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EU: Candidate Countries Offered Financing Terms For Enlargement

Brussels, 30 January 2002 (RFE/RL) -- The European Commission today released a report on financing the costs of enlargement that it says makes a "fair and solid" offer to the up to 10 candidates expected to join the bloc in 2004.

Under the proposal, the EU will allocate 42 billion euros (approximately $36 billion) for up to 10 new members between 2004-2006. This is less than the 58 billion euros ($50 billion) initially foreseen for enlargement by "Agenda 2000," an intra-EU compromise agreement adopted at the Berlin summit in 1999, which fixed expenditure ceilings for EU budgets between 2000-2006. "Agenda 2000" was based on the assumption that enlargement would take place in 2002, but according to its rules, funds left unused in 2002 and 2003 "lapse," and are not available in 2004 or thereafter.

The offer foresees a 10-year waiting period before the new members are allowed access equal to that of current members to the EU's agricultural subsidies, which make up half of the EU's budget.

On accession, farmers in new member states can expect 25 percent of the EU subsidies given to current members. This amount will increase yearly, reaching 35 percent in 2006, when the EU's current budgetary period expires and new terms have to be negotiated for the next period running from 2007-2013. The commission's proposal does not fix an increase rate for farm subsidies beyond 2006, saying simply that parity with full EU levels would be reached in 2013.

The report also says candidates cannot expect equal levels of regional aid until well beyond 2006, with receipts in 2006 forming roughly 55 percent of projected aid for current members like Spain, Greece, and Portugal. Again, what happens after 2006 is left open and will be determined by current member states later.

EU Enlargement Commissioner Guenter Verheugen said in a statement today the offer "strikes the right balance between the expectations of the candidate countries [and] the budgetary limits of the EU."

He rejected early claims from candidate countries that the offer unfairly discriminates against them.

"I don't agree with the argument that this system makes candidates second-class members. Transitional periods are normal. The agricultural situation in northeastern Poland, for example, cannot be compared [to] the situation in Ireland -- the situations are definitely not comparable. When we compare them on a purchasing power basis, one can say that the offer we have made -- the direct payments and, in addition to that, the structural aid for rural development -- then the treatment is equal."

Presenting the document to the European Parliament this afternoon (30 January), Verheugen also made it clear that the offer did not leave candidate countries much room for bargaining and it already represented what the commission said was "realistically achievable." He said the funds until 2006 were of necessity limited by the 1999 Berlin agreement, adding that no member state was ready to negotiate the "Agenda 2000."

Highlighting EU concessions, Verheugen said that although the "Agenda 2000" made no provisions for direct agricultural subsidies for the new members, the commission had still managed to find the margins to offer the candidates at least a quarter of what EU farmers receive. He added that the commission considered some form of direct subsidies unavoidable, lest EU membership be rejected by Poland. The commission offer also proposes a number of "flanking measures" to support structural development in rural areas, which exceed the amount set aside for direct subsidies. This latter move might be welcome in some candidate countries on the grounds that it is more likely to contribute to balanced agricultural development than direct payments to farmers.

Verheugen then reiterated well-rehearsed arguments saying candidates should not receive full subsidies immediately because the sudden influx of money into the agricultural sector would remove incentives for reform and unbalance the entire economy.

The enlargement commissioner also dwelled on the limits set on negotiations by the present members' reluctance to spend any more on enlargement than they had agreed at the Berlin summit. He said the overall financial burden on the present members would not increase and that the cost of financing the new members would not exceed 0.08 percent of the enlarged EU's gross national product.

Verheugen also said that although the candidates will receive 42 billion euros in subsidies in the first three years after enlargement, they are expected to make budget contributions amounting to more than 5 billion euros ($4.3 billion) a year immediately after enlargement. He added, however, that the EU should see to it that none of the new members ended up in a worse financial position after enlargement than before.

Candidate country sources have told RFE/RL on condition of anonymity that it is impossible to say at this stage to what degree subsidies will offset the payments the candidates are expected to make into the EU budget. The candidates will obviously strive to maximize their net gains. It is highly likely that they will be forced to do this in an organized and uniform fashion, as EU sources have privately ruled out any differentiation between future members.

Today's proposal makes special provisions for decommissioning nuclear reactors in Slovakia and Lithuania. Slovakia will receive 20 million euros ($17 million) a year between 2004-2006 to dismantle the Bohunice plant, while Lithuania will get 245 million euros ($212 million) to decommission obsolete reactors at Ignalina.

The commission has also earmarked 200 million euros ($173 million) for the northern, Turkish part of Cyprus, whose leaders are presently in talks with the Greek government of the southern part of the island, which is among the frontrunners to join in 2004.

Today's proposals do not extend to Bulgaria and Romania. However, Commissioner Verheugen said today it was "vital" that both receive a "clear and substantial" signal by the end of the year mapping out their future progress toward joining the EU.