Ireland has become the first EU state to move to break completely the link between farm production and EU payments, bringing to an end a 30-year era of subsidy-driven farming.
The historic announcement was made yesterday by the Minister for Agriculture, Mr Walsh, who described it as "a fundamental change in the nature of support for Irish farmers under the Common Agricultural Policy".
In less than 15 months, the €1.3 billion in direct payments made annually to farmers will be based on their entitlements in the first three years of this decade, and come in the form of a single payment, irrespective of whether they produce food or not.
Although the decision was welcomed by a majority of farmers, a spokesman for the Irish meat factories said the move would cost at least 1,000 jobs in Irish meat plants, currently employing 6,000 people, and put at risk a further 1,000 jobs in related service industry.
The ICMSA described it as "a very damaging retirement package for Irish agriculture".
It said it would lead to significant rationalisation of beef production and coincide with a large fall in the number of dairy farmers.
The decision to opt for the full decoupling of all payments for cattle, sheep and arable crops under the recent CAP reform package came following a Cabinet meeting on Saturday.
Farmers, Mr Walsh said, would now be free to focus more on the market and the demands of the final consumer, and it would provide a better basis for a competitive agriculture not based on eligibility for EU premiums.
Mr Walsh said he had given careful consideration to the 200 or more submissions received under the public consultative process which he initiated following agreement of CAP reforms to allow member-states to opt for a full or partial break between subsidies and production.
He said he had also carefully studied the outcome of the independent research he had commissioned from the Food and Agriculture Policy Research Institute, which recommended last week that full decoupling was the best policy for the Irish agricultural industry.
It concluded that although animal production would fall following the break with production, price increases of around 10 per cent would follow and reduced farm costs would result in the best income prospects for most farmers.
For the dairy sector, however, it predicted a decline in dairy farmer numbers from the current 26,500 to 18,000 by 2012, with dairy compensation payments being decoupled in 2005.