This paper examines the relationship between structural changes and EU agricultural policies and their implications in the context of the enlarged EU. The paper examines the impact of EU policies on the restructuring and competitiveness of farms in the new member states taking into account imperfections in rural markets. Using a model of rural factor market imperfections in the new EU member states, including both high transaction costs and imperfect competition, we analyse the effects of EU policies on the distribution of policy rents, on the restructuring of farms, and on aggregate productivity. In addition, we draw upon the findings of a series of other studies to identify the effects and constraints of rural development and structural policies in these countries for enhancing the competitiveness of the various farm structures.