Critic on Commission’s proposal on special financing facility worth €1 billion to help developing country farmers

The European Commission proposed on the 18th of July 2008 to establish a special “facility for rapid response to soaring food prices in developing countries”. The fund would be worth €1 billion and would operate for two years, 2008 and 2009.

This money would be in addition to existing development funds and would be taken from unused money from the European Union’s agricultural budget. It would be provided to developing countries which are most in need, based on a set of objective criteria. The facility would give priority to supply-side measures, improving access to farm inputs such as fertilisers and seed, possibly through credit, and to safety net measures aimed at improving productive capacity in agriculture. The support would be paid via international organisations, including regional organisations. The proposal falls under the co-decision procedure and the Commission hopes that Council and Parliament can reach agreement by November in order not to lose the unused 2008 money. The Commission hopes the co-decision procedure can be completed by November to allow commitment of funds in 2008 and implementation in early 2009.

However, a crescendo of objections from the European Parliament is greeting European Commission plans to switch €1 billion from the Common Agricultural Policy budget to developing countries affected by food price rises. At the Parliament’s budgets committee meeting on 14 July, political groups chorused their criticisms. Reimer Böge, a German centre-right MEP, chairman of the committee, said that the plans were “more than sleight of hand” and “an infringement of the budget rules”.

The concerns focus on disrespect for normal procedures for reallocating money in the EU budget. German Socialist MEP Jutta Haug, who is drafting the European Parliament’s opinion on the 2009 budget, told European Voice: “This does not respect normal budget rules.” There is also anxiety about insufficient budgetary oversight of funds given to the United Nations and the World Bank: “We don’t have adequate access to the accounts and audits of these funds,” said Böge. The parliament’s reservations threaten Commission hopes to see the scheme adopted by November 2008, and enter into force early next year.

The Member States have also raised rather critical voices over the new fund on Friday the 18th of July, where a formal proposal of the Commission was officially made towards the EU MS, saying that while something must be done to deal with the crisis, “Barroso’s billion” – as one diplomat called emergency fund – is not the way to go about it.

Some eight member states have said the scheme may not be legal – Austria, Britain, the Czech Republic, Denmark, Finland, Malta, the Netherlands and Sweden – according to diplomats. One diplomat, speaking to the EUobserver, called the new fund “Barroso’s billion”, saying: “Many countries in the council have a lot of sympathy for the thought behind it, but worry whether it is in the EU rulebook financially.”

Development groups cautiously welcomed the new fund. “Agriculture in the developing world has long suffered from a lack of investment, so this is a welcome sign that the commission has recognised the importance of putting money in this area,” said Alexander Woollcombe, a spokesperson for Oxfam. “However, this should not distract attention from the unfair trade and agriculture policies that are what caused the situation in the first place,” he added.

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