Schroder is fed up subsidising Europe's farmers

GERMANY : The musical Oklahoma teaches us that, despite their differences, the farmer and the cowman can be friends

GERMANY: The musical Oklahoma teaches us that, despite their differences, the farmer and the cowman can be friends. It remains to be seen, however, if the European farmer and his paymaster can remain on such harmonious terms.

With just a few days to go before EU leaders meet in Seville, the German Chancellor, Mr Gerhard Schröder, has declared that his country is fed up with subsidising Europe's farmers. Writing in a Sunday newspaper, Mr Schröeder said new member-states cannot be allowed to join the EU on the basis of an unchanged Common Agricultural Policy (CAP).

Extending the present system of agricultural subsidies to 10 new member-states would add €8 billion to the EU's budget.

"Germany alone would have to bear a quarter of that - two billion euros," he said.

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Agriculture was always going to be the most difficult element of the negotiations with candidate countries, not least because the 15 existing member-states are so sharply divided on the issue.

At the heart of the disagreement is the question of whether to extend direct payments to farmers in central and eastern Europe after they join the EU. These payments were introduced in the EU in 1992 to compensate for the reduction of price support payments made by the individual states to their farmers.

Direct payments now account for around 80 per cent of the agricultural budget, which in turn, comprises half of the total EU budget. The accession of the 10 candidate countries, likely to join the EU in 2004, will increase the number of farmers in the EU by half and the area under agricultural production by just under a third.

This does not bother the main beneficiaries of the EU farming policy, who hope to gain new allies to defend their subsidies after enlargement. This explains why France, Spain and Ireland, which together receive around 40 per cent of the EU farm budget, have supported the candidates' demands for direct payments.

The Commission has proposed phasing in direct payments for farmers from candidate countries, starting at a level of just 25 per cent of those enjoyed by their counterparts in western Europe. By 2013, farmers in the new member-states would enjoy the same level of subsidies as everyone else.

Most EU states support the Commission's proposal, although candidate countries regard it as ungenerous and unfair. But Germany, Britain, Sweden and the Netherlands are blocking it on the basis that it will impose an intolerable, future burden on EU finances.

In fact, Mr Schröder is less concerned about the cost of extending subsidies to eastern Europe than with the fact that, if he does not act now, he will miss the last opportunity to reform Europe's agriculture policy.

The EU agrees a budget every seven years and the next negotiations are due in 2006. By then, if everything goes according to plan, 10 new member-states will have joined - many of them with an interest in maintaining the present system of farm subsidies.

Mr Schröder believes that the CAP should be thoroughly overhauled and that direct payments should be abolished altogether. Subsidies should be shifted from production to such areas as rural development and money saved could be used to extend subsidies to candidate countries.

But the German chancellor's misgivings about the present subsidy system go further. He argues that, having benefited from EU subsidies for so long, countries such as Spain and Ireland should show solidarity by digging into their pockets to pay for enlargement.

As Germany's economy remains sluggish and the cost of reunification remains a huge drain on the national finances, Mr Schröder is telling Ireland, among others - it's your round.