Last year, for every £100 worth of goods and services produced in Ireland, three were contributed directly from Brussels in farm payments. The Common Agricultural Policy, the lifeblood of our farming community, pumps in an average of £8,600 a year to every holding in Ireland.
Reform and financial stringency, however, are the order of the day and, when EU farm ministers sit down today to work out the budget for 2000-2006, they face a mammoth task in turning around the juggernaut which eats up half the EU budget. The Minister for Agriculture, Mr Walsh, knows he holds the future of rural life in his hands.
Four imperatives drive the CAP reform: the demands of the EU's paymasters for budget discipline; growing opposition to what is seen as an inefficient system; the world trade regime and the desire to export, and the political priority of enlargement of the EU. In the medium term all four point clearly in one direction, that started by Ray MacSharry as Agriculture Commissioner in 1992.
In essence, Agenda 2000 is a continuation of the radical dismantling of a system based on guaranteeing high prices for farmers to one based instead on supporting farm incomes through "direct aids" or cheques in the post.
By the time it is implemented, some 80 per cent of the CAP budget will take the form of the latter.
The determination of the Germans to cut spending to reduce their net contributions to the budget has led to a broad agreement to cap farm spending in 2006 at 1999 levels in real terms. That will mean finding savings in the Commission's proposals of £5 billion a year by then.
The talks are also complicated by the reality that the cash balances do not tell the whole story. As a senior French diplomat says, a bookkeeper may regard payments to France to decommission its Breton fishing fleet as budget contributions to France, but the real beneficiary is the Spanish fisherman. Similarly with the export refunds which subsidise Irish beef sales on world markets.
The beneficiary is not just the Irish producer but the German farmer, who survives only because of the artificially high prices, maintained by the EU, which his own consumers pay. The French, who pay 18 per cent of the costs of the CAP but draw down 25 per cent of its cash, say nevertheless they are willing to contribute to reducing the burden on the German taxpayer, but not necessarily in the way Bonn would like. The EU's right to trade its farm produce on the world market is severely circumscribed by the last World Trade Organisation agreement. In liberalising global trade, the 1992 agreement set annually decreasing limits on the amounts of exportable subsidised products. In the EU that means exporters who want subsidies must apply for ever-diminishing numbers of licences to sell abroad.
That logic will be repeated with a vengeance in the next round of WTO talks due to start next year.
Quite simply, if we want to trade on world markets, direct subsidies will have to go. If we are not prepared to accept the disciplines needed to get on to world markets then, given the EU's huge productive capacity, we are left with two choices. Either surplus produce will have to be stored indefinitely at taxpayers' expense or the Union will have to set about the destruction of its capacity through penalties against farmers who produce too much, or through expanded setaside.
The latter option has been chosen by the Government as its negotiating strategy, backed by the Irish Farmers' Association.
The Commission insists that prospects for world exports are basically very sound despite the crises in the Far East and in Russia which have hit pork and beef exports hard. While world cereal prices are also at their worst levels in five years, most experts share the Commission's optimism and predict a significant growth in world demand.
Enlargement
Farming plays a far larger role in the applicant countries of central and eastern Europe (CEECs), a combined share close to 9 per cent of GDP compared to 2.4 per cent in the EU, but 22 per cent of their jobs. Productivity is low, capital is lacking and sanitary standards are well below EU levels.
The challenge is how to extend the CAP to the east - the Union plans to spend as much as £3 billion a year by 2006 on the acceding states but cannot afford levels of aid per farmer at the same rates as in the 15. There is also a fear that if price support was extended to the CEECs, it would both encourage massive overproduction and impede restructuring.
If, instead of price support, the Union's policy is based on suppor ting farm incomes and compensating those who face price cuts, the Commission reasons it can legitimately argue to the CEECs that they should not be compensated for a drop in price levels they never enjoyed. A two-tier system of direct aids becomes justifiable and enlargement suddenly becomes affordable.
Commission package
Beef: phased cuts of 30 per cent in the safety net, guarantee price with compensation, direct aids, at only 80 per cent of that figure, at a cost of some £100 million to Irish farmers if real prices do fall that far. As in other sectors, discretion for national governments to target 30 per cent of the compensation in the way they see fit.
Irish farmers are also concerned about the tilting of the package in favour of intensive production methods against the Irish grass-based system.
Dairy: phased cuts of 15 per cent in the support price of butter and skim milk - in effect 17 per cent in milk - with a 2 per cent increase in the quota. The latter is to be applied on a discriminatory basis with Ireland eligible for only half the amount. Compensation at 80 per cent of the price cut. Cost to Irish farmers: £80 million.
Cereals: phased cuts of 20 per cent and ending of setaside payments (although their potential use in future is retained). Compensation of 50 per cent of the price cut.
Rural development: a significant expansion of funding to support rural infrastructure and non-farming aspects of country living.
Instead of a 30 per cent cut in the beef guarantee price, Ireland is arguing for a 15 per cent cut, with full compensation to farmers. This would be accompanied by a number of measures aimed to cut back production. so that demand and supply in the EU would balance.
A similar rationale is applied to the milk regime where the Government defends the status quo.
The Commission, on the other hand, argues that its proposal for a 30 per cent cut in beef would increase demand by 200,000 tonnes inside the Union and allow for the external export of the same again. On milk, the Agriculture Commissioner, Franz Fischler, has insisted that the status quo is not an option - there are already signs that supply is exceeding demand.
He insists that a dynamic model of the effect of the changes would be an increase in farm incomes by between 22 and 34 per cent in real terms by 2006 on 1992-96 levels - for those who can stay on the land. He cites the overall positive effect of the deeply feared MacSharry reforms.
Indeed, although farm incomes were down 3.9 per cent in 1998 and 2.7 per cent in 1997 in real terms, the years from 1993 to '96 saw a remarkable growth in incomes - agricultural income per work unit is now 14 per cent higher than in 1992.
Yet such changes are far from even, and Ireland's dependence on beef and dairy production - 70 per cent of our farm output - and on exports - we sell abroad 90 per cent of the beef we produce - has left it particularly vulnerable to contractions in the world and European markets.