BRUSSELS, Belgium (Reuters) – Plans for a more equal distribution of European Union farm subsidies will affect farmland prices, says a senior EU official said.
The European Commission has called for greater equality in the distribution of direct payments between old and new EU countries as part of the upcoming reform of the $78.5 billion a year Common Agricultural Policy (CAP).
Direct payments account for 70 percent of the annual CAP budget.
However, while the EU average rate is about $140 per acre, actual levels vary from more than $275 per acre in Greece to $50 in Latvia.
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“Farmland prices are partially based on the level of subsidies that they generate, as well as other factors such as commodity prices,” said Tassos Haniotis, head of economic analysis at the commission’s agriculture department.
“Redistributing direct payments among member states and within member states will affect asset values, and we’re going to see it start touching some of the most competitive member states,” he said.
Previous analysis by the commission showed that any redistribution of direct payments between countries should be smooth to avoid sudden increases or decreases in land prices in different parts of Europe, Haniotis said.
That is why the commission is likely to propose a phased increase in the level of direct payments paid to farmers in newer EU countries such as Poland, Romania and Bulgaria when it makes legislative proposals for the CAP reform later this year.
Poland is one of a number of newer members calling for an EU-wide flat rate for direct subsidies based on land area as part of the CAP reform.
However, the commission ruled out moving to a flat rate, which would imply a huge redistribution of funds, and instead said all countries could receive a minimum percentage of the $140 per acre EU average rate.
A sudden fall in land prices would have a negativeeffect on Europe’s most productive farming regions.
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