009 of 19 January 2009 establishing common rules for direct support schemes for farmers under the common agricultural policy and establishing certain support schemes for farmers, amending Regulations (EC) No 1290/2005, (EC) No 247/2006, (EC) No 378/2007 and repealing Regulation (EC) No 1782/2003. agri_aar_2011_final Page 11 of 85

12 second half of the year, the analysis and assessment of notifications sent by 19 Member States regarding the implementation, from 2012, of specific support measures, took place. DG AGRI was in charge of preparation of 10 Commission Decisions authorising complementary national direct payments ("CNDPs") in the new Member States. The total amount of CNDPs authorised in 2011 calendar year reached almost 3 billion in 12 new Member States. CNDPs enabled to compensate the phasing-in of direct payments (80 % in 2011, for Bulgaria and Romania 50 %) as established by the Treaty of Accession and gave flexibility to the new Member States to grant national support in sensitive sectors. Last year, DG AGRI pursued the operation management of the coupled payments by adjusting the legislation as appropriate (e.g. modification of the Maximum Guaranteed Areas for protein crops 33 ). The Regulation (EC) No 1122/2009 governing the implementation of the Integrated Administration and Control System (IACS) 34 was also amended. The modification concerns the simplification of the on-the-spot control of direct payments, cleaning out of provisions which become obsolete as from 2012 due to further de-coupling of coupled payments, and the simplification or improvement on certain other provisions related in particular to livestock payments. Based on the experience gained during the first year of application of the quality assessment of the Land Parcel Identification System (LPIS) made by the Member States, the technical notes on the EU requirements and methodology of LPIS quality inspection have also been revised. Throughout 2011, DG AGRI was thoroughly monitoring and managing cross compliance rules, covering a.o. the link between fulfilling conditions related to public, animal and plant health, environment, animal welfare and the good agricultural and environmental conditions. In this sense the CAP payments covered by cross compliance represent more than two thirds of the totality of payments. The recasting proposals of Council Regulation (EC) No 247/2006 regarding the outermost regions of the Union (POSEI) 35 and No 1405/2006 regarding the smaller Aegean islands 36, submitted to the co-legislators at the end of 2010, were discussed in the European Parliament and in the Council in The first report on the impact of the 2006 reform of the specific scheme for the smaller Aegean Islands was adopted in December 2011 and submitted to the European Parliament and the Council. Modification proposals of the three POSEI programs were also approved by Commission's Decisions. A specific evaluation of the income effects of direct support 37 examined the efficiency and effectiveness of these direct payments in a broad range of agricultural sectors and farm types across the EU. The results of this horizontal evaluation showed that direct payments contribute to enhancing the income of farmers and play a particularly important role in generating income for grazing livestock specialist farms, farms specialised in field crops, mixed farms and dairy farms. At global level, the efficiency of direct payments in terms of reaching farms that are in need of income 33 Commission Implementing Regulation (EU) No 785/2011 of 5 August 2011 amending Council Regulation (EC) No 73/2009 as regards the maximum guaranteed area for which the protein crop premium may be granted. 34 Commission Regulation (EC) No 1122/2009 of 30 November 2009 laying down detailed rules for the implementation of Council Regulation (EC) No 73/2009 as regards cross-compliance, modulation and the integrated administration and control system, under the direct support schemes for farmers provided for that Regulation, as well as for the implementation of Council Regulation (EC) No 1234/2007 as regards crosscompliance under the support scheme provided for the wine sector. 35 Council Regulation (EC) No 247/2006 of 30 January 2006 laying down specific measures for agriculture in the outermost regions of the Union. 36 Council Regulation (EC) No 1405/2006 of 18 September 2006 laying down specific measures for agriculture in favour of the smaller Aegean islands and amending Regulation (EC) No 1782/ Final report to be found on agri_aar_2011_final Page 12 of 85

13 support is quite high the analysis indicated that four fifths of expenditure was going to farms which, even with direct payments, did not reach the reference income (regional GDP 38 /employee). The evaluation indicated that direct payments make also an important contribution to farm income stabilisation, in particular for small farms and farms in Less Favoured Areas (LFAs), and in the field crops and mixed farms sectors. In terms of payment modalities, direct payments have a higher positive effect on income equity in regions that apply the hybrid and the regional SPS models than in those applying the historical model. The results of this evaluation provided input into further simplification of existing legislation and supported the decision-making process on new initiatives, including the preparation of the CAP towards The Commission's proposals on the reform of the CAP include proposals on the future system of direct payments to farmers 39. The proposal includes a new architecture of direct payments, consisting mainly of a Basic Payment Scheme with entitlements plus mandatory additional layers ("greening" scheme, Young Farmers Schemes, Small Farmers' Scheme) as well as optional schemes (Payments for natural constraints, voluntary coupled support) Rural development (ABB 04) The EU's rural development policy seeks to improve the economic, environmental and social prospects of the rural areas of the EU. Its objectives are to improve the competitiveness of the agricultural and forestry sector, to improve the environment and the countryside and to improve quality of life in rural areas and encourage diversification in the rural economy. To achieve its objectives, the policy operates through 94 regional and national Rural Development Programmes (RDPs). These interpret EU-level challenges in light of particular circumstances in the area covered by the RDP in question, and respond with a series of measures designed to meet the challenges. The measures are outlined in EU legislation but selected and adapted by national and regional governments, according to the needs of the area in question. The available measures cover a wide range of themes, for example measures intended to increase competitiveness include support for training, investments in farm modernisation and involvement in food quality schemes; measures intended to benefit the environment include annual area-based payments which compensate for the costs of environmentally friendly farming and forestry practices, as well as support for ecological investments; and measures intended to improve quality of life and economic diversification include support for non-agricultural business start-ups, rural tourism and basic services for the rural population was an important year for the CAP as a whole and for rural development. The implementation of the Rural Development Programmes through EAFRD during the programming period is progressing well. The EAFRD payment rate for rural development accelerated in By the end of 2011, 45.7 billion of the total budget of 96.2 billion had been executed. Out of the 45.7 billion, 6.2 billion was paid as pre-financing arrangements. The remaining 39.5 billion was paid as co-financing of actually incurred rural development expenditure on the basis of requests made by the paying agencies of the Member States. The rate of budget implementation varies between Member States, between the four thematic Axes of the policy, as well as between different measures within the Axes. By the end of 2011, Member States have implemented between 29.1 % and 72.1 % of their 38 Gross Domestic Product. 39 Proposal for a regulation of the European Parliament and of the Council establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy, COM(2011) 625 final of 12 October agri_aar_2011_final Page 13 of 85

14 allocated EAFRD funds (including advance payments). The expenditure declared by the Member States so far focuses on measures related to improving the environment and the countryside, for which 53 % of the total EAFRD allocation related to these measures is paid out. For measures related to improving the competitiveness of agriculture, 37 % of the total EAFRD allocation has been spent. The budget implementation mirrors the importance of these measures, which receive approximately 80 % of the total EAFRD budget. The differences in budget implementation between different measures clearly show that investment measures (Axis 1, 3, and LEADER 40 ) are slower to get started than area or animal-related payments. LEADER, in particular, has experienced a slow start, but the implementation accelerated in 2011, reaching 15 % of the allocated budget. Since 2010 was the mid-point of the programming period , the Member States examined the progress towards the goals set in their National Strategy Plans (NSP) for rural development. The strategic summary reports on the progress made in the NSP implementation were submitted to the Commission in the autumn of Based on these reports, in June 2011 the Commission finalised the report on the implementation of the national strategy plans and the Community strategic guidelines for rural development ( ) 41. This report illustrates that, for many programmes, implementation only really started in 2008 and accelerated in 2009, despite some unfavourable conditions such as the economic situation. Nevertheless, many RDP modifications have already been made to correct the first difficulties encountered, such as by changing the level of grant or intervention rates for the less attractive measures, by adjusting the selection criteria or by reallocating the funds. Mid-term evaluations (MTE) of 92 Rural Development Programmes were conducted by the Managing Authorities and submitted to the Commission at the end of These were examined during 2011 and appropriate follow-up was undertaken. An EU-level synthesis of the MTE reports was launched in 2011 and will be completed in mid A conference on Monitoring and Evaluation for the CAP towards 2020 was held in September This brought together stakeholders from across the EU to share experiences of the current situation and reflect on how monitoring and evaluation could be improved. The stock-taking and experience-sharing exercises have contributed to the internal DG AGRI process of developing the future rural development policy. The closure documents for the 146, out the total of 152 programmes from previous programming period, were received already in The closure documents for the remaining 6 programmes were provided by March By the end of 2011, the final payment was made for 94 programmes and they were closed. The final balance, as proposed in the pre-closure letter from the Commission, was also paid for another 13 programmes, however additional complementary payments are possible in the current year. In addition, at the end of 2011, the final balance to be paid/to be recovered has been proposed for another 15 programmes and the proposition for a further 10 programmes was in the pipeline. Finally, for 20 programmes the winding up declaration or the final report is still to be approved. The Act of Accession of Finland and Sweden provides for the possibility of granting national aid to agriculture (Nordic Aid schemes) in order to maintain agricultural activities in the Northern regions of these two Member States. In accordance with Article 143 of the Act of Accession, and on the basis of the 2011 annual reports submitted by the Member States, the Commission has been currently preparing a five year report to the Council on the implementation of these aid schemes which is to be adopted in Leader ('Liaison Entre Actions de Développement de l'économie Rurale', meaning 'Links between the rural economy and development actions') is a local development method which allows local actors to develop an area by using its endogenous development potential. 41 Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions, (COM/2011/0450 final). agri_aar_2011_final Page 14 of 85

15 In 2011, the European Network for Rural Development (ENRD) was functioning at full capacity, with all communication tools set up and efficiently running (6-language website with extranet facilities, a database and a new publication on examples of projects funded under the EAFRD, newsletters etc.). Several group meetings and seminars were organised in 2011 on topics relevant for the policy (e.g "Delivery mechanisms of EU rural development policy", "Better local development strategies", "ICT in rural areas", "rural entrepreneurships"). These meetings and their reports helped identify what works well and what works less well in the implementation of the policy, and have thus informed the process of policy development. The cooperation with the National Rural Networks (NRNs) was continuously reinforced through regular exchanges and meetings with NRNs on different topics (rural entrepreneurship in particular, covering local food and short supply chains, youngster, local financial engineering etc.). Actions were also carried out to support the activities of Local Action Groups (LAGs), and engage their cooperation, notably through a special event 42 dedicated to them. Contributions to EU environmental policy (biodiversity, water, soil, climate change etc.) were provided in 2011 in view of implementing the 6 th Environment Action Programme, in particular by ensuring the coherence with the requirements of sustainable agriculture. Contributions to the integration of environmental requirements into the CAP was pursued by contributing to ongoing work on the CAP towards 2020, notably concerning measures encouraging the delivery of eco-system services by agriculture. A study "Addressing biodiversity and habitat preservation through measures applied under the CAP" was finalised and is expected to be published early Progress was made in managing and implementing the 17 actions under the Community programme on the conservation, characterisation, collection and utilisation of genetic resources in agriculture (Council Regulation (EC) No 870/2004). The evaluation of the Community Programme, which is scheduled to conclude in 2012, has been started. Work started on establishing the European Innovation Partnership (EIP) for agricultural productivity and sustainability. The EIP has been taken up in the proposal for a rural development Regulation, including a definition, provisions for an EIP network, and links it to concrete rural development measures. A draft Communication, presenting the objectives, delivery mechanisms, and principles of the EIP was established, and the Interservice Consultation was finalised with an agreed text. On 10 December 2010 the Commission adopted the Quality Package including a legislative proposal for a Regulation on agricultural product quality schemes (the Quality Regulation). During 2011, the Commission proposal was under discussion in the Council and European Parliament with a view to reach an agreement. In February 2011, the 1000 th food quality name was registered. By end of 2011, the number of new names added to the registers for PDOs, PGIs and TSGs stood at In addition, 24 amendments of existing registered names were approved and 5 applications were withdrawn by the applicants following analysis and comments by the Commission services. In 2011, 114 new applications for registration or amendment of existing registrations were received, which is almost the double of A provision was adopted under the EU organic farming legislation concerning the publication as from 1 st January 2013 of information on the organic farming operators in each EU Member State. Regulation (EC) No 889/ was amended accordingly in order to give the consumers the opportunity to inform themselves of the operators and of their products which are subject to the organic farming control system. Concerning import of 42 Leader as a Driver for Rural Europe: Workshop for New Local Action Groups. More information on 43 Protected Designations of Origin, Protected Geographical Indications, Traditional Specialities Guaranteed. 44 Commission Regulation (EC) No 889/2008 of 5 September 2008 laying down detailed rules for the implementation of Council Regulation (EC) No 834/2007 on organic production and labelling of organic products with regard to organic production, labelling and control. agri_aar_2011_final Page 15 of 85

16 organic products from Third Countries, the reciprocal equivalence between Canada and the EU concerning organic farming production standards was established and the similar negotiations with the USA were finalised. A first group of control bodies and control authorities competent to carry out controls and issue certificates in third countries for the purpose of organic farming equivalence was adopted. EGTOP (expert group for technical advice on organic production) delivered 3 reports of recommendations to the Commission concerning feed, fertilisers and soil conditioners and plant protection products. A study on "Use and efficiency of public support measures addressing organic farming" was performed and is expected to be published in early The results of the study will be used in 2012 for policy-making purposes. Work continued on further integrating climate change adaptation and mitigation into the CAP towards 2020, notably concerning new measures for greening direct payments, cross compliance and rural development towards 2020, including forestry measures improving carbon sequestration. The expert group on climate change and agriculture met twice. The work focused on the prospective impacts of climatic changes on EU agriculture, adaptation and mitigation action plans on national and regional level and grassland and soil carbon management. A study on EU agriculture vulnerabilities and impacts of climate change was finalised and is expected to be published in early Technical support was provided in the framework of United Nations Framework Convention on Climate Change (UNFCCC) negotiations sessions particularly on agriculture and on the land use, land use change and forestry parts. Contributions were made to the implementation of the Directive on Renewable Energy, in particular concerning biofuels and their indirect effects (ILUC), possible sustainability criteria for biomass and the analysis of National Renewable Energy Action Plans (NREAPs). Assessment of new market opportunities for the development of value added products from agriculture origin have been developed with contribution to the Communication on bioeconomy 45. A number of actions of the EU Forest Action Plan were completed and first steps of the work for the new Forestry strategy to be adopted in 2013 and for an international Legally Binding Agreement (LBA) have been achieved in According to the Commission's legal proposals for CAP towards 2020 concerning rural development 46, the rural development policy will retain the long-term strategic objectives of contributing to the competitiveness of agriculture, the sustainable management of natural resources and climate action and the balanced territorial development of rural areas. In line with the Europe 2020 strategy, these broad objectives of rural development support for are given more detailed expression through the six priorities 47. These priorities should be the basis of programming, including the definition of target indicators in relation to each of them. Finally, it is proposed to build on the Common Monitoring and Evaluation Framework (CMEF) introduced in the current period which will be simplified and improved based on experience gained to date. The internal mechanisms of rural development policy will become more results-based and the policy will operate in more effective co-operation with other EU policies. 45 Communication from the Commission to the European parliament, the Council, the European Economic and Social Committee and the Committee of the Regions "Innovating for Sustainable Growth: A Bioeconomy for Europe", COM(2012) 60 final of 13 February Proposal for a Regulation of the European Parliament and of the Council on support for rural development by the European Agricultural Fund for Rural Development (EAFRD), COM(2011) 627 final of 12 October These priorities are as follows: fostering knowledge transfer and innovation in agriculture, forestry and rural areas; enhancing competitiveness of all types of agriculture and enhancing farm viability; promoting food chain organization and risk management in agriculture; restoring, preserving and enhancing ecosystems dependent on agriculture and forestry; promoting resource efficiency and supporting the shift towards a low-carbon and climate-resilient economy in the agriculture, food and forestry sectors; promoting social inclusion, poverty reduction and economic development in rural areas. agri_aar_2011_final Page 16 of 85

17 1.2.5 SAPARD/IPARD (ABB 05) This activity is an integral part of the broader EU pre-accession strategy, assisting candidate countries to progressively align their policies with the "acquis communautaire" and preparing the economies to sustain the competitive pressure from the internal market. It supports the efforts of Candidate Countries 48 (CC) and potential Candidate Countries 49 (pcc) working towards EU accession. It is therefore most appropriate that both policy and assistance is provided at EU level to ensure that a coordinated approach and strategy is formed and implemented. Through initiatives such as enhanced donor coordination of assistance with Member States, International Financial Institutions and other donors, taking a lead at the EU level means that maximum impact can be achieved. Under SAPARD (Special Programme for Agriculture and Rural Development), assistance was provided from to 10 Member States 50 and in 2006 for Croatia. The SAPARD Programmes of the 8 Member States, which joined the EU on 1 May 2004, were completed by the end of The final applications for payment for the SAPARD programmes of Romania, Bulgaria, which joined the EU on 1 January 2007, and Croatia were submitted at the end of 2009 to the Commission. The total amount of EU contribution declared by these three countries was 1.3 billion. By the end of completed projects were reported, of which, for the most important measures, for farm investments, 713 for processing and marketing, 880 for infrastructure and for diversification. Due to ex-post controls and cancellations the number of projects has decreased in comparison to last year. The co-financed nature of SAPARD results in a leverage effect, because of the use of additional public and private funds for the financing of the projects. EU funds declared by Bulgaria, Romania and Croatia under the programmes of 1.3 billion, together with national public and private funds, result in a total amount of 2.9 billion of expenditure. Therefore, every Euro given by the EU under SAPARD, results in an investment of From 1 January 2007, the Instrument for Pre-accession Assistance (IPA) provides the basis for the co-ordination, management and implementation of the pre-accession strategy by the Commission. It is split into five components 51, one of which is IPARD (Instrument for Pre-Accession Assistance Rural Development). IPARD assists CCs with the preparation for the implementation of the "acquis communautaire" of the CAP and to align to EU structures, through the provision of financial assistance under multi-annual rural development programmes. Assistance under these programmes is based on the condition that the CCs have set up the required institutions and management and control capacity for the implementation of IPARD. The work regarding IPARD under this activity in 2011 was accompanied and affected by two political events: the closure of the accession negotiations with Croatia and the projection of the date for membership in 2013 as well as the change from pcc to CC status for Montenegro. As a result, efforts for Croatia under IPARD were intensified in order to ensure best preparation for membership in the area of agriculture and rural development. Montenegro officially submitted its first draft IPARD Programme, which was assessed and revised. Moreover, implementation of IPARD finally started in summer 2011 in Turkey with the conferral of management for 3 measures (farm and food investments and diversification). Conferral was also achieved for two further measures (diversification and rural infrastructure) in Croatia. On the programming side, the Programmes for Croatia, Turkey and the fyr of Macedonia have been revised to take account of results of the conferral exercise as well as of lessons of the implementation (the Commission 48 Turkey, Croatia, the former Yugoslav Republic of Macedonia and Montenegro. 49 Serbia, Bosnia and Herzegovina, Kosovo (as defined in UNSCR 1244) and Albania. 50 Poland, Lithuania, Latvia, Estonia, the Czech Republic, Slovakia, Slovenia, Hungary, Romania, Bulgaria. 51 Capacity building; cross-border co-operation; regional development; human resources; rural development (IPARD). agri_aar_2011_final Page 17 of 85