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Rural development does not sufficiently foster economic diversification, says European Court of Auditors

The Common Agriculture Policy does not contribute enough to diversifying the rural economy, recently concluded the European Court of Auditors in its special report on Durability in rural development.

Through its Pilar 2, the CAP is supposed to help diversifying the rural economy on the long-term, by making rural areas less dependent on agriculture and forestry and supporting the development of other economic sectors and the creation of jobs.

 

The CAP did not deliver enough on diversification in the past

In the past, the 2007-2013 and 2014-2020 CAP included specific measures aiming at diversifying the rural economy. They included:

  • for the 2007-2013 CAP: M312: Support for business creation and development, M313: Encouragement of tourism activities and M311: Diversification into non-agricultural activities
  • for the 2014 and 2020 CAP: M6.2: Business start-up aid for non-agricultural activities in rural areas and M6.4: Investments in creation and development of non-agricultural activities.

The European Court of Auditors’ report found that the previous CAP support to rural development did not enough contribute to economic diversification. In the past, most of the initiatives funded by diversification measures were related either to agriculture and forestry or to tourism.

Yet, the analysis carried out by auditors concludes that funded services to agriculture or forestry poorly contribute to diversification. These projects are not cross-sectoral enough and still too focused on agriculture and forestry to help beneficiaries really diversify their income.

When it comes to tourism, the report shows that some opportunities exist – knowing that the number of tourism nights per resident in rural areas is three times higher than in urban regions, and tourism expenditure per resident is generally higher in rural areas. An important share of the budget allocated to diversification measures was therefore granted to projects related to rural tourism accommodation. However, auditors point out two limits of such initiatives. Firstly, they stress that tourist accommodation can diversify beneficiaries’ activities and income (such as farmers in the case of agritourism) but additional accommodation capacity does not diversify the economy of an area already well frequented by tourists. Secondly, the report highlights that benefits are often only for the short term. Indeed, the analysis revealed that most projects cease their activity in the 6th or 7th year of operation, a few years after the end of the legal durability period.

 

How to better support diversification in the current programming period?

Diversifying the local economy is crucial for the future of rural Europe, including to achieve the objectives of the Long-Term Vision for Rural Areas towards stronger and more resilient territories. In its recent contribution to the European Commission’s consultation on brain drain, Euromontana stressed the fact that the lack of qualified and diversified job opportunities is the main driver of brain drain in mountain areas. Moreover, in the 2022 Euromontana report “Being young in a mountain area”, mountain youth deplored that the local mountain economy is often too focused on agriculture and tourism, leaving few opportunities to work in other sectors.

Within the 2023-2027 CAP, Member States must describe in their national Strategic Plans how they intend to use rural development funds to support economic diversification. “Setting-up of young farmers and new farmers and rural business start-up” and “cooperation”, for instance through LEADER initiatives, are the two types of interventions targeted. Euromontana calls for an uptake of these funds to especially support new businesses as a way to overcome the shortage of jobs and for ensuring adequate durability rules.

Yet, few of the 8 types of interventions available under the Pilar 2 have a strong diversification potential. Therefore, Euromontana calls for a smart funding combination to really boost the rural economy in the next years. In line with the approach promoted through the EU Long-Term Vision for Rural Areas, Euromontana in particular recommends using, whenever possible, both the EAFRD and ERDF to support the emergence of new economic sectors and the creation of diversified and qualified employment opportunities.

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30 June 2022

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