A panel of advisers to the European Commission President, Mr Romano Prodi, has called for huge cuts in EU farm subsidies as part of a plan to encourage economic growth in Europe.
The panel, chaired by Prof André Sapir, professor of economics at Brussels's Free University, also calls for changes to the Stability and Growth Pact that would allow the Government to borrow more.
Describing the EU budget as "a historical relic", the panel's report argues that EU spending cannot become more growth-orientated as long as half its budget goes to fund the Common Agricultural Policy (CAP): "The present share of the CAP is so large that unless it is brought under tighter control, no significant reallocation of resources within an EU budget of the current size is possible."
The report suggests that farm subsidies should be paid out of national government budgets and should abide by EU state aid rules so that they do not distort competition. It proposes that the EU should offer transitional funding of agriculture at about one-fifth of the present level and that farmers displaced from their jobs should be given a retraining grant of about €5,000.
Mr Prodi's spokesman said the document did not reflect the Commission's thinking, and other Commissioners had criticised many of its elements. A spokesman for the Agriculture Commissioner, Dr Franz Fischler, said the idea of renationalising farm subsidies was highly problematic.
The report calls for the EU budget to be funded primarily by an EU-wide tax rather than, as at present, from national contributions. It suggests that the Stability and Growth Pact's rule that national budget deficits should be below 3 per cent of GDP should be maintained. But it calls for greater flexibility in the interpretation of the rules so that countries such as Ireland, which have low public debt, could borrow more to fund infrastructure projects.
It says Europe's economic growth record since the beginning of the 1990s has been disappointing, both in its own historical terms and in comparison with the US. "Growth must become Europe's number one economic priority - not only in the declarations of its leaders but first and foremost in their actions."
A Government spokesman said the Department of Finance was studying the report.
