Article on subsidies misses the point

"Have you seen Der Spiegel?" the Farm Commissioner, Franz Fischler, asked his spokesman. Gerry Kiely, the Commission's affable agriculture spokesman, had not yet seen the portrayal of his native country's farmers as a lazy and crooked bunch of subsidy junkies.

Fischler was appalled. "Should we not send off a reply?" he asked.

"Leave it to the Irish," Kiely responded.

Indeed, within a day of the German magazine's swipe last week, a missive was wending its way from the Irish Embassy in Bonn to Der Spiegel's editorial offices.

Der Spiegel is no tabloid rag, nor particularly xenophobic. Germany's leading news magazine, politically left of centre, it employs some 1,000 journalists and has a reputation for getting its facts right. It is a magazine that deserves to be taken seriously. This time, no less.

Despite the embarrassed rage of Irish officials at the spin put on the figures for Irish EU farm subsidies, currently running at £1.5 billion a year, the figures themselves cannot be faulted.

And the article, importantly, does reflect a prevailing German view that it is forced to contribute unfairly to the cost of Europe and that others are milking the system. Hence the call from Bonn for a substantial rebate on its contributions, a rebate that would certainly end up being paid for by countries such as Ireland.

Kiely describes the article as "misleading" and "amateurish", betraying a fundamental lack of understanding of the Common Agriculture Policy. And, despite past concerns about Ireland's inspection system - a fine was upheld by the European Court only this week over problems in beef intervention in 1990 and 1991 - the Commission "has full confidence in the Irish inspectors". Fraud is not rampant, he says.

He points out that the subsidies on beef available to farmers in Ireland are exactly the same as those in Germany, with the exception of those in less-favoured areas where governments have a right to top up EU payments, and the Germans in fact do.

And, while it is true that Irish farmers, who export 80 per cent of their beef production, benefit substantially from export refunds on sales outside the EU, such payments merely reflect the difference between world prices and the guaranteed price that all EU governments have agreed farmers should get.

In other words, while the EU taxpayer pays that difference to Irish farmers so that they can sell their produce on the world market, the German or Irish consumer pays it to the beef producer who sells on the protected domestic market in terms of a higher price in the shops. The result is the same overall income to the farmer from each animal he sells, the essence of the Common Agricultural Policy, but different levels of individual subsidy. (The problem at the moment is that Irish beef producers cannot sell their animals because of the collapse of the Russian market, plunging them into a crisis as severe as that provoked by BSE).

The Spiegel comparisons between relative Irish-German levels of subsidy per animal and relative net contributions and receipts from the EU farm budget miss the essential point that German farmers benefit as much from the system of farm supports as Irish farmers do. If CAP is fundamentally flawed, that is a different argument.

It is also worth noting that Irish farmers have a lot of catching up to do. Eurostat reports that last year individual Irish incomes from agricultural activity were on average some 80 per cent of the EU average, while German incomes were 114 per cent of the average.

The same report shows that in terms of purchasing power the effect of the CAP on incomes in Ireland has been to substantially close the gap between Ireland and both Germany and the EU average. Between 1981 and 1996 individual average incomes rose from 63 per cent of the EU average to 89 per cent.

Yet, no matter how flawed its logic, the article does hit a raw nerve with the Irish in Brussels at a time of painful adjustment to the national status. A sympathetic understanding that Ireland's recent success should not be jeopardised by too-sudden a cut-off in structural funding requires careful nurturing. It is not helped by perceptions in the member-states that Ireland has been milking the system.

The words "having their cake and eating it" have been heard muttered in the corridors of the Commission's Breydel headquarters.

The Commissioner for Regional Affairs, Ms Monika Wulf-Mathies, has recently warned against "subsidy shopping" in Ireland's efforts to redraw maps for structural funding purposes. Hence the clear warning by the Minister for Finance, Mr McCreevy, that expectations should not be raised that regionalisation of the country will significantly raise the overall take for Ireland. The regionalisation must be justified in its own right.

And the Spiegel article may well also find sympathetic echoes in Ireland's cities where an increasing urban-rural gulf in mutual understanding is leading many to question the real value of the whole CAP.