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Alternative direct payment arrangement options

The last section will focus on the first results from model calculations with respect to alternative arrangements of direct payments (Bureau et al., 2010). Regional or EU- uniform flat rates per hectare are examined, derived from the premium budget of EU member states or EU27 together. In addition, progressive premium reductions by premium level of farms (equivalent to modulation) are considered, as well as upper direct payment limits related to labour capacity (< EUR 15 000/AWU for farms with direct payment > EUR 50 000).

The model calculations are carried out on the basis of individual farm data from the EU FADN. These data refer to 2013 and include a complete implementation of the regional models of SPS in England and Germany as well as an entire upgrading of payment levels in the new EU member states. The distributional effects of flat rates are close to the German regional model. Indeed, uniform EU-based flat rates induce clear redistributions to the disadvantage of the EU15 and in favour of most new member states. The premium limitations with respect to AWU lead to significant premium reductions for farms with more than EUR 100 000 of direct payments, above all in Germany, the

United Kingdom, France and Italy. In the new Member States, only relatively low reductions arise from this alternative, due to the higher labour input of those farms.

Model calculations based on the transformation of half of Pillar 1 premiums in favour of Pillar 2 payments (without considering co-financing) show above all strong income losses in the bigger farms, because the transfer efficiency of Pillar 2 payments with respect to income is perhaps only half that of Pillar 1 payments.

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