EU to rob Peter, pay new member Paul

By Philip Clarke, Europe editor

DIRECT income aids to the EUs existing farmers will have to be cut if Brussels is to pay subsidies to producers in central and eastern Europe and still balance the books.

According to a new study from the Dutch Agricultural Economics Research Institute, paying full aid to these countries from the day they join the EU would cost an additional 6.8bn (4.25bn), more than double the amount already set aside.

As well as offering full aid from day one, the study considers “phasing in” area aid and headage payments, starting at 20% of the full amount in 2004 and climbing in equal steps to 100% in 2008.

While this would only cost an additional 1.4bn (875m) in the first year, this would still exceed the current budget, as set at the Berlin Summit for 2000-2006.

Thereafter, the additional cost would climb to 7.5bn (4.7bn) by 2009.

It is unlikely this funding will be available, which leads to the option of paying aid in full to new members from day one, but cutting payments to all farmers by 10% a year from 2007 onwards.

Under this scenario it is estimated that the savings to the budget would start to outweigh the additional costs from 2009 onwards.

“For the EU 15, this means a reduction in expenditure of 7.6bn (4.75bn) by 2010,” says the report.

“The absolute consequences are greatest for France, though in percentage terms the effect is the greatest for the UK, for whom the cereals and beef payments are important.”

It estimates that total aid to UK producers would fall by over 1bn (625m), or 25% by 2010, compared with an EU average drop of 18%.

Much will depend on what reference period is used for basing aid payments. The new members want to use 1989, when production was at its peak. The commission prefers something more recent.

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