Commission agrees to changes in tobacco and olive oil policies

BRUSSELS (Reuters) – The European Commission altered its plans for shaking up EU subsidy systems for tobacco yesterday, bowing to pressure from southern countries worried about job losses in some of Europe’s poorest areas. Tobacco growing is a key economic concern for nations such as Spain, Greece and Italy, which have protested that some of their poorest regions would face ruin if production were curbed. These countries have deployed the same argument for olive oil, for which the Commission fleshed out its reform proposals but has kept the main thrust unchanged. «Following broad consultations with member states, the concerned regions and the representatives of the sectors, the Commission introduced certain changes… for tobacco and olive oil,» the Commission said in a statement. «The proposed reforms would enter into force in 2005 and would undergo a midterm review. They would be budgetarily neutral compared to past expenditure,» it said. The Commission’s proposals for both sectors follow the spirit of the EU’s major farm reform in June for cutting the link between subsidy and production, a concept known as decoupling. For tobacco, the changes would largely affect smaller producers, as more payments would be shifted into a restructuring fund to help farmers improve yields or switch to other crops, with correspondingly less subsidy split from production. The effect would be to lessen the initial pain of decoupling which many farmers fear will lead to sharp falls in production, with negative consequences for small rural communities. However, after three years, no payment would be linked to production and national tobacco quotas to limit subsidized output would eventually be abolished. Greece and Italy receive the lion’s share of EU tobacco subsidies. The Commission estimated that total support to the tobacco sector at some 955 million euros a year. Tobacco is mostly grown in some of the poorest areas of the European Union. Production is highly concentrated, with seven regions accounting for around 70 percent of total holdings and 63 percent of the EU area under tobacco. On Monday, the agriculture ministers of France, Greece, Spain, Italy and Portugal signed a letter demanding more flexibility in Commission plans to reform the tobacco sector. The ministers, representing the EU’s major tobacco-producing countries, said the reform proposals in their current form would cause massive land abandonment and loss of jobs. For olive oil, the Commission changed little in its proposal floated in September but did flesh out some of the details that would allow olive growers to qualify for EU subsidies – such as how to calculate the eligible cultivated area and classify trees planted before the cutoff date of May 1998. Under the reform plan, olive oil producers with holdings larger than 0.3 hectare would see 60 percent of subsidies decoupled, redistributed on an area, or «per tree» basis. The EU grants some 2.3 billion euros in annual olive oil subsidies, a fraction of the 43 billion spent on farm policy which itself swallows nearly half the entire annual budget.