The European Commission has backed proposals to reform the Common Agricultural Policy (CAP), despite strong opposition from France and other nations.
The reform will mark an end to the historic link between subsidies and output when aid levels depended directly on the amount of production. This link has been widely blamed in the past for the EU's surplus wine lakes and butter mountains as farmers churned out extra payments to win aid from Brussels.
The package, first proposed by EU Farm Commissioner Franz Fischler in July 2002, aims to make European agriculture more competitive and market oriented with farmers receiving a single payment - decoupling - which would be reduced over time.
"This reform has one objective: making sense of farm subsidies for our farmers, consumers and taxpayers. Society is ready to support farming provided farmers give people what they want: safe food, animal welfare and a healthy environment," said Fischler. "Farmers can count on new EU support to help them to adapt to demanding EU environment, food safety and animal welfare standards and to promote quality food and traditional products."
The food industry largely came out in support of the reforms this week, particularly moves to open up the CAP to market forces. Both the UK Food and Drink Federation (FDF) and the European Confederation of Food and Drink Industries (CIAA) condoned the principals behind the mid-term review.
Martin Paterson, deputy director general of the FDF said: "FDF still sees these proposals as a clear and positive step to a more market orientated CAP, encouraging a viable supply base for the UK food and drink manufacturing industry.
"The retention of the Commission's decoupling proposals, in particular the single farm payment is encouraging, as this should strengthen the EU's position in the WTO negotiations," he added.
Echoing these views the CIAA said in a statement this week: "The CIAA supports this realistic approach as it considers meeting the balance in EU markets and international deadlines: enlargement of the EU, WTO negotiations, implementation of bilateral agreements.
The CIAA reaffirms its agreement with the principle of further decoupling support to production. For the food and drink industry, it is essential to improve competitiveness of community agriculture, while taking care to preserve the different production sectors which provide a necessary supply to processing companies."
A further guiding principle of the reforms is that savings made on reducing subsidies to farmers could be redirected and ploughed back into rural development with a particular emphasis on sustainable agriculture.
But this is clearly one of the most unpopular aspects of the reform with critics from all sides - including farmers, several EU governments and the food industry.
"Following the budgetary perspectives for 2007-2013 set by the Brussels summit, the Commission made choices in saving budgets to finance new reforms. As a result, transfers to the 2nd pillar, to finance rural development measures, have been reduced.
Questioning the credibility of the measures proposed by the Commission to reach its sustainable development objectives, the CIAA believes that more significant means will have to be provided to support them, and emphasises the importance of these measures for the supply of the industry," said the CIAA.
But on this point Fischler still remains unabashed, determined and confident that the reform will function. "It is a first step," he said this week. "I trust that Member States live up to their commitment in the Brussels Summit to further beef up support for rural development in the next financing period. The new single farm payment will not distort international trade and hence not harm developing countries. This will maximise the negotiating capital of the EU in the WTO and help defend the European model of agriculture."
The food industry was disappointed to learn that revisions to the market policy of the CAP will see milk quotas staying the same until 2014/2015. "We would look to an early abolition of milk quotas and would welcome a speedy and managed move to a more world market based economy fordairy.
The UK is one of the best geographically located areas in the world for milk production, and we should be able to make full advantage of this," commented Martin Paterson.
France - the biggest winner in the farm subsidy stakes - is opposed to changes which would hit its many small farmers. But Germany has argued that changes to the system are needed before EU 15 becomes EU 25 next year with the addition of 10 new Member States, many of whom have large agricultural sectors.