Direct payments were established by the 1992 reform of the Common Agricultural Policy. Prior to this reform, the Common Agricultural Policy supported prices: i.e. the prices at which farmers sold their products in the market (such support is therefore not paid directly to farmers). The 1992 reform reduced the level of price support. To prevent a corresponding fall in the incomes of farmers, direct payments were introduced.
Nowadays, direct payments are granted to farmers in order to support their incomes and to remunerate them for their production of public goods.