Mr Claus SØrenson and Ms Christina Borchmann

3 MARCH 2005

  Q496Chairman:Good afternoon, Mr SØrenson and Ms Borchmann.

Mr SØrenson: Welcome to this lovely building that we are still getting accustomed to. I am in your hands. I can take you through how we see things, I can listen to your questions, it is up to you.

  Q497Chairman: Mr SØrenson, thank you very much indeed for finding time in your busy life to see us this afternoon. Lord Plumb, who knows Brussels extremely well, tells me that if you stop moving about in this building the lights go out. I do not know whether that is significant or not, it is a new approach to see if we all work too hard. You know why we are here. We are writing a report as a European Union Lords Committee on future financing of the CAP, looking at what has already been decided or announced in terms of what the Council said in 2002, what the Commissioners have said is going to be needed both in terms of the CAP and then Pillar 1 and Pillar 2. If you would like to give us your thoughts at the start as to is this all going to work, is what has been announced by counsellors and Commissioners going to be the final word particularly against the background of six countries saying they do not want to contribute more than 1 per cent of national income. Is everything compatible or not? Obviously it is early days, we realise that, but we hope to report around June before the final decisions are taken giving our impressions at this early stage.

  Mr SØrenson: Let us start there and then we can go through the various elements. Anything can work, let us face it. We can stop the whole show and go back home and start it all over again. Were we to land on 1 per cent then I think it is fair to say the whole basis on which we launched the CAP reform would be challenged and very deeply so. I would say it would be extremely difficult to move any further on the outstanding reforms. I do not see how we can handle our constituencies if the whole basis on which they entered into the last CAP reform has been shaken, because that is what it could amount to. We may all have our private thoughts about the budgetary deal that was struck in Berlin. Normally I say that the night Mr Schröder spent down there in the Conrad Hotel was probably the most expensive hotel bill ever paid by a single person because that paved the way for the famous Brussels ceiling. Maybe he should not have done that, but that was what happened and it was accepted afterwards. We have the guarantee on the first pillar, which is political of course, and I do not see that being thrown out of the window easily, but we do not have as yet a political guarantee on money for rural development. What I really see as a problem is that the internal logic of the last CAP reform said to the farmers and the people living out there that we would decouple and reduce the direct aids and take in a number of new Member States. If you look at the EU15 there is already quite a decrease in the support there. Then as part of the counterbalance, we would beef up the rural development policy in a way that could collect support from a wider constituency. Because we beef rural development up in order to be able to produce Public Goods such as improvement in the environment, diversification in jobs, a certain number of things that in effect give benefits to the wider society. Some people in the agricultural constituency did not fully realise or appreciate that at the beginning. But I think they have a great interest in absorbing this new mindset because that is one of the reasons why they can get the money. This was the internal logic in the last CAP reform: a reduction over a period in the market support and a beefing up of the rural support. That is a logic that would definitely break apart if the 1 per cent is going to be the final result. I am not going to accuse anybody. If I was a Minister of Finance in a particular country that I happen to know maybe I would go for that and then see if I could get away with it. But this is a negotiation and I can say that seen from our perspective the logic would not be there any more. Let me point to another type of reflection. In a way, if possible, we have to look beyond the present financial perspectives. It is not only about the period up to 2013, it is also preparing for what may come after. I am not sure that Mr Gerhard Schröder will sleep again in the Conrad Hotel and enter into a process of paying another hotel bill for the period after 2013 until 2019-20. Something will be up for negotiation in 2013 and in my view it would immensely important if this period that we are entering into now was used to build up resilient, hopefully competitive, prosperous rural communities which are able to receive some of our people who want to move out of the urban environment because they have a sufficient minimum level of services. These communities would also provide services of recreation, of tourism, of clean drinking water because they act as a filter and so on and so forth. We have this window of opportunity until 2013 to get that right and we would be wise to use that time. This is another reason why I would want to see the rural development because that is what will be hammered if the 1 per cent get their way because the rest of the money is stable. The rural development will be hammered together with the cohesion policy where we will have different problems and obviously more growth oriented research and so on which is in rubric 1a at the top of the list of financing items. We are not stubborn. The Prodi Commission put a proposal on the table and it is now up for negotiation. But I want to make it clear that there are some red lines in the sand, or whatever colour they may be, and beyond a certain pain threshold it will not work. It is important to keep a long-term perspective on these matters.

  Q498Chairman: Can I make it absolutely clear that the amount of money that goes into pillar two, the amount of modulation from Pillar 1 to Pillar 2, was not dealt with at all in the agreement at the Conrad Hotel or the agreement of 2002, it is entirely now for the Commission to decide and argue that it should be whatever it is?

  Mr SØrenson: It is for Gordon Brown and the new guy in Paris, for the Ministers of Finance. The Commission has made its proposal and we will try to defend it. We are not going to win everything.

  Q499Chairman: It is all up for debate as to how much goes into Pillar 2?

  Ms Borchmann: Not the amount of modulation, that is fixed. That will be 5 per cent as from 2007. That is in the CAP reform. The 8.8 million that comes from modulation is fixed if the Brussels ceiling is fixed and that is not up for discussion.