EU to cut subsidies for largest farms: draft

BRUSSELS: Europe's biggest farms will see their EU agricultural subsidies capped at 300,000 euros a year under draft proposals seen by Reuters to reform the bloc's farm policy from 2014.

The plan would cut the current 40 billion euro ($56.34 billion) annual bill for direct farm subsidies by at least 2.5 billion euros, but is likely to face opposition from countries with large land holders such as Britain, Germany, and the Czech Republic.

EU governments rejected a similar cap in a 2007 reform of the common agricultural policy (CAP).

Other proposals in the draft European Commission reform include making a third of EU direct subsidies contingent on farmers meeting new environmental goals, and ensuring that only "active farmers" are eligible for support.

The Commission said the 300,000 euro cap, as well as cuts to farm payments between 150,000 and 300,000 euros, would address the current situation where large amounts of EU aid are paid to a small number of Europe's biggest farms.

"It is therefore fair to introduce a system for large beneficiaries where the support level is gradually reduced and eventually capped to improve the distribution of payments between farmers," the draft said.

France is the biggest annual recipient of EU direct aid at more than 8 billion euros, followed by Germany at 5.5 billion and Spain at around 5 billion, Commission data for 2009 showed.

Under the proposal, the cap would be raised for large farms employing high numbers of workers, offsetting the impact on large cooperative farms in eastern Germany, for example.

All savings generated by the plan would be retained by national governments to spend on other agricultural priorities, rather than returning to EU coffers, the draft said.

The proposal was criticised by George Lyon, a British liberal member of the European Parliament, who said it would unfairly penalise British farms that tend to be larger and more efficient than those in most other EU countries.

"Punishing those who are the most efficient and competitive will take European agriculture down the wrong road, and we must ensure the Commission is defeated on this issue when the negotiations begin," Lyon said in a statement.

Plans to force farmers to meet new environmental and climate objectives to qualify for full EU subsidies are designed to boost public support for the CAP the bloc's most expensive policy at about 55 billion euros a year.

In June, the Commission proposed freezing EU farm spending at its current level between 2014 and 2020.

Proposed environmental criteria include requiring arable farmers to cultivate at least three different types of crop, with none exceeding 70 percent of the total farm area, and forcing all farmers to maintain areas of permanent grassland.

About a third of the total value of direct subsidies would be made dependent on meeting these criteria. Organic farms would be exempt from the requirements thanks to "recognised environmental benefits" of organic production, the draft said.

Commission farm spokesman Roger Waite said the proposals on direct subsidies are due to be published Oct. 12.

They will appear alongside related plans to reform other areas of the CAP such as rural development policy and market management tools.

Under those proposals EU sources said they expect the Commission to propose new EU-funded instruments such as crop insurance and mutual funds to manage price volatility on agricultural markets.

Sources also expect a phase-out of EU export subsidies.

Once the proposals are finalised, EU governments and lawmakers will then begin the lengthy process of approving the reform plans, which could take up to two years.

Copyright Reuters, 2011