As the EU expands its membership to welcome the former communist republics of Europe, a question mark is raised over who will fund the necessary food reforms to bring the agricultural systems of these poorer countries up to scratch. Keith Nuthall argues that a political policy of largesse and inclusion could mean the tightening of a financial noose around the EU.
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As acts of international largesse go, the expansion of the European Union eastwards and southwards must rank as being one of the most generous in history, especially regarding the subsidisation of eastern Europe’s food production.
Research estimates are claiming that the size of the EU budget will soar to accommodate the needs of the former communist republics (plus Cyprus and Malta). We are talking Marshall Plan here; billions of euros being transferred from the national coffers of western Europe to the east, via Brussels. Yet, despite these concerns and the others trumpeted about the inability of some east European governments to even administer EU programmes once they are implemented, the enlargement process is trundling along nicely.
The European Commission has now released its plans for integrating farmers from these new Member States into the Common Agricultural Policy (CAP). The details betray a good deal of optimism in Brussels about the ability or willingness of eastern Europeans to reform their own traditional, often inefficient and sometimes semi-subsistence food sectors into something approaching the commercial model of the existing EU. It does however also show that the Commission has listened to advice that transplanting the existing CAP subsidies en masse to the new member countries would be counterproductive, in that it would lock their food industries into their current patterns of small scale inefficiencies.
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By GlobalDataTherefore, under the plan, the countries that might be full members by 2004 (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia, Cyprus and Malta), would not immediately be given all the food production supports that are available to existing Member States. Instead, direct payments would be granted in 2004 at 25% of the present system, rising to 30% in 2005 and 35% in 2006. From that year on, direct payments would increase annually so that new Member States would receive the same support as old members by 2013.
To sugar this pill, the Commission has proposed beefed up rural development grants, which could be co-financed by Brussels up to an impressive 80%. The money would be used to fund the establishment of producer groups, technical assistance, agri-environmental programmes, the forestation of farmland, and to cater for the early retirement of farmers.
There would also be special grants for “semi-subsistence farms,” with the aim of making them commercially viable operations. This flat rate aid of up to € 750 would be paid on condition of the submission of a business plan.
Presenting the package
Agriculture commissioner Franz Fischler has made a decent fist of his case, insisting: “This is a fair, balanced and reasonable package. Our strategy makes sense in economic, ecological and social terms.
“It ensures that EU money is well spent in boosting the necessary restructuring process in the new Member States.
“We have to live up to our responsibility. If we do not help to modernise agriculture and diversity employment in rural areas, agricultural restructuring will produce a spiral of growing unemployment and destabilised communities.”
Fischler does acknowledge that this is going to be an expensive responsibility, but has encouraged support saying: “Let’s face it: a larger EU costs money.”
And well it might; a Dresdner Bank study has predicted that enlarging the EU on the basis of existing programmes would increase its budget by 50%, which would double Germany’s net contribution to €21bn and increase Britain’s net payments from €5.3bn to €16.4bn. The European Parliament Committee on Budgets has meanwhile estimated that direct support to central and eastern European farmers will cost the EU more than €105bn between 2004 and 2013.
A larger EU?
These figures are doing little to deter Dr Fischler and his colleagues however; they remain wholly convinced of the value of a larger EU.
Fischler argued: “Turning the debate on enlargement into a pure ‘piggy-bank operation’ is simply not good enough. If the Member States live up to their commitments, the costs are manageable.”
This is hopeful stuff and betrays the difficulty of the current position of the Commission and many national governments. It was easy to say ‘yes’ to enlargement when it was a far-off theory and a welcome distraction from difficult debates about whether to pool more sovereignty amongst existing members.
Serious decisions looming
The numbers are now being crunched and serious decisions are looming about whether to allow the poorer eastern Europeans and their cut-priced farm produce into the EU.
Governments are under pressure to stall negotiations. Italy and Spain, for instance, have been making noises about developing poverty stricken rural areas in the current EU (i.e. the poorer regions of their countries), before making big handouts to the easterners. Denmark and Netherlands also want the CAP to be further reformed, before any enlargement takes place.
Delaying tactics will only work for so long, however. Targets have been laid to admit eight eastern countries, plus Cyprus and Malta, as early as 2004 and any serious attempt to derail this process will risk a diplomatic crisis. This would undermine reformers in the applicant countries and damage the reputation of the EU. Whether this happens or not will depend on how much existing Member States care about their financial bottom lines.
By Keith Nuthall, just-food.com correspondent
