Fischler faces battle to balance the accounts

Date: 06/02/1997

By Michael Mann

NEW moves to reduce farm spending look set to cause severe financial headaches for Agriculture Commissioner Franz Fischler.

With structural funding due to rise by 7&percent; in 1998 and the European Commission determined to limit the overall increase in the Union's budget to just 3&percent;, officials stress this will only leave room for a 0.5&percent; rise in farm spending.

They say Germany and France are once again pushing for spending on the Common Agricultural Policy to be pegged at near 1997 levels, as happened with this year's budget, where proposed agricultural expenditure was eventually reduced by 1 billion ecu.

But initial calculations by the Directorate-General for agriculture (DGVI) put projected spending for 1998 at close to the original agricultural guideline of 43.4 billion ecu. If expenditure were to be pegged back to nearer 41 billion ecu, in line with 1997 spending, Fischler would have an even bigger problem than usual to balance the books.

“It looks like we will have a shortfall of around 2.5 billion ecu,” said a close aide.

DGVI has in the past shown itself adept at creative accounting, but has never been faced with having to save such a large amount of money, particularly at a time when the beef market is likely to continue costing the Union vast sums of money.

Nonetheless, even this cloud has a silver lining for Fischler, who will now be able to refloat the plan he originally unveiled last year to slash compensation payments to cereal and oilseed farmers.

Fischler was looking for a 7&percent; cut in aid payments and a 27&percent; reduction in set-aside payments in an effort to raise 1.3 billion ecu in emergency aid for beef farmers. This was rejected out of hand by most agriculture ministers, despite the demands being made on the budget by the slump in beef prices.

Although Fischler intends to revive the idea, officials insist he will not tie it in with the annual price fixing proposals for all agricultural products which are currently being drawn up, but will not now be ready until a week after the next meeting of EU farm ministers on 17 February.

In fact, the price package looks like being devoid of revolutionary proposals, despite Fischler's oft-repeated assertion that the Union has to get its well-protected farm prices down nearer to world market levels.

Historically a cause for much trepidation among the farming community, as the Commission sought to reduce support prices offered for EU farm products, the price package has become an exercise in consolidation since the 1992 CAP reform.

Officials say that small adjustments will be proposed to the interest payments offered to farmers with produce in Union storage, but there will be little else which will cause much offence.

Fischler will also have to consider how to relaunch his controversial plans for the cereals sector, which takes up the single biggest share of the EU budget. Clearly, the initiative will have more chance of success if it is being looked at by finance ministers rather than by their somewhat more defensive agricultural colleagues.

However, even if ministers were to agree to the cereals aid cuts, the great imponderable remains how the additional 1.2 billion ecu of the 2.5-billion-ecu shortfall can be raised. The answer is unlikely to lie within the price proposals.