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Co-financing the Common Agricultural Policy

As far as the CAP is concerned, probably the most radical proposal in the leaked draft of the Commission’s forthcoming communication on the future of the EU Budget, is for the introduction of co-financing. The draft suggests that a larger responsibility for CAP spending could be assigned to member states, with direct aids ‘co-financed by national contributions’. This would free up money in the EU budget for other policy areas like energy, foreign policy, economic growth, jobs and climate change.

It is also likely to put to the test the memorable dictum of former Commissioner Ralf Dahrendorf that

“[the CAP] is little more than an instrument for Ministers of Agriculture to get for their farmers in Brussels and in the name of Europe what they would not get at their national Cabinet tables.”

Not surprisingly, farm unions are running scared. Farmers Guardian reports that NFU head of economics and international affairs Tom Hind said the suggestion the CAP should be partially co-financed ‘fills us with dread’. “We are absolutely clear on the need to defend the common policy,” he said. Mairead McGuinness MEP, a leading member of the Agriculture Committee, has spoken out against the prospect of co-financing of the CAP, fearing the consequence for farm subsidies if they must compete with national spending on schools and hospitals.

Germany, a massive net contributor to the EU budget, has always been a supporter of co-financing. France, until recently, the biggest net beneficiary, has always opposed the idea. The French position has changed of late, following the realisation that the enlargement of the EU means that France is becoming a steadily bigger net contributor to the EU budget and at some point fairly soon will pay more for the CAP than it gets out of it. The UK has traditionally opposed co-financing on the grounds that it doesn’t actually reduce spending on farm subsidies but simply changes the responsibility for financing them, and with the UK rebate still in place, the UK is exempted from being a significant net contributor to the EU budget. With the UK rebate slimming down each year and unlikely to survive the next big budget negotiation, the UK may consider co-financing to be a more attractive second-best option should overall cuts to the CAP budget be impossible to achieve.

The countries that oppose co-financing are those that benefit from the largest net budgetary flows from the CAP: Ireland, Greece, Spain, Poland, Portugal and Romania. France and Germany, together with other powerful net contributor countries like the Italy, Netherlands, Denmark, Sweden and Austria should comprise a strong coalition in favour of co-financing. The UK’s support, or at least acquiesence, could be a critical deciding factor.

With the Commission and a large number of powerful member states now favouring co-financing of the CAP, it seems to me very likely that it will be an important part of the Euro-fudge cooked up to preserve the CAP after 2013 but still allow the EU to expand its budget in other policy areas. Exact mechanisms and rates for co-financing and the crucial question of how much of co-financing will be compulsory and how much will be voluntary top-ups at the member state level remain to be negotiated. With most other areas of the EU budget already subject to national co-financing (including the rural development ‘pillar’ of the CAP) the privileged position of the CAP is unlikely to last beyond 2013.

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