The European Commission approved this Thursday a government aid package worth 500 million of euros to help farmers to cope with rising fertilizer prices as a consequence of the crisis in the Middle East.
Spain had informed Brussels of its intention to launch an aid package for companies who are dedicated to agricultural production worth 500 million. The aid will be translated into direct subsidies to alleviate the impact of rising prices of fertilizers. This Thursday, The Community Executive has given it the go-ahead.
Companies will be able to receive up to 22 euros per hectare on dry land and up to 55 for irrigated land. The aid must cover up to 70% of the increase in costs what the war in Iran has entailed and, as a consequence, the closure of the Strait of Hormuz.
More flexibility
Last April, the European Commission approved a reform of state aid that allows this type of support. “The framework allows the State to grant aid to mitigate the immediate adverse effects on the most exposed European companies, while preserving fair competition in the single market,” said the Commission’s executive vice-president, Teresa Ribera.
That Time Frame of State Aid for the Middle East Crisis allows to cover up to 70% of additional costs derived from the war. That is exactly what Spain has done with this package. In addition to agriculture, Brussels gives scope to governments to support other sectors sensitive such as transportation or fishing.
More help
Last week, the Commission also announced its intention to expand the flexibility enjoyed by governments to redirect funds from the Common Agricultural Policy. The objective, also in this case, is release more aid to cope with rising fertilizer costs.
In practice, the Community Executive will propose redirect European funds to strengthen the agricultural reservewhich is currently endowed with around 450 million euros per year, “with a substantial amount” for give “substantial and targeted support” to farmers. Brussels did not give figures, but announced that it will present this financial project before the summer to guarantee liquidity before the next production cycle.
Furthermore, the Commission will propose modify the Common Agricultural Policy by introducing a new system of liquidity, also giving more flexibility to governments when it comes to make advance payments. At the same time, Brussels plans to give incentives to farmers that they “reduce and optimize” the use of fertilizers or that they opt for biologically based fertilizers.
Brussels anticipates that this aid will be extended at least until the end of the year. However, in practice, Everything will depend on how long the crisis lasts.
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