 Thank you Michael, thanks to the Institute for this invitation which I find both very friendly and courageous, friendly not the least from a personal perspective because it provides me with an opportunity to come back to Ireland where for a reason I can't quite understand I haven't been for quite some time. Courageous because some of the messages that I have today are unfriendly for a country such as Ireland where agriculture and in particular where the payments received from Brussels play such an important role and I'm very grateful to you Michael for having indicated where the emergency exit is. It's becoming too unfriendly you know where and how you can leave the room. Now Europe and I don't need to remind you of that it's a very deep crisis at this very moment, very deep indeed it's that crisis that has hit a number of countries Greece of course in particular and that is indeed driving many policy makes it to deep despair. Angela Merkel is on record of having said and I believe it's a reference to a statement by a great British statement that this is Europe's toughest hour since the Second World War and indeed some begin to fear that the cohesiveness of Europe as one of the most magnificent creations political nature after the Second World War is severely threatened. When it comes to the economic implications everybody appears to agree that what's needed now is rigid fiscal discipline and structural improvement to the structural adjustment to improve any competitiveness of Europe's economy and you would have thought that should apply to all sectors of the economy to all areas of policymaking. As it happens in that very phase the commissions Brussels had to table their proposals for the future of the common agricultural policy which you know have come out on 12 October it's certainly not the Commission's fault that there is this coincidence but you would have thought that in that particular situation the proposals tabled by the Commission would have shown some degree of response to that particular combination of problems in particular that they would be characterized by a willingness to save public money and to do something very serious to improve the competitiveness of the EU economy. That would have been important challenges but the challenges that the Commission has identified in particular in the earlier document they issued in November 2010 were strictly agricultural challenges. Food security in particular at the global level was identified as one particular challenge low levels of farm income if calculated per working hour in agriculture and compared to incomes and the rest of the economy are a problem in the eyes of the Commission the need to do more to save the environment and in particular to reduce the pressure for climate change something where agriculture according to the Commission needs to make a contribution and then the issue of territorial balance and the fact that some regions are falling increasingly behind our developments. I have no doubts that all these challenges are real. I would love to go into more detail on that perhaps we can do some of that during the discussion period. It's a matter though of how they should best be met and I think for each of these challenges one can easily think of a set of specifically targeted policies that would best be suited to dealing with that particular challenge. Some of these policies by the way are of a more general nature and have relatively to do with what we traditionally refer to as the common agricultural policy. While the Commission has identified these for major challenges there are two other challenges they've not really spoken about in either their more general document or the concrete legal proposals that have come out now and the first one is the budgetary challenge. The Commission as I guess you all know has issued a document in June this year sort of outlining the overall budget they believe Europe should have. That overall budget proposal by the Commission at least in my mind can't really be called a rigid budget in the sense of trying to save public money. When it comes to the common agricultural policy the original idea discussed in the Commission was to keep the budget at least constant and normal in terms after 2013 the current multi-annual financial framework runs out. I think even that couldn't have been called a major saving but when you then look at the actual proposal that the Commission has made that even proceeds some increase in normal expenditure and only a very minor decrease in inflation corrected expenditure. These are the amounts for the overall seven-year period 2014 20 compared to expenditure in the current period 2011 2014. I'm afraid not everything is coming out here. This is the expenditure that was actually made 2007 to 2014. The second bar is the planned expenditure 2014-20 all of this in current prices and then we have the same thing in inflation corrected prices the right-hand side. There's quite a bit of creative accounting in the Commission's budget proposal with new forms of expenditure that do not fall under the traditional heading of the common agricultural policy. If you include that then you can see that in current prices this would amount to an increase of expenditure around 3%. If you correct it for inflation then the decrease is no more than 7%. Now a major part of that plan expenditure would continue to go for break payments nearly 70% of all of that and that leads me to a second challenge that I find the Commission has failed to identify and that has to do with the future of these direct payments which really form the core of the current common agricultural policy certainly when you look at expenditure set 70% of the total pet budget both in the past and in the future are allocated to direct payments. Now these payments were introduced when serious reform of the common agricultural policy began under Irish Commissioner McSherry in 1992 when support prices were cut and therefore farm incomes would have come under serious pressure without any additional measure. So compensation payments were introduced at the time that was absolutely necessary I don't have the slightest doubts on that. It also was absolutely beneficial to these couple of these payments from production as has happened under Commissioner Franz Fischler. All this was good policy and it shouldn't have been any different. Over time though of course the compensation argument fades you can expect people affected by major policy reforms to gradually adjust to the new situation and at some point then a new world has been established in their environment and they should no longer need compensation. We cannot in all parts of our economy whenever we reform policies compensate the losses for the rest of all times. That of course opens up the question about the future of these direct payments and the Commission doesn't even discuss that question to my surprise. They don't say now look we need to take a very fundamental decision as to what to do with these payments in the future. They don't see that as a problem. They proceed directly to saying they continue to be the solution. There will be direct payments in the future as well. Sounds like there aren't any alternatives to direct payments and what they're supposed to achieve but of course there are. One can use much much more targeted policies and I say a few more words about that nature in a moment that are much different from these payments per hectare that now made on a per hectare basis which isn't really targeting any specific services that society wants every culture to provide. And if one were to move in that direction that wouldn't mean that the direct payments would have to disappear overnight. One can do that in a gradual way. Policy continuity can be well provided by having a relatively long transitory period but what would be important in my mind is to say explicitly where the policy is going in the future to announce the schedule of future payments and then that farmers readily adjust to that situation. Farmers would then adjust indeed very important the land prices would adjust as well. The current direct payments since they are made on a per hectare basis have a strong tendency to keep land prices significantly higher than they would be in the absence of these payments which undermines competitiveness of Europe's agriculture. After all land cost is one major cost element in agriculture and farmers would then by being gradually weaned off these payments become more free to act in the marketplace without permanent support to which typically all sorts of strings are also attached. Now targeting public payments in agriculture to specific things one wants to achieve essentially means to pay farmers for providing public goods and there are sorts of public goods that they do provide no doubt about that but if you want to support that in a targeted way you first need to consider what is the nature of these public goods in each specific location. You want to measure the cost of providing them and then make payments equivalent to that cost. You want to enter into contractual arrangements with farmers for them to provide these services as a quick pro quo for receiving these payments. The payments would be made not on a per hectare basis but on a basis of the units of public goods that are provided and the result of that of course would be that payments would differ significantly from place to place because the nature of the public goods required but also the cost of providing them is in a spatial sense rather different across the community. Since you do it in a more targeted way you can also save quite a bit of public expenditure. All this is something that we've described in much detail in the OCD and I can't really go any further here in this short presentation. The point I want to make simply is it's not like there aren't any alternatives. There are alternative policies that I can pursue that are much more effective but also much more efficient. Now that's not what the Commission has proposed rather than sort of moving gradually away from the big payments they have proposed to reshuffle these payments they would still be made on a per hectare basis and the major aim in my interpretation of the thrust behind the Commission's proposals and that also has been said explicitly by the Commission in November 2010 is to make the payments more understandable to the taxpayer to make them politically more digestible and that will be done in particular by trying to respond to some of the most acute political criticism of the payment regime that we currently have which has to do with the equity matters and the environmental implications. The equity thing is some receive much others receive less and the Commission proposes various different changes to deal with that problem redistribution across countries so that the new member countries in the East would become more and the old would become less make them more equal and that dimension across farm categories some farmers currently have received larger payments than others in the same country depending on their past production structure that would be even out large farms would no longer receive quite so much more than small farms that would be digressivity that would even be capping for very large farms and then a new definition would be introduced that make sure only active farmers in the sense of not receiving less than 5% of their income from agriculture would be the only people eligible that would exclude people such as the Queen of England from receiving these payments now if you think a bit about it then that doesn't really do a lot to improve equity equity in a general sense it's a matter of the actual income that somebody receives and is that below a certain line in order to provide payments in a equitable way in that sense you need to engage in a means test paying everybody the same makes payments more equal but not more equitable if I receive the same payment as my neighbor that's not equitable at all because I happen fortunately enough to have a higher income than my neighbor so I can't really see that as improving equity really it does so in a rather superficial sense now the environment issue the Commission's response to by proposing a greening component which essentially is something such as you could call it super cross compliance farmers have to respect certain conditions for them to be eligible to receive these payments that's much different from targeted measures provide per unit of environmental service just to give you an example of a more technical nature what the Commission has proposed that all farmers receiving that greening component which would form 30% of the future direct payments would have to use 7% of their area as a ecological focus area rather than a reduction production that's certainly too much in some cases too little in some other places crop rotation is required three different crops at the same time some farms it would be much more sensible to have that in a sequential way here after year rather than in parallel I understand that's a particularly sure so here in Ireland now more fundamentally the big thing the Commission appears to be heading towards is to make these payments a permanent future feature of the common agricultural policy for ever by cutting their substantive connection and relationship with the past and introducing new justifications and new payment parameters that have nothing to do with this compensation function that these payments have had in the past and one of the major justifications proposed now is that in the European Union farmers have to respect environmental and other standards that are much above that in the rest of the world that may or may not be the case I haven't seen any evidence being provided by the Commission or for that matter by any other European government of the extra cost that really results from these so called higher standards and the direct payments are in any way so equivalent to these expert costs so it's a vague argument without any evidence what's there now having sort of criticized these proposals so fundamentally I have hastened to say yes there are also some positive elements in that big package of proposals something like a thousand five hundred pages I believe that they are more emphasis will be placed on innovation 1.2% of the budget would go for that is that much I think one can discuss that small farmers according to the proposals can take their payments out of agriculture to the year 2020 when they transfer their farm to different farmers that's a good idea the Commission has now finally proposed an elimination of sugar quotas and so on so there are a couple of positive elements some people also say the positive one very positive thing about these proposals is that they do not suggest to go back to the outdated policies of the past more market interference or some things such as counter-circuitly commitments like in the US I find that is relatively weak to praise proposals for them not containing of two negative elements so that's why I put that in brackets there a couple of other problematic elements also that in part would even turn back the clock of past reforms Moscow for a couple of payments belongs there a new income stabilization tool that's now proposed as an element of the rural development package in pillar two in my mind belongs there until 2008 the Commissioned themselves have said such a measure could generate large and very erratic budget expenditure what's more yes agricultural marks are very volatile and therefore it sounds like a great idea to help farmers of live with that but the nature of that volatility as we have very clearly seen in the past few years is such that once in a while there is a major peak in agriculture prices and hence a major increase in incomes but that's not matched by equivalent crops so you have the normal fluctuations and then suddenly comes a peak now if that's the situation and if you then follow a rule like the Commission has proposed an income drops by more than 30 percent below the average of the past three years then of course you have situations where by the three-year average is pushed up very high as a result of high price in the past and that then indeed if you calculate according to that rule makes farmers receive payments in compensation for them having had particularly high incomes the last two years or so something where my logic has a bit of problem as of understanding why that should be needed now I'm coming to the end of my presentation I hope it's not the end of kept reform really we've had a succession of three commissioners for agriculture all of which were strong minded very successful and courageous reformers make sherry fishler fisher bull they all have really changed the face of the common agricultural policy for the better and the European Union has received a lot of praise for these reforms and various fora including the OSE it's now time to continue with that reform I would have thought the common agricultural policy has gone from market support originally where support was provided per ton of production to decoupling where it was provided per hectare and should now move in the phase of targeting where it's provided per unit of public good that's unfortunately not what the Commission's proposed its aim at but as I said they also don't aim at responding to the current deep crisis the farm commissioner is on record of having said the biggest obstacle we the agricultural policy makers face is getting the budget that we need when I hear these things I get the impression there's some sort of deep split between the agricultural vote and the rest of the vote in agriculture it appears what one hasn't taken the ball the fact that you indeed has a very deep crisis at this moment therefore one cannot simply continue with policies like one did in the past I don't see much aiming at structural adjustment or improve competitiveness I have difficulties understanding why this would be a called a deep and ambitious reform I'm not even sure it's politically viral because parliament and council will still have to look at it and it does not at this moment look like they're all very happy with that but maybe when they come to the side and then you try your luck something much better will come out of that package then what the Commission has proposed that's at least my hope thank you very much for your attention and sorry if this was not a very pleasant message for a country that received so much money from Brussels some of which would be greatly reduced if the Commission were to follow advice like I've proposed here thank you very much