Luxembourg, 19/06/2003 (Agence Europe) - It was in a dramatised context, together with hardening positions, that Member State Agriculture Ministers continued their negotiations on Thursday with a view to reaching a political agreement on the Common Agricultural Policy (CAP). As EUROPE was going to press, no fewer than nine Member States (France, Belgium, Ireland, Finland, Luxembourg, Spain, Portugal and Austria,) had sharply criticised the most recent compromise presented in the afternoon at the Council and which, however, was looking at a significant number of demands from Member States. Other countries, such as Germany appeared to be able to live with the compromise.
The last concessions offered by Commissioner Franz Fischler focused on the following elements:
Decoupling of aid: Most direct aid (arable land) will be replaced by a single payment per farm on the basis of the 2000-2002 reference periods. For large crops, the final compromise planned for a minimum decoupling of 75% of aid with the possibility for any Member State that wanted, to maintain a direct link with aid and production up to 25% of the payment in all areas of the EU 'therefore not only in those where there is a risk of abandoning the production of land, such as the compromise proposed the evening before). For bovine meat, the decoupling system retained is far from being ideal but appears to satisfy almost everyone: 1) the possibility for a Member State to keep the link between aid and production up to 50% of the payment for sheep and goats (including the complementary bonus in this sector); 2) the possibility to maintain the bonus for mil cows at the current level (as opposed to 75% of the Wednesday compromise) or alternatively, the chance to keep the current bonuses up to 30% (linked to the level of production) to be transformed into uniform payment per head cattle; 3) complying with a request by the United Kingdom, Member States that wish can reserve up to 10° of their national envelope for bonuses to be paid as supplementary aid at a regional or national level in order to keep certain beef meat production. Decoupling will not apply to aid for fodder (complementary payments for grain) and single payments to remote areas. This possibility will be offered to Member States to excluded fruit and vegetables, as well as potatoes on eligible areas for single payments (this will be done to avoid unfair competition with regard to traditional fruit and vegetable and potato producers: Editor's note). The Commission will possibly propose making this measure compulsory before the end of 2008.
Modulation: as in Wednesday's compromise, modulation (reduction of aid for strengthening rural development policy) will begin in 2005 (as opposed to 2007 according to the initial proposal, which demanded slight modifications to the 2000-2006 financial perspectives at a 3% rate, then 4% in 2006 and 5% from 2007. A threshold of EUR 5,000 will be applied to aid received by farms. 1% of saving funds, due to modulation, will return to the Member State where it was saved, whereas the remaining funds will be allocated to the most deprived areas, as defined by the Commission. One change was added to satisfy the demands of Member States known as the "net contributors" (Germany, Netherlands, Sweden and the United Kingdom): the Presidency added a paragraph stipulating that 80% of funds saved thanks to this system can go back to the country in which it was saved, which provoked a debate on Community solidarity by the so-called cohesion countries.
Grain: Despite opposition from France, the Presidency proposed a 2.5% reduction in the intervention price for all grains, compensated by an increase of EUR 63-64.5/tonne for direct aid (as opposed to an increase that would have gone up to EUR 66/t according to the initial proposal) and a 50% reduction in monthly surcharges for grain. For durum wheat, decoupling of aid will be introduced in traditional production zones up to EUR 313/ha in 2004, EUR 290.9/ha in 2005 and EUR 277.25/ha starting 2006. A new bonus can be added to this for quality - EUR 40/ha.
Dairy Products: decoupling of direct aid and the decision on the possible additional increase for quotas will intervene only with reform of Agenda 2000 and when the sector has been implemented integrally (from 2008). According to the most recent compromise from the Presidency, it could still be modified, with support prices being reduced by 7% per year from 2004-07 for butter and 5% a year for fat free milk powder in 2004-07. The indicative price will be got rid of.
In conformity with the initial Commission proposals, the system of quotas is extended until the 2014/1015 harvest year and, pursuant to the Agenda 2000 decisions, quotas were increased by 1.5% in 2004/2005.
The themes of the reform on which ministers had given their agreement are as follows:
Aid regionalisation: Member States will have full latitude to pay direct aid at regional level.
Advance payments and specific cases: Member States are authorised to pay advances of up to 50% of payments in regions where exceptional conditions expose farmers to serious financial difficulty. Furthermore, countries will have the right to form a national reserve for compensating farmers finding themselves in a particular situation which prevents them from receiving payments during the reference period for determining the amount of single payments. The list of cases of farmers in this difficult situation has been extended.
Aid conditionality: The establishment in 2005 of a compulsory sanctions system (partial or total reduction of aid) for farmers that do not comply with certain regulatory norms in environmental matters or food safety, health and animal welfare, and job security on the farm. The list of criteria to be upheld has, however, been greatly reduced compared to the initial proposal. Beneficiaries of aid should also maintain their land in good agricultural condition, even if their land is targeted on the list of land to be abandoned. Member States could keep back up to 25% of aid if farmers fail to comply with criteria relating to protection of the environment, to product quality and to animal welfare.
Agricultural advisory system: The system (which comes within the context of aid conditionality) would be optional for Member States until 2006 then, from 2007, should be compulsorily proposed to farmers.
Set aside: Member States will be able to maintain rotational set aside and non-food production on the areas concerned. Exemption for organic farming will be maintained.
Aid degression: The vaguer notion of "financial discipline" has been preferred to the politically sensitive concept of degression (often interpreted as a reduction in aid in order to finance future reforms). As of 2007, payments could be reduced at a Commission proposal (and Council decision), if market forecasts show that budgetary ceilings are exceeded. The aim consists in keeping a margin of security under the ceiling of at least EUR 300 million. The amounts thus retained would be fully reimbursed up to a franchise of EUR 5,000 and 50% of the aid instalment between EUR 5,000 and 50,000.
Rural development: Investment aid and aid to the establishment of young farmers could be increased. Aid of EUR 3,000 annually (as opposed to 1,500 according to the Commission's proposal) may be paid under the programmes for improving product quality. The rate of cofunding for agri-environmental measures was increased to 85% in the areas under Objective 1 and to 60% in other areas. Support measures in favour of State forests will be possible.
Rice: The Commission agreed to withdraw its proposals not only on the application of a "super-penalty" should the maximum guaranteed surface area be exceeded, but also on the setting in place of a private storage system. A 50% reduction in the intervention price to 150 euros/tonne and public procurement within the limit of 50,000 tonnes annually. The Council invites the Commission to begin discussions at the WTO on modification of consolidated import duties applicable to rice.
Potato starch: Maintaining minimum prices (while the Commission hoped to abolish it) and 40% decoupling (as opposed to 50% under the initial proposal) of direct aid to producers of starch potatoes.
Dried fodder: No gradual dismantling of aid for processing. By 30 September 2008, the Commission will present, in the light of an assessment of the dried fodder CMO, a report on the development of surface areas devoted to the use of legumes and other green fodder, on the production of dried fodder and on savings in fossil fuel.
Mediterranean production: Before making legislative proposals, the Commission will, in the autumn, present a communication on reform of the common market organisations for olive oil, tobacco and cotton. Italy, which will be holding the EU Presidency from next month on, has said it will do everything to settle these issues before the end of the year.
Management of market crises: Before the end of next year, the Commission will report with proposals on specific measures to face up to the risks, crises and natural disasters at national level.