ECONOMY

CAP reforms will have a heavy impact on Greek farmers, State

Brussels – Greece’s agriculture is obliged to enter new and unchartered territory following yesterday’s presentation of the European Commission’s reform proposals concerning longstanding Greek products, like tobacco and olive oil, as well as cotton and sugar. These products had been excluded from the Commission’s proposals – adopted earlier this year – on the reform of the Common Agricultural Policy (CAP). As in its earlier proposals, the Commission’s main aim is «decoupling,» that is, breaking the link between subsidy and output, which has created huge surpluses in some products and fostered corruption by farmers eager to receive ever-higher subsidies. The nature of subsidies will change, to provide income support and encourage environmentally friendly farming. But it is certain that reforms will mean subsidy cuts for products such as tobacco. Negotiations on the Commission’s proposals will begin at the next Council of Agriculture Ministers. If adopted – and this is a big «if,» considering the stakes for southern EU members – the reforms will be gradually implemented by 2007. The current system will remain in place until 2013, when the CAP, and especially its budget, will be up for reform once again. Besides decoupling, the other important reform element is the introduction of a completely new monitoring system, which is expected to stretch the Greek administration’s current capabilities to the breaking point. While the current monitoring system limits itself to certifying the quantity produce in order to receive the corresponding subsidy, monitoring is now extended to the quality of products and the quality of environmental protection on the farmers’ part. This is the so-called «multiple compliance» system, which, undoubtedly, will be one of the toughest parts of the reform to apply. Specifically, the Commission proposals for each product are the following: For producers owing less that 3 stremmas (0.3 hectares) of olive groves, subsidy is completely decoupled from output. For larger producers, only 60 percent of the subsidy is decoupled. The remaining 40 percent will be provided by the State, on the basis of either the area under cultivation or the number of trees. In certain areas, such as Corfu, a subsidy will be provided irrespective of olive oil production. Farmers will still be obliged to look after their trees. For tobacco, producers with an annual output of less than 3.5 tons – 55,000 out of 60,000 Greek producers – will receive income support irrespective of production. Producers with an output of between 3.5 and 10 tons will receive 80 percent of the original subsidy, while the amount paid to larger producers will decrease 30 percent each year between 2005 and 2007. The amounts saved will be used to finance those farmers wishing to switch to other crops. As for cotton, a crop rarely cultivated in Greece in the pre-subsidy era and in which the country accounts for 80 percent of EU production (2 percent of global production), the cultivated area must shrink by 11 percent and subsidies will be decoupled by 60 percent (that is, only 40 percent of the amount will depend on the amount of cultivated area and no longer on output, while the remaining 60 percent will count as income support). Finally, on sugar, the Commission has submitted three alternative proposals: keeping the system as is, gradually eliminating subsidies and immediate elimination.