Brussels, 16/07/2012 (Agence Europe) - On Monday 16 July, the European agriculture ministers were reasonably divided over the need to include risk management tools in the framework of rural development programmes. A majority of countries is in favour of this, whilst others (such as Germany, the United Kingdom and Sweden) voiced criticism, particularly over the planned revenue stabilisation tool.
Articles 37 to 40 of the proposed regulation on rural development provide for aid in favour of risk management measures covering crop, livestock and vegetables insurance, and also provide for a revenue stabilisation instrument. This instrument would take the form of a mutual fund providing assistance to farmers experiencing a sharp drop in their income. The draft text also provides for the mutual fund to intervene to grant farmers compensation for losses caused by animal or vegetable disease and environmental incidents.
In order to ensure equality of treatment between farmers across the EU, to make sure that competition is not distorted and that obligations in the framework of the WTO are adhered to, specific conditions will apply to the granting of the aid. Farmers will only be able to benefit from the aid if the losses represent more than 30% of his or her average annual production. In the case of the revenue stabilisation instrument, the farmer must have suffered a drop in revenue greater than 30% of his or her average annual income. The compensation may not exceed 70% of the loss in revenue and, if a producer also receives natural disaster assistance aid during the same year, this may not exceed 100% of the total losses suffered.
Introducing the debate, Agriculture Commissioner Dacian Ciolos said that the proposed reform on the prevention and management of crises should be seen as a whole and that synergy should be drawn between pillars 1 (direct aid and market measures) and 2 (rural development) of the CAP. Within the first pillar are annual crisis management tools: safety nets with intervention and the renewed private storage aid tool and, for sudden and violent crises, exceptional measures. These measures are vital, but insufficient. “Anticipating, preventing, reacting - this calls for multi-annual tools. The second pillar of the CAP is therefore the right response.” Furthermore, the second pillar gives the member states and regions the flexibility needed to choose the most relevant instruments and their financial levels in relation to national or regional context. The second-pillar programming system allows the possibility of combining prevention and risk management measures with other complementary measures (including promotion, investments and diversification). The beneficiaries of these prevention and risk management tools of the second pillar (aid to insurance schemes, climate and sanitary mutual funds, mutual funds against income volatility) must be farmers themselves. For example, the mutual funds cannot be designed as a way of providing risk reinsurance for insurance companies. Lastly, these tools, to be applied on a voluntary basis by the countries of the EU, must respond to the requirements of the WTO green box. In this regard, “they must be triggered by losses of more than 30% per holding and for mutual funds, the capital must be exclusively made up of private funds. Under these conditions, the planned co-funding of 65 cents for each euro paid by the mutual funds seems to me to be the best possible solution”, said the commissioner.
Speaking on behalf of the Presidency, the Cypriot agriculture minister Sofoklis Aletraris summed up the debate as follows: - most of the ministers agree that in light of the challenges facing farming (climate change, price volatility), risk management has become particularly important; - many delegations supported the Commission's proposals on risk management under the second pillar (rural development), which makes it possible to give the countries flexibility in terms of implementation; - certain countries stressed the optional nature of these measures; - certain delegations are not convinced that there is a need to put risk management measures under the second pillar, particularly the income stabilisation tool; - regarding this income stabilisation tool, a number of delegations criticised its cost; - as regards the level of support, a number of countries called for the co-funding rate to be increased for these measures to come into line with current levels of support; - on the other hand, many countries are concerned that the increase in the level of support could increase the financial burden; - certain countries called for the threshold of 30% to be reduced for the income stabilisation tool (the farmer must suffer a loss in revenue of greater than 30% of average annual revenue); - a number of delegations argued in favour of keeping the possibility of an indexing system to facilitate the evaluation of farmers' losses in revenue.
It is the farmer himself who should make decisions on his production, said the Danish minister. We are against extending the risk management measures, Denmark added.
Belgium described the idea of a revenue stabilisation tool as very attractive. However, the country added that its cost is very high, even “prohibitive”. The control mechanism seems very difficult to manage and it is hard to assess income objectively.
Spain supports increasing the arsenal of risk management tools, but as long as this does not jeopardise the systems already in place in the country. The agricultural insurance policy must be able to develop at a national level, the Spanish minister argued. The income stabilisation instrument “may prove adequate, as long as financial contributions and insurance premiums are included in it”, Spain concluded.
In the view of Sweden, the pace of the reform is currently stagnating. This instrument to stabilise revenue “will bring nothing” and cost a lot. However, Sweden can agree to certain insurance systems.
France feels that these crisis management tools must be able to remain voluntary and adaptable on the basis of the situations or crises encountered. “It is also vital to improve a number of things, in particular to take account of situations in stock rearing and crops”, the French minister said.
“We do not need any additional risk management instruments”, said Germany. “We reject the proposal on the income stabilisation tool”, Berlin added.
Estonia stated that the risk management measures should be flexible and take account of differences between the regions. Estonia added that the income stabilisation instrument is similar to an additional state aid, running counter to the principle of the market. “We must earmark more resources for training farmers to face challenges such as climate change”, Estonia argued.
“It is the farmers who should take crisis and risk management measures”, said the United Kingdom. Crisis management tools must respect WTO rules. The UK takes the view that the income stabilisation tool has no place in rural development, notably because it is very expensive (€7 billion a year if all countries use it, which is more than the UK envelope for rural development over seven years!).
Malta called for the proposals to be improved (mutual fund or insurance system).
It is right for the CAP to provide instruments post-2013 to manage crises (insurance premium and mutual fund), said the Netherlands. But this country is not enthusiastic over the place for the income stabilisation tool (cost, difficulties in defining agricultural revenue, existence of identical measures under the first pillar).
Latvia feels that the risk management measures proposed are a step in the right direction, and that the income stabilisation tool should not lead to any market disturbances.
Italy believes that the crisis management instruments could constitute an adequate tool, as long as they are able to do their job. “We must better specify the operational details of the mutual funds”, the country argued. Italy would like an incentive for farmers adhering to it, “or I believe that we risk a failure”, the Italian minister stressed.
Dacian Ciolos wished to clarify a number of misunderstandings: - the mechanisms proposed under the second pillar “do not run counter to” mechanisms which already exist; on the contrary, they reinforce them and provide incentives to farmers wishing to do so to be able to get organised to face difficult situations; - the intervention of the public administrations is being reduced and farmers given the means to face market crisis situations themselves (this should, therefore, make it possible to reinforce the orientation on the market, the commissioner said); - regarding the co-funding levels, the budgetary allocation cannot be extended (in reference to the request by certain countries to increase the co-funding rate). (LC/transl.fl)