EU budget talks question farm spending

By Dana Spinant

Date: 10/02/05

Controversial plans to make member states pay a share of the EU's subsidies to farmers have gained some momentum with unexpected support from Italian Prime Minister Silvio Berlusconi. In a letter to José Manuel Barroso, president of the European Commission, and Jean-Claude Juncker, chair of the European Council, Berlusconi said that if the 2007-13 EU budget proposed by the Commission is to be cut, then money should be saved by making member states contribute to farm payouts.

By talking about "introducing an element of national co-financing in the first pillar of the CAP", the income support part of the Common Agricultural Policy, the Italian premier threatens to reopen a 2002 agreement between the EU's heads of state and government, which set out the Union's farm spending until 2013 and capped farm subsidies at 2006 levels.

Berlusconi's support for co-financing in agriculture looks like a strategy to split the Union's six biggest paymasters, which have asked for the EU's budget until 2013 to be capped at 1% of the Union's gross national income (GNI). The six agree on the cap but are split on what should be cut in order to get a budget of 1%. The UK, Sweden and the Netherlands are in favour of cutting agricultural spending and of introducing co-financing, while France is defending fiercely the generous payouts to its farmers.

Berlusconi also suggests that the UK budget rebate, under which London gets back around €4.6 billion from the Union's coffers, should be gradually phased out. This is likely to please Paris and Berlin but will infuriate London.

Italy is the first state openly to question the 2002 deal on farm spending, but Sweden, Denmark, the Netherlands, as well as Luxembourg are known to support the introduction of co-financing in agriculture, an idea that was floated back in 1999 when the present financial perspectives (2000-06) were negotiated.

Supporters of the proposal say that co-financing could replace both the British rebate (justified when it was given to the UK in 1984 because farm spending was the biggest part of the budget) and the 'general correction mechanism', which the Commission proposes should replace the UK rebate with an automatic payback to all member states that pay more into the EU budget than they receive from it.

Nicolas Schmit, deputy foreign minister of Luxembourg, said that his government "has sympathy for the idea of co-financing".

"It is a valid idea. But it is unlikely to be accepted. What the British like, the others may not like," he said.

Staunchly opposed is France, backed up by other countries that enjoy sizeable farm subsidies, such as Ireland and Spain.

A diplomat from the French permanent representation in Brussels says that introducing co-financing for farm income support is "completely out of the question".

"The 2002 agreement is part of the EU's acquis communautaire and it cannot be broken. Otherwise, that would complicate the negotiations [on the financial perspectives] enormously."

The 2002 agreement can only be modified by a unanimous vote and France will never accept reopening it, he said.

"France has already made an effort, since the 2002 accord stabilises the agricultural spending [at 2006 levels]. After 2013, we can talk about it, as we can talk about everything."

The co-financing idea has some support in the European Parliament, with many MEPs arguing that if member states are not to pay a share of the subsidies, farmers in the 25 member states will lose out when and if Romania and Bulgaria join the EU in 2007.

Jan Mulder, a Dutch Liberal Democrat, was the first deputy to propose such co-financing in 1999. "It would allow the EU to do more with the same budget or to do the same with a smaller budget," he says.

"It would put the agricultural budget in line with other parts. We have co-financing in rural development, in structural funds, in research policy, in foreign policy: we should also have it in agricultural policy."

But he insists that topping up by member states should be made compulsory, not optional, so that farmers enjoy equal treatment.

Mulder suggests that the co-financing could be phased in from 2007, when member states could pay 5% of the income support, and increased gradually to a 25% national contribution, for instance.

The new member states are likely to reject the suggestion. According to their accession treaty, their farmers receive EU farm payouts at a fraction of the rate paid to farmers in the old member states (25% in 2004, to increase to 100% in 2013) but the governments have the option of topping up the payments with national subsidies. They are looking forward to receiving 100% of subsidies from Brussels.

But Mulder says they should not fear such a scheme as it could take into account the difference between poorer and richer states: "For the poorer, we could have a higher percentage coming from Brussels."

But the idea is unlikely to get Parliament's support this time around, as "the agriculture committee is against it".

Outside the Parliament, France and other members of the agricultural lobby don't give it any chance. Still, at least the unthinkable is being discussed.

Controversial plans to force Member States to co-finance subsidies under the EU's Common Agricultural Policy have gained momentum with a letter from Italian Prime Minister Silvio Berlusconi to José Manuel Barroso, President of the European Commission, and Jean-Claude Juncker, chair of the European Council. Berlusconi said that if the 2007-13 EU budget proposed by the Commission is to be cut, then money should be saved by making Member States contribute to farm payouts. This is likely to reopen a 2002 agreement between the EU's Heads of State and Government, which set out the Union's farm spending until 2013 and capped farm subsidies at 2006 levels.