Farm subsidies to reward some for less work

The reformed Common Agricultural Policy (CAP), which is scheduled to go into force on January 1, 2006, will bring drastic changes to the agricultural scene in Greece and have an immediate effect on the country’s entire productive fabric, experts and officials say. Many farmers will simply choose to stop raising their crops, since whatever they do they will still receive the subsidies that have been decoupled from the type of product and the quantity they produce. In other words, they will receive an annual check for a specific amount, on the minimal condition that they till their land once a year. Production will therefore fall significantly. These cutbacks will have a serious knock-on effect, including on food processing plants and, by extension, those who work in them. A number of cotton and tobacco factories, for example, have already started picking up and moving to other countries, where they can find cheaper raw materials. Cutting expenses Income from European Union subsidies, once thought to be secure, will be thrown into jeopardy when the CAP evaluation in 2009 is carried out. A trend toward reducing farm subsidies is already apparent from recent debates within the EU (which appears to be in one of its gravest crises since its foundation), which have focused on cutting overall expenditure in the agricultural sector. The political leadership of Greece’s Ministry for Agricultural Development and Food appears to be moving toward fully decoupling subsidies to olive oil and tobacco as well as to other products for which there is a choice of how much to decouple the subsidy for production (of cereals, sheep and goats, and cattle). Once subsidies and production are fully disengaged, every farmer or person who is entitled will receive a certain amount every year – an independent subsidy – which will be calculated on the basis of what they received on average over three years (2000-2002), and regardless of how much they produce or even whether they produce anything. Virtually all farmers have declared through their representative bodies that they want full decoupling, so as to ensure a guaranteed income while being able to grow the crops that they want or that the market demands. «The entire farmers’ cooperative movement in Greece concurs with the stance of the Panhellenic Confederation of the Unions of Agricultural Cooperatives (PASEGES) on completely detaching subsidies from production so as to transform mandatory application of the new CAP into an opportunity for a new policy for the agricultural economy. «The common stance of the cooperatives and businesses was unanimously confirmed at last Wednesday’s meeting of presidents and managers of the Unions of Agricultural Cooperatives, which saw a strong turnout of members,» announced PASEGES. The farmers’ wishes match the administrative capability of the mechanism that will have to meet the needs of the new CAP. The sluggish and problematical Greek public administration (and the pace at which the mechanism put in place for adapting to CAP is moving) is not deemed capable of meeting the needs of a more complex subsidy payment system. However, full decoupling is in line with the current political needs of both the government and of the opposition. Changes A report on the effects of implementing the new CAP, conducted on behalf of the ministry by Associate Professor Constantinos Tsimboukas and lecturer Stathis Klonaris of the Agricultural University of Athens, found that farmers’ incomes would not change much either way. The two researchers reported that the immediate effects (apart from the reductions foreseen by the new CAP) in farmers’ income would not be great, whether full decoupling was adopted or a proportion of the subsidies were to remain linked to production. However, they also found that the productive fabric of Greece, and by extension of industry and the economy, would be considerably affected. Some farmers would be able to act freely and to produce in accordance with the demands of the market as long as they are kept informed by an official body. However a very large percentage of them will likely chose to disengage from the productive process altogether, and to draw a sum of money every year without really doing anything. Tobacco The immediate effect of full decoupling on farming families’ incomes will not be great (in any case, farmers will get subsidies). However, only 10 percent of farms will remain viable compared with 42 percent today. Clearly, there will be a significant drop in production, which is why the League of Tobacco Processing Factories has called for the least possible decoupling for commercial tobacco varieties. «Opting for full decoupling will have extremely unfavorable consequences, both in terms of unemployment and the balance of trade, as many businesses will close down and exports will stop,» say the researchers. Olive oil The researchers predict changes in olive oil production, even though this sector generally faces fewer problems than do other agricultural sectors. «Subsidies are not as important for olive oil as they are for tobacco and cotton,» they note. Even with the implementation of full decoupling, some 60 percent of olive oil-producing farms will be viable. But about 7 percent (10,000-12,000 businesses) will face problems: Not only will they not produce an income, but growing crops will cost the title holders more than they get from the new subsidy. The report cites the hypothetical example of an olive grower with around 4.2 hectares, of which 3.05 hectares are devoted to olive trees. In 2002 his income (subsidies plus the commercial value of the product minus growing costs) was 970 euros. If full decoupling is applied, this grower will receive 1,734 euros without growing anything. If, however, he wishes to produce, he will have to pay the extra 1,044 euros out of his own pocket and will thus receive an income of only 690 euros. Obviously in such a case it is hardly worth his while to keep producing his crop as before. Cotton The situation is somewhat different in the case of cotton, because the Greek government managed to link 35 percent of the subsidies to production in order to protect the product. The first evidence of change will be the absence of protest rallies by farmers. «We won’t see farmers on the streets again, because the subsidy refers to acreage, so there will be no point in asking for subsidies for extra weight,» explained Klonaris. Will this reduce intensive farming? «Some people might give up farming. But large producers will keep up the same pace in order to secure a larger income from selling the product,» Klonaris said. What is certain is that there will be a distinct drop in production, which will have an effect on manufacturers. Tsimboukas said the researchers did not know how great that fall would be, and added that some cotton mills have already started arranging to move out of Greece and set up operations in other countries.

Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.