Europe's banana growers face dramatic changes to the way they receive EU subsidies as the 13-year old policy comes in for an overhaul, officials say.

After introducing a single-tariff import duty from 2006 the EU has now turned its focus towards reforming its internal subsidy system.

The reform will be of prime interest to France, Spain and Portugal, the EU's main banana growers, in remote islands, such as Martinique and Guadeloupe, as well as smaller producers, Greece and Cyprus.

The EU’s current policy, established in 1993, is called compensatory aid and based on the difference between a flat-rate income rate and the average EU banana price for that year.

In 2004, these payments amounted to some €240 million.

They are also linked to volume of production, unlike many of the EU's other farm subsidies.

Known as “Coupled aid” this is seen in World Trade Organisation terms as trade-distorting.

The remotest EU regions also get aid under special packages called POSEI for the French, Spanish and Portuguese islands.

The Canary Islands are Europe's largest banana producer, exporting 412,000 tonnes in 2004. Martinique ranks second with about 253,000t, followed by Guadeloupe with 70,000t.

The European Commission, is now finalising several reform options.

Officials say the most likely proposal will be a partial decoupling - breaking the tie with volume figures - of subsidies.

The EU also pays supplementary aid to regions whose average incomes fall 10 percent below an average EU price.

Guadeloupe and Martinique usually qualify for this top-up. In 2004, their prices were 30 percent below the EU average.

The Commission is also expected to favour shifting banana subsidy funding away from straight agricultural support and into the POSEI budget, which has already been rebuked by France, Spain and Portugal.

As well as the fear of losing money, these countries are also reluctant to take on the administrative responsibility now handled by Brussels.

"We haven't decided yet what we're going to do. There are a number of options, one of which is transferring funds to POSEI," one Commission official said.

"If we did that, it would then be up to member states to design some programmes.

"They would then have to take responsibility for any cuts. POSEI money would become one pot of cash, so bananas would also have to compete with other crops (for subsidies)," he said.

Topics