EU's Stability Offer Could Prove Fractious

A plan to extend membership to Balkan states and other nations in Eastern Europe is sure to rile EU farmers.
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BERLIN -- Europe's drivers may soon find themselves dodging more than potholes if Thursday's proposal to speed the integration of Eastern Europe picks up steam.

The proposal, put forward as a "stability pact" to help bring peace to the strife-ridden Balkan region, will likely enrage

European Union

farmers, who in the past have protested efforts to reduce agriculture subsidies by covering highways in horse manure.

The cause, of course, is noble. But EU ministers will risk a pitchfork rebellion if they drastically overhaul the region's public finances to embrace the former communist nations of the East, which would garner significant subsidies under the EU's current financing arrangements.

In addition to farmers' hackles, the plan raises economic and practical questions. Albania, for example, will need both extensive land and market reforms before it can be admitted to Europe's most-desired club. And the EU itself will need to slash support for its farmers before it can hope to accept countries from the Balkans or Eastern Europe.

While agriculture plays an increasingly marginal role in the EU's economy, the

Common Agricultural Policy

, which regulates farming in the region, continues to gobble up half of the region's spending.

Mindful of this, leaders throughout Western Europe have begun the arduous process of restructuring the EU's finances -- they met two weeks ago in Berlin to tackle finances through

2006 -- to accommodate the first wave of potential member-states. Those will likely include newly inducted

NATO

members Poland, Hungary and the Czech Republic, as well as Slovenia and Estonia.

The rub: The EU can't push east without further reforming CAP because the economies of prospective applicant countries, in particular Poland, are considerably more agrarian than those of Western Europe. The EU is therefore left rafting between the Scylla of wanting to continue supporting its own farmers and the Charybdis of not being willing to offer Eastern European and Balkan farmers such huge subsidies.

By most accounts the efforts at the Berlin summit to reduce the intervention price for dairy and cereals support by 15% to 20% and to tinker with the level of beef subsidies came up disappointingly short. How short? Agricultural outlays will continue to total more than 40 billion euros a year through 2006.

"Enlargement cannot go ahead until they have this resolved," says Jan Holthusen, an economist at

DG Bank

in Frankfurt. "I can't imagine it will happen for the next two or three years."

Even the

European Commission

in Brussels concedes that reforms are on hold for the moment. "Things did get watered down a bit from what we had proposed," says Gerry Kiely, spokesman for EU Agricultural Commissioner Franz Fischler. "We probably won't revisit the possibility for further reforms until at least 2002."

One possibility, according to DG Bank's Holthusen, is the creation of a "two-class" Europe. Current EU members, he says, could see their farm subsidies gradually reduced to support new countries. While likely to please few, it would be a classic EU compromise.

Once the EU solves the subsidy question for the first batch of new members, membership for war-torn Balkan countries will likely depend more on political considerations, as well as democratic and economic reforms, says Holthusen.

In the end, the EU has much to gain by offering membership to Albania, Macedonia and maybe Yugoslavia. By readying itself to take on new members, the EU will not only become leaner and more market-oriented, it will also increase political and economic stability throughout Europe.

Last Friday,

TSC

Senior Reporter

Peter Eavis

examined how the war in Kosovo could impact attempts by E.U. hopefuls to join the union.