Hypotheses of Direct Aid Modulation in Italy

The paper focuses on the implementation of direct aids modulation, as provided for by Regulation 1259/99. After a critical review of the most relevant questions arisen around the effectiveness and the viability of modulation, the paper presents results about its possible application in Italy. In the first part of the paper a special attention is given to the actual distribution of direct aids in Italy, to the number of farms involved and the amount of revenues realised. In the second part four different hypotheses of modulation are tested. In order to evaluate the effectiveness of modulation revenues under the four different hypotheses are compared with the financial resources allotted in Italy to the regional Rural Development Plans (RDPs). While results of modulation are, generally speaking, quite poor in terms of re-distribution of direct aids, there is a more relevant effect in terms of additional resources destined to the RDPs. However, resources are to be destined to measures that receive the highest share of resources within the RDPs. On the contrary, other measures, more genuinely addressing Rural Development and territorial issues within the RDPs, receive a much smaller amount of resources and cannot be funded through modulation. In other words, if the main objective of the modulation is that of shifting resources from the first to the second pillar of the CAP, this is only partially realised, given the mandatory destination of financial resources on measures that are substantially financed and that do not fully address the economic diversification and the development of rural areas.