Dáil Éireann debate -
Thursday, 4 Feb 1999

Vol. 499 No. 5

Adjournment Debate. - EU Payments.

Mr. Sheehan

Will the Minister explain why this shock in relation to reduced payments was landed on the farming community after what farmers have undergone in the past year and a half? The reduction seems to have come about as a result of the devaluation of the Irish punt in previous years. I understood reductions were frozen for the past two years when the Minister made an application to Brussels. Why has he not made a similar application this year? It is very serious that a pensioner relying on his farm retirement pension of £341.99 a month last month received only £299.80, which is £42.19 less than usual. That is a huge reduction of almost £500 a year. I understand that the average is even higher than that. I have also been told that this will affect REPS payments and all other EU payments which will be reduced by 5.05 per cent. Will it also affect headage payments?

The Minister stated that details of compensation arrangements will be published in the middle of next year. He should spell out this evening to what extent compensation will be given. Will it be at a rate of 100 per cent of the reduction? It was a low act on the part of the Department of Agriculture and Food to hit the most vulnerable section of the farming community, people who have retired from farming and who had planned to live on a certain sum of money per month. It is a small enough amount of money without reducing it.

Has the Minister made any demands on Brussels or has he kept his mouth shut completely? The Minister seems to have thrown in the towel and has not put up a fight in Brussels to have this devaluation offset. The Minister should withdraw this reduction immediately and demand that Brussels not recoup this money from the unfortunate farmers in question because it will seriously affect on them.

At my clinic last weekend I met 20 people from my part of the constituency who are affected by this. The Minister has to get down to basics and explain to Brussels that this is not on so far as our farm pensioners are concerned. If the REP scheme is affected all hell will break loose and farmers will be back to square one because every other day brings a reduction in their income. How long more can that sector of society bear this treatment from the Department?

Mr. Walsh

I thank Deputy Sheehan for raising this matter which is of concern to people in receipt of payments such as the farm retirement pension. I am pleased to have this opportunity of clarifying the matter and setting out the arrangements which were agreed at the EU Council of Agriculture Ministers meeting in December to compensate farmers for the reduction of approximately 5 per cent in certain direct payments which has resulted from the introduction of the euro on 1 January 1999.

Prior to 1 January 1999, institutional prices and amounts under the Common Agricultural Policy were fixed in ecus. The ecus were converted into national currency by means of agricultural conversion rates, more commonly known as green rates. From 1 January 1999 farm prices will be denominated in euros and, as the conversion rates to the euro have been irrevocably fixed from that date, green rates have been abolished.

The green rates which applied to certain direct payments to farmers, that is, livestock premia, arable aid, farm retirement pensions, REPS payments and certain forestry payments, were frozen in 1995. These frozen green rates were applicable only for a limited period and were due to lapse on the introduction of the euro. The Irish frozen green rate was 1 ecu to IR£0.829498. These direct payments will now be made at the euro rate of IR£0.787565, which is 5.055 per cent lower than the frozen green rate. The resulting loss to our farmers has been estimated at over £40 million. However, the agri-monetary arrangements for the introduction of the euro, which were agreed at the Council of Agriculture Ministers in December, include compensation for such losses.

Compensation will be paid over the next three years. Full compensation, 100 per cent funded by the EU, will be provided in 1999. Two further annual tranches of compensation will be paid, each reduced vis-à-vis the level of the previous tranche by at least a third of the amount paid out in the first tranche; these will be funded equally by the EU and member states, with the member state's contribution being optional.

The details of the compensation due in each of the member states affected by the abolition of the frozen green rates are being worked out by the EU Commission. Sanction may not be received until May or June but arrangements will be made for the payment of compensation as soon as possible thereafter.

We must remember the overall benefits of EMU for agriculture. The biggest single impact of EMU on agriculture, as on other sectors in the economy, is the fall in interest rates which it has caused. Agriculture is a highly indebted sector and has had a proportionately large gain from lower interest rates. Every 1 per cent drop in rates is worth about £20 million to the sector. As interest rates have already dropped by around 2 per cent due to EMU, this is worth up to £40 million per year to agriculture. This benefit is likely to rise as interest rates are expected to fall further and to be long-term, as it is generally accepted that euro interest rates will continue to be lower than Irish rates would be outside the EMU.

Substantial benefits will also arise for the agri-food sector due to the elimination of foreign exchange transaction costs and risks on exports to euro countries. This is particularly important as the development strategy for the sector is to maximise exports into these high price countries.