 presentation here will be a bit to give it the kind of the context of the future debate about the CAP. What's the context in terms of Europe? What's the context in terms of the budget, which is all important, of course, not only for the CAP, but certainly also for everybody in particular in these times, the sovereign debt debate. And also to point a little bit about where we're heading, what's the future going to bring in terms of the reform, the upcoming reform. I think what we need to underline is that we've gone through a continuous process, a continuous process of reform, actually starting with the former commissioner, McSherry. I came to the commission exactly on the date that Commissioner McSherry took up his office and it was a great pleasure to work together with him, had very strong views, something which probably was essential and necessary to get and push through the rather radical change of the CAP that he started, a process that he started and basically we're still on that course in terms of rendering our agricultural sector more competitive and in line with international requirements and the WHO and all the rest of the challenges that we have. So this process needs to continue. We need to continue down that path of linking our agriculture in Europe with that of the world. We cannot, as the minister said, be in isolation, splendid isolation. We're not an island as such in the world of agriculture. We need to connect. We need to interact. Agriculture has become global. Our economies have become global. We are all interconnected one way or the other and it would be a grave mistake if we were to try to turn the clock back, be inward, try to close our borders, be protectionist, try to safeguard our little nice garden from the dangers of the international wolves. We're there. We should be there. I think we have a potential. I think we have, in fact, probably the best conditions for agriculture in the whole world with a good combination of soil, good combination of climate, rain, sun, combination. Structures are still certainly lacking a behind. We have a lot to do still on the structures. But otherwise our conditions, our natural conditions are really providing a comparative advantage for our agriculture production versus that of many places in the world which are suffering either from too much heat, too much sun, drought, too little water, too cold climates, very volatile types of climates, extreme weather conditions going from very cold winters to hot summers and things like that. We have that parts of Europe as well, but they are marginal. We have generally a very good condition for agriculture. So we need to sort of make use of that potential and take our place in the world, not just on agriculture of course, but in general in the world. Right now we're a little bit sort of inward looking, very much inward looking because of the sovereign debt crisis, the eurozone, the economic crisis, the kind of situation you're going through in Ireland in terms of the debt and the need to restructure the debt, the need to recapitalize the banks, the need to get back on foot. And therefore it was very good to hear from the minister, and I've also heard this from others, that agriculture actually presents a kind of a potential, a potential for pulling you out of this dire economic situation and presents itself as a potential for continued growth, for employment, for exports, and I think that is a very positive message and I think I can only support that in terms of what the minister said. Let me go through a couple of slides and give a little bit of the context of the debate on the CAP as we're moving forward. And let's see if this here works. Well I was told to press this button to start, but it looks like I've pressed the button to stop. Okay, here we go. So this is a little bit the context also I think important to have in mind when we're talking about the CAP that we're talking about a huge diversity of agriculture across Europe. We're talking about huge differences in climate, significant differences in structures. We have something like 14 million farmers, but of these 14 million farmers, a lot of them are in the new member states like in Romania. We have like two million farmers in Romania alone. Romania has to go through a significant restructuring of its farming sector like we've seen that of Poland. Before Poland joined and we were discussing the accession of Poland, there was like this insurmountable barrier to getting adapted to European agriculture, having very small farms, a million subsistence farmers, having one cow, things like that. All this has gone extremely quickly with the accession of Poland. There's been a fantastic restructuring of Polish agriculture and now Polish agriculture from being very, we're in some very concerned about membership. Negative has turned this into a very positive attitude of the EU membership in addition to other sectors, by the way, of Polish economy. So this is really a success story and this is the same kind of transition that we have to see when we're talking about Romania. As the situation is today, we have something like four to five million farmers who will be retiring in the next 10 years. So we have an age profile, of course, tilted towards the upper category. We only have something like 6% of young farmers, below 35, in European agriculture. And we'll seek probably a situation where we will have a redressing of this balance so that a lot of the older farmers will leave, a lot of farmers who otherwise are not able to keep up with the pressures of the economy and the market will also leave. So we'll have a necessary restructuring taking place. But at the same time, what we're concerned about is we need to maintain a certain degree of territorial balance in the EU so that we do not have depopulation going on in the marginal areas like in Northern Finland or Sweden or Southern Greece, Italy. Areas where the conditions for agriculture is difficult. Western Ireland is another example. Or Scotland, Portugal with dryness, et cetera. So we need to have elements that contribute to alleviate the pressures of the market because if we leave it completely to the market, which is one option and which some would like to see, which for example on the other side of this channel, I don't know if you call it the Irish channel or the British channel, but it's on the other side going east of this country here, a lot of people would like to see just basically a CAP which consists maybe only of the second pillar and no first pillar. So if we leave it everything to the market, we've done some studies and looked at it and the consequence of that would be, it's called CNR 2020. It's very relevant for the debate right now because it wouldn't actually result, as some people might think, that there would be a reduction in production. Production would basically be maintained even without the kind of level of the support direct payments, market support and all the rest. But production would be very much concentrated. It would be concentrated in the central continental parts of Europe where the endowment for agriculture is optimal. So it would have depopulation going on for the marginal areas, for the peripheral areas like in northern Sweden, Finland, et cetera, and we would have concentration going in the middle of Europe. So we would lack the territorial balance that we're looking for. We need to have therefore an element of income support in the form of direct payments. We need to have a large degree of support also in the form of less favored area payments. We need to have a support for the small farmer. We need to have some degree of countering the pressures only from the market so that there is a balanced use of our agricultural land across Europe, which is important from a demographic point of view, from a point of view of the territorial balance. So this is an element in the CAP. An element is competitiveness, market orientation. This is what we've gone through. Yes, but it has to be also supplied and adjusted by a certain degree of a policy of maintaining activity in the countryside, maintaining some life which can sort of sustain also the economic basis for maintaining other activity in the countryside in the world of areas like schools, infrastructure, small businesses, and industries. The, it doesn't look quite well. There we have it. If you want to change, you can do it. That's fine. The CAP basically still is going to be also in the future composed of these three million elements. We have the pillar one, which is the markets, the direct payments. Out of the 52 billion euros, more or less, that we are using, this is a figure which is going to be more or less stable. We have something like four or less than 1% going into the markets. In the old days, the markets was the main use of the budget for the CAP. That's no longer the case. We now have the direct payments on the right side, which is the something like almost 40 billion, 38 or whatever, a billion representing the major chunk of the use of the budget, 73%. And then the, the role development with the co-financing of something like 12 billion or 25% of the budget. This structure here basically is going to be also the structure, as we will see it in the future. This was just recently confirmed, as the minister said, on the basis of the proposals which came out last week on the financial framework for 2020, which we'll also cover, of course, the budget for the CAP. So in this process of reform, this is going to be still the basic construction that we will build on with its different balances between the markets, between the need to support incomes, the need to have a role development, taking care of the need to have a less favored era of payments, environment, et cetera. Let me see if this works here. Yeah. Mentioning before the McSherry forms and what we've gone through, we've gone through looking at this from the perspective of competitiveness and from the perspective of the WTO. We've gone from the left, from the amber box, which is the trade distorting type of support, to the blue box, which is less trade distorting, but still subject to disciplines, to now having the major chunk of our expenditure in the green box, which is considered to be non-trade distorting, or at least negatively in terms of trade distortion, and which is not under the WTO subject to any reduction commitments in terms of the money that is being spent. This is extremely important. That's the whole purpose of our reform, that is to safeguard the money for the CAP, also in the context of a future WTO agreement, which for the moment isn't exactly around the corner. I like to say that the WTO for the moment is sleeping, it's having a good nap. We don't exactly know how long that nap is going to last. We do hope that the slumbering body is going to wake up at some stage. But it is essential to keep this course, as I said at the beginning. This is the way by decoupling our payments to disconnect our money from production, not providing a production incentive, but providing an income security, by providing a choice for the farmer, by providing the industry as such with the responsibility to decide what should be produced, how much should be produced, and should anything at all be produced, as long as there is the respect of the cross-compliance requirements, that is in terms of safety, food safety, animal health, environment, and animal welfare. This is the construction which basically we need to maintain. Cross-compliance linked to direct payments which are decoupled is an essential element of also the future CAP. But we do have an income problem, it jumps a little bit, we do have an income problem, there we are. We do have an income problem, and this income problem is of course something that seems to be a permanent feature of agriculture. There is a need to compensate for this deficiency, because if we do not compensate for a deficiency in terms of incomes between countryside and the cities, there's going to be a continuous exodus. This exodus has always been going on, it will continue, restructuring is necessary, but if we do not in some way alleviate this income difference, then this process is just going to accelerate, and we will have the question of the territorial balance being put in jeopardy. We also know very well that there is an income problem due to this development in terms of costs and prices. We've seen that, yes, there has been a fantastic increase in commodity prices over the last year or two. There is a fundamental change, as the Ministers have talked about, in terms of the fundamentals between supply and demand, and the demand in the future, and the growing economy in the world, and China which is pulling in the middle class, and in India as well. All this is a very good thing, but at the same time, there's also been a very significant increase in the cost of production. We've had increases in energy costs like 100% to 150% increases in pesticide costs for the farmer. So although the prices have increased significantly, the incomes haven't really been able to be improved. There's a squeeze between the prices and the cost of production, and this is something that is also part of the debate about, should we, and how can we support agriculture also in the future in terms of its income situation? In terms of the debate on the future CAP, we know that one of the things that is going to be highly discussed, I think you better help, that's it. Thank you, is of course the question about the direct payments. When we did introduce the system of direct payments decoupled based on an area base, either the historic model as you're using it in Ireland or the regional model as is used in Germany or the hybrid model which is used in Northern Ireland, which is a combination of historic and regional. It was clear that based on the past payments and the reference period, there was a huge difference in terms of the payments per hectare between the old member states and the new member states with the old member states on the left side. Ireland is quite comfortable in that sense because it has an average which is just more or less at the average of the EU, which is around 270 euros per hectare. But we have the Baltics, which is down on the right side, which has something even after phasing in, which will have only something like 100 euros per hectare. And the Polish minister together with others have been very insistent on the need to redress this imbalance which they consider as unfair, which is putting them in a competitive disadvantage, versus the old member states and they want to have a rebalancing. As it turns out, and the proposal that which just came out last week on the 29th of June, presented by President Barozo and Mr. Lewandowski who was in charge of the budget, what we're going to propose is not something that we in D. Jaguar were working on, which was much more ambitious. It's instead going to be a more moderate kind of rebalancing which will say, well, we will look at those who have an average of direct payments per hectare, which is below 90% of the average. And if you have an average which is 90% below, or 90% or below 90%, then you will be having an increase in your direct payments by one third, 30%. So there's going to be a certain limit of rebalancing. Those who are going to pay, of course, are those who are above the average, which is countries like Belgium, the Netherlands, Italy, Greece, my own country, Denmark, et cetera. And as I said, Ireland being pretty much in a comfortable situation being on the average, you will probably not have to contribute that much. I think this is going to be a very kind of a disappointment seen from the new member states. They will be disappointed that the degree of rebalancing is so moderate, is so timid, and we can foresee quite a difficult debate and discussion in the council, and certainly also in the European Parliament with the co-decision now being part of the CAP. We'll also have a discussion about the, yeah, it's better I ask you, perhaps, of the distribution of the expenditure between the first pillar and the second pillar. And as you can see from this chart here, it represents in the yellow, it represents the expenditure in terms of direct payments, market support, pillar one, and the blue is the second pillar of the role development policy. And there's a very uneven distribution here, and perhaps you would note, for example, a country like Austria, when we introduced the pillar one and the pillar two concept and the role development policy, Austria has a very relatively high degree of second pillar payments. It's not by coincidence. At the time, we had an Austrian commissioner, Mr. Fischler, who had experience from his time as Minister of Agriculture in Austria. He was really the one who put in place in Austria a policy of that kind. He exported that to the rest of the EU, but made sure, of course, that Austria in that process got its share of the budget. But it's not so unnatural because Austria has a natural condition with a lot of mountains, a lot of dairy farmers, a lot of difficult circumstances for farming, which cannot survive simply on a policy based on the great plains of Paris or Germany with cereals, and that being a major factor in their production. No, it is a difficult circumstance, and they only have parts around Vienna, which is an area which corresponds more or less to the agricultural situation in some of these kind of little Western European countries. So there is a need to do something here to compensate those natural handicaps. But on the other hand, there's also a need to do a certain degree of rebalancing because other member states, particularly those on the left, they're very unhappy that they're not getting a bigger share of the second pillar money, which they would like to get their hands on because second pillar is about climate change. It's about the environment. It's about water management. It's about emissions. It's about modernization. It's all those which would really point to the future challenges for the agricultural sector, and therefore, this is part of the future, is not something of simply consolidating what you've already achieved. If we go into the next, much talk has been about the so-called need to do a greening of the CAP. Well, the second pillar, as I mentioned, environment and all the rest is already green. It's one of the most green policies you can imagine as part of the European project. But there's also been this need to say, well, we need to have the first pillar being more green. Well, the first pillar is also green to some extent, to a large extent, I would say, due to this link to cross-compliance. As I say, you get your full money, direct payments as farmer if you respect the cross-compliance, which is good agricultural environmental practice, which is questions in terms of nitric directive, which is respecting water courses, which is a question of animal wealth and all the rest. But since we're talking about high degrees of direct payments, a big budget, we say, well, in the future, we need to justify these payments, not just on the basis of the need to provide a certain income stability, a certain floor under incomes, which is justified because of the natural conditions under which agriculture is taking place, which is weather-dependent, which is very much dependent on the international markets, the high degree of volatility we've seen in prices, the speculation which is taking place also from the financial markets and all this. So there is an income argument, the fact that we have the income deficiencies, as I pointed out. But that in itself, we're saying, is not going to be, in the long run, the sole argument to justification for keeping the direct payments at the level they are. And therefore, you need to introduce this supplementary element of greening. And the elements of greening, they're not yet established, but they're pretty much yet fixed with this proposal coming out last week, which is an element of crop rotation, permanent grassland, set aside water courses, rivers, lakes, which are to be protected, Natura 2000. Natura 2000, maybe there's some other things that come in. The essential message is, however, we do not want to make these greening requirements more complicated than necessary. We don't want to have it, as in the second pillar, the farmer going into having a contract for producing less, more extensive type of production or respecting certain periods when he can cut his grass, the harvest and all that. No, this is not an individual contract. These are general requirements for the farmer in terms of permanent features that is part of his natural production if he is behaving as a rational person and respecting the requirements in terms of agriculture, good agriculture practice and environment. Now, in terms of set aside, lots of farmers already do this because they have an interest in themselves. The question is what level of set aside are we talking about? If we're talking about something like three to five percent, probably it wouldn't make much of a difference. If we're talking about 10 percent, of course, then it may make quite a big difference because then there is a loss of production with the high prices in oil season cereals which could represent quite a significant loss. So we need to be able to determine the level of greening at a reasonable level so that the farmers is not a subject to income losses. We're saying that 30 percent in the future should be the green part. So we have a basic income support part which is the lower level which is going to be for everybody and then we have a greening element, 30 percent which will be controlled on the basis of the visits that in any place is taking place in the farms, five percent visits by the controlling authorities which is normal part of the practice. So it should be simplified provisions but they should be complied with by all farmers. Question is, is it something that can be in terms of a menu so that not all the requirements are to be respected? This is still something which is part of the debate and we'll have to determine. Another element is the question of targeting support to active farmers. Often we've seen and just recently the Court of Orders again has come out with a criticism of the direct payments as going to farmers who are not actually maintaining any agriculture activity or at least they're not maintaining their land. They point to Scotland as one case, huge areas of Scotland where they're using the areas for roaming of sheep or goats or for deer or whatever but they're not actually doing anything. So why should these people then get direct payments? And it's a difficult debate, it's a difficult course to explain and it puts the CAP in a negative light and therefore we're thinking about requiring certain elements to be able to qualify also for the direct payments in terms of having a certain element of composition of income, professional qualifications, residence or whatever on the farm but what is important and this is particularly important for many of the part-time farmers, part-time farmers would probably not be covered by this idea. The next one. We need to make sure that if we have this kind of restriction in terms of support to the active farmers that it does not endanger the green box qualification that's the definition because that of course would be very detrimental overall to the CAP. So the WTO says you cannot make your support subject to production factors. If that is the case, then it's no longer green and therefore we're subject to attack. So we have to make sure that that doesn't happen. Next one. In terms of the CAP reform as I talked about we need to make sure that we have a continuation of the process of improving competitiveness that we put agriculture in the global context. We also have it for budgetary reasons. I'll come to that just in a moment and of course also for the reasons of the WTO. Next one is in fact just a summary of that because what I've talked about market orientation, the need to have a rebalance into a certain extent of the direct payments, the issue of the income deficiency and the need to have a greening part of the first pillar in addition to the cross compliance and put this all in the context of the financial framework. So the next one here is something that the next slide will be a little bit difficult for you to read. The important message is here that what the commission has come out with regard to the future finance perspectives is basically to lock in the expenditures of the CAP in nominal terms also based on the 2013 figures into the future into 2020. There is an inflation factor 2% which will be used which de facto means that we will in nominal terms more or less to maintain the figures but in real terms there will of course as a consequence be a reduction with the figures that are being proposed here. Overall the EU budget still represents something like 1% of GDP in the EU. You can say this is marginal if we take the next one. This is certainly marginal in terms of the use of public money for other expenditure because on average we're something like, perhaps we can take the next one. We have something like public expenditure representing 50% of GDP on average across the EU. We have a high degree of social security, we have the education, we have infrastructure. All these are public expenditures which are for the benefit of the general public but in terms of the EU budget it represents something like 1% and of that with the figures we have before in terms of what the EU budget represents of the total budget 41% we're down to less than 0.5% of the GDP in the EU. Now that is still considered to be too much and too high for many member states and we're gonna have a very difficult debate. We've already seen the initial shots coming from the UK and others saying in times of austerity this is not a serious proposal, we need to reduce the budget, you have to make savings like we're making savings, we're going through a hard time so this is not acceptable. If we look at the budget as such for what the CAP is going to be endowed with in 2020, basically we can say that we came out of this process in pretty good shape. As was mentioned by the minister there were a lot of tax, there were a lot of interest in trying to cut down the budget for the CAP but in general we can say we kept our hide, we kept our clothes intact, not too many holes, we're pretty much in good shape but we do have some elements which have been introduced as novelties and these are up here where the food safety part, 2.2 billion euros over the seven year period which is around 300 million per year, comes out of the veterinary fund, the Sanco, the DG Sanco, the health issue which for historic reasons was under the CAP but has now been taken out which allows us then under the CAP with the unchanged amounts of money to have a little bit more space and this goes also for the so-called most deprived person scheme which is 500 million per year and where there's been a lot of controversy over this lately because of Germany bringing a court case against the commission saying this has nothing to do with the CAP. First of all and secondly, you're financing this out of the EU budget and no longer on the basis of intervention stocks which was originally the idea for the model. So we're taking that out as well which is another 2.5 billion over the period. Then we have as novelties a new kind of reserve or crisis, 500 million per year, 3.5 billion over the seven year period. And what is that? Well, E. Coli for example, we just had an outbreak, we had severe losses for farmers in Southern Europe across Europe in general but of course in particular and those who were exporting fruit and vegetables to the rest of the EU and this cost us 210 million. So in a case of that, we would have a yearly fund of something like 500 million to address a future crisis. So that taking this out again of the CAP part of the budget allows a little bit more space which is amounting to something like if we add all those figures together something like eight to nine billion, eight to nine billion euros which is necessary because there is a programmed increase in the direct payments to the new member states where there is a phasing in and where that phasing in has not yet been completed. And in particular we're talking about not just the 10 member states but also of course Bulgaria and Romania. So that means that there is a space which is created by taking these budget lines out of the CAP to address that increase financing need of the direct payment which is essential because otherwise if there's not enough money under the CAP to a combination of direct payments or market support then we have this notion of financial discipline being introduced and financial discipline simply means if there's not enough money we're gonna cut the direct payments to finance what is ever necessary in terms of market support. We also have the so-called global globalization fund which is sort of a euphemism talking about international challenges transition payments and whatever. Now, I don't know exactly what this means. Maybe you know better than I do. There is a international context here which is relevant. Research and development and innovation which is something that all members of all member states are insisting on and I think the ministry of equity was also into that in terms of the need to modernize in terms of the need to provide value added in terms of quality, production and innovation all of this is part of the general phase of the picture. We need to connect as I say with the international context we need to be competitive and this is a key element in that process of competitiveness. One question we don't have an answer to is but all this for the crisis fund and the globalization fund and all the rest is the agriculture in charge is the commission for agriculture in charge. I don't know and this is a bit of a preoccupation because if we don't have access but have to go and ask for a dime for the needy from our rich brothers in charge of the budget or whoever this might put us in the fit of a spot but we hope for the best and we're optimistic. The next one here is basically just a summary of the budget situation leading up to 2020. So I think the good message is that we came out of this process in pretty good shape as the minister mentioned where there was a lot of risk of being severely curtailed. I'm going to finish now Mr. Chairman so that you don't get nervous and going beyond the time. I mean as the company already and addressed this now we have a situation where the proposals coming in has come out in terms of the financial perspective. We've got the bullish precedent now during the second half of 2011 the Danish Presidency coming out in 2012. This means that the budget discussion has had a head start on the reform debate on the CAP because the reform proposals will not be coming out before something like October. And I think this is pretty good this is rational for the point of view of the CAP because if we do not know in the context of the CAP what more or less we can count on then it makes the debate or the discussion on the CAP reform much more difficult. So I think that's a good thing but it also means with the co-decision on the CAP and there's not co-decision by the way on the financial perspective there is a need to consult with the European Parliament. The Parliament can reject or accept but cannot come as in the context of the CAP debate with its own proposals with counter proposals there's not even reconciliation there's not a kind of a process of negotiation during the council the council and the European Parliament and that of course means that on the budget side which is a key element the council does have at the upper hand. But in terms of the CAP reform I think it's realistic to say that the Danes who had this high ambition of finalizing the package will not have that time the polls will just have two meetings of the council minutes to be able to debate the reform when they come out in October. So the real negotiation is going to start during the Danish presidency the cyclist is a question whether they will be able to live that and therefore it points very much towards an Irish president in 2013 as having to finalize and complete the process together with this co-decision situation now of the Parliament. The last slide is in this debate in terms of the budget where we now have the proposals. The difficulty is as usual all member states tend to be very much like money and pictures. You know what am I getting out of the budget? Am I paying more into the budget or am I getting more out? Am I a net contributor or a net benefit? And this sort of dictates the attitude. That's why the commission said can we get out of this pecking debate you know the UK Mrs. Thachern I want my money back all this debate which has been extremely negative always very negative in the EU can we get out of that debate and substitute the contributions based on the the VAT value out of tax and substitute the contribution based on a share of the GDP by substituting this with a normal resource situation for example the Tobin tax the tax on financial transactions. Again the UK has come up very quickly because of this huge financial sector London is being totally against this whole idea this is never going to happen Mr. Barozo the president said well I'm not surprised but nonetheless European Parliament is very much in favour so we do have a high degree of support also for this idea which is to get out of this stale debate as I say about how much do I contribute how much do I get out and to have a bit of an independence in formulating the budget. As usually it will be then well the British say I need to continue with my rebate and we have this odd situation where Germany and the Netherlands and also Austria which is not mentioned here actually have a rebate on the rebate which is meaning well I am a net contributor so I'm not going to pay to the Brits to increase my net contribution so I sort of have a rebalancing back so I don't pay more even as a consequence of the UK rebate and my compatriots have just come out a couple of months ago very forceful and say yeah well we're also net contributors so we also have to have a rebate on the rebate so in the end who's going to pay all this is a bit nonsensical and therefore it's not very positive a debate. I think the end message is that the CAP is going to have the money which is necessary to finance the different activities to have this balanced territorial approach income support it's going to be an environment where the market is going to be more and more stronger determining the context for the CAP you can ask the question do we need a CAP with a good favorable market situation we do need a CAP for the reasons mentioned in terms of weather volatility income problems the need to have public goods which are not paid by the market we need to have a CAP to take care of the territorial balance in the real development situation all these are are part and parcel of the CAP but if in fact the market situation the fundamentals are much more positive this will of course make uh... agriculture regain its place uh... to have also society recognizing that agriculture is not something of the past but it's something also of the future thank you very much