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East: EU Farm Reform Proving Difficult

Prague, 20 January 199(RFE/RL) -- Member states of the European Union are now deeply embroiled in negotiations on internal reform, particularly of their Common Agricultural Policy (CAP), which swallows half the entire EU annual budget.

Reform of the CAP and the EU's other expensive budgetary policies are seen as a pre-condition for eastward expansion of the Union. Current EU President Germany says that progress toward taking in new members from Central and East Europe is out of the question until the present 15 members can put their own financial house in order.

The government of Chancellor Gerhard Schroeder wants to reach agreement on CAP and other reforms by the end of March and, consequently, the pace and sharpness of negotiations among the members are now heating up.

In order to get to grips with the notoriously difficult question of CAP reform, the EU has set up a high-level group of national agriculture representatives. Last week, it held its first meeting in Brussels, under the chairmanship of Martin Wille, Germany's Agricultural State Secretary. Wille has been told to report regularly to member states' ambassadors on the progress his panel is making, and next month a meeting of EU agriculture ministers will review what has been achieved.

Things have not got off to a good start, according to an official in the German Agriculture Ministry who is close to the negotiations. Speaking to RFE/RL today on condition of anonymity, the official said that France is resisting "vehemently" the concept of national co-financing of support payments to farmers. That idea is strongly supported by Germany and also by the Netherlands

Co-financing would mean that the individual member states would themselves pay part of the compensation payments now made to farmers by the EU. At present Brussels pays the full amount of such direct subsidies. Under co-financing, national governments would take responsibility for 25 percent of the subsidies due to their farmers, leaving the remaining 75 percent for Brussels to pay.

France is a major beneficiary of CAP funds, and agricultural co-financing would mean that its net financial burden would increase. On the other hand, Germany and the Netherlands are the two biggest net contributors to the EU budget, and co-financing would mean their financial burden would decrease.

Describing the French resistance, the German official said that Paris is opposing the move by all possible means, even to the point of rejecting the overall compromises seen as necessary for successfully reaching the end-of-March deadline. French Agriculture Minister Jean Glavany warned late last year that the concept of co-financing would, in his term, "kill" the CAP.

The French stand comes after a brief so-called "honeymoon" between the recently installed Schroeder and French President Jacques Chirac. At a meeting between the two leaders late last year, Chirac moved substantially toward the German position that Bonn cannot continue to pay in 58 percent of EU net contributions.

Co-financing is only one of the difficult areas. The heart of CAP reform involves the introduction of a more market-oriented way of dealing with three key foodstuffs -- grain, beef and dairy products -- which are presently produced by EU farmers under a guaranteed price system.

Proposals contained in the EU Executive Commission's Agenda 2000 reform document foresee a reduction in this highly expensive level of support. For grain, for instance, it's proposed to reduce the guaranteed prices given to farmers, and to offer instead cash compensation covering only 50 percent of the size of the cut in the guaranteed price. As such arrangements would reduce the real income of farmers, they are politically difficult to achieve.

And what of the Eastern applicants? They too have farm sectors that must eventually find a fair place in the EU structure. Membership for the five front-running candidates -- Poland, Hungary, the Czech Republic, Estonia and Slovenia -- is still some years away. To bridge this waiting time, the EU Commission has proposed a pre-accession agricultural aid fund for all 10 candidates totaling some $4 billion over a seven-year period, starting in 2000. This fund would be meant to assist development and modernization of the candidates' farming sectors.

This money is envisaged as pre-membership assistance. The actual membership terms for the individual candidates will be the subject of negotiations. In some cases, long transition periods can be expected before new members are fully integrated into the prevailing EU system.

Poland, for instance, realizes that present EU members are very uneasy about its large agriculture sector. But President Aleksander Kwasniewski said late last year that an extended period of integration for the Polish food economy would benefit neither his country nor the EU. He also said he does not agree that eastward expansion of the EU will destabilize the Union's agriculture markets.