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In the baseline scenario, compulsory modulation of 5% in the period 2007-13 results in a reduction of EUR 8.2 billion in the ‘Direct Payments’ budget for the EU15 as a whole (Table 15.4). For the individual EU15 member states, this implies a reduction of the overall “Direct Payments” budget of between 1% and 4%. The addition of the modulation funds to the EAFRD budget for the EU15 increases this budget by nearly 20%. However, the increase in the EAFRD budget varies significantly between individual EU15 member states, mainly depending on the relative shares of ‘Direct Payments’ and EAFRD in the total budget, which is in turn affected by the allocation criteria6 determining the proportion of the total EU core EAFRD budget received by individual member states. As a result, countries where EAFRD constitutes a relatively small proportion of the total budget, such as Denmark, the United Kingdom and the Netherlands, face an increase in their EAFRD budget of 56-94%, whereas countries where the EAFRD constitutes a high share of the total budget, such as Austria and Finland, show an increase of only about 6%. In addition, as a result of the “return key”, some countries lose from the redistribution of modulation funds: these member states are mainly located in north western Europe, Finland being the exception. Countries that benefit from the redistribution are located in Southern Europe. It is important to note that the addition of EUR 8.2 billion of modulation funds to the EAFRD budget also results in an increase of EUR 7.2 billion of national co-financing as well as EUR 7.2 billion of private funding. This means that, overall, the total budget available for Pillar 2 in the EU15 increases by 14%.

In the Health Check scenario, modulation in the period 2009-12 results in an additional reduction of EUR 5.1 billion of the Direct Payments budget for the EU15 as a whole (Table 4). As a consequence, the EAFRD budget 2007-13 for the EU15 increases by EUR 5.1 billion relative to the Baseline Scenario (+10%). If voluntary modulation funds in the United Kingdom and Portugal are deducted, the net increase of the EAFRD budget 2007-13 amounts to EUR 4.4 billion. As in the Baseline scenario, the increase in the EAFRD budget for the individual EU15 member states varies greatly, mainly depending on the shares of Direct Payments and EAFRD in the total budget. The addition of an additional EUR 4.4 billion of modulation funds in the Health Check scenario to the EAFRD budget results in an increase of EUR 3.7 billion of national co-financing and EUR 5.2 billion of private funding. Overall, the total budget available for Pillar 2 in the EU15 increases by 8%.

Table.15.4. Direct Payments, EAFRD and P2 budget in the Baseline and Health Check Scenario in the EU15, 2007-13

Baseline

scenario

Health

Check

scenario

Health Check scenario relative to baseline scenario

Billion , EUR %

Billion

EUR

Billion % EUR %

Direct Payments budget before modulation

254.4

254.4

Modulation Pillar 1

8.2

13.3

5.1 63

‘Direct Payments' budget

246.2

241.1

-5.1 -2

Decrease Direct Payments budget due to modulation

3

5

EAFRD budget before modulation

42.8

42.8

Modulation available for Pillar 2

8.2

13.3

5.1 63

EAFRD budget

50.9

56.1

5.1 10

Increase EAFRD budget due to modulation

19

31

Pillar 2 budget

166.5

179.8

13.3 8

Source: Budget Model (LEI).

The addition of EUR 8 billion of compulsory modulation funds to the EAFRD budget 2007-13 in the EU15 implies an increase of EUR 7 billion of national co-financing and also EUR 7 billion euro of private funding. Figure 15.2 shows the division for the EU15 member states.

Figure 15.2. Breakdown of increase in Pillar 2 budget induced by 5% compulsory modulation funds, 2007-13

 
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