New EU states hooked by farm cash, says budget chief

The European Union's new member states risk becoming addicted to "easy money" in farm subsidies, complicating efforts to modernise the way the bloc allocates its resources, the EU budget chief said.

Budget Commissioner Dalia Grybauskaite said she planned to outline a radical option for redirecting EU money from "old" policies such as agriculture and regional aid to "new" areas such as innovation, energy and the environment when she kicks off a mid-term budget review this summer.

But she told Reuters in an interview she was worried that the growing flow of farm cash into the ex-communist central European countries that joined the bloc in 2004 and this year could create new sources of resistance to reform.

"The new member states are already starting to enjoy the smell of money now," the former Lithuanian finance minister said, adding that in her home country, many people could not believe they were getting "money for nothing".

The phasing-in of generous EU farm payments not directly tied to the market for agricultural produce was distorting the economies of acceding countries and offering opportunities for corruption and political patronage, she said.

It could also give traditional farm powerhouse France new allies in opposing any substantial reduction of the share of the EU budget lavished on agriculture - currently 43 per cent.

"I expect increasingly the new member states will be a problem because they are growing addicted to easy money. The longer it drags on, the more addicted they become," she said. "There is no premium for reform."

After months of feuding, member governments agreed in December 2005 on a new seven-year budget framework for 2007-13, limiting EU spending to one per cent of gross domestic product.

Unable to agree on a significant reorientation of the budget towards investment in the knowledge economy, EU leaders agreed to hold a mid-term review in 2008/9, although France insisted any change in farm spending would have to wait until 2014.

Ms Grybauskaite said she would set out three options in her initial policy paper - a radical overhaul going beyond the EU's existing treaties; a more modest reform sticking to the current policies; and an incremental adaptation based on the status quo.

She made no secret of her own appetite for radical change, saying the EU executive headed by Commission President Jose Manuel Barroso should lay the foundations for a fundamental redirection of the bloc's finances in the next decade.

She voiced hope that a change of generation of EU leaders would open the way for new thinking, especially on reducing agricultural subsidies.

Outgoing French President Jacques Chirac has long been the most fervent defender of the much-criticised Common Agricultural Policy and many in Brussels hope his successor, to be elected in May, will be more flexible.

"We need to look for new policies where we have added value at a European level, which is not the case at all in the CAP, which could all be done at a national level," Ms Grybauskaite said.