France determined to defend CAP budget

The EU budget for 2013 was finally signed off this week after the European Parliament approved a compromise agreement between member states that will give the CAP slightly less next year than was originally proposed by the European Commission, reports Agra Europe

CAP payments for 2013 will total €56.44 billion, a marginal increase from the current year but €350 million lower than what the Commission asked for. This leaves the Pillar One direct aid and market-related payment kitty at €43.93bn, up 0.13 per cent from this year, with the Pillar Two rural development budget set at €12.5bn - 3.38 per cent greater than in 2012.

On the subject of the next long term budget, France set out its stall against any cuts to the CAP budget for 2014-2020 and called for greater reductions from elsewhere in order to appease countries such as Sweden and the UK, who are fighting for greater reductions than are currently on the table. If the CAP is left inviolate, this would mean quite substantial cuts elsewhere, in particular in programmes that might do more to stimulate the growth of the European economy than the CAP.

As the biggest recipient of CAP funding within the EU, France is determined to pull back further funds into the agricultural budget after European Council President Herman Van Rompuy proposed a less drastic reduction of €17bn at the EU budget talks, softening on the €25bn he had earlier proposed.

But 'several billion' euros will still need to be restored to the budget if it is to satisfy France, the country’s European Affairs minister Bernard Cazeneuve told journalists at a European Parliament plenary session this week. But no specific amount to be recovered for the CAP is being aimed for, a spokesperson for the French Agriculture Ministry told Agra Europe.

Grey mouse rocks France

EU Council president Herman van Rompuy has proposed an EU budget that is €20bn less than the current EU budget and at least €75bn less than the European Commission's original proosal. It focuses cuts on agricultural spending including a €13.2bn reduction in farm subsidies which drew a furious response from France. It does also plan to cut the UK rebate of €3.5bn.

There is also a row going on about cohesion funds. The Friends of Cohesion constitute a group of 14 member states from central and eastern Europe, with some from Southern Europe. They face a group of member states known as the Friends of Better Spending, but there are only seven of them (Austria, Germany, Finland, France, Italy, Netherlands, Sweden. Another name could be the 'group of net contributors': Better Spending .

Not all of those seven would sign up to a significant reduction in farm spending. Indeed, one could only rely on the Netherlands and Sweden.

Van Rompuy's proposals would mean €13.2bn less for Pillar One (P1) and €8.3bn less for Pillar Two (P2) for the 2014-2020 period than wanted by the European Commission in its initial CAP reform proposals. The cut is three times greater than the €6.8bn the Cypriot Presidency had suggested trimming off earlier this month, proposals which themselves caused a big storm.

The Cypriot plan would have seen €50bn cut from the overall EU budget, but Van Rompuy’s proposal would double that figure to nearly €100bn. Under the Council President’s plan, spending on P1 direct aid payments and market tools over the seven years would go from the €283.05bn tabled by the EU executive down to a maximum of €269.85bn, nearly 4.7% less. The CAP would bear the brunt of further cutbacks as a planned 'Crisis Reserve' to fund emergency measures - for which the EU executive had earmarked €3.5bn - would also be included under P1.

The P2 budget for co-financing national rural development programmes should go from €91.97bn to €83.67bn, around 9% less, Van Rompuy said. The Commission proposal for P2 already involves a 10% cut in real terms from 2013 to 2020, so a further €8.3bn reduction could mean some member states seeing their rural development envelope cut by more than 20% in real terms. Potentially, at least, this form of spending can be more socially useful than Pillar 1.

Somewhat predictably, EU Farm Commissioner Dacian Ciolos responded that the suggestion 'goes against efforts to make the CAP fairer, greener and more efficient'. He also said that this was the 'first step away from a common agricultural policy' and that it could set the CAP budget 'back 30 years'.

With the crunch talks on the multiannual financial framework set for next week (November 22-23), one interpretation is that the Council President has decided that some appeasement of the net contributing states is needed to ensure that the summit is not ‘dead on arrival’ and that progress can be made.

Meanwhile, Agra Europe analyst Brian Gardner has suggested a way to knock around 25% off the EU budget for 2014-20 in his latest comment article – reduce the size of the CAP budget by 75%.

He argues that with the strong likelihood that crop prices will remain at historically high prices in the years to come, largely due to increasing demand, the EU can afford to only provide subsidies to those farmers who really need it.

The EU's most efficient cereal growers in France, Germany and the UK, for example, with average yields of above eight tonnes per hectare, can make adequate profits without receiving EU income subsidies, he argues.