EU reforms cut subsidies to big farms

European Union governments agreed Nov. 20 to divert chunks of long-standing subsidies enjoyed by large farms into countryside preservation schemes in the biggest revamp of farm policies for five years.

The early-morning deal came after concessions given by EU Agr icul ture Commissioner Mariann Fischer Boel, most notably to France, Germany and Italy, in an overnight session in Brussels.

The policy revisions will start in 2009 and run until 2013. An EU official said there had not been full unanimity of the 27 EU states behind the agreement but did not name which country or countries had refrained from backing it.

“You can count on the fingers of half a hand the countries who had a different opinion,” French Farm Minister Michel Barnier told French news channel LCI.

“We have kept the regulation mechanisms and the governance that we need, because we are talking about food, not cars or telephones,” he said.

Under the scheme, all farms subject to a basic threshold of 5,000 euros (US$6,312) in annual subsidies will shift five per cent of their EU grants into countryside projects by 2012 – Fischer Boel had wanted eight per cent – on top of five per cent now in force.

Plans for a tiered system of annual income thresholds to shunt subsidies from large farms to rural spending were diluted.

Instead of three income thresholds for farms receiving subsidies, only one will now apply – 300,000 euros and higher, where four per cent of subsidies will be moved into rural projects by 2012. The outcome will be that big landowners will see their payments clipped the most.

Despite the last-minute changes, it remains Europe’s most significant farm reform since 2003, which introduced the concept of “decoupling” – EU jargon for breaking the link between how much farmers produce and the amount of subsidy they receive.

The old system was criticized in the developing world for distorting trade and encouraging the overproduction that created the bloc’s infamous “grain mountains.”

These reforms reinforce the move towards full decoupling.

Limits

They also cap the maximum amount of wheat which can be delivered to EU intervention stores and allow an increase in milk quotas in the buildup to their abolition in 2015.

Fischer Boel agreed to set an annual ceiling of three million tonnes for EU producers to sell bread-making wheat into public stores. There had previously been no ceiling.

“It’s distressing given that we’ve just seen a global food crisis and are in the midst of a financial crisis,” Philippe Pinta, president of French grain and oilseed growers’ group ORAMA, referring to the limits on wheat intervention.

“In not even a year from now we are going to regret having dismantled these mechanisms,” he added.

Ministers agreed to increase milk quotas by one per cent every year in the lead-up to abolition, raising concerns among some dairy farmers, particularly in Germany.

“If this is implemented as announced it will end in a catastrophe. We already have the situation in which we are almost drowning in milk,” Romuald Schaber, chairman of the German dairy farmers’ association, said.

Germany won the option to spend some of its rural development cash to support the milk sector.

In a concession to France, which chaired the negotiations as current EU president, the compromise deal allows more flexibility to support the sheep and goat sectors.

Italy, the EU’s leading offender in overshooting milk output quotas, also got a deal on dairy by being the only country allowed to take on the entire quota increase from next year.

Britain’s Farm Minister Hilary Benn said the agreement was a step in the right direction of further reform but also a missed opportunity to speed up the process of change.

“This is a mixed result. On the big items of reform this is a step forward, but I regret what has been conceded in order to secure a deal which will lead to some new distortions in the short term,” Benn said in a statement.

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