Bridges Weekly Trade News DigestVolume 13Number 36 • 21st October 2009

EU Ag Commissioner Proposes €280mil in New Dairy Subsidies


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Following weeks of protests by dairy farmers across the EU, the European Agriculture Commissioner proposed on Monday injecting €280 million into the troubled European dairy sector.

The proposed new subsidies would be drawn from the EU’s 2010 budget and distributed to member states according to their dairy production levels, EU Agriculture Commission Mariann Fischer Boel told agriculture ministers at a Monday morning meeting in Luxembourg.

European dairy producers have been struggling this year, as dairy prices have plummeted but production costs have stayed high. Angry at the lack of government controls, some frustrated farmers have halted deliveries and dumped millions of litres of milk into their fields.

But even as she announced the proposed new government aid, Commissioner Boel made it clear that European agricultural producers should not expect any more emergency interventions in the future, as further allocations would risk running afoul of EU financial disciplines.

“There will be no possibility for any delegation to come and ask for more money now,” Boel told journalists after the Monday meeting. “And I say this as I see some other sectors of agriculture facing some problems.”

But the potential new subsidies face one more hurdle: the European Council of Finance Ministers will rule on the €280 million proposal at a meeting on 19 November. If the finance ministers approve it, the promise of aid will become binding.

At their Monday meeting, the EU’s 27 agriculture ministers also considered a proposal to give the European Commission, the EU’s executive arm, more power to intervene in times of crisis, as well as a proposal to allow member states greater freedom to restructure their milk sectors. In another move to prop up dairy prices, the Commission plans to continue special purchases of butter and skimmed milk powder through at least February 2010. Earlier this month, Boel laid out other potential response measures, including a proposal that would allow EU member states to dole out payments of €15,000 to their domestic dairy farmers (see Bridges Weekly, 7 October 2009, http://ictsd.net/i/news/bridgesweekly/56547/).

The European Milk Board, which has lobbied hard for government action to stabilise the dairy sector, lauded the politicians for showing “concrete movement” at Monday’s meeting. But subsidies may not be the smartest approach, said EMB’s vice president, Sieta van Keimpema.

“It makes no sense when ministers talk about money, which then flows into the milk sector in the form of subsidies with little impact,” van Keimpema told the EU Observer. “Flexible production controls represent no extra burden to the taxpayer and can be an effective way of creating milk prices which are fair both to producers and consumers,” she added.

Meanwhile, other European agriculture sectors are also struggling. French farmers blocked off Paris’s famous Champs-Elysées during morning rush hour on Friday of last week, burning tyres and straw to protest low wheat prices, which recently dropped below the farmers’ costs of production. If the proposed €280 million dairy subsidies are approved, the wheat farmers will have little chance of getting any help at all from Brussels.

More information

To read Fischer Boel’s 19 October statement to EU agriculture ministers, please see http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/09/482&format=HTML&aged=0&language=EN&guiLanguage=en

ICTSD reporting; “Farmers block off Champs-Elysees in Paris, Burn Tires,” BLOOMBERG, 16 October 2009; “Milk farmers to get controversial EU aid of €280 million,” EUOBSERVER, 19 October 2009.

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