Germany Plans to Rush Special Credits to Farmers

Bonn is expected to rush through legislation this month creating special credits to protect West German farmers from a proposed European Community, EC, payments freeze, government sources said.

The new measures are apparently designed to shield West German farmers from the consequences of the looming EC budget crisis and give Bonn scope to keep up its opposition to the EC executive commission’s farm policy reform plans, political sources said.

EC finance and farm minsters held an unprecedented joint session in Luxembourg today to try to solve the stalemate over future farm financing.

West Germany has proved the main obstacle to Commission attempts to raise fresh funds for farm financing by taxing imports of vegetable oil and fats, for fear of U.S. retaliation.

Bonn has also opposed the abolition of an agri-monetary mechanism that acts as a subsidy for West German farm exports.

The draft legislation, which the ruling centre-right coalition will present to parliament tomorrow, would provide temporary credits for farm subsidies usually paid by Brussels.

The Commission, facing a five billion European Currency Units (5.73 billion dlrs) budget deficit by the end of the year, has threatened to start phasing out payment of some subsidies and premiums from August, unless EC member states take urgent measures to provide fresh funds.

West German Agriculture Minister Ignaz Kiechle gave the new legislation top priority after last month’s failure to agree to a farm price package for 1986/87.

Political sources in Bonn said Kiechle decided to take the sting out of proposed Commission measures to cut back subsidies by creating a buffer for West German farmers.

The opposition SPD has agreed to back the Kiechle bill and allow its hasty passage through parliament by July 1, ahead of the summer recess, SPD sources said.

SPD farm policy spokesman Jan Oostergetelo said his party would support the bill, even though it would further swell massive government spending on agriculture. He said the bill was an admission that the government believes the farm price talks will fail and the EC faces bankruptcy.

According to a copy of the draft bill obtained by Reuters, government authorities will have over two billion marks (1.1 billion dlrs) available to pay farmers advance subsidies and premiums for grains and other crops harvested this summer.

The Commission has agreed to pay the subsidies eventually. But paying farmers on time will cost Bonn about 100 mln marks (55 mln dlrs) in interest payments, farm policy sources said.

Chancellor Helmut Kohl’s cabinet is expected to support the bill when it meets tomorrow.