A threshold will apply to exempt the first €2000 from this "Financial Discipline" instrument. An amending letter to the 2014 draft budget, aimed at updating forecast budget requirements, is expected in mid-October, and in this context the Commission may propose to the Council to adapt the percentage reduction to be applied.

The Financial Discipline mechanism was first established in the 2003 CAP reform to ensure that the programmed phasing-in of Direct Payments in the EU-12 or any unexpected market spending did not breach the budget ceilings set in the 2007-2013 EU multiannual financial framework (MFF).

However, it was not triggered in that period.

With the real-term reduction in the CAP amounts for the 2014-2020 period and the move within the MFF to fund the new agricultural Crisis Reserve (of €424m a year) from within the CAP 1st Pillar envelope, the mechanism has now been triggered for the 2014 budget year.

The Commission made its initial proposal for Financial Discipline at the end of March.

The rules required the Parliament and the Council to reach agreement on the original March proposal by the end of June, otherwise the power for adopting Financial Discipline would pass back to the Commission.

As the two co-legislators could not reach agreement in time, the Commission is today fulfilling its responsibility through an implementing regulation, in line with the CAP reform and the initial proposal. 

Source: ec.europa.eu, ag-press.eu