Demand for rural funds stretches Union budget

Date: 29/07/1999

By Simon Taylor

EU GOVERNMENTS are demanding increases in rural development funding which would double the cost of such projects next year.

European Commission officials say member states have asked for €7 billion to fund a range of initiatives in 2000, compared to the €3.5 billion they usually request. The projects are designed to help farmers in disadvantaged areas and encourage the creation of alternative businesses in rural areas, such as farm tourism.

But this is putting the Union's farm budget under severe pressure. Unless EU governments agree to increase agricultural spending above the strict limits set in Berlin in March, the Commission will have to find a way to scale back the demands. If it refuses certain requests or applies an across-the-board reduction to balance the books, it faces a politically damaging row with members states. In their draft budget for 2000, EU governments themselves have so far only allocated €4.3 billion for such projects.

The Commission also faces a battle with the European Parliament, which has demanded additional rural development funding next year, further reducing the room for manoeuvre. In recent discussions on the 2000 budget, MEPs called for an extra €400 million to be spent on environmental schemes to cut nitrate pollution.

Traditionally, the Parliament has limited powers over agricultural spending, which accounts for more than 40% of the Union's €92-billion annual budget. But following the Agenda 2000 deal agreed by EU leaders in March, MEPs can demand money for rural development projects.

Requests for funding for such assistance are ballooning because the EU is shifting more money into support for rural areas and away from keeping farm prices high. These schemes are expected to become even more important over the next five years if the forthcoming multilateral talks on farm trade liberalisation force the EU to switch from paying money directly to farmers. Union governments are increasing their use of the schemes to ensure that they get a share of the funding in the future.

But European farm unions are becoming increasingly concerned about how the Commission will share out rural development spending between the member states.

UK farmers' groups in particular are concerned that they could lose out if the Commission allocates money on the basis of a country's track record in participating in such projects, even if there was an increase in their number. As a net contributor to the EU budget, the UK has traditionally offered fewer schemes for rural areas than other member countries because it has to shoulder some of the cost from the national budget.

In a separate move, the Commission has asked EU governments for more flexibility to shift money between budget years if spending requirements threaten to break the strict farm spending ceiling of an average €40.5 billion over the next seven years. The Commission wants to be able to delay payments for several months if it faces higher than expected costs in other areas.