Annecy, France, Sept 23 - Europe's farm chief dug in her heels on Tuesday over proposals for gradual increases in milk production quotas, saying there could be no fresh EU cash to cushion any financial pain suffered by dairy farmers.
Milk quotas, and their agreed phase-out by 2015, are fast becoming one of the trickiest areas of disagreement in the planned "health check" of the EU's Common Agricultural Policy (CAP), in effect a mini-reform due to be finalised in November.
In her reform blueprint, EU Agriculture Commissioner Mariann Fischer Boel wants annual quota rises of 1 percent in a slow market liberalisation. Major dairy producers like France and Germany have serious doubts about the idea -- but others, such as the Netherlands, say the proposed quota rise is far too low.
"I don't underestimate the difficulties that we see in the mountainous regions for those that have difficult production facilities," Fischer Boel told a news conference at the end of an informal meeting of EU farm ministers in France.
"We will be open to discussion in the 'health check', one way or another, to find a solution," she said. "But there will be no new money for the dairy sector. If we want to increase the dairy payment, it has to come from modulation."
Modulation is EU jargon for channelling direct EU farm subsidies into specific projects that are designed to enhance and preserve the countryside, using the saved cash to ramp up rural spending across the EU's 27 member countries.
This is an especially difficult area in Fischer Boel's reform plan, since her modulation ideas also involve trimming handouts to large farms by siphoning off cash via a tiered system of income brackets -- and spending it on the countryside.
The tiering system would also effectively hit the income of big landholders, although all sizes of farm holding would be hit by progressive annual cuts in subsidies.
Ending milk quotas, a system of production ceilings allocated around EU countries, was agreed as part of the EU's mammoth CAP reform in June 2003.
France wants to redistribute subsidies to support its dairy farmers directly, keeping its farm handout within the CAP's "first pillar", the main budget area earmarked for market support measures and representing some 75 of the CAP spend.
"We want to have certain guarantees for a move out of quotas," French Agriculture Minister Michel Barnier said.
"You could also do this in the (CAP) first pillar, not by modulation, reorienting certain aids in what is going to be a difficult time," he told the news conference. "And there is also great volatility in the dairy market." Germany, for example, wants the EU to finance a special scheme to aid dairy farmers during the milk quota phase-out period, particularly for farmers in greenland and hillside areas where there are few alternatives to dairy farming.