Economic and regional consequences of direct payments under the current CAP philosophy

Abstract

The paper deals with one of the key instruments of the actual EU Common Agricultural Policy (the CAP), the direct payments. The economic as well as the regional implications of application for direct payments in the CAP strategy are evaluated there. The study deals with the economic costs, direct and indirect effects of such type of subsidy in general and a demonstration thereof in the context of the development of the European model of agriculture. Based on the economic principle of this type of transfer evalution, the processes of the income redistribution in the framework of global/common policy in general is characterized. It explains the causes as well as the nature of implementation of this instrument in the reform processes in the last twenty years, focusing on the reasons and consequences of different application in the original and the new EU member states. It considers the question of whether this type of support to agriculture is truly a tool that does not interfere with market conditions affect the respective competitive ability of agricultural producers. In the context of changes to income support in agriculture in the CAP development process, the effect of decoupled payments on the pricing within the agricultural commodity markets is specified. At the same time the work deals with a broader social context and social impact of the differing forms of support in European regions.