February 15, 1999. Copyright, 1999, Graphic News. All rights reserved

BONN PLANS HUGE CUTS IN FARM SUBSIDIES
By Margot Nesdale


LONDON, February 15, Graphic News: GERMAN EU officials hope to clinch a deal by March which will slash European Union farm subsidies after 2000, cutting the cost of the Common Agricultural Policy which consumes more than $45 billion a year.
The proposals, known as ÔdegressivityÕ Ð EU-speak for a reduction in aid payments to farmers Ð will hit large, rich Northern European farms most of all. 
Farmers in Britain, Sweden, Denmark and Luxembourg will suffer more than anyone, while their counterparts in Portugal, Italy, Greece and Spain will see their subsidies largely left intact.
Despite repeated reforms to try and remove costly grain and beef mountains and wine lakes, agriculture still absorbs half the total EU budget.
The biggest impetus for the deal is that for the first time since the Union was created the governments of France, Britain and Germany are not dependent on farmers for their votes.
However it is likely the French government will have to cope with an onslaught of demonstrations by farmers once the proposed deal becomes public knowledge.
Any deal is likely to include a sharp cut in the guaranteed price offered to farmers, a drop in total CAP spending, and direct subsidies to needy farmers only. 
France, the unionÕs main agricultural producer, is already at loggerheads with Germany over plans to slash expenditure on the industry. 
Germany wants to wrap up a deal with heads of the 15 EU governments at the March 25 summit on Agenda 2000, the UnionÕs blueprint for reform, which proposes cutting the EUÕs internal prices for cereals, beef and dairy produce by up to 30 percent.
But glaring differences among member states on how the CAP should be funded beyond 2000 threaten to delay or even scupper an agreement, EU officials say.
Eight European finance ministers have said they favour a freeze in the CAP budget and Germany wants to impose a straitjacket on spending in the six years beyond 2000.
France, the main beneficiary of the CAP, has vowed to veto any attempt to shift any of the financial burden on to member states.
Under the CAP, European farmers are guaranteed prices for their production, regardless of the conditions of the market; they receive extra subsidies to shift production from one season to another, payments to stop producing, and ÒhardshipÓ money according to very complex criteria. 
When the CAP was introduced in 1962, the goal was to expand production (the community only produced 80 percent of its total consumption needs) and reduce food imports through high internal prices, tariff protection and giving preference to European produce.
By the early 1980s, there were huge surpluses of goods, and the cost of subsidizing the storage or disposal of produce inside the EU forced the community to dump goods on world markets, triggering trade wars. 
Notorious episodes like the sale of cut-price butter to the USSR further damaged the credibility of the CAP with the public. 
In 1992 the European Commission  tweaked payments and eliminated unwanted surpluses, but this was largely achieved through payments to farmers to persuade them to Òset asideÓ agricultural land.
Officials say that without radical reform, food surpluses will return as early as 2001.
/ENDS.

Sources: Foreign Report, Reuters, European Commission