Farewell to subsidies? Finland fights back

National subsidies are a must to farmers in Finland. The European Commission has a different view. If subsidies were slashed, that would have a negative impact on Finnish attitudes towards the European Union, writes Kyösti Karvonen, Managing Editor of the newspaper Kaleva.

Pretty much everybody knows what 911 or 112 stand for. But do you know what 141 means?

The first two are the universally known emergency phone numbers. In Finland, during the last couple of months 141 has been equivalent to a political emergency number. And for a farmer in southern Finland, the three-digit figure is a matter of life and death.

Yes, there is agriculture in Finland. Yes, you can raise decent crops up here. It is not an agricultural Klondyke, but farming is part and parcel of Finland's past, present and even future, from the south to the very north. In southern Finland, its future is more or less tied up with what happens with 141.

A very concise history of 141 is needed. Finland joined the European Union in 1995. Article 141 of the Treaty of Accession states that the European Commission can give Finland permission to pay national subsidies to farms situated below a certain degree of latitude in southern Finland.

The argument between Finland and the Commission is basically about how to interpret the Article. Finland maintains that it has a permanent right to pay subsidies to its southern farmers, from Finnish coffers, of course. The Commission's point of view is that subsidies can be paid only temporarily. Article 142 unequivocally gives Finland the right to subsidize more northern farmers on a permanent basis.

The present subsidy period expires at the end of this year. The amount of money involved is not much, about EUR one hundred million annually. To an outsider, the controversy looks more like a storm in a teacup. As a Finnish member of the European Parliament, Alexander Stubb, put it, "The Finnish government and the Commission are now negotiating how long the following subsidy period will be and how much, or how little, the national subsidy will decrease. To the approximately 30,000 subsidized farms the issue is a very serious one indeed. The 141 subsidy ranges from 30 up to 60 per cent of their net income.

All politics

And here comes the hard part: politics. Though the share of agriculture is merely around two per cent of the Finnish GDP, farming is an eternal hot potato in domestic politics. To make the case even more difficult, the Finnish subsidies have fallen under scrutiny in neighbouring EU member states Sweden, Denmark and Estonia.

It is hardly a surprise that the centre-right government is under intense pressure, not least from its own ranks, not to mention the political opposition and the farmers, not to give in. The timing could not be worse, because the European Commission just decided to slash sugar beet subsidies. This was a scathing defeat for Finland. The sugar decision may turn into a death blow to the last sugar factory in Finland.

The sugar beet row led to political repercussions. Prime Minister Matti Vanhanen announced in parliament that it would affect Finland's opinion of the Commission. If his words turn into practice, it would be a departure from the Finnish long-term policy line of seeing the Commission as the best friend of a small Union member country.

All told, there are now more critical voices towards the EU in Finland than ever before during the membership years. Finland has consistently wanted to be a model student in the EU classroom. Those days might not be over yet, but they cannot be taken for granted anymore.

A telling example is the idea of linking Article 141 to the coming national ratification of the reform treaty negotiated recently in Lisbon. The first one to suggest linkage was surprisingly Esko Aho, a one-time prime minister. He was the point man during the accession talks in the early 1990's. The government is vehemently opposed to the linkage, but if the subsidy talks fail to produce a satisfactory compromise, it cannot be totally excluded.

Forget wine

The key Finnish figure in the subsidy talks is the Minister of Agriculture and Forestry, Mrs Sirkka-Liisa Anttila. She made an appeal to stop domestic bickering and asked Finnish lawmakers to mind their words about the European Commission and the Danish Agriculture Commissioner, Mrs Mariann Fischer Boel. That happened right after the Commissioner's fairness was questioned.

There are interesting footnotes to the story. First, Mrs Anttila's family runs a pig farm situated inside the southern subsidy zone. Second, it was reported that Mrs Fischer Boel got angry when Mr Ilkka Kanerva, the Finnish Foreign Minister, took up the subsidy issue directly with Mr José Manuel Barroso, the Commission President, thus bypassing her.

There is a rather humorous episode about Finland, agriculture and -- well, wine. Mrs Fischer Boel was quoted as saying in Helsingin Sanomat, the largest Finnish daily, that because Finland is seeking the status of an A-grade wine growing country in the EU, farming subsidies are clearly not needed. The truth is that there is a vineyard of about five hectares in area in the Åland Islands, in the Baltic Sea. Farmers there have been testing whether certain grapes could be grown on the Islands. The grape types come, by the way, from Siberia. The parliamentary Agriculture and Forestry Committee concluded rapidly that it would be wise to give up seeking the EU status.

Declaration of war

Although the Commission has the final say, there have also been other cooks stirring the pot. Mrs Anttila disclosed in an interview published in the daily newspaper Kaleva in early October that the dear western neighbour Sweden had been lobbying in Brussels against 141 subsidies.

The disclosure led to strongly worded reactions in Finland. The Swedish manoeuvring has even been called a declaration of war. Finno-Swedish EU history has had problems before this one. For example, Finland did not quickly forget that Sweden decided to apply for Union membership in the early 1990's without informing Finland in advance.

Unlike Finland, in the accession talks Sweden did not seek the right to pay national farming subsidies. The core of Swedish farming lies in the southern parts of the country, up to 600 kilometres south of Finland. Sweden sees the Finnish 141 subsidies as unfair competition. To Finland, a key factor is climatic conditions. The Finnish argument is that as long as the climate in Finland is not as favourable to farming as climates further south, Finnish farming is entitled to national subsidies.