ECONOMY

CAP reform leaves subsidies to most Greek farmers intact

Brussels – After a long and painful period of gestation, the radical revision of the European Union’s Common Agricultural Policy (CAP) is suddenly upon us, in flesh and blood. The revision’s main aim is to hold spending on CAP, currently 44 billion euros per year, to reasonable levels by effecting a gradual transition from a subsidized to a market-driven agriculture. The final phase of negotiations, which had begun on June 11, was completed early yesterday morning with a vote at the Council of Agriculture Ministers. Portugal was the only dissenter, invoking «symbolic reasons» rather than an essential disagreement with the decision. Giorgos Drys, the Council president, and other ministers, spoke of an «historic decision,» while farmers’ union leaders, as expected, declared it a catastrophe. Indicatively, a spokesman of pan-European farmers’ union COPA-COSECA said that with the reform the EU was in danger of becoming a Switzerland on an immense scale «with a lovely countryside and minimal production.» The main features of the revision are the decoupling of production from subsidies, a gradual reduction in subsidies and the introduction of producers’ «environmental responsibility» as a factor. Beginning in 2005, producers will begin receiving subsidies independently of the kind and quantity of products they produce. This subsidy will gradually be reduced in favor of measures favoring more integrated and balanced development in the countryside. In order to receive the subsidy, farmers must follow minimum environmental protection standards. Beyond the subsidies, farmers are encouraged to maximize their income by adapting their farms to the needs of the market. However, a number of exceptions in effect allow member states to take their own measures. These may include restoring the link between production and subsidies for certain areas and products where decoupling would lead to an abandonment of production and the depopulation of a region. How Greek farmers fare Concerning Greece, there has been no decision yet on the way products such as olive oil, tobacco or cotton will fare under the new regulations. The European Commission will submit proposals on these products in the fall. For cotton in particular, the old subsidy system helped a once-negligible production take root and flourish beyond all expectations, turning, in the end, into a huge liability for cotton growers. In any case, it appears that the vast majority of subsidy recipients in Greece will continue receiving them, since the reform measures exempt those farmers who receive less than 5,000 euros in annual subsidies. According to the Ministry of Agriculture, this would exempt 92 percent of Greek farmers, who receive 52 percent of CAP subsidies directed to Greece. Conversely, what this means is that just 8 percent of farmers currently receive about half (48 percent) of all subsidies. Subsidies on larger farms will be reduced by 3 percent in 2005, 4 percent in 2006 and 5 percent in 2007, at which level they will be stabilized until 2013. As a basis for calculations, the EU will take the average of the years 2000-2002. This reduction is expected to save a total of 1.2 billion euros. One percent of this amount (12 million euros) will be returned to member states, while the rest will be used in a variety of countryside development programs. For Greece, this means 25 million euros annually for such programs. Finally, farmers will get extra financing to improve product quality, plus an extra subsidy of 1,500 euros per farm for improving food safety and promoting animal welfare. An extra gain for Greece is the decision to increase the milk quota by 17 percent. This decision significantly decreases the danger of fines imposed for excessive production. The significant changes in wheat production hardly affect Greece, since the intervention price is not affected, at least where so-called «traditional» production areas are concerned. Despite the reforms announced, prospects for a new global free trade pact by the end of next year remain cloudy. While officials in Brussels said the CAP reform meant the EU could now seek concessions in World Trade Organization (WTO) negotiations, early signs from other trading powers suggested this was far from the case. «Any reform is positive, but this is not the full reform wanted,» said a spokesman for Australian Trade Minister Mark Vaile, leader of the Cairns Group of key agricultural nations, which want a quick end to all EU farm subsidies.