EU to give 1 bln euros to farmers in poor regions

BRUSSELS (Reuters) - The European Union plans to give 1.0 billion euros ($1.57 billion) to farmers in developing countries until the end of 2009 to help combat high food prices and boost production, a document said on Friday.

The EU cash, largely the result of underspending and leeway in the farm budget, comprises 750 million euros earmarked for 2008 and the remainder for 2009. This year's amount could be given retrospectively from mid-June.

"This facility would primarily support agriculture in developing countries and enable them to enhance production levels," said the paper, a draft proposal obtained by Reuters.

"It will also help those countries to rapidly mitigate the negative effects of the high food prices on the poorest."

The proposal should be formally endorsed next week by the European Commission, the EU's executive arm, and will then be sent to EU ministers and the European Parliament. If all goes smoothly, the money would start to flow in early January 2009.

The desired effects of the funding were to raise farm output and food security in assisted countries, as well as reduced malnutrition rates and food price inflation, the document said.

The money would be channeled to developing countries through international or regional organizations, such as the United Nations and World Food Program.

Four areas of financial support are envisaged, the main two being to improve access to farming "inputs" such as fertilizers and seeds and measures to improve agricultural capacity.

The EU funding would also cover food assistance and measures to help farmers boost production.

Commission officials say the most difficult debate may come after the summer: how to set eligibility criteria for recipient countries and how much cash will be allocated by country. Those negotiations should be concluded by December.

So far, for the 2008 farm budget, the EU has been heavily underspending on classic market support measures such as export subsidies, public intervention buying of staple commodities and subsidized private storage, officials say.

Agriculture eats up more than 40 percent of the EU's annual budget, which for 2008 is planned at 120.7 billion euros.

(Editing by Charles Dick)