Germany suggests dropping dairy reforms

05 March 1999

Germany suggests dropping dairy reforms

By FWi staff

GERMAN agriculture minister Karl-Heinz Funke has suggested that plans to reform the European Union (EU) dairy sector should be abandoned.

In an eleventh-hour move, Germany claimed that cutting support prices by 15% for milk would fail to yield the predicted savings of Euro8 billion (£5.4bn) in the EU budget.

The news is likely to dismay UK agriculture minister Nick Brown, who favours radical changes to the dairy sector, including the phasing out of milk quotas by 2006.

Germanys suggestion to abandon dairy reform was made just before the Agenda 2000 talks between European agriculture ministers ended today in Brussels.

Ministers will now resume talks again next Tuesday to discuss other proposals in their efforts to reform the Common Agricultural Policy (CAP) before the end of the month.

Meanwhile, the European Commission has urged all 15 EU member states to reach agreement in an effort to ensure that the ministers make progress within the deadline.

£16.8bn deficit

It has produced a paper which forecasts a budget deficit of Euro25bn (£16.8bn) if all the conditions on reform currently demanded by the different countries are implemented.

Such an outcome is not an option without the introduction of some savings, so long as European finance ministers insist that the farm budget should be stabilised.

The agriculture ministers will now reconvene on Tuesday afternoon to continue discussions on how to solve the finance problem.

Reducing direct aid payments paid to farmers by a set percentage each year – the concept known as “degressivity” – remains firmly on the agenda.

Degressivity cuts

Degressivity would knock 3% a year off direct payments to farmers, although producers receiving less than £3400 a year would be exempt from any reductions.

The policy would leave an estimated 70% of European farmers unaffected, except in the UK where farmers have large holdings and often command big subsidies.

That has encouraged UK farm leaders to point out that even official statistics show degressivity would save only £3bn a year – well short of the cuts needed.

The National Farmers Union (NFU) also fears that its farmers could be hit by an Austrian proposal to limit payments to larger producers.

Another idea is to reintroduce “capping” – the concept of individual ceilings to limit the total amount of subsidy on subsidy payments above £51,000 .

“There is certainly a threat that both measures could apply,” acknowledged NFU chief economist Sion Roberts.

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