Unusual EU concession allows government to financially support farmers

By Matthew Vella

An ecstatic Nationalist press must have gone crazy when it saw the figure of EUR181 million stamped onto the incoming fax from Brussels, with Friday’s hasty headline in In-Nazzjon announcing Malta would be receiving EUR181 million in EU funds for farmers.

And so the real deal about Malta’s EU negotiations on agriculture was once again the site of contentious debate by both sides of the political divide.

The closure of the negotiations on agriculture, heralded as ‘excellent’ by the government, turned out to be a hard-won victory for Malta’s negotiating toughies, who have so far faced a stringent Danish Presidency in their financial negotiations.

After having called foul at the EU’s meagre financial package, whose re-negotiation is still in progress but has resisted any leaks to the public, Government’s agriculture ‘victory’ comes as an unusual exception from the European Union.

The Commission has in fact accepted for the Maltese state to financially assist farmers and agricultural producers over a period of 10 years, to hold in abeyance foreign market pressures whilst allowing for the restructuring of the sector.

The state aid will include EUR116 million (Lm46.4 million) to be allocated to crop farmers – fruits and vegetables - and vineyards till 2014. Livestock farmers – dairy, pork and poultry - will be getting EUR65 million (Lm26 million) in state aid up till 2010. The state aid will cushion farmers against the dismantling of levies and the consequent major drops in prices.

The brokered compromise was in reality an unusual allowance for the EU since the bloc is committed to safeguard its free market by providing a level-playing field for all players.

The Maltese negotiating group however achieved compromise on financial assistance for those sectors which could be hit by price increases of grain, wheat and sugar. Within the arrangements, the EU has also included a five-year safeguard period for Malta, allowing Government to intervene together with the commission if the local market is distorted after accession.

The EU reserves similar rights for three years after accession, where it will be able to intervene and redress any form of imbalance which could affect the free market negatively due to these negotiations.

These latest negotiations have so far allowed Malta a degree of ‘protectionism’ whilst the agricultural sector gets ten years to restructure itself to be able to meet the European market’s challenge fully. And like the rest of the moratoriums the country has rightfully won, expectations for the Maltese economy are indeed high.

Labour spokesperson for Agriculture and Fisheries Noel Farrugia remains however, not impressed. He believes the arrangements carry with them an anomaly that can only burden taxpayers whilst handing the agricultural sector a slow death.

Speaking to The Malta Financial and Business Times, Mr Farrugia said: "There were two new international developments this year which the government did not take into account. One was the two-thirds increased in the US agriculture budget, lending more internationally competitive quality and prices to their product. Secondly, the EU’s 1997 tariffs against multi-penetration will be kept until 2013 to protect its own agriculture.

"Maltese taxpayers are now expected to foot Lm75 million to protect the agricultural sector whilst having to adhere to the EU regulations."

Mr Farrugia said that as US prices drop and the EU retains its quotas on external products, EU integration will mean the Maltese would lose their flexibility.

"At the same time, we shall only be benefiting from a share of the 10 per cent of Common Agricultural Policy funds, whilst the agricultural sector is being given 10 years more to meet its death at the hands of European competition."