French subsidy row
August 5, 2009
The European Commission ruled in January that subsidies worth around 338 million euros ($486.4 million) paid between 1992 and 2002 by the French government to support its fruit and vegetable sector had violated European farm and state aid policy.
The EU executive has said the subsidies gave French farmers an unfair advantage over their European competitors.
The Commission has ruled that French growers now owe a total sum of about 500 million euros, including interest charges.
Farmers angry about pay back demands
The announcement has been met with widespread anger and disbelief in orchards and vegetable markets across France.
The EU decision comes at a time when farmers in Europe's largest farm economy have already been protesting against a recession-linked drop in demand and sliding incomes.
"We just don't understand it. These recent weeks, we've been telling the government how bad things are for us. And the first answer we get is this - that we have to pay back money we received 10 even 15 years ago," Salvatore Esorordu, a fruit grower from the southern region of Gard, said.
"It's a provocation. Prices are at their worst level in 20 years," he added.
Producer prices for fruit and vegetables fell 3.1 percent in June, putting them down 17.6 percent year-on-year, according to latest data from French statistics office Insee.
The French fruit and vegetable sector, the third-largest in Europe, also says it faces growing cheap competition from fellow EU countries that have lower labor costs.
France to negotiate hefty sum
France has disputed the hefty sum the EU wants to claw back from fruit and vegetable farmers.
But if the government fails to refund the money, it would be liable to pay a heavy fine. Typically, such fines are open-ended, calculated on the basis of the time it takes the government to act. If it doesn't comply, the fine goes on increasing.
Farm Minister Bruno Le Maire said this week that France would accept the EU demand for recouping some of the subsidies, but emphasized that he would negotiate with the EU over the total sum.
He also said he wanted the recovery of subsidies to be done gradually and on a case-by-case basis so as to avoid forcing vulnerable farmers to pay back.
"We want the reimbursements to be spread over time. It would put an unbearable strain on farmers if they're forced to pay this money back immediately," Le Maire said.
"Unfair and immoral"
This is not the first time France has been forced to ask farmers to pay back subsidies. But in the past, French farmers received generous aid directly from the European Commission.
This time, any recovery of subsidies will go back into the French budget, not EU coffers. That's why the French government has more of an incentive to recoup the cash.
But French farmers are unlikely to accept the demands without a fight.
José Bové, a French member of the European Parliament and former president of the Peasants Confederation farmers' union, has urged civil disobedience.
"The farmers must not reimburse this money," Bové said. "If the government sends them letters telling them to do so, I encourage them to refuse and disobey because it's unfair and immoral."
Author: John Laurenson in Paris (sp)
Editor: Susan Houlton