26 March 1999
Europe waters down farm reform package

By Philip Clarke, Europe editor

EUROPEAN heads of government meeting in Berlin have watered down the farm reform package agreed by their agriculture ministers just two weeks ago.

The heads of government opted for smaller price cuts in the cereal sector and further delays to milk reform.

Senior politicians from across the European Union (EU) emerged triumphant from their all-night summit meeting early this morning (Friday).

They claimed to have stabilised the farm budget at current spending levels for the next seven years.

The main change for the arable sector is that intervention prices will be cut by 15% over the next two years, instead of the 20% farm ministers suggested.

And instead of Euro66/t compensation, growers will get Euro63/t (£41.89/t), paid out through area aid.

Set-aside continued

More worryingly, set-aside is being set at 10% for the next six years, instead of reverting to 0% in 2002.

Although this will be reviewed in the light of market experience each season, it suggests farmers will be prevented from producing to their full capacity.

British farmers leaders slammed the deal as a missed opportunity and one which only stores up problems for the future.

“At face value, a smaller price cut appears to be good news for farmers,” said Ben Gill, president of the National Farmers Union.

“But for cereals, it will risk a stock build-up in those years when world prices are bad, while farmers will certainly suffer from lower compensation.”

The back-tracking is mainly blamed on French president Jacques Chirac, under pressure from disgruntled farmers back home.

There is also concern at the decision to delay dairy reforms until 2005, instead of 2003.

Already EU dairy markets are under pressure from the last GATT deal, which restricts the amount that can be sold with export subsidies.

“There is now an even more serious risk that emergency measures will be necessary before the end of the reform period,” said Mr Gill.

“All that we are doing is storing up problems for the future.”

The more immediate concern is that some countries, including Ireland, will get additional milk quota from next January.

Other member states, including the UK and will have to wait until 2005.

There is some relief, however, that a deal has been done at all, giving farmers some degree of certainty.

Serbia

With the resignation of the entire commission last week and the start of bombing raids in Serbia, it was feared the Agenda 2000 reforms would be sidelined altogether.

But, while heads of state claim to have reined in a Euro7 billion (£4.7bn) overspend, it has only really been achieved by delaying reform.

And it remains to be seen how much the farm budget will rise again, should intervention stocks of grain and dairy products start to mushroom.