Ministers agreed to reduce payments to holdings receiving more than €150,000 by at least five per cent yesterday, tying up loose ends remaining from the last round of negotiations in June.

This is called ‘capping and degressivity’ and takes account of salary costs by deducting them before calculations are made.

However, the reduction is not compulsory for Member States applying the 'redistributive payment, an EU spokesperson explained.

The term applied to countries with arrangements that 'hold back' five per cent of the national funding for redistribution over all farms.

Ministers have been clear that will only apply to direct or ‘single area’ payments.

The long awaited issue of modulation was also finalised at 15 per cent of payments between the two pillars. The movement is optional and can go in both directions between direct payments and rural development payments.

Ministers also opted to introduce a measure to increase direct payments for countries with below average funding.

This means that nations receiving less than 90 per cent of the EU average direct payment will have their share increased.

The increase will see direct payments for these countries lifting by one third of the shortfall between the current payment and the EU average. The overall goal is to reach a minimum level of 75 per cent of the EU average by 2019.

EU agricultural commissioner, Dacian Ciolos, paid tribute to the politicians involved in the discussions, and said that legislative texts and transition arrangements are now able to be adopted before the end of the year.

Mr Ciolos said the decision provides farmers with ‘greater certainty’ for the coming year when reforms are applied from 1 January 2014.

But despite yesterday’s agreements representing an important step towards reform, the overall process is not complete.

A spokesman explained that the EU parliament and agriculture committee still needs to vote through reform regulations, to occur on 30 September.

There is also the issue with administration on the transition arrangement to take member states into 2014. This will also be voted through by the agriculture committee.

These important stages are expected to take place in November.

Furthermore, the parliament is required to form a plenary session to vote on the package and the Council of Member States must then formerly adopt all the legal texts.