The Eastward Enlargement of the European Union and the Common Agricultural Policy: the Direct Payments Issue

This paper traces the main features of the Common Agricultural Policy (CAP), and of the transition process in the agricultural sectors of Central and Eastern European countries. We argue that currently the main challenge is to extend the CAP to the new members without upsetting the net contributors to the EU budget, and we analyse the effects of different schemes that would allow some cost sharing between EU and national budgets. The main conclusion is that the CAP for an enlarged Union should be based on decentralization of expenditures and a system of subsidies and transfers among countries.