Euro ministers calls for cuts threaten farm aid

By Philip Clarke

DIRECT income payments to farmers could be progressively reduced from 2003 to appease Europes finance ministers.

Speaking at this weeks Oxford Farming Conference, EU commission vice-president Sir Leon Brittan said there had been growing demands for farm spending to be frozen at 1999 levels of Euro39.5 billion (£28bn). But that threatened to derail the Agenda 2000 reforms on the table, which require extra funds from Brussels coffers.

That was inevitable, short-term, said Sir Leon, because Agenda 2000 involved a transfer of farm support away from the consumer (by lower prices), and on to the taxpayer (by increased income aid).

“There is a clear logic in this. But it is increasingly difficult to explain to EU citizens that every time you reform the CAP it costs more money,” he said.

Without a rise in the budget, Brussels would either have to drop parts of the CAP reform package (for example, dairying), or agree to less radical price cuts with lower compensation. Neither was desirable.

“But more realistic ideas emerged from the recent Vienna European Council which may produce a way out of the dilemma,” said Sir Leon. “Ministers might agree on an increase in the cost of the CAP in the first three years, as long as spending falls back to a lower level by 2006.”

This would make it possible to keep the reform intact, and to agree it by the intended March deadline, while still delivering long-term budgetary savings.

“But CAP expenditure will not go down by itself after 2003,” said Sir Leon.

“Although the EU has not faced up to this yet, it is clear that savings could only be realised by introducing an element of degressivity into the system of direct payments.”

Sir Leon also stressed the importance of agreeing on Agenda 2000 before the start of the next World Trade Organisation talks in December, rather than trying to negotiate the two reforms in parallel.

In particular, the EU would have a much better chance of defending the so-called “blue box” of subsidies, such as area aid and livestock headage payments, if it had already completed the CAP reforms and was exporting to world markets without the use of export subsidies.

French cereal producer Michel Caffin said farmers in his country accepted the need to remain competitive – to make the most of growing world markets and to avoid a return to the high set-aside rates of the past.

But price cuts of 20% were excessive, he said, while compensation should be both full and guaranteed.