The analysis focuses on the European Commission’s reform proposals for the years 2028 to 2034. These include capping and degression of area-based income support as well as changes to the CAP’s Green Architecture. The reform aims to redistribute direct payments more strongly and give Member States greater flexibility. According to the authors, however, these objectives conflict with effective environmental measures and stable regional agricultural structures.

Regions with large-scale farm structures, as found in Saxony, other eastern German federal states, and several other EU countries, would be particularly affected. There, cuts in income support could reduce not only the liquidity of individual farms, but also put rural value creation, employment, and incomes at risk, while making participation in demanding agri-environmental programmes more difficult. The study therefore points to a trade-off between the redistribution sought by the Commission and the affected farms' capacity to contribute to rural areas.

The researchers are also critical of the reform because future environmental and rural development measures would require higher national co-financing, while income support would continue to be fully funded from the EU budget. For Saxony alone, maintaining the current level of environmental and rural development support could require an additional €240 million in co-financing. The authors warn against putting at risk an agri-environmental policy that has been built up over recent decades and has become increasingly targeted through abrupt institutional changes or weaker financial incentives.

The study recommends safeguarding continuity in the Green Architecture, maintaining binding environmental standards and effective earmarking for environmental measures, and further developing agri-environmental programmes. From a Saxon and eastern German perspective, capping and degression should be rejected. If they cannot be prevented at the EU level, then opt-out arrangements, the deduction of labour costs, and the retention of reduced funds within the affected regions should be pursued.

At the same time, the study argues that the enterprises concerned should make their role more visible in the European debate. Large farms, in particular, need to explain more clearly how their business models work, the importance they have for value creation, employment, and incomes in rural areas, and how they can contribute to environmental and climate goals.

Please find the study “Capping, Degression, and the New Green Architecture: Risks and Trade-offs for Saxony and Europe” available for download here: https://t1p.de/4mb6l

A summary of the study “Capping, Degression, and the New Green Architecture: Risks and Trade-offs for Saxony and Europe – Summary” can be found here: https://t1p.de/fxk1r

About IAMO

The Leibniz Institute of Agricultural Development in Transition Economies (IAMO) analyses economic, social and political processes of change in the agricultural and food sector, and in rural areas. The geographic focus covers the enlarging EU, transition regions of Central, Eastern and South Eastern Europe, as well as Central and Eastern Asia. IAMO works to enhance the understanding of institutional, structural and technological changes. Moreover, IAMO studies the resulting impacts on the agricultural and food sector as well as the living conditions of rural populations. The outcomes of our work are used to derive and analyse strategies and options for enterprises, agricultural markets and politics. Since its founding in 1994, IAMO has been part of the Leibniz Association, a German community of independent research institutes.

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