Where European countries stand in the scramble for farm funds

Brexit has blown a hole in the next EU budget and a significant shake-up in farm subsidies seems an inevitable part of the solution.

How that will work in practice will have a bearing on EU leaders’ discussions at a summit in Brussels on Friday as they seek to prepare for life without the U.K. (The Brits aren’t invited).

The Common Agricultural Policy makes up some 40 percent of the bloc’s budget and farm ministers are already locked in debates about how to change the structure of farm payments from 2021 to 2027.

The European Commission at present awards farmers money based on the amount of land they have. Critics argue this is costly, contributes to high land prices and incentivizes the creation of ever larger farms, to the detriment of the environment.

The CAP currently amounts to €59 billion per year, but EU Budget Commissioner Günther Oettinger more or less confirmed that it would have to go down, in remarks to members of the European Parliament’s agriculture committee on Wednesday.

“I’d love to make promises, but I want to say things that I can stick to,” he said. The commissioner added that governments were clamoring for more money for research, education and defense, while some also want to keep agricultural subsidies level. Oettinger stressed it would not be possible to have everything. “At my age, pipe dreams — no thank you.”

For farmers, several big reform options are under discussion:

Capping

The first — dubbed “capping” — involves limiting the amount of subsidies the very largest farms receive. The Commission floated such a move in its suggestions for the reform in November, and the thinking is that it would allow Brussels to help smaller farmers while also saving money.

Mandatory capping would give the Commission some budgetary wiggle room while also proving popular with citizens worried about intensive farming. However, many governments want the option to be voluntary in order to protect their large farms. Few are openly in favor.

“I agree that, under certain conditions, we should introduce a capping on the disbursement of aid to farms. We also need to ensure that any resources recovered need to remain in the member state,” Italian Agriculture Minister Maurizio Martina said at a meeting of agriculture ministers on Thursday, joining his Dutch counterpart in welcoming the idea.

A limit of, say, €100,000 per farm would be a massive blow to big agri-businesses that receive millions from the CAP. This is a big concern in the Czech Republic and eastern Germany where many big farms are former cooperatives from the communist era.

Convergence

One of the more sensitive issues going into CAP reform involves balancing the amount of money that farmers receive per hectare in all parts of the European Union — known as “convergence.” Currently, farmers in the east of the bloc receive less money on average compared to those in the west because of a different payment formula introduced when they joined the EU, designed to take lower land prices and labor costs into account, among other things.

However, the issue is highly emotive in many Central and Eastern European countries, which argue that the situation makes second-class citizens out of their farmers. Lithuanian Agriculture Minister Bronius Markauskas said Monday, for example, that “convergence is the only important element missing from [Brussels’ CAP reform] communication.”

But for wealthier countries, equalization could mean their farmers receiving less. German Agriculture Minister Christian Schmidt said there are “good reasons” for the pay gap between East and West.

Coupled payments

Coupled payments — subsidies that Brussels allows governments to allocate to specific struggling sectors, such as sugar or dairy — is another area of the CAP whose future is uncertain. The Commission made no mention of the policy in its CAP communication. Some ministers drew attention to this gap at a meeting in Brussels on Monday.

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Most countries want to retain the ability to support their most precarious farmers. However, the measure is controversial since some — like the Netherlands — argue it artificially stimulates overproduction, which in turn drives down prices for everyone. Even the World Bank weighed in on the issue this week, for example, warning the EU to abandon coupled payments.

“Some countries are running before they can walk by issuing payments to farmers who don’t have the necessary infrastructure to effectively bring their products to market or to make the best use of their investment,” said Rogier van den Brink, a lead economist at the bank.

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