The so-called financial discipline proposal is made each year and reduces spending under the common agricultural policy (CAP) – specifically direct payments that are funded by the European Agricultural Guarantee Fund (EAGF) – in order to set aside €400 million (in 2011 prices) to cover potential crises in agricultural markets.

The proposal for 2019 aims to reduce CAP direct payments in excess of €2,000 by 1.422184%. This excludes payments to Croatian farmers as they are still being phased into the scheme due to their accession to the EU in 2013. The money saved will be used as a crisis reserve of €468.7 million (in current prices), made available in the 2019 budget. The rate is slightly higher than the one applied in 2018 of 1.388149%, which allowed a reserve of €459.5 million.

In addition to creating the crisis reserve each year, the financial discipline mechanism can also be used to ensure that EAGF expenditure stays within the annual limits agreed as part of the overall seven-year EU financial framework (the so-called MFF). However, current estimates for direct payments and market related expenditure for 2019 suggest that they will be within the agreed limit and therefore the present financial discipline proposal does not foresee any reduction for that purpose.

According to CAP legislation, amounts generated by financial discipline which remain available in the EAGF budget at the end of the financial year, including those of the crisis reserve, have to be reimbursed to farmers. Since the establishment of the crisis reserve in 2014, it has never had to be used, and the money set aside each year has been made available again to farmers.

Via ec.europa.eu