EU executive unveils "greener" farm policy vision

BRUSSELS (Reuters) - The EU executive adopted plans on Thursday that would force farmers to do more to protect the environment in order to justify public subsidies, despite farm unions warning that could threaten their economic viability.

In a policy paper on reforming the EU's common agricultural policy (CAP) from 2013, the European Commission said direct subsidies to farmers -- currently worth about 40 billion euros ($54 billion) a year -- should in future be partly linked to meeting environmental goals.

"European agriculture needs to be not only economically competitive, but also environmentally competitive," EU Agriculture Commissioner Dacian Ciolos said in a statement.

But EU farmers' union Copa-Cogeca said the Commission's focus on "greening" the CAP risked undermining EU food production by increasing farmers' costs.

"The only concrete proposal in the paper is to add more costly (environmental) burdens onto EU farmers," said Copa President Padraig Walshe. "Increasing costs lowers incomes and will have a devastating effect on production," he told a news conference in Brussels.

The negative reaction from farm unions, whose views carry considerable weight in many national agriculture ministries, could signal difficulties for the Commission when it presents its vision for the reform to EU farm ministers on November 29.

But initial reaction from the European Parliament -- which will have an equal say in the reform with EU governments -- was more positive.

Scottish liberal MEP George Lyon said the paper was similar to the parliament's own views on CAP reform, as set out in a report published in July, which he drafted.

"We must ensure that any move to green part of direct payments is based on incentives, more carrot that stick," Lyon added.

BUDGET QUESTIONS REMAIN

The Commission paper was drafted on the assumption the post-2013 CAP budget would be kept at the current level of about 55 billion euros ($74 billion) a year, an EU agriculture official told Reuters, but the actual budget level remains in doubt.

The EU executive is due to publish proposals for the bloc's next long-term budget from 2014-2020 by next June. Few expect a drastic cut in farm spending, though many believe the Commission will try to reduce CAP spending to fund new priorities.

"Clearly this (paper) is only the second step along what will be a very difficult road," Lyon said.

"The real threat of big budget cuts still hangs over the whole policy debate, and the final decision on the budget will have a profound impact on the final outcome," he added.

France, Spain and other traditionally pro-CAP governments have pledged to resist any moves to cut the CAP budget, pitting them against Britain, Sweden and others who want to limit EU spending and refocus it on economic growth and innovation.

LIMITING PRICE VOLATILITY

Other proposals floated in the paper include limiting the level of direct subsidies paid to individual farms, which would free up resources and curb criticism that the current policy mainly benefits wealthy landowners and industrial-scale farms.

The Commission also called for a fairer distribution of subsidies between old and new member states, with direct aid currently varying from more than 500 euros ($674.9) per hectare in Greece to less than 100 euros in Latvia.

The paper rules out an EU-wide flat-rate subsidy, but says farmers in all countries could be guaranteed a minimum percentage of the EU average rate, which is currently about 250 euros per hectare.

The share of CAP funding spent on market management instruments such as export refunds and storage intervention has dropped from 92 percent in 1991 to just 7 percent last year, the Commission said.

Such instruments should be kept as a "safety net" against growing price volatility, the Commission said, but new tools such as public-private funded harvest insurance and mutual funds could also be introduced.

France is believed to support the introduction of new market tools, but Germany is thought less keen on the idea, an EU official said.

EU governments are expected to issue their official reaction to the paper early next year. In the meantime, the Commission will carry out an impact assessment of its plans, ahead of formal legislative proposals due by mid-2011.

(Reporting by Charlie Dunmore, editing by Rex Merrifield and Keiron Henderson)