EU agri chief warns against risks of state aid overuse in farming sector

Agriculture Commissioner Janusz Wojciechowski with his colleague Margrethe Vestager, tasked with overseeing EU's antitrust policy. [EC/ANSOTTE]

Excessive use of state aid to bail out struggling farmers during the COVID-19 crisis could be a cause for concern for the single market and fair competition in the member states, according to the European Commissioner for agriculture, Janusz Wojciechowski.

EU’s state aid rules for agriculture were temporarily loosened during the pandemic to help those sectors that are not covered by the support measures set up in the Common Market Organisation regulation. CMO constitutes the safety-net for farmers in case of market crises, countering, for instance, collapsing prices.

The new relaxed antitrust framework increased state aid for farmers up to €100,000, an amount that can be topped up by the so-called de minimis aid, a type of national support specific to the agricultural sector that can be granted without prior approval from the Commission.

Recently the ceiling of this aid was increased to €20,000 and up to €25,000 in specific cases. This means that the total national support that can be granted per farm adds up to €120,000 or €125,000.

On Wednesday’s EU Agrifish Council (13 May), Wojciechowski informed the minister that, eight member states have so far benefitted from the new temporary framework, putting in place specific schemes for agriculture for about €1.23 million.

However, one country alone – the Netherlands – accounts for around half of the total amount of state aid in the farming sector approved by the EU executive.

On Monday (11 May), the European Commission gave the go-ahead to a record-breaking state aid scheme of €650 million to compensate Dutch businesses active in the floricultural, horticulture and potato sectors for the damage they have suffered due to the coronavirus outbreak.

The Dutch aid scheme, one of the highest ever allowed in the farming sector, will allocate €600 million to farmers and traders in the floricultural sector and companies in the speciality horticultural sector for the food-service market.

Dutch ornamental sector has a turnover of €7 billion a year, of which €6.2 is in exports, accounting for 10% of the total export of agricultural goods in the Netherlands. The sector estimates that at least €1.3 billion will be lost as a result of plummeting export.

Although the flower market is already collapsed, it does not get any subsidies and does not have access to the CMO’s safety net in case of market crisis. The EU ornamental sector employs 760,000 people and has a turnover of €48 billion.

The ‘Dutch imbalance’ in the agri-food sector recreates the same disputed pattern that has seen Germany taking the most from the emergency coronavirus state aid framework, which was criticised because it jeopardises a competitive level playing field within the single market.

Germany gains most from relaxed EU state aid rules

Germany accounts for more than half of the emergency coronavirus state aid approved by the EU executive, prompting concerns that countries with the deepest pockets might be getting an unfair advantage in the bloc’s single market.

Asked if this imbalance could be a reason for concern in competition among farmers in different member states, Wojciechowski recognised that this is a “special situation” and added: “We should monitor the situation because there is a risk that it will be not good for the fair competition and for the common market.”

On the same point, Marija Vučković, the agriculture minister of Croatia, which currently holds the rotating EU presidency, said that there have always been differences among member states and it is no different during the COVID-19 crisis.

“We are all in favour of the single market and of an open and transparent process. But we should also embrace the principle of subsidiarity, meaning that each member state is able to choose what is most needed for them,” she added.

Besides the Dutch scheme, the biggest state aid packages in the farming sector approved by the Commission are the €100 million loan grants for small and medium-sized enterprises (SMEs) agri-business in Italy, a €35.5 credit line for Latvia and €30 million support for Finnish farmers.

At the beginning of Commission President Ursula von der Leyen’s five-year term, the sensitive state aid competences on agriculture and fisheries were taken over by Vice-President Margrethe Vestager’s supporting services, in order to boost competition enforcement across the board.

Agriculture DG loses state aid oversight to boost competition rules

In an unexpected move, Commission President-elect Ursula von der Leyen has decided to move state aid competences in farming and fisheries from two directorates-general, Agriculture and Maritime affairs and fisheries, to DG Competition.

[Edited by Zoran Radosavljevic]

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