Ahern faces further cuts in EU funding

A compromise paper on Agenda 2000, proposed yesterday by the German Presidency of the EU as the basis of the Berlin summit starting today, presents the Taoiseach with a number of steep hurdles.

As expected, the major Irish concerns will be its provisions for restricting Cohesion Fund eligibility, the small scale of payments to regions losing Objective 1 funding status, and the farm budget claw-backs.

The German paper suggests the final total for structural and cohesion funding should lie between £150 billion and £170 billion. That's £16 billion less than proposed by the Commission, much of the difference taken from the Social Affairs Commissioner, Mr Padraig Flynn's, proposed social fund spending on training.

On the Cohesion Fund, the fund targeted at the EU's four poorest member-states, the German paper does not give any overall indication of the total budget, giving rise to concerns that member-states will insist the fund is considerably smaller than the £16 million proposed by the Commission.

The compromise also suggests reviews of eligibility in 2002 and 2004 instead of 2003 - the result would be to deprive Ireland of at least one year's eligibility or up to £200 million.

Attempts by member-states to save yet more have also put pressure on the allocation to regions in transition - of specific concern to the 21/2 million who live in the east and south of Ireland.

The paper suggests an allocation of 6 per cent of the total structural funding - on the upper figure that would mean a total of only £10 billion to be spread across regions containing some 40 million people.

To make such a figure stretch the paper suggests cuts in entitlements from the first year of the budget, instead of two years into it as suggested by the Commission - that makes for a much steeper glide path for Ireland's hoped for "soft landing".

The Irish and Portuguese problem in this regard has been specifically acknowledged by the Germans publicly, but not addressed in the paper, although there is an unexplained and unelaborated reference to "particular situations", with a promise that proposals will be forthcoming in Berlin. In part that is believed to be a reference to a new special peace fund for Northern Ireland, expected to be worth some £400 million over five years.

On the farm budget, the German compromise suggests four options to bridge the £5 billion overspend:

1 per cent cuts in direct aids per annum across the board - the so-called degressivity approach favoured by the French;

the same, but putting half the savings into rural development spending;

savings through prudent management of spending;

a combination of all three.

Dublin will be supporting the third option, concerned that the first could cost the Irish farming sector more than £200 million over seven years. And Mr Ahern will be aware that the Commission is also working on scenarios for even more severe cuts - degressivity of 2 per cent in cereals and 1 per cent in other sectors, expected to bring in some £4.8 billion in total savings.

Yesterday, Commission officials were expressing fears that the French would also want to un-pick some of the detail of the farm package. If they do so the whole thing could unravel.

Yet although there are clearly major differences to bridge between Ireland and the presidency, as between other member-states and the presidency, it is also clear from the paper that the Germans have been able to whittle down the disagreements to a manageable number of problems, making a deal far from impossible today and tomorrow.

There's still all to play for, but Mr Ahern's aspiration for a €4 billion (£3.2 billion) package for Ireland - corrected down hurriedly from £4 billion - may still, however, be on the upper side of optimism.