WEDNESDAY 5 DECEMBER 2007

Mr Walter Duebner

  Q420  Viscount Ullswater: I think you have answered quite a lot of the questions about rural development because you indicated, I believe, that the position is that you would rather the payments came through the first pillar rather than the second pillar, partly because you have explained about the co-financing from the eastern Länder particularly. What are the circumstances that various Länder are using to get money through the second pillar?

  Mr Duebner: The Länder have a budget in the agricultural sector and then they can co-finance these measures. We have three-fold financing; money comes from the EU, from the federal government and from the Länder. It depends on them as to how much money they want to spend and sometimes they do not have enough money to offer all the measures available in the second pillar, so they have to concentrate on whether they want to support more investment in farming or if they want to support agri-environment measures or other things, to finance development strategies, making studies and so on, or support Less Favoured Areas. This is a decision for the Länder.

  Q421  Viscount Ullswater: Is the German Government in favour of keeping the Single Farm Payment for as long as possible and not moving the money from Pillar I to Pillar II because maybe Pillar II is not looking after the disadvantaged areas because of the problems that you have outlined?

  Mr Duebner: It is rather difficult to answer your question because we have such a different structure in Germany. In southern Germany we have rich Länder, Bavaria and Baden-Württemberg, which have their own programmes and they can do a lot, and then we have the eastern part of Germany which cannot spend so much money in this sector. They are very reluctant to have modulation or to spend even more money in the second pillar, they want to keep their money in the first pillar. That is the main point. For the time being, on the discussion about modulation the federal government says we will not change the budget for the first pillar until 2013 and that is agreed in the German Government even if some politicians say we should think about a change in this policy. For the time being that is the position of the German Government. In the next few years we will discuss whether we have a vision for 2020 as the British Government already has, but this discussion has not started in Germany yet. We are trying to finalise the consultation on the Health Check and then we will have the issue paper about the Budget Review and we will discuss what will happen after 2013.

  Q422  Earl of Dundee: What position will Germany take on the Brussels ceiling on funds available under Pillar I until 2013?

  Mr Duebner: As I said, this is very difficult to answer because we do not have a position and it has been agreed in the government not to say anything on that topic because we are very busy finding a position on the Health Check. We are commenting on the issue paper from the Commission about the Budget Review and after that we will start discussing how much money we can spend in the agricultural sector in the EU budget after 2013. Personally I think that will depend on how the world markets develop. If we have high prices, such as nowadays, the politicians and even the sector itself will be prepared to lower the premiums, but if we have market prices around the intervention price level then we will have a totally different discussion.

  Q423  Earl of Dundee: That apart, and as the German position develops for these reasons, how consistent or otherwise do you think that will come to be with CAP reorientation? What are your views on CAP reorientation?

  Mr Duebner: We have already reoriented the CAP through the 2003 reforms. That has been a big step. Now we have to have the discussion as to how much money we will spend in the second pillar in future and in the first pillar or if we follow the British vision and say that the first pillar should be abolished, and we should have a free liberal market. Or, whether we still need the money in the first pillar to keep a premium so that our farmers can cope with their competitors in third-countries. That will be the main question.

  Earl of Dundee: Do you believe that after 2013 there can be a much better reallocation of resources? In what particular forms would you like such reallocation to take?

  Q424  Chairman: If at all.

  Mr Duebner: I can only give you my personal view on that. (The answer continued off the record)

  Q425  Lord Cameron of Dillington: I have always thought that Germany is capitalist, probably one of the most free trade nations in Europe and yet you have always had this blind spot about agriculture. From what you are saying you do see that possibly eventually Germany could have free trade agriculture but paying to have higher standards or maybe higher environmental standards or the state paying only for goods that it might require, such as access or environmental goods or something of that sort. It sounds to me as though that is the sort of vision that is not totally alien to what you are saying.

  Mr Duebner: It is not alien to me but perhaps to a minister. If you talk to Mrs Künast from the Greens she may agree with you.

  Q426  Lord Cameron of Dillington: I have had conversations with her and I think she does.

  Mr Duebner: But if you talk to a Conservative minister he would have a different approach.

  Q427  Lord Greaves: Mr Seehofer suggested that we are on the verge of a new Green Revolution. Can I ask you, first of all, what are the implications, if that is true, for farm incomes and production productivity? Secondly, what contribution could that make to adapting to climate change and mitigating the effects of it?

  Mr Duebner: On the first part of your question, productivity does not mean that we should use GMOs. He is quite reluctant on GMOs but, of course, you can increase productivity without GMOs too. What we have recognised in the last two years is that farmers have a new production line, and these are the renewables, so they do not depend on food production alone any longer, they have another outlet, these are the renewable resources, and that is what he meant by the Green Revolution. That is positive for agriculture because prices are rising. We do a lot to support this production of renewables in Germany. We have a programme of about €50 million to support research, demonstration and market launch of non-food commodities. At the beginning of next year we will have a biomass research centre in Leipzig. All in all, the German Government is very committed to the development of renewable resources which, as I have already mentioned, provide new income possibilities for the farmers. That is the main point.

  Q428  Chairman: In the renewables are you looking beyond biodiesel and ethanol to third and fourth generation biomass production?

  Mr Duebner: Yes.

  Q429  Chairman: There is a lot of scepticism basically about where we are now with the first generation and people tend to be looking a couple of steps forward. Is that what is happening in Germany?

  Mr Duebner: Yes, but we need a lot of time. It is not for tomorrow but for ten or 15 years to develop the second generation of biomass. That is why we have created this centre in Leipzig to support research in this sector. Producing biodiesel from rapeseed or bioethanol from maize may have all these negative effects on the demand side with prices shooting up, for example in Mexico, where the poor people temporarily could not afford to have their maize meals.

  Q430  Lord Greaves: What is the balance here? There is a reaction against biofuels and so on, is there not, from people who believe that we are heading for a new serious food shortage and this is already reflecting itself in the increased prices and taking land out of food production is not the way forward.

  Mr Duebner: We have a reserve in Germany. Nowadays 13% of the arable area is used for the production of renewables and we could double this percentage without having problems with the food supply.

  Q431  Lord Greaves: This is in terms of Germany's own food needs?

  Mr Duebner: Yes.

  Q432  Lord Greaves: Or not Europe.

  Mr Duebner: Yes.

  Q433  Lord Plumb: Is that based on a constant level of production or on the possibility of an expansion of production?

  Mr Duebner: It is status quo.

  Q434  Lord Plumb: On status quo?

  Mr Duebner: Yes. On the other hand there are still a lot of production reserves in Eastern Europe, in Ukraine, Russia, where production could easily be doubled or tripled.

  Q435  Chairman: It is called market economies.

  Mr Duebner: It is a pity.

  Q436  Lord Greaves: What about the climate change side of it? Do his comments about the Green Revolution and so on have any bearing on climate change at all?

  Mr Duebner: Yes. We have a decision by the European Council to raise renewables up to 20%, so we have to fulfil this aim. This will contribute to the problems that we have with climate change in a positive way.

  Q437  Lord Greaves: On a slightly wider issue, if the climate of Europe is changing and getting hotter, wetter or drier in different places, how is that going to affect the kind of agriculture that takes place in Germany?

  Mr Duebner: As far as I know it will have a positive effect, as I have heard in Great Britain too. That is why you are advocating a higher amount of area for wine, as I understand it. You are aiming at raising the de minimis rule from 25,000 hl to 50,000 hl.

  Q438  Lord Plumb: We are not up to quota yet!

  Mr Duebner: For Germany it will have positive effects but southern Europe will have problems, especially Spain and Italy perhaps. We probably will not have any major problems in Germany with the climate change.

  Q439  Chairman: The interesting thing on your renewables is your energy policy, although we cannot get into this, saying no to nuclear and then a heavy dependence upon Russian gas.

  Mr Duebner: It is very difficult.

  Q440  Chairman: You have got some real energy security issues.

  Mr Duebner: Yes.

  Chairman: Thank you very much indeed, that is very helpful.