Farm subsidies still get top share of EU austerity budget

Fri Feb 8, 2013 2:20pm EST

* Farm spending set to fall 13 pct under EU budget deal

* Agriculture would claim 38 pct of total budget pot

* Farming giant France hails result as a victory

* Reform of EU farm policy rules still to be finalised

By Charlie Dunmore

BRUSSELS, Feb 8 (Reuters) - Farm subsidies will continue to gobble up the biggest share of the European Union's budget to 2020, despite a 13 percent drop in future agricultural spending, under a deal struck by EU leaders on Friday.

Agriculture's budget supremacy was secured after France and other major farming nations thwarted attempts by Britain and its northern European allies to shift a greater share of EU spending towards new measures to boost growth and jobs.

As a result, farm subsidies will consume some 38 percent of the EU budget for 2014-2020, equivalent to 363 billion euros ($485.7 billion) of the 960 billion total, or around 50 billion euros a year.

That is still a significant reduction compared with the 417 billion euros earmarked for farming under the current seven-year budget, but supporters of the bloc's 50-year-old common agricultural policy (CAP) will reflect that the result could have been a lot worse.

French President Francois Hollande was quick to claim victory in the negotiations, saying that France had managed to maintain its farm subsidies while other nations saw theirs cut.

"The relative share of agricultural spending in the European budget will decrease, but I made sure to preserve the funding destined for our farmers," he told a news conference at the end of the 24-hour talks.

The EU's farm commissioner, Romanian Dacian Ciolos, said the deal confirmed the importance of Europe's farm policy for the 50 percent of EU citizens that live in rural areas.

"EU leaders have reiterated their confidence in a modernised CAP and recognised the important contribution of farming and rural areas to the EU economy," he said in a statement.

The only outright dissent came from Europe's powerful farm lobby, accustomed to seeing its subsidies protected in previous EU budget deals.

"The decision will mean a 15 percent reduction in CAP spending, threatening the employment of 40 million in the agri-food sector and millions more in rural areas," EU farm lobby Copa-Cogeca said in a statement.

GREEN LIGHT FOR REFORM

In 2011, Ciolos proposed an overhaul of CAP rules to coincide with the new budget period, and some of the main elements of his reform were endorsed by EU leaders as part of the budget deal.

Chief among these was a plan to make a third of the direct subsidies paid to farmers conditional on improvements in the environmental performance of agricultural production.

Ciolos has argued that what he terms as the "greening" of the CAP rules is vital to win the support of sceptical EU citizens for maintaining the bloc's generous farm subsidies.

Conscious of the likely reduction in future farm spending, EU agriculture ministers have led efforts to water down the environmental proposals in parallel talks on the CAP reform, though politicians have yet to agree on the final result.

EU leaders also backed plans to share out farm payments more fairly across the bloc to address the disparity between producers in Italy, Belgium and the Netherlands who receive more than 400 euros per hectare on average and those in the Baltic states who get less than 150 euros per hectare.

But a proposal to limit subsidy payments to Europe's wealthiest landowners by capping individual payments at 300,000 euros per year was weakened at the summit, with leaders saying governments should be able to choose whether to impose the limit or not.

Provided the budget deal gets the approval it needs from the European Parliament, EU politicians will push ahead to try to finalise the CAP reform during the first half of this year.

Even if they meet that ambitious deadline, officials say it will leave too little time to implement the complex changes in direct subsidy payments for the start of the new budget cycle in 2014. As a result, next year's direct payments will be based on the existing rules but using the revised lower budget. ($1 = 0.7474 euros) (Additional reporting by Sybille de La Hamaide in Paris; editing by Jane Baird)