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EUROPE: Subsidies Fail the Poor Among the Rich

Claudia Ciobanu

BUCHAREST, May 13 2008 (IPS) - Romanian farmers have started receiving the first payments under the European Union's Common Agricultural Policy (CAP). But the poorest farmers might have to wait years to see some benefits.

According to EU budget plans for 2007-2013, Romania is to receive around 5.5 billion euros for direct payments to farmers under the first pillar of CAP, and another 8 billion euros for rural development under the second pillar.

With 35 percent of the labour force in the country of 22 million concentrated in agriculture, EU money for this sector is considered one of the main benefits of joining the Union.

However, inequities in the distribution of funds are already apparent.

For 2007 (payments for 2007 are being made in the spring of this year), the EU allotted roughly 400 million euros for direct payment to Romanian farmers, to be dispensed in proportion to the surface cultivated. Given the total eligible area for 2007, farmers should get 50 euros per hectare. The amount is to increase yearly, reaching 200 euros in 2013.

According to the Ministry of Agriculture, there are 4.5 million farms in Romania, of which almost three million are smaller than one hectare. Under the rules of CAP, a farmer must cultivate at least one hectare of land in order to ask for funding. Some have joined their parcels to meet this condition.

"A sum of 180 lei (the equivalent of 50 euro) is not enough even for plowing the land," said Maria Matei, a farmer from Giurgiu in southern Romania, one of those with a little over a hectare of land. "Seeds cost 200 lei now, and fertilisers can be 670 lei (180 euro)."

Another problem is that the payments are made through bank accounts, and many farmers have to travel to the closest town in order to find bank machines. Such a trip may cost more than ten euros.

In all 1.2 million applications were filed in 2007. At the end of April, with only two months left to finish distributing the money, the Agency for Payments and Intervention for Agriculture (APIA), the body in charge of distributing the money, had only given out 70 million of the 400 million euros available. The money not dispensed must be returned to the EU.

With the deadline for 2008 in June, only 700,000 applications were filed this year. APIA claims that the reason is that more and more farmers are grouping in associations. But another factor is that many of the subsistence farmers decided it is not worth the trouble applying.

"Most of the smaller farmers are probably going to give up soliciting funds because the process is too tedious and costly for them," said APIA director Dan Gherghelas.

On the other hand, investigations by several national publications, such as the weekly Capital and daily Evenimentul Zilei, show that most money will go to the already rich. Echoing the UK list of CAP beneficiaries, which featured the Queen, the Romanian list is topped by former member of parliament Culita Tarata, who owns more than 55,000 hectares. The list includes numerous prominent businessmen.

Commenting on the effects of CAP, Wyn Grant, professor at Warwick University (UK) specialising in agricultural policy, says that "the implicit policy of the EU is to phase out subsistence farmers."

Larger farms, encouraged by CAP, are supposed to allow for increased land productivity. Together with Bulgaria, Romania has the lowest agricultural productivity rate in the EU, a hectare of land yielding on average three tonnes per year, compared to the EU mean of 4.7 tonnes. Reducing fragmentation of farms could have beneficial effects.

On the other hand, intensive exploitation of land, usually associated with industrial farming, entails high environmental costs. The reformed CAP – set out in 2003 and followed up with a CAP "health check" started in November 2007 – tries to address such negative effects.

In order to receive EU money, Romanian farmers must adhere to environmental and animal welfare criteria, deemed "cross compliance". Farmers are also paid to "set aside" land in order to avoid excessive erosion, although this measure might be restricted given increased prices of agricultural products worldwide, which arguably make "setting aside" too costly.

One of the central aims of the CAP reform is to shift funds from direct payments to rural development (the so-called "modulation").

Second pillar money goes to developing rural infrastructure, modernising farms, and providing added value to crops. Given out on the basis of projects, it is usually available to larger farms and local authorities. Some of the funds also assist young farmers to start up operations and contribute to maintaining agricultural activities in areas where farming is difficult. The second pillar is supposed to support agriculture in the long term.

Interest in accessing these funds was high in Romania. Of the total of 8 billion euros given to this country for rural development for 2007-2013, 1.4 billion are to be distributed in 2008. Projects submitted for the first two of six cycles of applications to take place this year asked for 1.3 billion euros, almost equal to the total yearly amount, even though beneficiaries are supposed to co-finance these expenses.

The response of Romanian farmers to the offer of EU funds seems to support the need to shift more money from direct payments to rural development.

"It is improvement in infrastructure that would help farmers in Romania most, as I observed first hand," says Wyn Grant. "Money given in general subsidies may be spent on investment, but could equally well go on consumption."

While this appeared the probable direction of change for CAP, reformist voices have lately been weakened. With France taking up the EU rotating presidency in July and Ireland being the only country holding a referendum on the Lisbon Treaty (the new Reform Treaty of the EU), pressure from French and Irish farmers opposing change may prove crucial.

"Unfortunately, the last EU budget settlement slowed down the transfer of money into the rural development budget, where more funds are necessary to meet the level of need. Capping subsidies remains highly controversial and encounters strong political resistance," Grant told IPS.

"I don't think that any reform will happen in the medium term or on a timescale that will be helpful to Romania."

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