22 March 2002

Dispute over EU income claims

By Philip Clarke

Europe editor

CLAIMS that farm incomes will improve significantly in central and eastern Europe following accession to the EU have been rubbished by the candidate countries at a joint council meeting held in Brussels this week.

A report from the EU commission published on Mon, Mar 18 suggested that, even if the new members received no direct payments, farm incomes would jump 30% by 2007 due to intervention support and export subsidies.

Paying full direct aids, up to the level of quotas and base areas suggested in the commissions enlargement proposal, would generate an 89% rise in farm incomes, said the report. And using the amounts requested by the candidate countries themselves would push incomes up by 123%.

"This would lead to a situation where an average Hungarian or Czech farmer would all of a sudden receive more than double the average national wages," said EU farm commissioner Franz Fischler. "This would create significant social distortions and hamper restructuring."

But this was fiercely contested by Polish farm minister Jaroslaw Kalinowski, who, like most of his colleagues, demanded equal treatment from day one, rather than the 25% direct payment on offer from Brussels.

"The proposal to considerably differentiate direct payments for a long time has no precedent whatsoever," he told the meeting. "It would result in the distortion of competition, pushing Polish farmers out of the market not because of their lower efficiency, but because of the higher financial support for their competitors."

Mr Kalinowski also rejected Dr Fischlers assertion that paying full aid would lead to social distortions and slow down reform.

"I disagree totally that this would lead to a shock to the Polish farming community," he told FW after the meeting. "On average, our farmers have an income of about half of those in other sectors. Even if incomes went up by 100%, that would only make them the same as elsewhere."

He also noted that the reference yield proposed for Poland of 2.96t/ha is only about half that used to calculate area aid in the EU15. "When the commission talk about paying 25% of direct aid in year one, in reality it is only 12.5%," said Mr Kalinowski. "Given that current cereal prices in Poland exceed those in the EU, if anything farm incomes are likely to fall in the first years of membership."

Despite these gripes, Dr Fischler was adamant that "being in is better than being out", especially for livestock farmers. "Our study shows that a certain amount of direct payments is necessary to stabilise incomes. But a low level is enough to ensure that all countries experience positive income effects as a result of enlargement."

He advised the candidate ministers that to demand 100% direct payments over and over again was not a winning strategy, pointing out that the margin for negotiation was very narrow.

The UK, Germany and Holland – all net contributors to the EU budget – argued against giving any direct payments to new members.

And farm ministers in existing member states also insisted new member states fully respect current veterinary and phytosanitary arrangements from day one. &#42