TABLE OF CONTENTS

1. Context and overview 2

2. Implementation of the Community's priorities 5

3. Horizontal issues 10

4. Outlook 13

This 2011 report is the first report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the implementation of the National Strategy Plans (NSP)[1] and the Community strategic guidelines (CSG) for rural development (2007-2013)[2].

This Commission report[3] is based on the analysis and appraisal of the summary reports submitted by Member States (MS) in 2010[4] as well as from other available information, notably the financial and physical common monitoring indicators and some outcomes from the European Network for Rural Development.

It provides a summary of the main current developments, trends and challenges relating to the implementation of the national strategy plans and the CSG.

It is important to note that the data used in the 2010 summary reports by MS are aggregates from the beginning of the programming period in 2007 to the end of 2009. The adjustments of the NSP and the related Rural Development Programmes (RDP) which followed the CAP-Health Check (HC) and the European Economic Recovery Plan (EERP)[5] are not taken into consideration in this current report. The modifications were indeed finalised at the beginning of 2010 only.

1. CONTEXT AND OVERVIEW

1.1 The Community's priorities for rural development for the period 2007-2013

On February 2006 the Council of the European Union adopted Strategic Guidelines for rural development for the period 2007-20132, based on the three core thematic priorities laid down in the Council Regulation on support for rural development by the European Agricultural Fund for Rural Development (EAFRD[6]):

Improving the competitiveness of the agricultural and forestry sector . The EAFRD should contribute to a strong and dynamic European agrifood sector by focusing on the priorities of knowledge transfer, modernisation, innovation and quality in the food chain, and on priority sectors for investment in physical and human capital. The measures grouped in 'axis 1' shall contribute mostly to the competitiveness objective of the RDPs.

Improving the environment and the countryside . To protect and enhance the EU’s natural resources and landscapes in rural areas, the resources devoted to this priority should contribute to three EU-level priority areas: biodiversity and the preservation and development of high nature value farming and forestry systems and traditional agricultural landscapes; water; and climate change. The measures grouped in 'axis 2' of the RDPs shall contribute mostly to the environment objective.

Improving the quality of life in rural areas and encouraging diversification of the rural economy . The resources devoted to the fields of diversification of the rural economy and quality of life in rural areas should contribute to the overarching priority of the creation of employment opportunities and conditions for growth. Interventions should in particular be used to promote capacity building, skills acquisition and organisation for local strategy development and also help to ensure that rural areas remain attractive for future generations. In promoting training, information and entrepreneurship, the particular needs of women, young people and older workers should be considered. The measures grouped in 'axis 3' of the RDPs shall contribute mostly to the wider rural development objectives together with axis 4 (see below).

Beyond the thematic priorities, the Strategic Guidelines also highlighted the need for:

- Building local capacity for employment and diversification - while contributing to the thematic priorities. This horizontal axis, also called "Leader Axis" (Axis 4) should play an important role in improving governance and mobilising the endogenous development potential of rural areas, through Local Development Strategies.

- Ensuring consistency in programming . Synergies between and within the axe should be maximised. Where appropriate, other EU-level strategies should be taken into account. Means to improve governance and policy delivery should be mobilised. In particular, European and national networks for rural development should be set up as a platform for exchange of best practice and expertise on all aspects of policy design, management and implementation between stakeholders.

- C omplementarity between Community instruments . In order to foster synergy between structural, employment and rural development policies, MS should ensure complementarity and coherence between actions to be financed by different EU funds.

These Strategic Guidelines provided the framework on the basis of which MS prepared their NSP, which translate the EU priorities into national priorities, and serve as a reference for the RDPs. These implement the priorities through sets of selected measures grouped by axis (see table 1[7] with the list of measures per axis). The programmes can be national or regional and were approved by the Commission in 2007 and 2008. Their implementation is monitored and evaluated on the basis of the Common Monitoring and Evaluation Framework (CMEF).

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1.2 Overview of the initial budget and operational targets

The overall EAFRD budget amounted to 90.98 billion EUR (prior to HC EERP modifications)[8] for the whole programming period 2007-2013. To ensure a balanced strategy the EAFRD has minimum spending levels for each thematic axis to be applied in each RDP (10%, 25% and 10% respectively for axis 1, 2 and 3). For the Leader axis a minimum of 5% (2.5% for the new MS) of the EU funding for each programme is reserved. The contributions of the EAFRD to the RDPs are complemented by national public funding (co-financing[9]). These EAFRD contributions aree financed in the context of shared management between the Member States and the Union.[10]

Once the programming was made at MS level, the financial breakdown between the different axe, as well as the definition of the main targets for 2013, resulted in the following, as at-June 2008[11]:

- Axis 1 'improvement of the competitiveness of the agricultural and forestry sector' accounts for 36 % of the total EAFRD. This axis is expected, by 2013, to contribute to 590,000 investment projects for the modernisation of agricultural holdings, to support 68,000 enterprises for adding value to agricultural and forestry products, and to result in 2.2 million participants successfully completing a training activity related to agriculture and/or forestry.

- Axis 2 'improving the environment and the countryside' is predominant with 46 % of the total EAFRD. The planned result is to have 45 million Ha of agricultural land under agri-environment management, 600,000 Ha of new afforested land, 1.1 million Ha of agricultural land supported to meet NATURA 2000 requirements and an increase in production of renewable energy of 20 500 ktoe[12].

- Axis 3 'quality of life in rural areas and diversification of the rural economy' has a lesser share with 18% of the total EAFRD. By 2013, it is expected to contribute to providing improved services to 71 million inhabitants of rural areas and to supporting 32,400 projects of village renewal projects.

The share of the Leader axis is 6% of total EAFRD funding. Support for implementing local development strategies is counted proportionally under the three main axe to which this support contributes.

At measure level, the main measure remains the agri-environment payments (214) which accounts for 20.3 billion EUR for the whole period. The next most important measures in terms of budget are the less favoured area supports (211+212) with 12.6 billion EUR, and the modernisation of agricultural holdings measure (121) accounting for 9.7 billion EUR.

Figure 1 : Overall rural development budget (EAFRD) before the HC and the EERP, broken down by measure (billion EUR)[13]

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2. IMPLEMENTATION OF THE COMMUNITY'S PRIORITIES

2.1 Overview of results, difficulties and solutions

The total EAFRD payment realized by the EU27 MS for the 2007-2009 programming period amounts to 19.4 billion EUR[14], representing 21.3% of the overall 2007-2013 budget of 90.98 billion EUR. Given that the timeframe under consideration represents 33% of the payment period (3 years out of 9[15]), this number indicates a slightly late uptake. However, programme implementation normally needs more time in the first years before it reaches normal speed, especially given that many RDPs were approved near the end of 2007 and 41 RDP (out of 94) were only approved in 2008.

The picture is far from homogeneous among the MS (Fig 2.): only 2 MS have spending levels above 40%, while 3 MS have spent less than 10%. It must be noted that in several cases payments have been made for commitments of the previous programming period 2000-2006 as foreseen in the transitional rules. This might lead to a slight distortion of the picture regarding the level of uptake for certain MS and measures.

Figure 2 : Overall execution of the EAFRD budget by the end of 2009 compared to the overall 2007-2013 allocation

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Some axis 2 measures have peaked more quickly than others due to the transitional measures mentioned above. On the other hand, axe 1 and 3 have been significantly slowed down by the financial crisis which reduced the availability of national funds on the MS side. It made it more difficult for beneficiaries to obtain the necessary private funding. As regards axis 4, a typically slow start is observed, which is explained by the establishment of local strategies and the selection of the Local Action groups prior to any project implementation (see table 3).

Figure 3 : Overall rural development budget (EAFRD) before the HC by axis (billion EUR) and share of the uptake by end 2009[16]

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The uptake of the output indicators against the overall targets for 2013 established by the MS in their programmes is globally in line with the financial level of implementation. The complete uptake of output indicators is represented in table 2.

General implementation difficulties, solutions found

Beyond the time gap needed to approve the RDPs, the most frequent issue raised by MS is the economic crisis. This led to difficulties in the uptake of investment measures due to beneficiaries' lack of own resources, difficulties in obtaining loans by the applicants and to budgetary constraints restricting public initiatives. The private sector has been in general less keen on taking risks, and some investments may have been shifted to less ambitious projects, or simply postponed. The difficult situation in the dairy sector in 2009 also had a negative effect on the implementation of RDPs.

High administrative costs and procedural complexity are underlined by some MS as impediments to smooth implementation. Moreover, some RDPs experienced a lack of sufficient capacity in the management and control authorities, some difficulties in the setting up of the monitoring system and legal uncertainties. In particular, some MS pointed out gaps in implementation at MS level of the environmental legislation (such as the Water Framework Directive, NATURA 2000…) relevant to certain measures (e.g.213) and the need to obtain interpretation of the state aid rules (notably.for renewable energy production projects).

Lack of awareness and experience by potential beneficiaries can also result in slow uptake notably in some EU-12 MS (i.e. slow progress on human capital measures; inadequate applications), or in the overall EU-27 when new measures are introduced. Some MS envisage offering a sufficiently critical mass of training/Farm Advisory Services activities to overcome these issues.

Solutions have been or are being found and are already substantially introduced in the programmes through modifications. In the face of the financial crisis, MS introduced different programme adaptations such as: change in the state aids coverage, the level of grants, the intervention rates for less attractive measures, adjustment of selection criteria, increase in the EU co-financing rate and/or reallocation of the funds. As regards the initial administrative and legal difficulties, most of them have now been dealt with.

2.2. Improving the competitiveness of the agricultural and forestry sector

The total EAFRD axis 1 expenditure registered for the 2007-2009 period amounts to 16.3% of its 2007-2013 overall allocation (EU27 average).

The main results for this objective, at the end of 2009, are:

- Number of participants who successfully completed a training related to agriculture and/or forestry: 696,000 (32% of the 2013 estimated target).

- Number of holdings introducing new products or new techniques: 33,400 (10% of the 2013 estimated target).

Implementation of measures[17]

Measure 121 (Modernisation of agricultural holdings) is the biggest axis 1 measure in terms of budget allocation (9.7 billion EUR). The payment uptake of this measure is 23% of its total budget with 106,000 modernisation projects already supported (18% of the 2013 target). Its positive uptake demonstrates the high interest of farmers for investments. Where implementation rates were below the estimates the main justification given by MS was the economic crisis which had a negative influence on the investment capability of the holdings. In some other MS the implementation rate seems to be faster than expected, requiring the need to increase the estimated budget for M121 (see table 3).

Measures 123 (Adding value to agricultural and forestry products) which is the second biggest axis 1 measure in terms of allocation, has an uptake of 9.6% and 7,060 holdings supported (out of 68,000 as the target for 2013). Among the other Axis 1 measures, we observe the following uptake level: 141 (Semi-subsistence farming, 29% and 8,885 semi-subsistence farm holdings supported), 113 (Early retirement, 28% and 17,385 beneficiaries) and 112 (Setting up of young farmers, 20% with 36,660 young farmers supported).

2. 3. Improving the environment and the countryside

The total EAFRD axis 2 expenditure for the period 2007-2009 represents 32.6% of its overall allocation. An implementation level significantly above the EU27 average has been achieved in several MS (see table 3). Other MS have a rate below 20% in particular where axis 2 measures are new or relatively new for beneficiaries and administrations in these countries.

The main results achieved for this objective at the end of 2009 are notably:

- 43 million Ha under successful land management contributing to biodiversity;

- 27 million Ha to improve water quality;

- 25 million Ha to adress climate change issues;

- 30 million Ha to improve soil quality[18].

Implementation of measures

The three biggest measures in terms of budget allocation are also those with the highest uptake among axis 2 measures: 211 (Natural handicap payments to farmers in mountain areas, with an uptake of 42%), 212 (Payments to farmers in areas with handicaps, other than mountain areas, with an uptake of 40%) and 214 (Agri-environment payments, with an uptake of 33%).

Measures 211 and 212 together support 50.9 million Ha, and agri-environment is supporting 21.5[19] million Ha. This high interest is supported in EU-15 by a long experience accumulated through the successive programming periods. The high uptake is also explained by the payment of commitments from the previous programming period, which was significant in many MS.

The three measures are followed in terms of uptake by measures 215 (Animal welfare, with a financial uptake of 33% and 126,700 contracts supported so far), and 221 (First afforestation of agricultural land with a financial uptake of 20% and 72,500 Ha afforested so far).

2. 4. Improving the quality of life in rural areas and encouraging diversification of the rural economy

T he total EAFRD axis 3 expenditure for the period 2007-2009 represents 6% of its overall allocation 2007-2013 with significant differences between MS (see table 3). According to MS, the main issues explaining this slow uptake are the financial crisis (scarcity of private and national/local funds) and some administrative difficulties (delays in the definition of national implementing rules, control obligations, complexity of applications…). Furthermore, in some MS, implementation of axis 3 is made exclusively via Leader, and therefore the delays in Leader implementation have also impacted on axis 3 uptake.

The main results achieved for this objective at the end of 2009 are:

- Axis 3 contributed to creating jobs (more than 4,000) in a context of growing unemployment in rural areas [20]

- Population in rural areas benefiting from improved services supported by EAFRD: 23 million[21]

- An additional 1 million households in rural areas have access to internet.

Implementation of measures[22]

The biggest measures of axis 3 in terms of total allocations are 322 (Village renewal and development, financial uptake of 5% and 12,800 villages where renewal activities took place) and 321 (Basic services for the economy and rural population, financial uptake of 7% and 8,700 projects supported).

The highest uptake among axis 3 measures has been recorded for 341 (Skills acquisition, animation and implementation of local development strategies) with 14% and 5,500 projects supported, followed by the measure 323 (Conservation and upgrading of rural heritage) registering the second highest uptake with 10% and 23,500 projects supported so far.

2.5. Building local capacity for employment and diversification

MS had to select the Local Action Groups (LAGs) two years after approval of the RDP[23] at the latest. At the end of 2009 the selection was completed in 20 MS with approximately 2000 LAGs. The number of LAGs has doubled in comparison to Leader+ and half the territories are implementing the Leader approach for the first time.

Due to the fact that the LAG selection process had just finished in MS, many of the selected LAGs had not yet started to implement projects linked to their local development strategy. This explains the low EAFRD axis 4 financial uptake which represents only 2.9% of the overall allocation of this axis for the programming period but a substantial number of projects have been approved lately.

Specific difficulties have been pointed out by some MS. The mainstreaming of Leader has notably affected the flexibility of the approach as many MS limited the choice of projects to the predefined measures while Leader projects often do not fit into the eligibility criteria of the predefined measures. This implied important administrative adaptations (administrative reorganization, training of staff).

3. HORIZONTAL ISSUES

3.1. Ensuring consistency in programming

Synergies between and within the axe have been ensured throughout the programming process, thanks to:

- the overarching requirement for consistency with the CSG for rural development;

- the reliance of the RDPs on an analysis of the situation in terms of strengths and weaknesses;

- the provision in the RDPs of specific information on the axe and measures proposed for each axis and their description, including specific verifiable objectives and indicators that allow the RDP’s progress, efficiency and effectiveness to be measured;

- an ex-ante evaluation of the RDPs.

The monitoring of the RDP implementation allows for checks to be undertaken to ensure that these provisions are respected.

Cross-effects and indirect contributions of a measure to another axis than the one it belongs to are, however, not currently measured through the monitoring system in place (e.g. contribution to climate change and adaptation from all axe). Only evaluations can provide more in-depth indications of these additional synergies and interlinks.

Other EU-level strategies have been taken into account in the NSPs and RDPs, such as the EU Forestry Strategy and the Sixth Community Environment Action Programme. An increased use of renewable energy sources and climate change adaptation and mitigation have been clearly addressed in the strategies and programmes, notably through the establishment of quantified targets[24]. The contribution of the RDPs to organic farming is being examined through a specific study of the European Commission on public support for organic farming.

It is to be noted that further emphasis on renewable energy and climate change – as well as biodiversity, water management and support to dairy restructuring - was given through the CAP HC, while a contribution to the EU broadband strategy was provided through the RDPs under the EERP. New targets were defined in 2010[25].

The National Rural Networks (NRNs) and the European Network for Rural Development (ENRD) have significantly contributed to the consistency in programming, notably by ensuring an exchange of information and practices between RDPs' managers and stakeholders and by carrying out joint analyses[26].

Together, the coordinated actions of the NRNs and the ENRD work to improve governance and policy delivery. Further work has been carried out on the implementation of Leader, and a Thematic Working Group is examining different delivery mechanisms through case studies. Through these networks, the dialogue between administrations and stakeholders is reinforced.

Networking is, however, a relatively long-term process. The establishment of these networks has been relatively slow, with different timeframes in different countries. The full-speed running of most NRNs and the ENRD has only recently been achieved.

The information and publicity actions of the MS are generally conducted separately from the NRNs' activities, using Technical Assistance. They target rural stakeholders as potential beneficiaries, those who are actual beneficiaries, as well as the general public to inform about the role played by the Community in the programmes and the results thereof.

3.2. Complementarity between community instruments

Other EU Structural Funds (SF) than the EAFRD can play an important role in rural areas such as the European Regional Development Fund, with focus on regional development, economic competitiveness and infrastructure, the European Social Fund, with focus on the development of human resources and the European Fisheries Fund.

In most cases, ensuring complementarity between these funds took the form of establishing demarcation lines and co-ordination mechanisms. Only in some cases a more strategic vision for the co-ordinated use of EU funds has been chosen by MS. The guiding principles were set in the NSP, while RDP provide the detailed description.

Demarcation

Demarcation criteria have been used by the MS to address the strict EU requirement that double funding must be avoided and that no project may benefit from more than one EU fund. Depending on the specific axe and measures, the demarcation criteria have been of different types: type of beneficiary; type of projects (size, territorial scale); type of operation or the type of economic sector

The demarcation has been successful in ensuring the avoidance of duplication between funds. Only a few difficulties were caused by different interpretations of the criteria in certain countries. Demarcation criteria can be adapted in the course of the programming period to address possible short-comings or difficulties.

Coordination mechanisms

Effective coordination is needed to ensure the application of the demarcation lines and the optimum use of funds through mechanisms such as inter-ministerial committees or cross-representation on Monitoring Committees, and in some cases a common IT tool.

Some states delegate part of the control to authorities – or even Local Action Groups – at quite local levels. This may enable local decision-makers to ensure that the patterns of demarcation and complementarity suit the particular circumstances and needs in their territories.

The existence of a specific coordination body (e.g. an inter-ministerial body) generally eases the coordination process. A source of difficulty is the difference in the level of programming, for example where coordination is needed between one national and several regional programmes.

Complementarity and synergies

Some MS have succeeded in creating effective complementarities, but generally a global strategic approach to ensure full complementarities and synergies between SF has been missing.

At local levels, there are more examples of a synergic approach. For example, in some countries, the local development strategy of a LAG can go beyond RDP objectives and part of their ambitions could be realised through the structural funds; sometimes a single common LAG for EAFRD and European Fisheries Fund programmes have been set up; in some MS Leader groups are established as local development companies, delivering not only RDP measures but also elements of other national programmes which can benefit rural people.

According to some National reports, elements which would help support synergies between funds are:

- the harmonisation of rules between the different EU funds as regards eligible costs (V.A.T. etc.);

- the consistency between the different systems of monitoring and evaluation to allow for an overall assessment of the EU funds on regional and thematic level.

More information from Managing Authorities to (potential) beneficiaries on demarcation criteria would also be useful to guide them to the relevant EU Fund.

4. OUTLOOK

For many programmes implementation only really started in 2008. Figures for 2009 however already show an acceleration, despite some unfavourable conditions such as the economic situation.

For the individual programmes implementation issues have been regularly discussed between Commission and MS. In the Rural Development Committee and through the European Network for Rural Development further exchange on implementation issues has taken place. Many RDP modifications have already been made to correct the first difficulties encountered, and further adaptations have been introduced to incorporate additional funds addressing new challenges (Health Check) and the economic crisis (European economy recovery package).

The Common Monitoring and Evaluation framework has provided useful information for reporting and for following the progress of the programme implementation and achievement on an ongoing basis. Preliminary figures for 2010 indicate that a majority of programmes has reached cruising speed. The synthesis of the mid-term evaluations of the RDPs to be available in 2012 will provide more information as to what extent the programmes are on track to achieve their objectives and to respond to the Community priorities.

[1] See Title II, Chapter II of Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD).

[2] Council decision of 20 February 2006 on Community strategic guidelines for rural development (programming period 2007 to 2013) (2006/144/EC).

[3] See Article 14 "Commission report" of Council Regulation (EC) No 1698/2005 of 20 September 2005.

[4] See Article 13 of Council Regulation (EC) No 1698/2005 of 20 September 2005. These summary reports set out the progress made in implementing the national strategy plans and objectives, and the contribution to the achievement of the Community strategic guidelines.

[5] See http://ec.europa.eu/agriculture/healthcheck/index_fr.htm for information on the CAP Health check and the European Economic Recovery Plan, and for access to the related legislation adopted in 2009.

[6] Council Regulation (EC) No 1698/2005 of 20 September 2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD).

[7] All the tables are presented in the Commission Staff Working Paper

[8] Since then, the EAFRD budget for the 2007-2013 programming period has been increased (notably by the HC and the EERP) to 96.2 billion EUR.

[9] All financial data in the report relate to EAFRD only.

[10] Article 4 of Council Regulation (EC) No 1290/2005 on the financing of the common agricultural policy.

[11] Part of the funds allocated to LEADER, technical assistance and direct payments have been attributed proportionally to the three main axe in the figures and table below.

[12] 2013 targets for agriculture and forestry established by the MS in their programmes.

[13] see legend of measures in table 1 of the Commission Staff Working Paper

[14] MS Payments related to 2007, 2008 and 2009 calendar year.

[15] Payments can be made 2 years after the last commitment (end 2013), thus until the end of 2015.

[16] Part of the funds allocated to LEADER, technical assistance and direct payments have been attributed proportionally to the three main axe in the figures and table below.

[17] See table 4 for the break down by sex and age as foreseen under the art.81(§3) of the reg. 1698/2005

[18] Result indicator from the CMEF, a same area could contribute to address several challenges.

[19] Commitments from 2007 onwards only

[20] Unemployment globally increased from 7.1% in 2007 to 8.9% in 2009 in the predominantly rural areas and from 7% in 2007 to 9% in 2009 in intermediate rural areas (source: Eurostat)

[21] This includes population benefiting indirectly of the services

[22] See table 4 for the break down by sex and age as foreseen under the art.81(§3) of the reg. 1698/2005

[23] With the exception of RO and BG who have 3 years to select the groups

[24] See list of targets in the annex VIII of the Commission Regulation (EC) No 1974/2006

laying down detailed rules for the application of Council Regulation (EC) No 1698/2005

[25] Fact Sheet: Overview of the CAP Health Check and the European Economic Recovery Plan: http://enrd.ec.europa.eu/app_templates/filedownload.cfm?id=5ACE6F64-F5FA-701C-70FD-E059E8462395

[26] For more information, please see enrd.ec.europa.eu