Mr Stefan Lehner, Mr Marco Pecci-Boriani and Ms Eleanor Brooks

3 MARCH 2005

  Q454Chairman:Can I thank you both for coming. This is a unique meeting for us; it is the first one that we have managed to have on time. It has not been entirely our own fault, we were delayed by a train in front of us going to Paris yesterday and, as you will know, there was a terrible traffic block this morning, I gather due to a bomb scare. For once, we have not got to apologise for our lateness which is extremely pleasant for us. I think you will know that we are writing a report as a European Union Committee of the House of Lords on the subject of future financing for CAP. Obviously we are looking particularly at the agreement that was reached before 2003 in terms of the CAP budget, moving money, modulation, from Pillar 1 to Pillar 2. This is the first matter of concern, is it going to work? Do you think that what the Commission is currently proposing is going to be the solution in the end? How does it fit in with the 1 per cent of national income that the five contributing countries are demanding as the total contribution to the EU budget? Could we start off on that. What are your views on that?

Mr Lehner: Chairman, my Lords, may I first say it is a great honour for me and for my colleague, Marco Pecci-Boriani, to have this opportunity to address you knowing the seriousness of your inquiry. In the past I had the privilege to be present when you met Commissioner Liikanen some years ago and Commissioner Schreyer who both served in different capacities in their cabinets in my previous professional assignments. I know the seriousness of your work and I have benefited from reading your past reports. I do not know how you want to group together the questions that you have submitted to us.

  Q455Chairman: I think probably in the three groupings: overall budget, Single Farm Payment, further reform of CAP, rural development and finally Doha, if we can manage to leave it to the end but sometimes it pops up rather earlier. Some of my colleagues have to leave at about half past two, so they will come in with questions earlier.

  Mr Lehner: You have referred to the matter of five contributing countries and that is an interesting nuance and leaves some space for speculation because there are six who originally signed up.

  Q456Chairman: Who are the six?

  Mr Lehner: My recollection is it is Germany, France, the UK, Sweden, the Netherlands, Spain and Austria. One of my first statements would be that at the current stage of negotiations it could be said that views are still wide apart. The Dutch Presidency has taken the effort to add up all the individual wish lists of the Member States and has established a maximum amount for these total wish lists of 1.30 per cent of gross national income. You will recall the Commission proposal being 1.26 per cent in commitments, known as 1.14 per cent in payments, and the six mentioning a ceiling of 1 per cent of GNI. We are still thus at that stage of a wide range of positions. I would add that should the Council agree on something it will not be the end of the financial package negotiation process. It should not be overlooked that there will still have to be an inter-institutional agreement with the European Parliament which in the past has obtained significant corrections from the Council conclusions, although not necessarily in the area of agriculture, which is of concern to you. While the range of negotiation positions is very wide, the Barroso Commission has made its own the proposals which the Prodi Commission had developed. You will understand that I can only accept for argument's sake the reflection of whether there would be a reduction and where this reduction could fall. This is a very open question because the six in their letter not only mentioned the 1 per cent but they also recommitted themselves to the 2002 ceiling agreed in Brussels and enshrined in Copenhagen for the first pillar. The 1 per cent and the reconfirmation of that ceiling are in one and the same sentence of the letter. That would lead one to the presumption that the six would not necessarily want to reopen this ceiling, the so-called Brussels 2002 ceiling. Nevertheless, there were scenarios circulated by Swedish officials about a year ago on the 1 per cent scenario showing that 1 per cent could only be met if there was a serious reduction in the 2002 ceiling, at least by adding into it the additional expenditure for Bulgaria and Romania.

  Q457Chairman: Included in it?

  Mr Lehner: Yes.

  Q458Chairman: About 1.1 billion?

  Mr Lehner: Per year, yes. About nine billion over the seven years, and cutting rural development in addition. I think that was never an official position of the Swedish Government. I am not aware of any official reactions of other Member States. I am convinced that the six do not have a common position on where they would want to cut if they wanted to achieve the 1 per cent. The Commission analysis has always been—Commissioner Grybouskaite has restated it recently—that 1 per cent financial perspectives are not imaginable without reopening the 2002 ceiling for the first pillar given the legitimate interests in other parts of community spending. If one were to lower the budget to 1 per cent and keep the ceiling as agreed in 2002 we would have agriculture as the dominant part of our EU budget in the 21st Century. The Commission would not want that as an outcome.

  Q459Lord Haskins: Would agriculture and environment be part of agriculture or would they not be part of agriculture?

  Mr Lehner: In our new structure we have three parts of our so-called heading two. One is the first pillar, agriculture, then there is the second pillar, with rural development, and then there is environment as a separate part.