Dr Sophia Davidova

9 MARCH 2005

  Q640Lord Haskins: Do you think that small farmers should be treated preferentially?

  Dr Davidova: Preferentially? I do not think so. Do we need to keep them in some structural deficiency and to lock them into that? No. Give more help to farmers either to be able to merge or to expand, or for the rest to get out of the industry? Yes, they do need help for that—but not to be helped preferentially to stay there.

  Q641Chairman: Do you think that money should come from the EU or from the nation, from the country?

  Dr Davidova: Pardon?

  Q642Chairman: The money to help them get out of the industry—is it appropriate for it to come from the European Union or should it come from national sources?

  Dr Davidova: Both. Money coming from the European Union is a small part compared with what they need to come from national sources and from private investors. We should not only look at public money. We are obsessed with this public money. There should be private investors.

  Q643Lord Lewis of Newnham: You have in part been discussing this question, but could we concentrate specifically on it? How far would developments in the new Member States be compromised if the net contributing governments were successful in reducing the overall budget—which is what they are trying to do—for the 2007-13 period?

  Dr Davidova: I think that the development will be compromised, not only rural development. Whether the cuts will be reflected in the structural payments, which are a big share of the EU budget, or to some extent the rural development need both. You can look at the differences in GDP, in the hard infrastructure, in the soft infrastructure—for example, computer networks or human capital—but they do need this money now to catch up. So there will be implications. The development will not stop—again, because this is not the only money, and it should not be the only money. To some extent, however, what we can achieve through the EU money will be less if the funding is decreased.

  Q644Chairman: It is a difficult question, is it not?

  Dr Davidova: Yes.

  Q645Countess of Mar: You have said that there are other funds apart from the two pillars. Our Treasury is extremely stubborn about coughing up for rural development. What is the response of other governments, particularly in the newly introduced states? Are their treasuries a bit more generous?

  Dr Davidova: I think that the Treasury here is relatively generous, even matching up the voluntary modulation. First of all, their treasuries' budgetary capacity is much smaller. Secondly, and that is why they are very keen on rural development money, the co-financing by the EU is much higher for the so-called convergence areas; and all the areas, apart from Prague and Bratislava, are convergence areas. So they can get a co-financing of 80 per cent from the EU for agri-environment; 75 per cent for others. To some extent, therefore, they are in a much better position, and that is why they would like to have this money—although co-financing capacity is still a problem.

  Q646Countess of Mar: Do you believe that it is possible to include Bulgaria and Romania under the ceilings agreed in 2002, or should further funding be made available? I gather that it is about 1.1 billion euros per annum that is required.

  Dr Davidova: I was thinking about what you meant by "possible". Of course it is possible, but is it desirable? For some reason, when this compromise was struck in that area regarding a ceiling for market support, the Commission insisted that they were not clear about Bulgaria and Romania and that Bulgaria and Romania should not be included. There is a big misunderstanding: not everyone is clear whether or not Bulgaria and Romania are included. However, I am more certain that these countries are not included. Do we want to reopen the negotiations for the Pillar 1 ceiling? I think that it will be quite a dangerous process.

  Q647Chairman: To reopen?

  Dr Davidova: To reopen the negotiations. We have the 10 new Member States, with a big wish list, and there could be difficult negotiations. The other option—and I am talking only about the Pillar 1 payments—is, for Pillar 1 to accommodate Bulgaria and Romania under the ceiling from Brussels. This will mean much more financial discipline than otherwise, and will therefore mean an immediate decreasing of payments for the EU-15. If this could be negotiated then, politically, I think that this is preferable. This is preferable for the UK, and preferable not to reopen the negotiations now.

  Q648Chairman: Can I ask you as a final question when, in your judgment, do you think that these negotiations will be finished? When would you guess that the CAP finances will be decided for the next period and all the country members will know just what is in Pillar 1, and perhaps also Pillar 2?

  Dr Davidova: These positions are sometimes tactical; they are negotiating positions. The negotiations are for the overall financial perspective, not only for this Pillar 1. Again, the wish is that it should be completed by June this year.

  Q649Chairman: Yes, I think we know that that is the aim, but when do you think it will happen?

  Dr Davidova: I think that they will strike a compromise, again at the last minute.

  Q650Chairman: In June?

  Dr Davidova: In June, at the last minute, just before the changing of the presidency. I can see that people disagree with that.

  Q651Chairman: Perhaps we are a touch more cynical!

  Dr Davidova: Or perhaps we all know that the compromise will hardly be struck during the UK presidency. There is nothing dangerous, however. There are examples. The EU will continue running, even if it is not agreed; but, as usual, everything will come at the last minute.

  Chairman: Dr Davidova, thank you for giving us so much of your time this morning. We do appreciate it. We will send you a draft of the evidence and if there are major corrections that you would like to make, please do so. Again, many thanks for giving us of your time. It was extremely interesting for us to get your view, particularly of the effect of the CAP changes on the new members.

  Lord Haskins: And the backing papers have been very useful.

  Q652Chairman: Indeed, and your backing papers, as Lord Haskins says.

  Dr Davidova: My Lord Chairman, thank you for inviting me to this very interesting discussion.