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EU to consider sweeping cuts in food subsidies

BRUSSELS: European Union farm ministers will discuss on Monday controversial proposals to scale back export subsidies for processed food and drinks, ranging from chocolate to Scotch whisky.

The EU's executive Commission says the cuts are needed to save money and comply with World Trade Organisation rules which limit the amount of money the EU can spend on export subsidies.

The EU will spend some 560 million euros ($544.7 million) on so-called non-annex one export refunds this year but WTO obligations, due to take effect next year, will cap spending at 415 million euros.

So savings must be found somewhere, EU diplomats say.

At stake is the level of financial support the EU doles out for processed agricultural goods made from cereals, milk, eggs and sugar.

Biscuits, drinks, confectionary, sauces, ice cream and even non-food products such as pharmaceuticals, paper and plastics are all affected.

EU farm ministers will not take a final decision on Monday and must first obtain the European Parliament's opinion on the Commission's proposals. This has not yet been given.

But EU diplomats say ministers, meeting from 1400 GMT, may decide in principle which products will suffer the biggest cuts in export support.

Different EU member states are certain to fight to protect their own products from the harshest reductions.

And, according to EU diplomats, several countries are likely to push for a commitment to review the measures should any markets be hit hard.

"It is very difficult to decide which products should be targeted. The best option is to get EU and world market prices sufficiently close so that refunds do not need to be cut," one diplomat said.

ITALIAN AID TO SUGAR SECTOR ON THE AGENDA

Diplomats said the only vote to be held at the EU's monthly meeting of farm ministers would concern state aid granted to Italy's sugar sector between 1984 and 1992 which the European Commission has already declared illegal.

"The amount concerned, of 66.9 million euros plus interest, corresponds to aid granted for three specific plans and three renegotiation loans," a copy of the meeting's notes said, saying Italy's public funding body had paid out the aid.

"According to the Italian authorities, failure to approve these interventions would compromise the reorganisation of the sector and jeopardise the economic equilibrium of several thousand smallholdings," it added.

The only other agenda items were a discussion of the Commission's plans to halve its school milk subsidies, an update of progress in the EU's "banana dispute" with the United States and a debate on the Commission's food safety proposals.-Reuters