Examination of Witnesses (Questions 660
- 679)
THURSDAY 6 DECEMBER 2007
Ms Dalia Grybauskaite
Q660 Chairman:
You are coming forward with some really radical, mind challenging
propositions.
Ms Grybauskaite: I am not radical, I am a pragmatist.
Q661 Lord Cameron of Dillington:
We strongly approve.
Ms Grybauskaite: I come from a region which
for 70 years was under reforms, reforms and radical reforms and
we were not afraid to scrap that and start from zero and create
something new and we looked to the best practices but then we
were approached with some policies from the European Union which
we are supposed to take.
Q662 Chairman:
To put it crudely, what support do you think you have got?
Ms Grybauskaite: For that?
Q663 Chairman:
Yes.
Ms Grybauskaite: Time and only time. If we propose
change from 2014 I know what will happen: nothing. I am going
for options between radical options and time. In the short and
medium-term we will have the Health Check, some small shifts of
phasing in and phasing out, but I want Member States to look and
decide what trend for European future finances we need to have
and for each financial framework to take some pieces on which
it is possible to get agreement, because there is still unanimity,
and then we will really start to talk about programmes, financial
frameworks and monies.
Q664 Lord Greaves:
Can I go back to my original question. There is certainly a lot
of agreement amongst us and elsewhere obviously that the future
financing of farming and of farmers in Europe has to come mainly
through the market and direct support to farmers generally for
pretty well everything they produce is going to reduce further
and ought to reduce further and perhaps ought to be eliminated,
but there are then certain things, such as environmental needs
and support in difficult areas, mountainous areas, et cetera.
It seems to me one of the greatest of them all is what we are
talking about, which is the need to finance structural reform
in many of the new countries at some stage which will require
huge investment. Where is that investment going to come from if
it cannot come from the CAP up to 2015 and perhaps after then?
Where is it going to come from? Does it come from the private
sector in some way and how does that happen?
Ms Grybauskaite: It is coming also from structural
actions. If you talk about road infrastructure, services for farmers,
it is coming already, it is coming from rural development. Because
rural and structural funds are co-financed it will be private.
Between 30 and 40% of co-financing is necessary for any structural
or rural development programme, it depends on the complete design.
There are three sources now and in the future it will be more
or less the same plus governments if they are asked on some agreed
common basis to help. Here again, we need to agree altogether
that this is more important than the first pillar. These policies
have to be accepted by all Member States because, as I said, especially
the newer ones are less and less interested in the second pillar
because it is more difficult to absorb, it is easier to go for
the first pilla. Rural development is more difficult, the same
as structural funds, you need to prepare programmes, you need
to have improvements, it is a lot of control.
Q665 Lord Greaves:
Is there understanding in some of these countries at a national
level that there has to be change which is not going to be necessarily
financed from European funds?
Ms Grybauskaite: That is not the case yet. Easy
money spoils everything, not only understanding. As you know yourself,
the problem is governments live from election to election and
strategically to be able to think about it only those institutions
which are more or less independent can do that. It was good that
it was given to the Commission because we are not so dependent
on elections. Of course, we are dependent on the European Parliament
and criticism of some Member States, but usually what the Commission
can propose is more strategic, more long-term. From this point
of view it is optimal that the proposal is here but the decisions
will be made by governments. The reform of the Common Agricultural
Policy showed this exactly. They started negotiating in 1999 and
finished in 2002 under the pressure of future enlargements. Of
course, the proposals were made quite soft and moderate but agreement
was only possible because the governments deciding knew that they
would not be in office after 2015. I am counting on that myself.
Chairman: That is a very good defence
of the House of Lords, if I may say so.
Lord Greaves: We understand the question
of not having to be elected.
Q666 Lord Plumb:
First, I think you are right to say that farmers jealously care
about what they are getting and what their neighbours are getting
and, therefore, will always demand fair play. You pointed out
very clearly that financial discipline is a very difficult business
and it becomes more difficult because of the expansion of Europe,
27 countries, possibly to be expanded further with a different
situation in each of the countries. It is very difficult to ask
you the question of how you see this proceeding because you have
already answered it to a very large extent. Do you anticipate
a discipline mechanism which does reduce the Single Payment, or
should reduce and I believe will reduce the Single Payment, over
a period of time, probably down to 35%, which may continue further?
A lot will depend on its use and where it is going. We are seeing
a situation in farming at the moment, and I speak as a farmer,
where the imbalance in farming is worse than I have seen for many
years, meaning the arable sector is doing extremely well and the
livestock sector is doing very badly. That is speaking for the
UK but it also speaks generally for many countries in Europe.
That is a worrying situation because the livestock have to consume
the cereals that are grown, cereals which are now at a very high
price. That may be exacerbated further, of course, as we see the
use of cereals for energy production and so on and so forth. In
all of this I think the question on financial discipline is how
do you see this mechanism working, accepting that there should
be a reduction in the expenditure in Pillar I, and how will it
be used? Do you expect the operation to be received by the Member
States in different ways? From what you have just been saying,
in my opinion it would go down quite well if we were to start
talking about radical reform in the future rather than tinkering
around with what may be a slight adjustment even after 2013. I
speak as a farmer and I know that I can speak for many who are
saying, "It has not worked in the past as perhaps it should
have done". If radical thoughts come forward I honestly believe
that there would be more political acceptance than perhaps you
imagine at the moment.
Ms Grybauskaite: Thank you very much. Please
help us. You know how I will be battling inside the house.
Q667 Lord Plumb:
We have got a pretty good idea!
Ms Grybauskaite: We need the support. If you
can come with some proposals it would be very, very useful politically.
You are a very solid institution with very solid recommendations,
at least as I hear from other people. You are right, the Health
Check that is on the table is less radical but already some Member
States have called it too radical and others not radical enough.
On the triggering of the financial discipline mechanism, Mrs Fischer
Boel will give you a more detailed prognosis but in my understanding,
because of the changing situation in market conditions and prices,
the mechanism will be postponed. That is my perception. For example,
this year we have a margin that is not used for agriculture because
of this, about 2.5 billion at a European level and next year 3.5
billion. We did not envisage that during the 2005 negotiations,
it was unexpected. We are still not able to use the margin. Before
it was expected in 2009 or 2010 the discipline margin may be triggered
but now I am hearing 2010 or 2011 and it is pushed further. Everything
will depend on market conditions and at this stage until 2015
it is very difficult to say. Mrs Fischer Boel will tell you more
precisely but in my understanding it will be later than was thought
before and maybe not at all in this financial framework.
Q668 Lord Plumb:
I wager that if I were to ask the question through the farming
papers in Britain, "Would you prefer to get money from the
market or from Brussels?" 80% would say from the market.
Ms Grybauskaite: That is very good, but I am
sure that is the case only in your country and maybe two or three
others. If you tell new Member States we are calling for budget
reform and saying that CAP is old fashioned, the reaction in Poland
and my country also is, "What do you mean old-fashioned?
You don't want us to receive fixed, clear, guaranteed monies?"
That is the question.
Chairman: It is quite interesting because
when we have been going around on various inquiries, to be frank
we have been surprised by the willingness of producers to move
away from direct subsidies and the conservatism comes from the
politicians.
Lord Plumb: Even on wine.
Q669 Lord Cameron of Dillington:
Particularly on wine.
Ms Grybauskaite: Did you visit some new members?
Q670 Chairman:
No, we have not visited new members.
Ms Grybauskaite: Please go to new members because
that is where the largest obstacle will be, not the old ones,
in the future reform battle.
Q671 Chairman:
It was interesting in France generally, for example, where the
producers are more up for change than many of their formal spokespeople.
Ms Grybauskaite: We have started to feel that
changes are coming in France and Germany in the more conservative
parts and that is very, very good, but new obstacles are growing
in new Member States, especially in Poland.
Q672 Chairman:
I heard the strongest defence for a protectionist agriculture
policy from a Polish minister.
Ms Grybauskaite: It is probably explanation
and understanding and what can happen in the future. In most cases
the new members calculate exactly how much they will get in their
pocket, they do not care about policy. Politicians understand
it is not the best investment in the quality of their country's
growth. After a night's discussion on politics if you are told
you will not receive it, imagine the politician who has to do
that. It is easier for me to do that from far away. I am an ex-finance
minister, so for me it is easier to look at the macro-economic
impact from a distance.
Q673 Lord Plumb:
Is it partly because a lot of people in the new member countries
were led to believe there was a pot of gold in Brussels?
Ms Grybauskaite: You are partly right because
in some advertisements for membership and arguments politicians
used this element that there are economic and financial benefits
from membership, not only political.
Q674 Lord Greaves:
It comes back to the question of structural change then, does
it not? If you are going to rely on the market you have got to
be efficient and you have got to be able to compete and if you
do not think you are going to be able to compete you are not going
to be confident of relying on the market, you are going to continue
to believe that the only answer is direct subsidisation. The two
should go hand-in-hand surely.
Ms Grybauskaite: I would be happy to hear such
questions from my parliament members but I have never heard that.
Q675 Viscount Ullswater:
You said that it was going to be driven by policy before the budget,
so agree on the policy and then work out how the budget is to
be disbursed, but I think I am picking up a couple of policies
which slightly worry me, and that is food security for the EU,
which means that is a little bit of protectionism for the EU farmers,
and the other one is the non-financial tariffs, ie a higher standard
of animal welfare within the European Union, which means we cannot
import chicken from China because their welfare standards are
not high enough. Are those legitimate policies that you are going
to have to address or are you going to find that they are rather
protectionist?
Ms Grybauskaite: There will be a lot of proposals,
and creative ones, as to how to keep money in the agricultural
pocket. If we are changing something under the reform, an animal
welfare is not such a bad policy but whether the chicken was raised
with or without music is not quite so good. These creative ideas
will arrive in all areas and that is why I am saying it will not
be easy to clarify and streamline and say what is better done
at the European level or at home. That is a challenge but not
only in the agricultural area, for all policies. The creative
minds in this house and outside are working very hard to keep
things in the same pockets.
Q676 Chairman:
Do you think that a co-decision making CAP will make your life
easier?
Ms Grybauskaite: Do you mean the Commission's
life? The Commission's life is not easy anyway. We are always
caught between two pressures, between the Council and Parliament.
The extension of co-decision elements will make the Council's
life more difficult.
Q677 Lord Plumb:
That is good!
Ms Grybauskaite: For the Commission it will
be the same more or less. We need to battle with both and sometimes
we are a facilitator for both, sometimes battling both, it depends
on the situation. I think it will be more difficult for the Council
now but the decision making process will be shorter, only one
reading in the annual budget.
Q678 Chairman:
Do you think reform will be more or less likely, easier or more
difficult?
Ms Grybauskaite: Budget reform is taken away
from the budgetary procedures really, it is a more political exercise.
It is in consultation with the European Parliament and national
parliaments but the final decisions will be made by governments.
These exercises do not involve a co-decision element.
Q679 Earl of Dundee:
I wonder if I could refer to the switch from production-based
subsidies to area-based payments. Media coverage of the EU Court
of Auditors' recent report suggests that one consequence of this
is that funds earmarked for agriculture are ending up in the coffers
of golf and riding clubs. How exaggerated is that allegation?
That apart, what are your own views on the way in which the CAP
budget is currently managed?
Ms Grybauskaite: It is very difficult to comment
on the press headlines because if you look at the Court of Auditors'
report the agricultural area spending was evaluated as one of
the best in recent years. The report on agricultural spending
found possible errors at about the materiality level, 2%, while
in the structural fund it was more difficult. You are referring
to press headings because nobody is paying for golf. There was
no error or illegal payments to anybody. I do not want to comment
on press headings, but the Court of Auditors' report on agriculture
is very positive.
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