Summary:The idea of cutting direct aid for farmers has come into much sharper focus, and has become a real political option altering the financial structure of the Common Agricultural Policy (CAP). On February 8, at the last meeting of the high-level group entrusted with the technical preparation of the Ministerial negotiation on the reform of the CAP, the representative of the European Commission submitted a new progressive reduction of aid to delegations from the EU Member States. The idea draws its inspiration, from earlier ideas submitted by France and the United Kingdom.

Having explained that he has taken account of the various options submitted by the Member States with the aim of complying with a stabilisation of expenditure in the EU farm budget for he period 2000-2006, the representative of the European Commission to the high-level group submitted a new draft on the progressive reduction of direct aid, to the surprise of the Member States. This option has, to date been contested by the European Commission (see European Report No 2379).

The Commission's calculations are based on a sliding-scale reduction of 3% across the board of all direct aid, and depending on the Common Organisation of the Markets (COMs) which will probably come into force:

- in 2002 for all direct aid resulting from the reform of the CAP of 1992, as well as the new aid concerning the cereals sector;

- in 2004 for the new aid to be spread over three years of the Common Organisation of the beef Market;

- in 2005 for aid to the milk sector, whose reform will be spread over 4 years starting in 1999.

The draft takes account of the reforms of the beef and milk sectors whose aid will gradually increase in order to offset the fall in intervention prices. In addition, the European Commission is suggesting that one quarter of the savings thus achieved from this substantial reduction in direct aid should be reallocated to rural development measures.

Savings of more than Euro 2 billion in 2006

Farms which qualify for less than Euro 5,000 in aid will be exempt from this sliding scale reduction. Thus, depending on the calculation methods used, between 67% and 73% on average of total farms throughout the EU will not be affected by the reduction in aid. This should help o narrow the gap somewhat between rich and poor farms in the EU. In Germany this varies between 44% and 58%, in France 42% and 50%, Spain 65% and 70%, the United Kingdom 26% and 46%, and, finally, the...

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