EU Agriculture Reforms Could Pinch East German Farmers

German politicians and farmers responded swiftly to the European Commission's approval on Wednesday of sweeping reforms to the European Union's 40-year-old common agricultural policy.

Under the new system, direct payment subsidies to farmers would be drastically reduced, with larger farms getting no more than €300,000 ($297,000) per year. Additionally, EU subsidies to farmers would be tied to strict standards on food safety, animal welfare and environmentally-sound production methods.

The proposals fit neatly with the German government's recent calls for cuts to direct farmer subsidies -- which have been a major pet peeve of the United States and the World Trade Organization for years -- and the promotion of smaller family owned and organic farms.

But Brussels' tack, which still requires the ratification of all 15 EU member states, could throw a wrench in Chancellor Gerhard Schröder’s reelection campaign. If implemented, the German Farmers Association estimates, the cuts would disproportionately impact eastern German farmers, who could face subsidy cuts as high as €250 million ($247 million) per year. This could lead to job losses and a destabilization of agriculture in the six German states formerly belonging to East Germany.

In an interview with DW-WORLD, Hans-Heinrich Berghorn of the German Farmers Association in Brussels explained the alarm the reform plan has set off in the German agricultural community.

Your organization, the German Farmers' Association, has called cutting direct payments to farmers "an affront to the eastern German states." Why?

The critical issue here is the capping of direct payments to farmers. The Commission plans to reduce direct payments to farmers by 3 percent every year until they've reached a reduction of 20 percent by 2010.

This primarily affects the states belonging to the former East Germany. Under the old communist agricultural system, the East Germans built enormous and highly specialized farms based on Soviet models, which had the advantage of economies of scale. After the Wall came down, the land was sold to the same local farmers and leaders who ran the system until 1990. Some were too huge and were scaled back, but the farms are still larger than those in the western states. The average western German farm is 30 hectares (74 acres), with the average in the east about 200 (494 acres). The EU's common agricultural policy has helped the eastern Germans because it gives premiums to farms based on the crops they grow. Eastern German farms wouldn't have prospered as much as they have without common agricultural policy.

Basically, eastern Germany will feel 90 percent of the impact of the cuts, and the United Kingdom 10 percent, since those are the only regions with farms on that scale. We're talking about farms of four-digit number hectares. For that reason, no single politician would dare to say this is a good proposal. There are too few jobs in the east, and we can't afford to lose any more.

How important is agriculture for the eastern German economy?

Agriculture only represents 3 percent of the gross national product in Germany. But it has been one of the few success stories in East Germany following reunification. We've experienced a process of deindustrialization that we still haven't recovered from. There are areas – like the states of Mecklenburg-West Pomerania and Brandenburg – where there are few other jobs outside of agriculture. East Germany still loses tens of thousands of people each year who migrate to the west for jobs, so this is a very big issue psychologically in the east.

How much do eastern German farms stand to lose under the common agricultural policy?

Large farms easily receive €750,000 ($742,000) per year under the current system. This is not an exception, it applies to many operations in the east. I have no exact numbers as to how many people might be laid off, but I do know that the lawyers are already working at full speed to break up farms and turn them into smaller units in order to work around the measure if they need to.

In what other ways will the reforms affect German farmers?

The subsidy cut proposals get a lot of support from certain parts of Germany, such as non-governmental organizations and Künast. They would like to see a reduction in funds paid to farmers and they would like to use this money instead to support the rural areas. At this stage, there are five different measures that can be supported under the rural development provisions of common agricultural policy – afforestation, early retirement schemes for farmers, measures to compensate for environmentally friendly production measures, compensation for conservation areas and support for agriculturally disadvantaged -- e.g. low-fertility -- areas. Under the reformed policy, the commission wants to introduce additional program areas to the rural development provisions, including food safety, animal welfare and environmental measures.

The German government has said there is still a "need for clarification" on the reforms. What position does this put Chancellor Schröder in, since his government has been a large promoter of reforming the common agricultural policy?

Well, Schröder has been very contradictory on the issue anyway. Two years ago, he went to the industrial farmers in Germany at the height of the BSE (mad-cow disease) crisis and said his government was against agri-business, which is mainly what the east is, and would instead support family businesses. His party doesn't usually get many votes from farmers, but jobs do tend to be an SPD issue, and this could create problems.

It's also difficult for Schröder because his government fears that it will miss the chance to put a ceiling on agricultural spending before the new member nations enter the EU. If the new countries become part of the current policy, Germany will get stuck being one of the largest EU net payers for years and years to come.