Is this the end of guaranteed subsidies? Hungary could be particularly badly affected by the new EU plans

In July, the European Commission presented its multiannual financial framework (MFF), which would radically reshape the European Union's common agricultural policy (CAP). Bernadett Petri, the Ministerial Commissioner responsible for coordinating the use of direct EU funds at the Ministry of Public Administration and Regional Development, as well as the Managing Director of the Hungarian Development Promotion Agency Nonprofit Ltd., shared her views with Agrárszektor on the planned changes and their expected impact.

According to the Commission's proposal, agricultural subsidies would be included in national and regional partnership plans instead of the current two-pillar CAP system, while the toolkit would be regulated by separate legislation.

This in itself carries the risk that the current two-pillar system, with its predictable structure, will cease to exist, or at least lose its stability,

the expert warned.

The planned changes would have a particularly significant impact on Hungary. The EU budget earmarked for agricultural subsidies would be reduced by around 25%, which is well above the EU average. In monetary terms, this equates to around €9.2 billion — more than €3 billion less than the budget for the 2021–2027 period. According to Bernadett Petri, taking inflationary effects into account could result in a real reduction of up to 35%.

The expert emphasised the importance of the two-pillar CAP system. The first pillar comprises direct payments and market measures, financed entirely by EU funds. "This provides farmers with predictable annual direct payments and includes intervention or export support mechanisms," she explained. The second pillar, rural development, is co-financed, giving Member States greater flexibility but also introducing an element of uncertainty.

The European Commission argues that the CAP is outdated and unfair, and does not encourage innovation. Therefore, it wants to prioritise competitiveness. However, Petri claims that

while certain elements of area-based subsidies are not entirely fair, their stabilising function is indispensable.

She emphasised that agriculture is not fundamentally a high-risk sector, since a decline in crop yields directly impacts income.

While the Commission's proposed 450-hectare cap on area-based subsidies may seem like a step in the right direction at first, according to the ministerial commissioner, it only addresses the problems of the largest players.

The average size of European farms is around 20 hectares, meaning that the 450-hectare threshold does not actually protect small and medium-sized farms,

she pointed out.

EU direct support programmes currently do not provide adequate support for agricultural innovation. Horizon Europe and other innovation programmes usually involve large, multi-stakeholder collaborations, in which the vast majority of Hungarian farms are unable to participate.

The vast majority of Hungarian businesses are unable to enter at this level because they lack the necessary professional capacity and network of contacts,

said the expert.

According to Bernadett Petri, an ideal CAP model would retain the two-pillar system and stable area-based subsidies after 2028. It would also include an EU capacity-building programme involving farmers through simplified applications. "This would lay the groundwork for higher-level innovation to be built on later," she said.

The ministerial commissioner welcomed the European Commission's recently presented package of measures to reduce bureaucracy (i.e. the CAP simplification omnibus), particularly because it included several Hungarian proposals. However, she emphasised that

this alone does not compensate for the many years of burden that farmers have already endured, nor does it offset the reduction in subsidies.

Cover photo: Portfolio