BRUSSELS, BELGIUM — This year's direct payments under the E.U.’s Common Agricultural Policy (CAP) will be reduced by 4% because the available budget is €1.47 billion ($1.98 billion) below budgetary requirements, according to a European Commission decision on Oct. 10.

A threshold will apply to exempt the first €2,000 from this "Financial Discipline" instrument. An amending letter to the 2014 draft budget, aimed at updating forecast budget requirements, is expected in mid-October, and in this context the commission may propose to the council to adapt the percentage reduction to be applied.

The Financial Discipline mechanism was first established in the 2003 CAP reform to ensure that the programmed phasing-in of Direct Payments in the E.U.-12 or any unexpected market spending did not breach the budget ceilings set in the 2007-13 E.U. multiannual financial framework (MFF). However, it was not triggered in that period

With the real-term reduction in the CAP amounts for the 2014-20 period and the move within the MFF to fund the new agricultural Crisis Reserve (of €424 million a year) from within the CAP 1st Pillar envelope, the mechanism has now been triggered for the 2014 budget year.

The commission made its initial proposal for Financial Discipline at the end of March. The rules required the parliament and the council to reach agreement on the original March proposal by the end of June, otherwise the power for adopting Financial Discipline would pass back to the commission.

As the two co-legislators could not reach agreement in time, the commission is fulfilling its responsibility through an implementing regulation, in line with the CAP reform and the initial proposal.