France, Germany strike deal on farm spending

BRUSSELS, Oct 24 (AFP) -

French President Jacques Chirac and German Chancellor Gerhard Schroeder struck a compromise accord Thursday agreeing to phase in farm subsidies to new EU members states in 2004, but capping overall farm spending from 2007.

In a move opening the way for an overall deal on the costs of enlargement, the two leaders agreed to back a Brussels proposal to extend agricultural subsidies, allocated under the EU's much-disputed Common Agricultural Policy (CAP), to the mostly farm-intensive new EU countries.

But from 2007 the agricultural spending of the EU will be capped, taking into account inflation, Schroeder said, adding that the deal would be in effect until 2013, when another six-year EU budget period starts."We are conscious that this summit and the (December EU) summit in Copenhagen are historic moments," Schroeder said."France and Germany are committed to EU enlargement and are working together to seize this historic chance to further the EU's development in a peaceful way," he added.

The much-disputed CAP system of farm subsidies gobbles up nearly half the current EU annual budget of 95 billion euros (dollars).

Germany, the biggest net contributor to the EU budget, has insisted that direct aid to farmers in the new member states must be linked to a reduction in the cost of the CAP. "Nothing will change in the farm policy until 2006," Chirac said, confirming the deal.

France, the biggest beneficiary of the CAP, has backed proposals by the European Commission, the EU's executive arm, for the extension of the system to 10 new candidate states, who are expected to join in 2004.

The Commission has proposed a phased introduction of farm aid to the new members, starting with 25 percent of the levels enjoyed by current EU member states in 2004, increasing to 100 percent in 2013.Schroeder said the two men had also discussed other financing issues, including structural funds -- payments to member states for major infrastructural projects such as transport. "There also we are agreed that we need to limit spending and make savings," he said.

The accord between the two heavyweight EU states must be approved by all members of the 15-nation bloc.The EU's leadership immediately welcomed the deal. "The presidency welcomes the agreement between Germany and France," said Prime Minister Anders Fogh Rasmussen of Denmark, which currently holds the EU presidency."It's progress. It has not made this summit more difficult," he said.

A European Commission official welcomed the deal and described it as a breakthrough. "We have to look at the details but on the face of it is good news. It is the breakthrough we needed," he said.