Programme of reforms initiated to meet challenge of enlargement

The EU opened a historic new chapter in its development yesterday with the publication by the European Commission of its opinions on 10 applicant members from the former Soviet bloc and a major programme of reform of its internal policies to meet the challenge.

Giving the green light to five eastern European countries and to Cyprus to the open accession discussions next year, Agenda 2000 also sets out a budget perspective for the 2000-2006 period which reconciles enlargement with the current ceiling on spending of 1.27 per cent of EU GDP.

Of the allocation of £55 billion for revamped pre-accession programmes and structural funding for those once admitted, some two-thirds will come from the fruits of a predicted 2.5 per cent in EU growth, and the balance from real cuts in structural funding to the 15 current members. Structural funding will be more narrowly focused and simplified - three "Objectives", instead of seven, and three "Community Initiatives" instead of 14 - and methods of calculating national allocations will be made "more objective, transparent and equitable".

The Commission will also devolve greater day-to-day administration of programmes to national governments or local communities.

The result for Ireland will be a significant reduction below the current level of £1 billion a year, although phased down over the course of several years. Northern Ireland, parts of Spain, Italy, east Germany and Belgium are also to lose their "Objective One" status by outstripping the eligibility limit of 75 per cent of average EU GDP.

But it now appears certain that Ireland will retain its eligibility for cash from the £15 billion Cohesion Fund, at least until the midterm review in 2003.

The Commission will also press ahead with the MacSharry reforms of the Common Agricultural Policy, bringing intervention prices down closer to world market levels while compensating farmers for losses in income.

This will mean cuts in beef prices of 30 per cent, cereals of 20 per cent, and 10 per cent in dairy prices. Compensatory increases in arable aid and beef premium will be complemented by the introduction for the first time of a premium on dairy cows of £165. Setaside is to be reduced from 17.5 per cent to zero.

The capping of headage payments may be introduced by national governments to allow small farmers to benefit most from the reform.

The IFA has expressed concern, however, at the suggestion that the Commission may allow national top-up payments to supplement compensation, a privilege that the poorer states are unlikely to feel able to afford.

The designation of five countries - Hungary, Poland, the Czech Republic, Slovenia and Estonia - to start accession discussions with Cyprus disappointed Slovakia, whose democratic record is criticised in the "opinion" submitted by the Commission on its suitability.

The other applicants, Bulgaria, Romania, Lithuania, and Latvia, were turned down at this stage because it is felt their economies could not withstand competition in the EU single market.

Turkey yesterday threatened it would respond sharply if plans to bring Cyprus into the EU weakened the position of Turkish Cypriots.

The deputy Prime Minister, Mr Bulent Ecevit, said that "any step taken in connection with Cyprus which we or Turkish Cyprus do not accept will be more than met by our own steps".

Mr Ecevit had warned that the Turkish Cypriot north of the divided island would be integrated into Turkey if the EU went ahead with membership talks with the Cypriot government. Ankara says allowing Cyprus to join before solving the division of the island would only reinforce the tensions between Greek and Turkish Cypriots.

The Commission did, however, send a positive signal to Turkey yesterday in accepting its place in the new "waiting room" for applicant states, a "European Conference" which will allow them to discuss common foreign and security policy and justice and home affairs co-operation in a formal setting once a year.

In its opinion of the prospective members the Commission set out three key criteria for accession: stable, democratic institutions and the rule of law, a functioning market economy, and the capacity to cope with market pressures in the EU.

And prospective members must be able to take on the full obligations of membership, including adherence to the aims of political, economic and monetary union.

The Commission considers that all five, and Cyprus, are capable of fulfilling the criteria but warns that the opening of accession talks with them all does not mean accession will be simultaneous.

Substantial investment will be required in environmental protection, transport, energy, industrial restructuring, agricultural infrastructure and rural society.