EU deadlocked over 'token' farming reforms

European ministers were struggling to break the impasse over reform of the Common Agricultural Policy (CAP) last night and campaigners dismissed the changes on the table as too limited to offer relief to Third World farmers.

France holds the key to whether agriculture ministers meeting in Luxembourg will remain deadlocked after months of negotiations. The biggest beneficiary of the €40bn (£27.4) CAP, it is resisting changes that would end largegenerous subsidies.

Last week, the French President, Jacques Chirac, a hardline opponent of reform, ordered a suspension of the talks and tried unsuccessfully to raise the issue at a summit of EU leaders. He has threatened to block changes on the basis that they threaten vital national interests even if France is outvoted.

Franz Fischler, the European agriculture commissioner, says that the proposed reforms are vital if the EU is to take the initiative in global trade talks scheduled to resume in Mexico in September. Development experts say Europe and the US must scale back subsidies or farming in the Third World will not be able to develop.

At the heart of the EU measures are efforts to break the link between farm subsidies and the production of food, thereby slashing the stockpiles that are dumped cheaply in the Third World, undercutting domestic produce. The Commission also wants to divert cash into rural development to help European farmers to diversify into areas such as tourism or organic crops.

Mr Fischler's plans are already much weaker than those he presented last year. Then, he suggested breaking the link between production and subsidies across the range of agricultural produce. Now, the measures applied to the dairy sector are to be deferred until 2005 and only 75 per cent of cereals are to be affected.

Plans to use 20 per cent of the budget for rural and environmental development have been diluted to proposals under which 3 per cent would be used in 2005, 4 per cent in 2006 and 5 per cent in 2007.

Meanwhile, a suggestion that payments to farmers should be capped at €300,000 (£200,000) has been seen off by Britain and Germany, whose ministers argue that this will simply encourage people to split their farms.

Sam Barratt, spokesman for Oxfam, said: "The lowest common denominator does not get much lower. At best this is tokenistic. A lot of damaging parts of the CAP will be left intact and, ultimately, the victims will be the world's poor."

But EU diplomats disputed that interpretation, saying that an important precedent would be set. "If there is a deal it will be a major step, which will reduce the incentive to over-produce, with all the consequences for the environment and trade," one said.

It remained to be seen yesterday whether Mr Fischler or M. Chirac, who are longstanding adversaries, would blink first. One source said: "Chirac resents the fact that Fischler has gone ahead with this despite his opposition." Mr Fischler said: "The member states must move and also the Commission. We will be constructive and also make certain concessions so that we can find a common position."

French sources suggested further concessions would be needed for a deal. Paris wants to retain the present level of market intervention to support the price for cereals and butter and is resisting moves to reduce subsidies in the beef sector. It has rejected a compromise that would include allowing countries to keep aid tied to output for up to 25 per cent of cereals and 30 per cent of beef.