Farm row splits EU partners

EUROPEAN UNION leaders meet today amid a flurry of public insults between France and Germany. You have to go back 16 years - some say 36 years - to find such irreconcilable differences on EU policy between the two nations at the heart of the Union.

The Germans insist that it is time for the French to pay their own way. The French say the new government in Bonn is arrogant, rude and "autistic". Worse, they accuse the Germans of "behaving like Margaret Thatcher".

In retaliation, German officials are making fun of the imperial pretensions of President Jacques Chirac. They leaked the fact that he wants to bring his own office furniture and three container loads of documents to the one-day EU summit at Petersberg, near Bonn.

The informal summit - on how to finance the EU as it enlarges to the east and how to reform the common agricultural policy (CAP) - is programmed for crisis. In the EU, you must always have a crisis before you can have a solution.

The chief surprise is that the summit looks likely to become a quarrel between the two countries that normally pride themselves on fixing the broad lines of EU policy in advance.

There will also be enormous pressure on the Prime Minister, Tony Blair, to renegotiate the 15-year-old permanent British EU budget rebate.

There will be pressure on the Italians to pay more into the EU and pressure on the Spanish, Portuguese and Irish to take less out. There will be pressure on the Germans to moderate demands for a reduction of their own huge net payments.

But Gerhard Schroder's left-green coalition, which presides over all EU negotiations in the first half of this year, has decided the route to an overall settlement requires them, first of all, to gang up on their closest allies, the French. To the fury of Paris, the Germans insisted on putting reform of the CAP, on Bonn's terms, ahead of any other part of the negotiations.

German officials say they are prepared to continue to pay the lion's share of the EU bills but they want guarantees that Germany's pounds 8bn net annual payment - 37 times bigger than France's, four times bigger than Britain's - will gradually be eased. Isolating the French may seem to be a tactical mistake, and so it may prove.

But the Germans believe this is the only way to persuade France, which takes one fifth of all EU farm spending, to accept it must make concessions.

There have been Franco-German quarrels over the years but few that go closer to the heart of the bargain on which the EU, or EEC, was founded (that German industry would have free access to French consumers but German taxpayers would subsidise French farmers).

Bonn and Brussels propose a reform that would be kind to European farmers, kind to consumers and kind to German taxpayers. Farm support prices for cereals, beef and milk would be slashed (reducing some food prices in the shops); farmers would be partially compensated with direct income payments; and national governments would pay up to 25 per cent of the subsidies to their farmers.

The centre-left government in France has already steered its farm policy away from decades of French obsession with increased productivity, dominated by the interests of large, rich French cereal farms. But it hates the German proposals because they would force France to pay a much larger part its own subsidies.

Paris has made a counter-proposal, which would be tougher on farmers, especially large farmers, tougher on consumers and kinder to French taxpayers. Support prices would not be cut but direct subsidies to farms would be reduced. Most of the cost of the CAP would still fall on the EU - largely on the Germans.

French officials acknowledge their net payments are disproportionately low. The solution, they say, should be to reduce the cost of the CAP, not to transfer farm spending to national budgets.

A huge dispute is inevitable.