THE REPUBLIC’S €1.7 billion share of Europe’s spend on agriculture is coming under threat as officials prepare a seven-year budget proposal for the European Union.
The plan, which will be unveiled next week by the European Commission, will open difficult talks between member states as budget beneficiaries vie for advantage and net contributors angle for minimal increases.
The negotiation is viewed with some trepidation by the Government and in farming circles, given the inevitability of pressure on EU agricultural payments to Ireland.
The looming battle comes as the Government tries to extract a lower interest rate from its euro zone partners while seeking to restore Ireland’s global reputation.
Although the plan from the EU executive is still subject to last-minute haggling between commissioners, the document is certain to propose a reduction in agricultural expenditure in older EU countries so spending can be increased in member states from the former Soviet bloc.
This threatens to cut Irish farm incomes, although the west to east shift in spending will be gradual.
In proposing such measures, however, the commission is likely to argue that agricultural spending is unfairly weighted in favour of older EU countries and should be redistributed.
While seeking to promote fairness, the plan is unlikely to propose full equality of the payment parameters between all beneficiaries of the Common Agricultural Policy (Cap) in view of the wide variation in farming cost structures between member states.
Nevertheless, the proposal is understood to aim for a phased elimination of the biggest discrepancies. It is understood the commission’s proposal would freeze the overall Cap budget at some €55 billion, with an agreed allowance to take account of inflation.
As the overall EU budget increases, however, the share of agricultural spending within the total will reduce. Some proposals under discussion would see agriculture’s share of total EU spending fall to about 33 per cent by 2020, from 40 per cent this year.
The release of the commission’s document, next Wednesday or Thursday, will trigger the start of talks between member states and, later, the European Parliament.
The involvement of the parliament adds further potential for tension, as MEPs’ support for big budget rises is at odds with the austerity drive in most EU countries.
Diplomats believe a settlement is unlikely before the end of 2012, one year before the start of the 2014-2020 budget cycle.
EU budget talks are frequently contentious and wealthy countries like Germany, France, Britain, the Netherlands and Finland signalled several months ago that they would adopt a tough stance.
While the commission is unlikely to bow to their demand to tie budget increases to inflation, it will propose an extension of Europe’s “own resource” funding via EU-wide taxes.
In a document last year it raised the prospect of EU taxation of the financial sector, revenues from auctioning under the greenhouse gas emissions trading system, a charge related to air transport, VAT and corporate tax.
Member states are deeply sceptical about measures like that. There is considerable doubt that such levies would ever proceed, given the requirement for unanimity among member states on taxation.
While commission chief José Manuel Barroso has pledged in recent days to propose a financial sector tax, countries with big financial centres are resisting.
