BRUSSELS (AFP) — The European Commission unveiled plans Tuesday to shake up Europe's farm subsidies in a bid to make costly hand-outs more relevant to the modern world as the sector enjoys the strongest boom in generations.
While past reforms have geared the European Union's Common Agriculture Policy (CAP) towards reining in production, farmers are now struggling to keep up with surging demand fuelled by explosive growth in China and India.
Kicking off a six-month review of the CAP, the EU's executive arm floated the idea of capping hand-outs to the biggest farms, phasing out milk quotas, scrapping rules on keeping land fallow and guaranteed minimum cereals prices.
Based on the findings of the review, the Commission is to come forward with reform proposals in May that would both modernise and simplify Europe's support of its farms.
It would then be up to member states and the European Parliament to decide on any reforms in the second half of 2008, when France -- the biggest recipient of EU farm subsidies -- holds the bloc's rotating presidency.
The Commission wants the new wave of reforms to build on an earlier shake-up in 2003, just before the EU took in 10 mostly former communist countries in May 2004 and whose farming sectors have had to modernise quickly.
"We need to look at whether we need to adjust the CAP for an EU of 27 (members) and a rapidly changing world," EU Farm Commissioner Mariann Fischer Boel said.
"The changes I propose will make a real difference for farmers, consumers and taxpayers," she added.
Set up in 1962, the CAP eventually exceeded its original aim of ensuring Europe's food sufficiency and led to chronic overproduction that drove down prices and left many farmers dependent on EU handouts.
The 2003 reform sought to discourage overproduction by making subsidies to farmers less proportionate on how much they produced, in what is known as "decoupling" in EU jargon.
The Commission wants to take that principle even further, making it more broadly applicable while also gradually reducing how much big farmers can receive over a threshold, which it suggests should be 100,000 euros.
The health-check comes amid dramatic changes in the farming world, which is increasingly struggling to keep up with rising global demand that has driven farm commodity prices to record highs in recent months.
In addition to pressure from spiralling Asian demand, the growing use of biofuels and droughts in major farming powers such as Australia are also lifting commodity prices.
The convergence of those factors has changed the tide for Europe's farm subsidy system, which is currently focused on reining in production after years of gluts.
Swallowing up 40 percent of the EU's joint budget, Europe's generous farm subsidies and other support have become a growing source of conflict in the EU in recent years.
France, the bloc's biggest farm producer, has led resistance to calls to cut subsidies or refocus in the face of criticism -- foremost from Britain -- that the system is hugely wasteful.
The French farmers association gave the Commission's plans a cool reception with the FNSEA farmers union, saying that the "letter and the spirit of Fischer-Boel's proposals give no answer to globalisation and its consequences."
Although Britain is in favour of phasing out hand-outs to farmers over the long term, a British diplomat voiced concern about the idea of capping subsidies to the biggest farms.
Reducing subsidies to big farms, which often include aristocratic landowners in Britain, would only compel them to split up their businesses to get under the threshold, the diplomat said.
"Having encouraged farmers to be more market-oriented and efficient, it's perverse to put in place a policy that would encourage them to do the opposite and split up," he said.
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