A few years after Bulgaria’s accession to the European Union in 2007, the Institute for Market Economics (IME) has analyzed the impact in Bulgaria of the direct payments per unit of land from the fund of the Common Agricultural Policy (CAP). To cut a long story short, the European financial boost has breathed some life into Bulgarian agriculture that lived through two critical decades at the turn of the century. 

The wrongly selected model of land restitution that resulted in the emergence of a great many small plots of land, coupled with the lack of any state subsidies in the sector has caused a dramatic collapse of Bulgarian agriculture which had for centuries been the economic pride of this country. Access to European funds in the aftermath of 2007 – despite that funds account for just one-third of what old EU members get – has revived local interest in farming. “One indisputable benefit arising from the introduction of direct payments per unit of land is the increase in arable land at the expense of uncultivated plots of land”, the IME study reads. 

Unfortunately, the selected way of subsidies via direct payments per unit of land has favored mostly the market of farming land and its owners, and to a lesser degree, the people employed in agriculture. Since the launch of European subsidies until 2012, the price of arable land in Bulgaria increased almost two-fold (175%), the study suggests. It goes without saying that the rising demand for arable land has also driven land rental prices up. This process has been coupled with a positive trend of fast land consolidation. 

However, some extremes have made themselves quite obvious. Since 2007, large farms (with more than 100 ha of land) have developed fast. In 2010 they already managed as much as 82% of the arable land. Their average size reached 671.7 ha compared to 538.5 ha in 2005. In the meantime, the average size of farms with 100 ha plus in EU is 264 ha, IME experts

point out. This huge concentration of land is seen mostly in the Danube Valley dubbed Bulgaria’s granary. Land owners in that part of the country have become millionaires almost overnight. The system of subsidies per unit of land has resulted in a distortion of agricultural assistance. A handful of big landowners engaged in grain production in the main have acquired the lion’s share of European funding. This has doomed to misery other farming sectors such as vegetable and fruit growing, stock-breeding and organic farming. 

Resulting from this drastic imbalance, the gross added value generated by the sector of agriculture in the bracket from 2000 to 2012 contracted by close to 19%. The share of agriculture in economy was almost halved, from 9.6 to 5.1%. The decline continued even in the period from 2008-2011, despite the inflow of European financing. 

The benefits of European subsidies also include the fact that incomes in Bulgarian agriculture have risen quickly for the past three years. On average for the period since Bulgaria’s accession to EU they are 15% up. However most of this increase comes from rent paid to landowners. 

On the other hand, Bulgaria should lobby for the equalization of direct payments to all EU member states given that at present, the new members get much smaller payments than the old ones. With this situation at hand, the Bulgarian agriculture can hardly become competitive getting 300 euro per ha in European funds, while the neighbors in old Greece are paid 3000 euro per ha. 

In case the drafts for the new CAP 2014-2020 remain unchanged, the main problems linked to absorption of direct payments will most probably get worse, analysts say. The model of payments per unit of land does not benefit the Bulgarian agriculture and should be replaced with a more neutral mechanism available in old member states. Subsidies should be bound to specific costs, and to the added value in respective sub-branches. Assistance should be focused on the Rural Development Programme which should finance investments and innovations in all sub-branches of agriculture regardless of the size of farms. 

Translated by Daniela Konstantinova