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Jonathan Braude

Tens of thousands of angry farmers from all over Europe march through the streets of Brussels protesting at cuts which threaten their livelihoods.

 Behind the barricades and barbed wire protecting them from hoodlum rustics, ministers from 15 countries meet behind closed doors and try to agree just how deep those cuts have to go so that the EU can absorb new Eastern European members without bankrupting the existing membership.

 And if they can't cut too deep, they will have to decide which of them will have to stump up most to keep the peasantry in beer and potatoes.

 It all sounds so painfully familiar.

 Ten, 15, even 20 years ago, the European Union was struggling with two galloping financial cancers, which seemed to threaten its very existence and made the prospect of bringing Spain, Portugal and Greece into the fold seem impossibly expensive.

 There was the burgeoning cost of its agriculture policy and the wasteful surpluses it created. And, worse, there was the incessant cry of 'I want my money back' from Britain's pugnacious prime minister, Margaret Thatcher, who was angry that her taxpayers and consumers were subsidising farmers and regional development elsewhere in Europe. European policies and finances demanded urgent reform.

 'Galloping' and 'urgent' are relative terms. The three new countries joined. It took years to get a British rebate reduced to the point that while London remained a net contributor to the EU budget, the Iron Lady could at least claim a victory over the French and Germans, who were going to have to pay a bigger share.

 And the reforms needed to drain the wine and olive-oil lakes and level the butter, beef and grain mountains? They're still working on those, despite some successes in the mid-1980s and again in 1992.

 Agriculture now swallows up an annual 40.4 billion euros (about HK$343.84 billion), about half the EU budget.

 Without reform, says the European Commission, expect stocks of surplus grain to rise to 58 million tonnes by 2005 and the mountain of mouldering beef to fester its way to 1.5 million tonnes.

 That should overhang the market and ensure no one, worldwide, can get a good return on agricultural exports.

 Even dairy production, kept under control by quotas since the mid-1980s, is still enough to ensure world markets are permanently awash in milk and butter.

 They are still working on the rebates, too. Except that now, for the first time, it is a German chancellor, Gerhard Schroeder, demanding his money back.

 Britain is only the third-largest contributor. Germany and the Netherlands both pay more. And even France, till now the largest beneficiary of the EU's farm subsidies - 22 per cent of the entire agricultural budget is spent on French farms and agribusiness - knows it will be paying a lot more into the kitty once Poland and the other East European candidates join.

 That is why, despite the farmers' anger, something may just come out of the latest attempts at reform.

 Germany now pays 11 billion euros net into the EU kitty each year. Compare that to Britain's 1.88 billion euros, and Spain's net 5.91 billion euro profit from EU funds, and you begin to wonder why it took Germany so long to put its foot down.

 Mr Schroeder, too young to remember the war, is less squeamish about his neighbours' feelings than his predecessors.

 There is more to it than that, of course. Germany, like France, likes to romanticise the small farmer and the rural way of life.

 But the biggest winners from the agricultural policy are not the inefficient small farmers of the mountainous regions and southern Europe, but the big industrial concerns of the north for whom public sympathy is hard to maintain.

 The structure of German agriculture changed when the old East Germany, with its large collective farms and weak economy, was absorbed into the EU.

 Protecting livelihoods in the rural south seems less important when the national economy is struggling, and cheaper goods are available from the east.

 Europe's 37-year-old farm policy was designed for food security after World War II, but is now producing too much and at unacceptable cost.

 At a time when the World Trade Organisation is about to start a new round of agricultural tariff negotiations and imported wines and foods are already making their way on to the previously closed EU market, the old policy is no longer sustainable.

 All member states have understood that. But some profit more than others from the existing regime. France will battle to keep its agricultural subsidies, Spain its 25 per cent of the EU's infrastructure funds and regional aid and Britain its multi-billion euro budget-rebate. All will be hit hard, if the Germans are to win a big rebate of their own.

 The reforms, when they come, will be neither as sweeping nor as effective as some would hope. But come they must, and the pressure is on to push them through soon.



Historical tide changes to dissolve farm policy