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Large farms in EU face subsidy cuts

The European Union wants to give less money in subsidies to its biggest farms so that other, needier enterprises can get more, officials in Brussels confirmed on Wednesday.

“Large farms generally have economies of scale, so they don’t need the same per-hectare payments as smaller ones do,” a spokesman for the EU’s executive, the Commission, told journalists. The Commission therefore wants to ‘better distribute’ the money which it hands out under the Common Agricultural Policy (CAP), by reducing the payments made to farms which receive more than €100,000 ($145,000) per year and re-allocating the money to rural development projects in the country in question, he said.

On November 20 the Commission is expected to call for discussion on the CAP, the system of EU farm support which is both the most controversial and, at some €50 billion per year, the most expensive policy in the 27-member bloc. CAP payments account for almost half the EU’s total expenditure, with direct payments to farmers in 2005 reaching €33.7 billion. And according to recent Commission figures, just 5.6% of the EU’s farmers receive almost 50% of all the direct payments made under the scheme - with a relatively small handful of massive farms receiving over €100,000 per year each. That situation stems from the earliest days of the CAP, when farmers were asked to cut their production, and the biggest farms made the biggest cuts, and received the most compensation. But the Commission considers that it is no longer politically acceptable in the recently-expanded EU, where tiny, subsistence-level farms in countries such as Lithuania and Poland are struggling to compete with the massive industrialized farms of Western Europe.

The Commission therefore wants to launch a debate on reshaping the system, with the biggest farms receiving less support and small farms and rural-development projects receiving more. That debate will serve as the basis for a legal proposal from the Commission, expected in spring 2008. However, it is by no means clear how member states will react. The CAP is the most hotly-debated policy in the EU, with states led by Britain saying that it wastes vital resources, and others led by France, the CAP’s biggest beneficiary, saying that it is vital to support Europe’s rural traditions.

In 2002, the Commission proposed that payments over a ceiling of €100,000 should stop. Member states rejected that proposal. “Last time this was proposed, it didn’t get beyond the ideas stage. We’ll have to see where it goes this time,” the spokesman said. (m&