Budget row hits CAP talks

Date: 15/10/1998

By Myles Neligan

CONTROVERSY over the European Commission's suggestion that national governments should bear 25&percent; of the cost of EU direct aid to farmers looks set to overshadow next week's meeting of agriculture ministers.

EU governments' reactions to the plan, which the Commission put forward last week as one of three options for easing the burden of Union budget payments on large contributors like Germany, have sparked fears that agreement on Agriculture Commissioner Franz Fischler's proposed farm reforms may be delayed.

Several ministers, including Louis le Pensec of France and Ireland's Joe Walsh, are expected to argue next week that 'co-financing' EU farm aid would distort competition in Europe's agricultural markets, since governments would inevitably wish to spend the money in different ways depending on national priorities.

Since both Ireland and France receive a disproportionately high level of EU farm aid, they would also lose out heavily in financial terms.

French Finance Minister Dominique Strauss-Kahn this week poured cold water on the CAP co-financing option, telling his EU counterparts that it was “not in the spirit of Community action”.

Dublin looks set to take an equally tough stand. “Co-financing could mean the end of the CAP,” said one Irish diplomat. “It would also penalise the EU's worst-off countries and is therefore regressive without a doubt.”

The crisis in the Irish beef industry has made the question of EU farm aid payments a highly sensitive domestic issue. Dublin argues that its large CAP receipts simply reflect the importance of agriculture to the Irish economy, and points out that industrialised countries benefit disproportionately from other aspects of EU policy.

The Commission denies that the CAP is under threat, insisting governments would not have any discretion over how they spent their share of contributions to direct farm aid.

Officials also deny that the co-financing option has any implications for the debate on CAP reform - the main item on the agenda for next Monday's (19 October) meeting of agriculture ministers. “It may complicate the negotiations, but the reform timetable should not be affected. It is a separate exercise,” said one But national officials say that although the plan does not yet amount to a formal proposal, it will nevertheless cast a shadow over the debate. They point out that the Commission's budgetary report subtly emphasises that co-financing the CAP is the most politically feasible of the three proposed options, since it is the only one which would not require unanimous agreement under EU rules.

“You cannot dissociate the agricultural aspects of the Commission's budgetary analysis from the CAP reform negotiations,” said one diplomat. “Co-financing the CAP may not require unanimous agreement, but the reforms that we are now discussing do.”